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AI tax tips: Helpful shortcut or costly trap?

Tue, 14 Apr 2026 21:27:26 GMT

If you have typed a tax question into ChatGPT, Gemini or any other AI tool, and received a confident, well-structured answer within seconds, you're not alone. Surveys suggest the majority of small business owners now regularly turn to AI for accounting and tax guidance.

The appeal is obvious. But the Australian tax system is not a subject where confidence and accuracy reliably go together — and the consequences of acting on incorrect AI advice can be expensive.

Where AI can genuinely help

AI tools are effective at explaining concepts in plain English. Understanding what negative gearing means, the difference between concessional and non-concessional super contributions, or the general framework of a tax concession. AI can give you a useful starting point for all of these.

The problem begins when AI moves from explaining concepts to giving advice. And that transition is rarely obvious.

The accuracy problem: Confident, but wrong

The term 'hallucination' describes the tendency of AI models to generate information that sounds authoritative but is incorrect, misleading, invented or out of date.

In a tax context this can mean:

Referencing a deduction or concession that exists in another jurisdiction but not in Australia.
Citing an ATO ruling, court case, or piece of legislation that does not exist, or that has been superseded.
Applying rules correctly in isolation but missing an integrity provision that changes the outcome.
Providing an answer that was accurate when the AI was trained but is now out of date.

These errors are not always obvious. But they are typically obvious to the ATO, a tax tribunal, and any experienced adviser who has to correct the problem.

The ATO's position

The ATO uses AI internally for fraud detection and analytics. But its public guidance is clear: AI tools can produce false, inaccurate, incomplete and outdated tax information. The responsibility for the accuracy of a tax return rests with the taxpayer. When something is wrong, the ATO will amend the return, apply the General Interest Charge, and may apply a shortfall penalty, even if the error came from AI advice.

High-risk areas

Work-from-home deductions: Rules have changed in recent years and AI tools frequently provide outdated or jurisdiction-incorrect guidance on what can be claimed.
Property deductions and CGT: The interaction between rental property deductions, the main residence exemption, and CGT calculations is fact-specific and complex. AI tools routinely miss critical nuances.
SMSF compliance: SMSF compliance depends heavily on the specific facts of each fund's situation. AI tools are poorly suited to this area, and errors can have severe and difficult-to-reverse consequences.

Our suggestion

If you have acted on AI-generated tax or super advice in the past 12 months and have not had it independently reviewed, please contact us. We can quickly assess whether the position is sound or whether it needs to be corrected before it becomes a larger problem.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Electric car discounts under review: What it means for your business

Tue, 14 Apr 2026 07:13:13 GMT

Electric vehicles accounted for 13.1% of all new car sales in Australia in 2025 — up from 9.6% the year before — driven in no small part by the Federal Government's Electric Car Discount, introduced in mid-2022. For many businesses and employees, it has materially reduced the cost of owning or leasing an EV. That concession is now under formal review.

While no immediate changes are proposed, this is a good moment to understand how the concession works, what the review means for your planning, and what to check before committing to a new arrangement.

How the Electric Car Discount works

The concession operates through three tax mechanisms:

FBT exemption: Where an eligible EV is provided to an employee as a fringe benefit, typically through a novated lease or salary packaging, private use is exempt from Fringe Benefits Tax. Without the exemption, FBT can apply at up to 47%. The saving for an employee can be thousands of dollars per year.
Higher luxury car tax threshold: Fuel-efficient vehicles qualify for a higher LCT threshold ($91,387 for 2025-26, compared to $76,950 for other vehicles), preventing the 33% LCT from applying to part of the purchase price.
Customs duty exemption: C ertain EVs are exempt from the standard 5% import duty, reducing upfront costs.

Important note: plug-in hybrid electric vehicles (PHEVs) lost eligibility for new FBT exemption arrangements from 1 April 2025. Only battery electric and hydrogen fuel cell vehicles qualify for new arrangements.

Why th e review has been triggered

The statutory review was announced in December 2025 and is being conducted by the Australian Centre for Evaluation (within Treasury) and the Department of Climate Change, Energy, the Environment and Water. Public submissions closed on 6 February 2026 and a final report is due by mid-2027.

However, industry commentary and recent political signals suggest the Federal Budget, which is expected before the review formally concludes, may include earlier changes to the concession. The Government is understood to be considering a broader than usual range of options. This makes a wait-and-see approach riskier than the mid-2027 headline date implies.

What this means for your planning

No retrospective changes are expected, and existing arrangements are likely to be grandfathered. But nothing can be guaranteed until the review reports.

If you are considering an EV arrangement for yourself or for employees acting under the current rules gives you the greatest certainty. Key things to check before you proceed:

Confirm the specific vehicle model is eligible. Only battery EVs and hydrogen fuel cell vehicles qualify for new arrangements after 1 April 2025.
Check the vehicle is below the luxury car tax threshold for fuel-efficient vehicles at first purchase.
Review the tax treatment of home charging infrastructure separately. This does not automatically attract the FBT exemption.
Model the after-tax cost carefully, including the vehicle price, interest rate, residual value and running costs.

Should you act now?

The current rules are clear and legislated. For business owners and employees who have been considering an EV arrangement, there is no compelling reason to wait for the review to conclude. Please contact us for tailored advice on whether an electric vehicle strategy makes financial sense in your specific circumstances.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Downsizer contributions and the main residence exemption

Tue, 14 Apr 2026 07:02:55 GMT

When you sell a long-held family home, you may be able to channel part of the proceeds into superannuation using the downsizer contribution rules, potentially boosting your retirement savings well beyond what the standard contribution caps would otherwise allow.

Although the concept sounds simple, the rules contain important nuances that catch people out. Here is what you need to know.

Basic eligibility conditions

To make a downsizer contribution, you must satisfy all of the following:

You are aged 55 or over at the time of making the contribution.
The property is located in Australia and you (or your spouse) have owned it for at least 10 years.
The disposal is at least partially exempt from CGT under the main residence exemption — but a full exemption is not required.
The contribution is made within 90 days of settlement, and an election form is lodged with the fund no later than when the contribution is received.

The contribution is limited to the lesser of the gross sale proceeds or $300,000 per person, meaning a couple could together contribute up to $600,000 from the one property sale. The downsizer contribution can only be used once per individual.

Importantly, while a downsizer contribution does not count toward concessional or non-concessional contribution caps, it will be included in your total superannuation balance (TSB) at 30 June. This can affect eligibility for other contribution strategies in subsequent years, so it is worth modelling the impact before you commit.

Does the sale need to be fully CGT-exempt?

This is one of the most common misconceptions. A full CGT exemption is not required.

Even if only part of the capital gain qualifies for the main residence exemption. For example, if the property was rented out for part of the ownership period, the property may still be eligible for the downsizer contribution, provided all other conditions are met.

Does the property need to be your current home?

No. The property does not need to be your principal place of residence at the time of sale.

If you lived in a property for some years and later moved out and rented it, it can still qualify, provided your ownership and residence history supports at least a partial main residence exemption.

What about pre-CGT properties?

Where a property was acquired before 20 September 1985 (the start of the CGT regime), the rules ask whether part of the gain would have been disregarded if CGT had applied. A key requirement is that the property contains a dwelling that qualified as the main residence. The disposal of vacant land will generally not satisfy this test.

Can non-owning spouses contribute?

In some cases, yes. However, the rules here are more nuanced than many people expect. A non-owning spouse may be eligible, provided the dwelling was owned by the contributing spouse (or their current or former spouse) throughout the 10-year ownership period, and all other eligibility conditions are satisfied. The ATO has published examples where this works and cases where it does not.

A spouse who never occupied the property and could not reasonably have treated it as their main residence is not eligible. If only one spouse is on the title, both partners should seek advice before assuming the non-owning spouse can also contribute (the outcome depends entirely on the specific facts of ownership and occupancy).

What happens to the money once it's in super?

A downsizer contribution is subject to the standard superannuation preservation rules. Once contributed, the funds cannot generally be accessed until you reach your preservation age (60) and retire, or until you reach age 65 regardless of employment status.

Before making a downsizer contribution, consider your future cash flow requirements carefully, particularly if you are planning to use some of the sale proceeds for other purposes such as purchasing a new property or funding living expenses.

Contact us before you contribute

Although the downsizer rules appear straightforward, there are a number of nuances, particularly around eligibility, the interaction with your total superannuation balance, and the timing requirements. Please contact us to discuss your specific situation before making a contribution.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Keeping your SMSF compliant: The rules that catch trustees out

Tue, 14 Apr 2026 06:50:58 GMT

Self-managed superannuation funds offer genuine flexibility. As a trustee, you can invest in assets that are simply not available through retail or industry funds — commercial property, private company shares, direct shares and more. But that flexibility comes with a legal framework that is more demanding than most trustees realise. Two rules in particular are consistently misunderstood and regularly breached.

Rule 1: The sole purpose test

The sole purpose test requires that your SMSF be maintained for the sole purpose of providing retirement benefits to fund members. Every investment decision, every transaction, every arrangement the fund enters into must be assessed against this standard.

In practice, this means the retirement interests of fund members must always take priority over the interests of any other person, including family members, business associates, or related companies.

The consequences of a sole purpose test breach can be severe. The ATO can disqualify trustees, and in the most serious cases the fund can be made non-complying — losing its concessional 15% tax rate and being taxed at the top marginal rate on the entire fund balance. Outcomes depend on the facts and circumstances of each case, but the risk is real and the consequences are difficult to reverse.

Rule 2: The arm's length requirement

Superannuation and taxation law both require that all dealings involving fund members, their families or related entities be conducted on arm's length commercial terms, exactly as if the parties were entirely unrelated.

This most commonly arises in two situations: leasing a fund-owned property to a related business, and related parties performing work on fund property.

Related property leases

Leasing a commercial property from your SMSF to your own business is entirely permissible but only if the lease is on strictly commercial terms. This means:

Rent set at market rates, supported by a written appraisal from a licensed real estate agent
A written lease agreement prepared by a legal professional, clearly setting out all obligations
Rent actually paid on time. Arrears that are allowed to accumulate without enforcement risk a non-arm's length income (NALI) finding

Where arrangements are not arm's length, the income from those arrangements may be taxed as NALI at 45% rather than the standard 15%.

Related parties doing work on SMSF property

If a fund member, their family, or a related business performs work on an SMSF-owned property, strict rules apply:

Market rates must apply: If a related trades company is engaged, the fund must pay market rates, the same as would be charged to any member of the public, supported by documentation for the auditor.
Members doing work personally: In most cases, trustees cannot charge the fund for their own labour. Doing so risks a NALI assessment.
Materials purchased by the SMSF directly: All materials must be purchased by the fund itself, not by individual trustees seeking reimbursement.

Contact us before proceeding with any related party transaction

The compliance consequences of getting these rules wrong can be severe and difficult to reverse. Please contact us before entering into any related party transaction, lease, or property improvement involving a related party.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

ATO update on inherited homes: What it means for your family's wealth

Thu, 26 Mar 2026 01:39:56 GMT

The ATO has released a draft ruling, TD 2026/D1, that changes how inherited homes are treated for capital gains tax (CGT). The new guidance is stricter than many families and their advisers expect. For some, it is a sign that their estate plan may not work the way they think.

How CGT normally works when someone dies

When a person dies, their home passes to their estate. CGT is not triggered straight away. Instead, it is deferred. The estate or beneficiaries may still be able to sell the property CGT-free, but only if specific conditions are met:

Sell within two years of death: The ATO can sometimes extend this deadline, but it is not guaranteed.
A qualifying person lives there continuously: The property must be used as the main residence of a qualifying person from the date of death until the sale. Qualifying people include the surviving spouse, the beneficiary selling the property, or someone with a right to occupy the home under the will.

What the new ruling changes

The ATO's draft ruling focuses on that third category: a person with "a right to occupy the dwelling under the will".

The ATO's new position is that this right must be:

Explicitly stated in the will itself.
Granted to a specific, named individual.

The following arrangements do NOT meet this standard, according to the ATO:

A will that gives the executor discretion to let a family member live in the property.
A testamentary trust where the trustee allows a beneficiary to occupy the home.
Informal family agreements made outside the will, even if followed consistently.

A testamentary trust is a trust created by a will that takes effect when a person dies. They are often used to hold assets for family members, including the family home. Under the ATO's new guidance, holding the property in a testamentary trust does not qualify as a direct right to occupy under the will.

This matters because many estate plans use these kinds of arrangements. If they do not meet the ATO's standard, the CGT exemption may not apply.

What this could cost your family

Some legal and real estate experts warn this could force families to sell homes within two years of death to avoid CGT, especially in high-value areas.

Consider this: inheriting a $2 million home with a capital gain of $1.5 million could expose the beneficiaries to $300,000–$600,000 in tax, depending on discounts and tax brackets.

However, it is important to remember that there are still other ways for the sale of the property to qualify for a full exemption.

That is money that could otherwise pass to the next generation. The risk is highest for families holding long-held properties in major cities.

Who should review their situation now

TD 2026/D1 is still in draft form and may change. But it reflects the ATO's current thinking and should be taken seriously. You should review your situation if:

Your will leaves property to your estate without naming a specific person with the right to occupy it.
You have inherited a property and are living in it under an informal arrangement or through a testamentary trust.
Your estate plan relies heavily on a testamentary trust for holding or distributing property.
You are an executor dealing with an estate where the two-year window is approaching.

What to do now

Review your will with your solicitor and your accountant. If you want a specific person to be able to live in a property after you pass away, that right needs to be stated clearly in the will, naming the person directly. We can work with your estate planning solicitor to make sure the tax consequences are properly addressed.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Division 296 is now law. What does that mean for your superannuation?

Tue, 24 Mar 2026 09:45:22 GMT

After more than three years of announcements, consultations, redesigns and political debate, the Division 296 tax on large superannuation balances has passed both Houses of Parliament. The Building a Stronger and Fairer Super System Bill 2026 passed the Senate on 10 March 2026 and is now awaiting royal assent. It takes effect from 1 July 2026.

If your total superannuation balance is above $3 million, or is likely to approach that level, this article explains exactly what the law means, what is different from the original proposal, and what you should do before 30 June.

Division 296 was first announced in the 2023 Federal Budget. The original proposal drew widespread criticism for one particularly controversial feature: it would have taxed unrealised capital gains inside superannuation — paper profits on assets like property or unlisted shares that had not actually been sold. Critics correctly pointed out this would create cash-flow problems for funds holding illiquid assets, potentially forcing asset sales simply to fund a tax bill.

After years of debate, the Government introduced revised legislation to Parliament in February 2026. The final version that passed on 10 March is materially different from the original and considerably more workable. Here is what the law actually says.

The key features of the final law

Division 296 imposes an additional personal tax on individuals whose total superannuation balance (TSB) exceeds $3 million. The tax is levied at the individual level, not the fund level, and applies to a proportion of the individual's superannuation earnings based on how much of their balance sits above the relevant threshold.

The final law includes two tiers:

Tier 1: Balances between $3 million and $10 million: an additional 15% tax applies to earnings attributable to the portion above $3 million (bringing the effective rate on those earnings to 30%, combining the standard 15% fund tax with the 15% Division 296 top-up).
Tier 2: Balances above $10 million: an additional 25% tax applies to earnings attributable to the portion above $10 million (bringing the effective rate on those earnings to 40%).

Both thresholds will be indexed annually. The $3 million threshold will increase in $150,000 increments; the $10 million threshold in $500,000 increments. This is a significant improvement on the original proposal, which would have left the $3 million threshold unindexed, meaning inflation alone would have pulled more and more Australians into the regime over time.

The tax is based on realised earnings only — dividends, interest, rent, and capital gains on assets that have actually been sold. Unrealised gains are excluded from the calculation. This removes the central objection to the original proposal and makes the regime far more practical for funds holding property or private company interests.

Who is affected?

The Government estimates that less than 0.5% of Australians will be affected at the $3 million threshold, and fewer than 0.1% at the $10 million mark. However, the cumulative impact of contributions, investment returns and the indexation of the threshold means that the number of people affected will grow over time, particularly younger high earners with decades of compulsory contributions ahead of them.

The tax applies across all superannuation account types — industry funds, retail funds, SMSFs, and defined benefit schemes. Your TSB is measured across all of your accounts combined, not fund by fund. If you have both an SMSF and an industry fund, both balances count toward the $3 million threshold.

How the tax is calculated: A practical example

The ATO will calculate each individual's Division 296 liability after the end of the financial year. The calculation is based on the proportion of the TSB that sits above the threshold, applied to the fund's earnings for the year.

Consider a member with a TSB of $4.5 million at 30 June 2027 (the first assessment year):

Their fund earned $300,000 in realised income.
The portion of their balance above $3 million is $1.5 million — one-third of the total $4.5 million TSB.
Division 296 tax therefore applies to one-third of the earnings: $100,000.
At 15%, the Division 296 liability is $15,000. This is in addition to the 15% tax already paid by the fund on those earnings.

Individuals can elect to pay their Division 296 liability personally, or have it paid from their superannuation account. Most will choose to pay from super to preserve personal cash flow, but this reduces the balance available to compound for retirement.

The SMSF CGT cost base election: Act before you lodge your 2026-27 return

One of the most practically important features of the final law is a once-only transitional relief measure for SMSFs. SMSF trustees may make an irrevocable election to reset the cost base of all directly-held CGT assets in the fund to their market value at 30 June 2026, for the purposes of Division 296 calculations only.

What this means in practice

If your SMSF holds assets — shares, property, or other investments — that have increased significantly in value since they were purchased, a large portion of any future capital gain on those assets would otherwise be captured in the Division 296 earnings calculation. The cost base election ensures that only growth occurring after 1 July 2026 (the start date of the new regime) is counted toward the Division 296 tax, not historical gains accumulated before the law existed.

This election must be made by the due date for lodging the fund's 2026-27 tax return. It cannot be reversed. It does not affect the fund's regular CGT calculations, only the Division 296 earnings calculation. Given the irrevocable nature of the election and the complexity of the interaction with existing assets, we strongly recommend SMSF trustees with balances approaching or above $3 million discuss this with us as a priority.

Note: this cost base reset option is not available to retail or industry fund members. Those funds will instead benefit from a separate transitional provision that reduces the proportion of net capital gains subject to Division 296 for the first four years (2026-27 to 2029-30 inclusive).

What about the Low Income Superannuation Tax Offset?

As part of the same legislation, the Government has increased the Low Income Superannuation Tax Offset (LISTO). From 1 July 2027, the income eligibility threshold will rise from $37,000 to $45,000, and the maximum offset payment will increase from $500 to $810.

Treasury estimates the average increase in the LISTO for affected workers will be $410 per year. While this has received less attention than Division 296, it is meaningful for lower-income earners — particularly part-time workers and those returning to work after parental leave.

What should you do now?

If your total super balance is at or above $3 million across all funds, contact us to review your position before 30 June 2026.

Key actions include:

Obtaining current market valuations for all SMSF assets
Reviewing whether the CGT cost base election is appropriate for your fund
Modelling the likely Division 296 liability for 2026-2027
Reviewing whether the split of assets between superannuation and other structures remains optimal given the new tax.

Do not wait until after 30 June. Some decisions, including the CGT election, have irrevocable and time-sensitive consequences.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

What parents and employers need to know about super on Paid Parental Leave

Tue, 24 Mar 2026 09:15:17 GMT

For the first time in Australia's history, parents receiving Government-funded Paid Parental Leave will also receive superannuation contributions on those payments. The first round of payments will be made by the ATO from July 2026, covering leave taken during the 2025–26 financial year. This is a genuinely significant reform, particularly for women, who have historically missed out on retirement savings during career breaks.

The Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Act 2024 introduced a new government-funded superannuation contribution on Paid Parental Leave (PPL) payments. The contribution, known as the Paid Parental Leave Superannuation Contribution (PPLSC), is equal to 12% of the Parental Leave Pay received, matching the current Superannuation Guarantee rate.

The change applies to parents of children born or adopted from 1 July 2025. The ATO will calculate each parent's entitlement and pay it as a lump sum directly into their superannuation fund after the end of the relevant financial year. The first payments will be made from July 2026.

What has changed?

The Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Act 2024 introduced a new government-funded superannuation contribution on Paid Parental Leave (PPL) payments. The contribution, known as the Paid Parental Leave Superannuation Contribution (PPLSC), is equal to 12% of the Parental Leave Pay received — matching the current Superannuation Guarantee rate.

How much super will eligible parents receive?

The current Parental Leave Pay rate is $948.10 per week before tax — based on the National Minimum Wage for 2025–26. For a parent taking 24 weeks of Paid Parental Leave (the maximum available for children born between 1 July 2025 and 30 June 2026), the total PPL payment is approximately $22,754. At a 12% contribution rate, the PPLSC would be approximately $2,730 — paid as a lump sum plus an interest component after the financial year ends.

From 1 July 2026, the PPL entitlement also increases to 26 weeks (130 days) for children born or adopted from that date, which will increase the super contribution amount proportionally.

What does this mean for women's retirement savings?

The gender superannuation gap has been a persistent feature of Australia's retirement system. Women retire with significantly less super than men on average, largely because career breaks taken for caring responsibilities result in years of missed contributions. This reform begins to address that gap. For a 30-year-old parent, the compounding impact of receiving even $2,730 in super contributions at that age, invested in a growth option over 35 years, could add approximately $7,000 to their retirement balance.

While this alone will not close the gender super gap, it represents an important acknowledgement that parental leave should not come at the permanent cost of retirement savings.

What do employers need to do?

Importantly, employers are not required to calculate or pay the PPLSC. The ATO handles the calculation and payment directly from government funds to the employee's super fund.

However, there are a few things employers should be aware of:

Employers can still voluntarily pay superannuation on top of the government contribution if their enterprise agreement, employment contract, or policy provides for it. The government contribution does not replace employer obligations under existing agreements.
Employees' super fund details need to be current and accurate. The ATO will pay into the fund on record, so it is worth confirming these details with any employee about to take parental leave.
Record-keeping requirements for Parental Leave Pay remain unchanged. Employers must continue to issue payslips that clearly identify PPL payments.

What do employees need to do?

Very little. The system is largely automated. However, eligible parents should:

Ensure their personal details are consistent between Services Australia (Centrelink) and the ATO — including name and address — as discrepancies can delay or redirect payments.
Confirm that their super fund holds current and accurate member details.
Be aware that the PPLSC will count toward their concessional contributions cap ($30,000 for 2025-26). For most parents the amounts involved will be modest, but anyone already making significant salary sacrifice contributions should monitor their total.

Note for SMSF members

If you receive Paid Parental Leave and you hold your superannuation in a self-managed super fund, ensure your SMSF's bank account details are up to date with both Services Australia and the ATO. SMSF trustees should also check that the fund is in a position to receive contributions and that compliance obligations remain current.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Holiday homes under the ATO spotlight: Are your deductions at risk?

Tue, 24 Mar 2026 08:01:18 GMT

If you own a holiday home that you also rent out — whether through a property manager, Airbnb, Stayz or a similar platform — a significant shift in ATO guidance released in November 2025 could materially change what you can claim at tax time.

The change takes full effect from 1 July 2026, and property owners need to act now.

What has changed?

The ATO released Draft Taxation Ruling TR 2025/D1 in November 2025, replacing a 40-year-old ruling (IT 2167) that had governed rental property deductions. The new approach is considerably stricter, particularly for properties that owners also use personally.

The key change involves the application of the 'leisure facility' rules under section 26-50 of the Income Tax Assessment Act 1997.

Under these rules, if the ATO determines that your holiday home is primarily used for your (or your family's) holidays and recreation, rather than primarily to generate rental income, certain deductions for holding the property will be denied entirely.

These denied deductions include mortgage interest, council rates, land tax, insurance, and repairs and maintenance. Notably, this rule is not new law but the ATO acknowledges it has never previously made its views on this provision public. That changes from 1 July 2026.

What is a 'leisure facility' in the ATO's view?

Under TR 2025/D1, a rental property will be treated as a leisure facility if it is used, or held for use, mainly for your holidays or recreation (or those of your family and friends at no charge or at a reduced rate).

The ATO determines this by looking at the overall pattern of use across a period of time, not just a single year.

Red flags that increase your risk of being classified as a leisure facility include:

Blocking out dates during peak periods (school holidays, Christmas, Easter) for personal use
Advertising the property at above-market rates in peak periods in a way that deters bookings
The property being occupied personally, or by family and friends at a reduced rate, more than it is rented commercially
The property generating very low rental income relative to its holding costs

By contrast, a property is unlikely to be classified as a leisure facility if it is consistently available to the public at market rates throughout the year — including during peak holiday periods — and is genuinely managed as an income-producing asset.

What deductions are still allowed?

Even where a property is classified as a leisure facility, certain deductions remain available. These are expenses directly related to earning rental income, such as real estate agent or platform commissions, advertising costs, linen and cleaning after guest stays, and a proportional share of utility costs attributable to rental periods.

The broad holding costs, including interest, rates, insurance and general maintenance, are what become non-deductible. groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash, particularly older Australians and those in regional or remote areas.

The transitional period and why you need to act now

The ATO has provided transitional relief: it will not devote compliance resources to reviewing whether section 26-50 applies to properties owned and arrangements entered into before 12 November 2025, for income years ending before 1 July 2026. This means the 2025-26 tax return is likely your last year of protection for pre-existing arrangements.

From 1 July 2026, the new rules will be actively applied. New arrangements, including new loan facilities taken out after 12 November 2025, are not protected by the transitional concession.

What should you do before 30 June 2026?

Review how your holiday property is being used and rented.
Consider whether it genuinely produces income as a priority over personal use.
Ensure your records clearly document all rental periods, personal use periods, and evidence of genuine availability at market rates.

If you are relying on rental deductions to offset income from other sources, the impact of losing those deductions under the new rules could be significant. Please contact us to review your specific situation.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Cash is making a comeback: Is your business ready?

Tue, 09 Dec 2025 22:20:27 GMT

For years, businesses have been moving away from cash and for good reason. Digital payments are quick, traceable, and cut down on the risk of theft or counting errors. But that tap-and-go world might soon have to make room again for notes and coins.

The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel, even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash.

Who will need to accept cash...and who won't

The new rules are targeted and practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials.

If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges.

The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice.

Why it's happening

The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash, particularly older Australians and those in regional or remote areas.

There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential.

What this means for your business

For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include:

Re-establishing cash floats and tills
Staff training to handle and verify cash
More frequent bank deposits and reconciliation procedures

For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that.

There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital, especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service.

Preparing for the change

With final regulations expected soon, it’s worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs.

If you’re exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations.

Looking ahead

Cash isn’t going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it.

If you’d like help assessing how these rules could affect your operations or what the exemption means for your business, get in touch with our team.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Know the rules before you break them. Why SMSF education matters more than ever

Tue, 09 Dec 2025 22:09:10 GMT

Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities. The Superannuation Industry (Supervision) Act 1993 (SISA) contains detailed rules on trustee duties, investments, borrowing, payments and record-keeping.

Simply put, you cannot identify or avoid breaches you don’t know exist. For trustees, this should mean education is not optional but is essential for risk management.

Why understanding SISA matters

You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early.
Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions.
Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members.

The ATO's focus on education: What trustees need to know

The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction.

However, trustees should not wait for an ATO directive before getting educated. Such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators.

Practical steps trustees can consider

Use the ATO’s official SMSF guidance. Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees:
Setting up an SMSF
Running an SMSF
Winding up an SMSF
Complete the ATO’s ‘knowledge check’. The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk.
Seek timely professional advice. If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action.
Document your learning and decisions. Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply.

Opportunity and responsibility

SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes.

The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but ideally, you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help early to better protect your fund and retirement outcomes.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Unlocking tax savings: Can your MBA or other studies pay off at tax time?

Tue, 09 Dec 2025 21:36:32 GMT

If you’ve invested in further study – an MBA, a leadership course, or a postgraduate qualification – you might be wondering: can this help at tax time?

For many professionals, the answer is yes but only if the right boxes are ticked. The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties.

Let’s unpack how it works with a real-world example and some practical takeaways.

The s cenario: Daniel's MBA

Daniel works in the Department of Defence and recently completed an MBA through a private provider. His employer supported his studies with a $40,000 study allowance, and the course fees totalled $18,000. He deferred payment using the FEE-HELP loan system and declared the allowance as taxable income in his return.

Now he’s asking:

Can I claim a deduction for my MBA fees?
Does it matter that I used FEE-HELP?
Does the employer allowance change things?

The type of loan matters

Not all funding for education courses is treated equally.

HECS-HELP: No deduction

If your course is a Commonwealth supported place (most undergraduate and some postgraduate university programs), you can’t claim a deduction. There is specific legislation in the tax system which denies deductions for fees covered by

HECS-HELP, even if you pay them upfront and even if the course is closely related to your work.

FEE-HELP: Potential deduction

If you’re in a full-fee course, your tuition fees might be deductible if the study directly relates to your current employment or business activities. The ATO doesn’t allow a deduction for loan repayments later on, just the course fees themselves.

Practical tip

Check your course statement or loan confirmation to see if you’re under HECS-HELP or FEE-HELP. Only FEE-HELP (or private payment) gives you potential deductibility.

The "nexus" test: Linking study to your current work

Even if the funding passes the first test, the purpose of the study is key. The ATO will only allow deductions if the course maintains or improves the skills you already use in your job, or is likely to increase your income in that same role.

It won’t apply if you’re studying to move into a new field or start a different career.

The ATO issued a detailed ruling on this topic in 2024 which provides some clear examples:

Allowed: A store manager doing an MBA to strengthen leadership and business operations skills.
Denied: A sales rep doing an MBA to change careers into consulting — the link to the current role was too weak.

For Daniel, the deduction depends on whether his MBA subjects (like strategy, policy or management) build directly on his current Defence role. The fact that his employer funded the course helps demonstrate relevance but it’s not proof on its own.

In some cases you might find that specific subjects or modules are sufficiently linked with current income earning activities, while other subjects are too general in nature for the fees to be deductible.

Employer allowances and HELP repayments

The $40,000 allowance Daniel received is assessable income and it’s taxed just like salary. But that doesn’t stop him from claiming eligible self-education deductions for the course fees.

HELP loan repayments later on are not deductible as they're simply a repayment of debt. The timing of the deduction is based on when the course expense was incurred (not when the loan is repaid).

Making it practical

If you’re planning further study or reviewing a recent course, here’s how to make sure you get it right:

Check your loan type: FEE-HELP or private fees can be deductible; HECS-HELP cannot.
Gather evidence: Keep course outlines, job descriptions, and any correspondence showing the study supports your current work.
Claim what’s relevant: You can only claim expenses directly connected to your current job (fees, books, and possibly travel).
Be ready for review: Large claims often attract ATO attention. A private ruling can provide peace of mind if the amount is significant.

Key takeaways

For many professionals, postgraduate studies like an MBA can deliver both career and tax benefits but only if they relate directly to your current role.

Handled correctly, self-education deductions can return thousands in tax savings. For Daniel, that could mean a refund of over $5,000 on an $18,000 course.

If you’re considering further study, talk to us before you enrol or claim. A quick chat could ensure your next qualification delivers the best return both professionally and financially.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Payday Super: Fundamental changes for employers

Tue, 09 Dec 2025 21:18:27 GMT

If you run a business, you already know the juggling act that comes with managing the payroll process: paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff.

If you run a business, you already know the juggling act that comes with managing the payroll process – paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff.

It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees, especially casual and part-time workers, get their retirement savings when they get paid.

What's changing?

From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds.

If payments are late, the Superannuation Guarantee Charge (SGC) will apply. That means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full.

Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible.

On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought.

The change isn’t just about compliance; it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700.

Why it's good for business

This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer.

Less admin: Paying super when you run payroll means no more quarterly payment crunches.
Fewer compliance risks: ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball.
Stronger employee trust: Staff can see their super growing in real time, which might help with engagement and retention.
Smoother cash flow management: Paying smaller, regular amounts of super is often easier to manage than large quarterly sums.

The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks.

How to get ready: Practical steps to take now

You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how:

Check your payroll software. Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed.
Map your pay cycles. Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each.
Brief your team. Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help.
Plan your cash flow. Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks.
Monitor and review. Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released.

If you outsource payroll, contact your provider soon as many are already updating systems for Payday Super and can help you make a seamless switch.

The bottom line

Payday Super isn’t just a compliance change, it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve.

If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team. We can help you make sure your business is ready to go when Payday Super commences.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Cybersecurity in your business: Safeguarding financial data in the digital age

Mon, 10 Nov 2025 22:42:34 GMT

Cybersecurity is fast becoming a critical business strategy – and if it’s not, it should be. Many businesses hold critical data that poses significant risk to both businesses and their customers if the data they hold is not safeguarded from cybersecurity threats.

The largest threats to businesses come from external entry points exposed by staff, through phishing links, malware being downloaded and payment fraud. The valuable information held by some businesses (such as professional firms) make them prime for cyber attacks, which can have devastating impacts on businesses and their customers.

Outside of Government organisations, the financial services sector was the most targeted industry in Australia in FY 2024/25, with the cost of these cybercrimes increasing up to 55% for small and medium businesses.

People: The biggest cyber ri sk

But where does your cyber strategy start, and how do you know what the risks are? The biggest risk to Australian businesses is its people. More than 85% of all cybersecurity incidents are caused by human error. The top three incident types all rely on staff and business decisions to gain access into systems, meaning it is more important than ever to conduct regular staff training.

Staff training should focus on identifying phishing attempts, understanding what to look for in malicious emails and content and how to maintain healthy password practices.

Technology and updates: Don't let legacy systems create weakness

Another considerable business risk is legacy hardware and software being used in your environment. It might seem like a small frustration, turning your computer off for updates regularly, and using the latest versions of software, replacing hardware to align with required standards, but it works to close the gaps of security vulnerabilities.

Recommendations aligned with the Australian Signals Directorate’s Essential 8 Framework are that all critical vendor patches are applied within 48 hours of release, and any non-critical patches are applied within two weeks. This method applies to networking equipment, third party vendor software and device operating systems.

Recently, Microsoft have made the Windows 10 Operating System End of Life (EOL) which means that devices still running on this operating system can no longer receive security updates, a vulnerability that malicious actors will no doubt use to their advantage.

Visibility and monitoring: Detec ting threats early

Realistically, you cannot defend what you cannot see. An important safeguard is event logging, reporting and alerting being setup in your environment.

Just by way of example, the average breach for financial services businesses in Australia takes 288 days to detect. 288 days of unmitigated breaches, access to customer and staff data, contact lists, patterns of behaviour and possibly already setting up rules and routing inside the environment that the business is entirely unaware of.

Setting up appropriate logging and alerts to ensure that you are notified when something risky, like logging in from Australia at 10am and Japan at 11am, is happening inside your environment. Understanding when unauthorised access to systems has occurred is critical in being able to then assess the potential scope of an incident, so it can then be managed.

The importance of a cyber incident response plan

A Cyber Incident Response Plan (CIRP) might seem like another piece of paper, but it is critical in defining the steps that your organisation needs to take to act, mitigate and respond to a cyber event. An adequate CIRP will include several critical components, but the incident management team, detection methods, incident categorisation, evidence process and resolution plans form the baseline of what will help an organisation act swiftly, and appropriately for the event type.

A CIRP that has been tested regularly ensures that in the event of a cybersecurity incident, your organisation has a prioritised and effective response that deals with the technical concerns, the potential data breaches and any ongoing communications required either internally or externally with customers and stakeholders.

Protecting your business, clients and reputation

In today’s digital world, it is never more important for businesses to ensure their data, systems, staff and clients are protected from threats. Cybersecurity and risk strategies are critical in this landscape and should consider different components, including staff training, technology strategies, data and information handling policies, and incident response plans.

Considering cybersecurity as a business strategy is how organisations will survive, and thrive, and ensure that their reputation, financial security and customers are protected.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Proposed extension of the Instant Asset Write-Off and other tax measures

Mon, 10 Nov 2025 21:57:34 GMT

A new Bill before Parliament – the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 – proposes several key changes that could affect small businesses, listed companies, and the not-for-profit sector.

The headline measure is the proposed extension of the $20,000 instant asset write-off for another year, to 30 June 2026.

Small business boost: $20,000 Instant Asset Write-Off extended

If the Bill passes, small businesses with an aggregated annual turnover of less than $10 million will continue to be able to immediately deduct the full cost of eligible assets costing under $20,000 (excluding GST) through to 30 June 2026.

The threshold applies per asset, meaning multiple purchases can qualify if each individual item is under the limit. To claim the deduction, the asset must be first used or installed ready for use by the new deadline.

This measure remains one of the simplest and most practical tax incentives available to small businesses. It provides a direct cash-flow benefit by allowing the full deduction in the year of purchase instead of spreading depreciation over several years, as long as the taxpayer would actually have a tax bill for that year. For example, a tradesperson upgrading tools, or a café purchasing a new fridge or coffee machine, can immediately claim the full deduction – freeing up cash for reinvestment elsewhere in the business.

While the proposal still needs to pass Parliament, now is the time to plan. If you are considering new equipment or technology upgrades, budgeting early ensures assets can be delivered and installed before the cut-off date once the law is enacted.

Strengthened corp orate disclosure

The Bill also proposes tighter disclosure rules for listed companies. Changes to the Corporations Act 2001 would require the disclosure of equity derivative interests – such as options, swaps, and short positions – under the substantial holding regime. These reforms are designed to improve market transparency and make it harder for significant shareholdings or control interests to remain hidden.

For listed entities, this will increase compliance obligations and may require updates to internal monitoring and reporting systems. Investors with substantial positions in listed companies should also review their current arrangements to ensure future compliance.

Greater transparency for charities

For the not-for-profit sector, the ACNC Commissioner would gain the power to publicly disclose “protected information” such as details of investigations, provided it meets a public harm test. This aims to strengthen public confidence in the charity sector by showing that the regulator is taking action where misconduct occurs.

For well-run charities, stronger transparency can enhance community trust but it also highlights the need for robust governance, record-keeping, and compliance processes.

Financial re gulator reviews simplified

Finally, the Bill would reduce the frequency of reviews of ASIC and APRA by the Financial Regulator Assessment Authority from every two years to every five. While largely administrative, this signals a shift toward streamlined oversight to allow regulators to focus on core functions.

What you should do now

Although these measures are still before Parliament, it’s wise to start planning. For small businesses, consider your 2025–26 capital expenditure needs and make sure any planned purchases can be installed and ready for use by 30 June 2026 if you are hoping to rely on the upfront deduction. For charities and listed entities, review governance and reporting frameworks to prepare for greater transparency requirements.

We’ll keep you updated as the Bill progresses. In the meantime, contact us if you’d like to discuss how these proposed changes might fit into your business or investment strategy.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

When medical bills meet tax rules – Lessons from a heartbreaking case

Mon, 10 Nov 2025 21:47:02 GMT

Imagine this: after years of hardship and illness, you’re forced to retire early on a Total and Permanent Disability (TPD) pension from your super fund. It’s your only income stream. Then come the medical bills – tens of thousands of dollars in treatments to manage the very conditions that ended your career. You might assume those costs are tax deductible as the TPD pension was payable because of this disability.

Unfortunately, a recent tribunal case shows it’s not that simple. In Wannberg v Commissioner of Taxation [2025] ARTA 1561, the Administrative Review Tribunal (ART) upheld the ATO’s decision to deny nearly $100,000 in medical deductions. The case is a stark reminder that the tax system draws a sharp line between earning income and dealing with your health.

The story behind the case

The taxpayer, Mr Wannberg, had left the workforce due to severe mental and physical health issues caused by years of abuse. His TPD pension from his super fund was his only income. In 2024, he applied to the ATO for a private ruling, asking whether about $98,000 in medical expenses – including psychotherapy, residential treatment, and dental work – could be claimed as deductions.

His argument was heartfelt and logical: these treatments were essential to manage his disabilities and sustain his eligibility for the pension. He compared his situation to a 2010 High Court case (Anstis), where a student was allowed to deduct self-education costs linked to her Youth Allowance.

But the ATO said no... and the tribunal agreed.

Why the deductions fail ed

The key issue came down to a single piece of tax legislation: section 8-1 of the Income Tax Assessment Act 1997. To be deductible, an expense must be incurred “in gaining or producing your assessable income” and must not be of a private or domestic nature.

The tribunal found no direct link – or “nexus” – between the medical treatments and the pension income. The TPD pension was payable because of his disability, not because of any ongoing effort to maintain it. As the tribunal put it, the medical costs helped him live with his condition, but didn’t produce the pension.

In other words, while staying healthy might be personally essential, it doesn’t make those expenses tax-deductible. The costs were considered private in nature, similar to most therapy, medical, or dental bills

Key takeaways from the case

This decision offers a few key takeaways for anyone receiving disability pensions, super income streams, or other support payments:

Understand the “nexus” test: An expense must directly help you earn your income. Medical costs for managing a condition usually don’t meet that test.
Recognise the private line: Even if a treatment relates to your ability to work, it’s likely still “private” unless it directly relates to producing income.
Treatment vs assessment: Some taxpayers are required to obtain certificates from medical practitioners to maintain a licence so that they can continue with their current income producing activities. These costs are often deductible, unless the individual receives medical treatment.
Plan for non-deductible costs: If you rely on disability or super pensions, factor medical expenses into your financial plan. Consider insurance options, offsets, or rebates (like private health or Medicare levy exemptions) to ease the load.
Seek advice early: Before spending large sums, get an ATO private ruling or professional advice.

The Wannberg case is a tough reminder that the tax law cares more about how income is produced than how life is lived. The system draws a firm line between personal wellbeing and income generation – and unfortunately, even genuine medical needs often fall on the wrong side of that line.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Super tax shake-up: Big balances beware

Mon, 10 Nov 2025 21:35:46 GMT

If your super balance is comfortably below $3 million, you can probably relax — the proposed changes to the super rules shouldn’t adversely affect you (yet). But if your super is nudging that level, or if you’re clearly over, the Treasurer’s latest announcement could change how you think about super’s generous tax breaks.

For some time now, the Government has been planning to introduce targeted measures to reduce tax concessions for people with superannuation balances over $3 million. This has commonly been referred to as the Division 296 tax.

However, the Government has reworked the proposed new tax — part of the Better Targeted Superannuation Concessions (BTSC) policy — attempting to make it simpler, fairer, and more practical. After a wave of industry criticism, the revised version keeps the broad policy intent (reducing tax concessions for very large balances) but removes some of the more problematic features.

Let’s break down what’s changed and what it means for you.

Whats changing and why it's simpler

The original 2023 proposal aimed to apply an extra 15% tax on “earnings” from super balances above $3 million. The big flaw? “Earnings” included unrealised gains — paper profits on assets like property or shares that hadn’t been sold. This meant some people could have owed tax on increases in value they hadn’t actually received in cash.

The reworked model drops unrealised gains from the equation entirely, taxing only realised earnings — actual income and capital gains when assets are sold. This makes the system far more practical and aligned with everyday tax rules. No more worrying about funding a tax bill on assets you haven’t sold.

A fairer, tiered approach

The new rules introduce a two-tier system for high balances:

Tier 1 ($3m–$10m): Extra 15% tax on earnings from this portion (making a total rate of 30%).
Tier 2 (over $10m): Extra 25% tax on earnings above $10m (for a total rate of 40%).

Both thresholds will be indexed annually to inflation ($150,000 steps for the $3m tier and $500,000 for the $10m tier), which should prevent “bracket creep” over time.

Importantly, the start date has been pushed back to 1 July 2026, with the first assessments expected in 2027–28.

The Government estimates less than 0.5% of Australians will be affected at the $3m level, and fewer than 0.1% at the $10m mark.

What this means in practice

Here are a couple of examples from Treasury to help you get your head around this.

Consider Megan, who has a $4.5 million super balance split between an SMSF and an APRA fund. She earns $300,000 in realised income for the year within the super system. The super balance above $3m represents is one-third of the total balance, so she’ll pay $15,000 in additional Division 296 tax (15% × 33.33% × $300,000).

Emma, on the other hand, has $12.9 million in her SMSF and $840,000 in earnings. She pays 15% on the Tier 1 portion and an extra 10% on the Tier 2 portion—a total of around $115,000 in extra tax.

These examples show how the tax scales up progressively. The ATO will calculate each individual’s total super balance across all funds (SMSFs and APRA funds) and determine the proportionate amount of earnings to be taxed.

Why it's still good news (for most)

For many SMSF members, this update is a relief. By removing unrealised gains, it eliminates valuation headaches and liquidity pressures — particularly for those holding property or unlisted assets.

That said, individuals with super balances above $10m will face a higher overall rate (up to 40%), which may prompt a rethink of long-term strategies.

However, remember that updated legislation relating to this measure hasn’t been introduced to Parliament and things could change before the proposed rules become reality.

Low income superannuation tax offset

In addition to introducing the revamped Division 296 tax, the Government has announced that it will increase the Low Income Superannuation Tax Offset (LISTO) from $37,000 to $45,000 from 1 July 2027.

The maximum payment will also increase to $810.

Treasury estimates that the average increase in the LISTO payment will be $410 for affected workers.

What to do now

Check your total super balance (TSB) now and project where it may be by 2026.
Seek advice early: Strategies like managing liquidity, reviewing asset allocations, and timing asset sales could make a real difference.
Stay informed: Draft legislation is expected in 2026. We’ll keep you updated through our newsletters.

Overall, the Government’s revised approach strikes a more balanced tone: fewer administrative headaches for most, but less generosity for the ultra-wealthy. If your balance is near or above $3 million, now’s the time to plan ahead — not panic.

Your future self (and your accountant) will thank you.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Accessing superannuation funds for medical treatment or financial hardship

Fri, 17 Oct 2025 04:57:36 GMT

Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible.

Early access is generally available in two situations:

Financial hardship: Where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses.
Compassionate grounds: Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain.

Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information.

If approved, the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below.

When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account.

It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance).

The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early .

Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Government review of supermarket pricing: What it could mean for your business

Fri, 17 Oct 2025 04:44:44 GMT

The Federal Government recently wrapped up a consultation process on supermarket unit pricing. While the topic might sound like a purely consumer issue, it could have very real commercial impacts for businesses supplying into the grocery sector.

On 1 September 2025, Treasury opened consultation on strengthening the Retail Grocery Industry (Unit Pricing) Code of Conduct. Submissions closed just a few weeks later on 19 September 2025, marking the end of a very short opportunity for stakeholders to have their say.

A quick recap

Unit pricing is what allows shoppers to compare costs per standard measure (e.g. $/100g or $/litre) across different pack sizes and brands. Since 2009, large supermarkets have been required to display this information to help customers spot value. While compliance has been relatively low-cost and penalties limited, the Government’s review signals that much tighter rules could be on the way.

Why now?

The ACCC’s recent supermarket inquiry highlighted that while unit pricing helps, there are still gaps. The big concern is shrinkflation—when pack sizes quietly reduce while prices remain the same or higher. With cost-of-living pressures dominating headlines, the Government is looking at clearer, fairer pricing to rebuild consumer trust.

What might change?

Proposals considered in the consultation paper include:

Shrinkflation alerts – supermarkets may need to flag when a product becomes smaller without a matching price cut.
Clearer displays – larger, more prominent unit prices both in-store and online.
Wider coverage – expanding the rules beyond major supermarkets to smaller retailers and online sellers.
Standardised measures – eliminating confusing “per roll” vs “per sheet” comparisons.
Civil penalties – introducing fines for non-compliance.

The commercial impact

For suppliers, packaging decisions could come under closer scrutiny. For retailers, costs might arise from updating shelf labels, software, or e-commerce systems. But there are also opportunities: businesses that embrace transparency could build loyalty and stand out in a competitive market.

What you should do

Now that the consultation period has closed, Treasury will consider submissions and the Government is expected to announce its response later this year.

Businesses in food, grocery, and household goods should stay alert—the final shape of the rules could affect pricing, packaging, and compliance obligations across the sector.

At Goodwin Chivas & Co., we can help you model potential compliance costs, assess financial impacts and prepare for upcoming regulatory change. Reach out to discuss how this review might affect your business.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

ATO interest charges are no longer deductible: What you can do

Fri, 17 Oct 2025 04:30:59 GMT

Leaving debts outstanding with the ATO is now more expensive for many taxpayers. As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years.

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy.

R efinancing ATO deb t

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities.

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as:

GST
PAYG instalments
PAYG withholding for employees
FBT

However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not.

Individ uals

If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity:

Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible.
Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible.

However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible.

Companies and trusts

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business.

However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them.

Partnerships

The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts.

However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity.

Practical takeaway

Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible.

Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates.

The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction.

If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Trust resolutions: Why timing and evidence matter

Fri, 17 Oct 2025 04:23:39 GMT

A recent decision of the Administrative Review Tribunal (Goldenville Family Trust v Commissioner of Taxation [2025]) highlights the importance of documentation and evidence when it comes to tax planning and the consequences of not getting this right.

The case involved a family trust which generated significant amounts of income. For the 2015, 2016 and 2017 income years, the trustee attempted to distribute most of the income to a non-resident beneficiary. As the trustee believed the income was classified as interest (this was challenged successfully by the ATO), the trustee assumed that the income would be subject to a final Australian tax at 10%, under the non-resident withholding rules. This was clearly more favourable than having the income taxed in the hands of Australian resident beneficiaries at higher marginal rates.

However, the ATO argued that the distribution resolutions were invalid and the Tribunal agreed. Why? The main reason was a lack of evidence to prove that the distribution decisions were made before the end of the relevant financial years.

While there were some documents that were purportedly dated and signed “30 June”, the Tribunal wasn’t convinced that the decisions were actually made before year-end and it was more likely that these documents were prepared on a retrospective basis. The evidence suggested the decisions were probably made many months after year-end, once the accountant had finalised the financial statements.

The outcome was that default beneficiaries (all Australian residents) were taxed on the income at higher rates.

Timing of trust resolution decisions is critical

For a trust distribution to be effective for tax purposes, trustees must reach a decision on how income will be allocated by 30 June each year (or sometimes earlier, depending on the trust deed). It might be OK to prepare the formal paperwork later, but those documents must reflect a genuine decision made before year-end.

For example, let’s say a trust has a corporate trustee with multiple directors. The directors meet at a particular location on 29 June and make formal decisions about how the income of the trust will be appointed to beneficiaries for that year. Someone keeps handwritten notes of the meeting and the decisions that are made. On 5 July the minutes are typed up and signed. The ATO indicates that this will normally be acceptable, but subject to any specific requirements in the trust deed.

If the ATO believes the decision was made after 30 June (or documents were backdated), the resolution can be declared invalid. In that case, you might find that one or more default beneficiaries are taxed on the taxable income of the trust or the trustee is taxed at penalty rates. This could be an unexpected and costly tax outcome and could also lead to other problems in terms of who is really entitled to the cash.

Broader lessons – it's not just about trust distributions

The timing issue is not confined just to trust distribution situations. Other areas of the tax system also turn on when a decision or agreement is actually made, not just when it is eventually recorded.

For example, if a private company makes a loan to a shareholder in a given year, that loan must be repaid in full or placed under a complying Division 7A loan agreement by the earlier of the due date or lodgement date of the company’s tax return for the year of the loan. If not, a deemed unfranked dividend can be triggered for tax purposes.

If a complying loan agreement is put in place then minimum annual repayments normally need to be made to avoid deemed dividends being recognised for tax purposes

A common way to deal with loan repayments is by using a set-off arrangement involving dividends that have been declared by the company. However, in order for the set-off arrangement to be valid there are a number of steps that need to be followed before the relevant deadline.

The ATO will typically want to see evidence which proves:

When the dividend was declared; and
When the parties agreed to set-off the dividend against the loan balance.

If there isn’t sufficient evidence to prove that these steps were taken by the relevant deadline then you might find that there is a taxable unfranked deemed dividend that needs to be recognised by the borrower in their tax return.

Documenting decisions before year-end

The key lesson from cases like Goldenville is that documentation shouldn’t be an afterthought – lack of contemporaneous documentation can fundamentally change the tax outcome. What normally matters most is when the relevant decision is actually made, not when the paperwork is drafted.

In practice, this often means:

Check relevant deadlines and what needs to occur before that deadline.
If a decision needs to be made before the deadline, ensure that a formal process is followed to do this. For example, determine whether certain individuals need to hold a meeting or whether a circular resolution could be used.
Produce contemporaneous evidence of the fact that the decision has been made. You might consider sending a brief email to your accountant or lawyer explaining the decision that has been made before the relevant deadline, basically providing a time-stamped record of the decision.
Finalise paperwork: formal minutes of meetings can sometimes be prepared after year-end, but they must accurately reflect the earlier decision.

Thinking carefully about timing – and building a habit of producing clear evidence of decisions as they are made – is often the difference between a tax planning strategy working as intended and an expensive dispute with the ATO.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

RBA cuts rates to 3.60%: What this means for you

Sat, 06 Sep 2025 07:27:56 GMT

In a widely anticipated move on 12 August 2025, the Reserve Bank of Australia (RBA) delivered a 25 basis point rate cut, lowering the cash rate from 3.85% to 3.60%, the third reduction this year. This rate is now at its lowest level since March 2023 signalling renewed monetary easing amid persistent economic fragility.

Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did however leave the door open for further action if conditions warrant it.

What's cut rates now?

The unanimous decision was made because:

Headline inflation has eased to 2.1% year on year and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target.
There’s still soft economic growth, quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%.

This is a welcome move for many with flow-on impacts across a wide section of the community.

Borrowing and mortgages: a borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually.

Refinancing

The latest cut has triggered a wave of refinancing, Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses.

Housing and lending

The cut may revive home buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief.

Currency and markets

The Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, particularly the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins.

While there are always winners and losers with a decision like this, for many Australians this is a positive change. Either way, please reach out if we can help you understand how to best manage your debt, exploring refinance options, adjust pricing models or evaluating investment readiness.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Superannuation guarantee: Due dates and considerations for employees and employers

Sat, 06 Sep 2025 07:20:27 GMT

On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday.

To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH).

The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers.

Employers

To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date.

Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some

superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions.

If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO article The super guarantee charge.

Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages.

There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this.

Employees

It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips.

Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO.

There is some helpful discussion on this process on the ATO website .

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Non-compete clauses: The next stage

Sat, 06 Sep 2025 07:08:45 GMT

Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027.

This increase affects cash flow, payroll accruals and employment contracts, especially where total remuneration includes superannuation. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers.

Consultation paper

Treasury has since issued a consultation paper, seeking feedback in the following key areas:

How the proposed ban on non-compete clauses should be implemented;
Whether additional reforms are required to the use of post-employment restraints, including for high-income employees;
Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and
Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act.

Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment.

If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Creating a more dynamic and resilient economy

Sat, 06 Sep 2025 07:04:43 GMT

The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations.

The PC has now released its interim report which presents some draft recommendations that are focused on two key areas:

Corporate tax reform to spur business investment
Where efficiencies could be made in the regulatory space (ie, cutting down on red tape).

The interim report makes some interesting observations and key features of the draft recommendations are summarised below.

Corp orate tax reform

The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes.

The first stage of this process would involve two linked components:

Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate.
New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion.

Cutting down on red tape

The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps.

The proposed fixes include:

The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism.
Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered.
Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation.

These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia.

The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

A win for people carrying student debt

Sat, 06 Sep 2025 06:56:24 GMT

In support of young Australians and in response to the rising cost of living, the Australian Government has passed legislation to reduce student loan debt by 20% and change the way that loan repayments are determined. This should help students significantly more than the advice from outside of Parliament – cut down on the smashed avo.

20% reduc tion in student debt

The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:

HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
VET Student loans
Australian Apprenticeship Support Loans
Student Start-up Loans
Student Financial Supplement Scheme.

How the reduction will work

The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied.

If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.

The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility.

Changes to repayments

The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.

The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.

Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above

$67,000. The repayments will be calculated only against the portion of income that is above $67,000.

Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.

For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Updates to superannuation rates and thresholds

Wed, 13 Aug 2025 21:52:05 GMT

Super guarantee rate now 12%: What it means for employers

From 1 July 2025, the superannuation guarantee (SG) rate officially rose to 12% of ordinary time earnings (OTE). This is the final step in the gradual increase legislated under previous reforms.

What’s changed?

Old rate: 11.5% (up to 30 June 2025)
New rate: 12% (from 1 July 2025)

This increase affects cash flow, payroll accruals and employment contracts, especially where total remuneration includes superannuation.

Employer checklist

Update payroll software: ensure systems are calculating 12% SG correctly from 1 July 2025 pay runs
Review employment agreements: if contracts are set to inclusive of super, the take-home pay of employees may reduce unless renegotiated or the employer decides to bear the cost of the increased SG rate
Budget for higher super contributions: consider possible cash flow impacts
Remember that significant penalties can be imposed for late or incorrect SG payments, including loss of deductions, interest and other administration charges.

Personal superannuation contributions

The annual concessional contribution cap will remain at $30,000 for the 2025/2026 financial year. The annual non-concessional contribution (NCC) cap is set at four times the concessional contribution cap meaning it will also remain at $120,000.

Although the annual NCC cap has not changed, NCCs can now be made by individuals with a total super balance (TSB) of less than $2,000,000 on 30 June 2025 (assuming they have not reached the age 75 deadline and any prior bring forward periods are considered). This is due to the fact that the upper TSB limit links to the general transfer balance cap (TBC) which has increased to $2,000,000.

The relevant TSB amounts for NCCs in the 2025/2026 financial year are summarised in the table below:

Personal deductible contributions

A superannuation fund member may be able to claim a deduction for personal contributions made to their super fund with personal after-tax funds.

A member will normally be eligible to claim a deduction if:

The member makes an after-tax contribution to their superannuation fund in the relevant financial year
They are aged under 67 or 67 to 74 and meet a work test or work test exemption
They have provided the superannuation fund with a valid notice of intent to claim
The super fund has provided the member with acknowledgement of the notice of intent to claim.

Notice of intent to claim

If the member is eligible and would like to claim a deduction, then they must notify their super fund that they intend to claim a deduction.

The notice must be valid and in the approved form – Notice of Intent to Claim or vary a deduction for personal super contributions ( NAT 71121 ).

The tax legislation provides a notice of intent to claim will be valid if:

The individual is still a member of the fund
The fund still holds the contribution
It does not include all or part of an amount covered by a previous notice
The fund has not started paying a super income stream using any of the contribution
The contributions in the notice of intent have not been released from the fund that the individual has given notice to under the FHSS scheme
The contributions in the notice of intent don't include FHSSS amounts that have been recontributed to the fund.

Notice of intent to claim

The member must provide the notice of intent to claim to the fund by the earlier of:

The day the individual lodges their income tax return for the relevant financial year; or
30 June of the following financial year in which the individual made the contribution.

However, if a super fund member provides a notice of intent after they have rolled over their entire super interest to another fund, withdrawn the entire super interest (paid it out of super as a lump sum), or commenced a pension with any part of the contribution, the notice will not be valid.

This means the individual will not be able to claim a deduction for the personal contributions made before the rollover or withdrawal.

Update superannuation and tax thresholds 2025/2026

Remaining unchanged

The following thresholds will remain unchanged for the 2025/2026 financial year.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Luxury cars: The impact of the modified tax rules

Wed, 13 Aug 2025 21:30:44 GMT

With the purchasing of luxury vehicles on the rise it’s important to be aware of some specific features of the tax system that can impact on the real cost of purchase. Often the tax rules provide taxpayers with a worse tax outcome if the car will be used for business or other income producing purposes compared with a non-luxury car, but this depends on the situation.

Let’s take a look at the key features of the tax system dealing with luxury cars and the practical impact they can have on your tax position.

Depreciation deductions and GST credits

Normally when someone purchases a motor vehicle which will be used in their business or other income producing activities there will be an opportunity to claim depreciation deductions over the effective life of the vehicle. Rather than claiming an immediate deduction for the cost of the vehicle, you will typically be claiming a deduction for the cost of the vehicle gradually over a number of years.

Likewise, a taxpayer who is registered for GST might be able to claim back GST credits on the cost of purchasing a motor vehicle that will be used in their business activities.

However, when you are dealing with a luxury car the tax rules will sometimes limit your ability to claim depreciation deductions and GST credits, impacting on the after-tax cost of acquiring the car.

How does it work?

Each year the ATO publishes a luxury car limit which is $69,674 for the 2025-26 income year. If the total cost of the car exceeds this limit, then this can impact the GST credits or depreciation deductions that can be claimed.

Let’s assume that Alice buys a new car for $88,000 (including GST) in July 2025. To keep things simple, let’s say Alice uses the car solely in her business activities and is registered for GST.

The first issue for Alice is that rather than claiming GST credits of $8,000, her GST credit claim will be limited to $6,334 (ie, 11th x $69,674).

We then subtract the GST credits that can be claimed from the total cost, leaving $81,666. As this still exceeds the luxury car limit, Alice’s depreciation deductions will be capped as well.

While she actually spent $89,000 on the car, she can only claim depreciation deductions based on a deemed cost of $69,674.

The end result is that Alice has missed out on some GST credits and depreciation deductions because she bought a luxury car.

Exceptions to the rules

There are some important exceptions to these rules.

The rules only apply to vehicles which are classified as ‘cars’ under the tax system. That is, the car limit doesn’t apply if the vehicle is designed to carry a load of at least one tonne or it is designed to carry at least 9 passengers.

The rules only apply if the vehicle was designed mainly for carrying passengers. The way we determine this depends on the nature of the vehicle and whether we are dealing with a dual cab ute or not.

For example, let’s assume Steve buys a ute which is designed to carry a load of at least one tonne. This isn’t classified as a car for tax purposes so Steve won’t miss out on GST credits or depreciation deductions.

However, let’s assume Jenny has bought a dual cab ute which is designed to carry a load of less than one tonne and fewer than 9 passengers. This is classified as a car and the luxury car limit will apply unless we can show that it wasn’t designed mainly to carry passengers. As we are dealing with a dual cab ute, we multiply the vehicle’s designed seating capacity (including the driver's) by 68kg. If the total passenger weight determined using this formula doesn’t exceed the remaining 'load' capacity, we should be able to argue that the ute wasn’t designed mainly for the principal purpose of carrying passengers, which means that Jenny should be able to claim depreciation deductions based on the full cost of the vehicle.

The approach would be different if we were dealing with something other than a dual cab ute, such as a four-wheel drive vehicle.

Luxury car lease arrangements

Normally when someone enters into a lease arrangement for a car and they use the car in their business or employment duties there’s an opportunity to claim deductions for the lease payments, adjusted for any private usage.

However, if the value of the car exceeds the luxury car limit then the tax rules apply differently. Basically, what happens is that the taxpayer is deemed to have purchased the car using borrowed money. Rather than claiming a deduction for the actual lease payments, instead we will be claiming deductions for notional interest charges and depreciation, subject to the luxury car limit referred to above.

Luxury car tax

Cars with a luxury car tax (LCT) value which is over the LCT threshold for that year are subject to LCT, which is calculated as 33% of the amount above the LCT threshold.

The LCT thresholds for the 2025-26 income year are:

$91,387 for fuel-efficient vehicles
$80,567 for all other vehicles that fall within the scope of the LCT rules

From 1 July 2025 the definition of a fuel-efficient vehicle has changed, meaning that a car will only qualify for the higher LCT threshold if it has a fuel consumption that does not exceed 3.5 litres per 100km (this was 7 litres per 100km before 1 July 2025).

Buying a car or other motor vehicle can be a complex process and there will be a range of factors to consider. If you need assistance with the tax side of things please let us know before you jump in and sign any agreements.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Interest deductions: Risks and opportunities

Wed, 13 Aug 2025 21:21:36 GMT

This tax season, we’ve seen a surge in questions about whether interest on a loan can be claimed as a tax deduction. It’s a great question as the way interest expenses are treated can significantly affect your overall tax position. However, the rules aren’t always straightforward. Here’s what you need to know.

The purpose of the loan

The most important thing when looking at the tax treatment of interest expenses is to identify what the borrowed money has been used for. That is, why did you borrow the money?

For interest expenses to be deductible you generally need to show that the borrowed funds have been used for business or other income producing purposes. The security used for the loan isn’t relevant in determining the tax treatment.

Let’s take a very simple scenario where Harry borrows money to buy a new private residence. The loan is secured against an existing rental property. As the borrowed money is used to acquire a private asset the interest won’t be deductible, even though the loan is secured against an income producing asset.

Redraw v offset acco unts

While the economic impact of these arrangements might seem somewhat similar, they are treated very differently under the tax system. This is an area to be especially careful with.

If you have an existing loan account arrangement, you’ve paid off some of the loan balance and you then use a redraw facility to access those funds again, this is treated as a new borrowing. We then follow the golden rule to determine the tax treatment. That is, what have the redrawn funds been used for?

An offset account is different because money sitting in an offset account is basically treated much like your personal savings. If you withdraw money from an offset account you aren’t borrowing money, even if this leads to a higher interest charge on a linked loan account. As a result, you need to look back at what the original loan was used for.

Let’s compare two scenarios that might seem similar from an economic perspective:

Example 1: Lara's redraw facility

Lara borrowed some money five years ago to acquire her main residence. She has made some additional repayments against the loan balance. Lara redraws some of the funds and uses them to acquire some listed shares. Lara now has a mixed purpose loan. Part of the loan balance relates to the main residence and the interest accruing on this portion of the loan isn’t deductible. However, interest accruing on the redrawn amount should typically be deductible where the funds have been used to acquire income producing investments.

Example 2: Peter's offset account

Peter also borrowed money to acquire a main residence. Rather than making additional repayments against the loan balance, Peter has deposited the funds into an offset account, which reduces the interest accruing on the home loan. Peter subsequently withdraws some of the money from the offset account to acquire listed shares. This increases the amount of interest accruing on the home loan. However, Peter can’t claim any of the interest as a deduction because the loan was used solely to acquire a private residence. Peter simply used his own savings to acquire the shares.

Parking borrowed money in an offset account

We have seen an increase in clients establishing a loan facility with the intention of using the funds for business or investment purposes in the near future. Sometimes clients will withdraw funds from the facility and then leave them sitting in an existing offset account while waiting to acquire an income producing asset. This can cause problems when it comes to claiming interest deductions.

First, even if the offset account is linked to a loan account that has been used for income producing purposes, this won’t normally be sufficient to enable interest expenses incurred on the new loan from being deductible while the funds are sitting in the offset account.

Example 3: Duncan's property loan and offset account

For example, let’s say Duncan has an existing rental property loan which has an offset account attached to it. Duncan takes out a new loan, expecting to use the funds to acquire some shares. While waiting to purchase the shares, he deposits the funds into the offset account, which reduces the interest accruing on the rental property loan. It is unlikely that Duncan will be able to claim a deduction for interest accruing on the new loan because the borrowed funds are not being used to produce income, they are simply being applied to reduce some interest expenses on a different loan.

To make things worse, there is also a risk that parking the funds in an offset account for a period of time might taint the interest on the new loan account into the future, even if money is subsequently withdrawn from the offset account and used to acquire an income producing asset.

For example, even if Duncan subsequently withdraws the funds from the offset account to acquire some listed shares, there is a risk that the ATO won’t allow interest accruing on the second loan from being deductible. The risk would be higher if there were already funds in the offset account when the borrowed funds were deposited into that account or if Duncan had deposited any other funds into the account before the withdrawal was made. This is because we now can’t really trace through and determine the ultimate source of the funds that have been used to acquire the shares.

What can you do?

It’s worth reaching out to us before entering into any new loan arrangements. In this area, mistakes are often difficult to fix after the fact, which can lead to poor tax outcomes. That’s why getting advice from a tax professional before committing to a loan is essential. We can work alongside you and your financial adviser to ensure your loan is structured in a way that makes financial sense and protects your tax position.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

The one big, beautiful bill that may not be so beautiful for Aussies

Tue, 15 Jul 2025 07:52:29 GMT

You may have seen the viral headline about a new U.S. tax bill called the One Big Beautiful Bill, but what does it mean for Australian investors, especially super funds and small businesses with US exposure? Turns out, it could mean a hit to investment returns.

Where are things at?

Australian superannuation funds currently have about $400 billion invested in the US and tax concessions are currently available under existing tax treaties. This could change.

A new bill, backed by the Trump administration and recently passed through Congress proposes higher taxes on countries seen to be discriminating against US businesses, including Australia.

The bill was signed into law by President Trump on July 4, 2025. As a result, Australian super funds could face higher taxes on US investments, directly affecting the long-term returns of super funds.

The implications

Even if you don’t have direct investments in the US, this matters. If your business is tied to superannuation funds or if you rely on consistent super returns for your retirement planning, changes like these can add pressure. It also adds a layer of uncertainty for Aussie businesses operating globally.

As trade tensions rise and tax rules shift, doing business internationally becomes more complex and potentially more costly. Tax experts say these changes could override existing treaties between the US and Australia. And they’re not just aimed at big corporates, any individual or entity with US exposure could potentially be affected in some way.

What's being done?

Industry groups including the Financial Services Council are calling on the Australian Government to step in and protect Australian investors through diplomatic and trade channels. Major super funds have already met with US lawmakers, reminding them that Australia is a significant source of capital for US markets and that strong partnerships go both ways.

What can you do?

Using John Howard’s barometer, for now we’re at the be alert but not alarmed stage. If you’re managing a business, planning your retirement, or investing overseas, this is a reminder of how global politics can impact your bottom line.

Here’s what we recommend:

Stay informed. Tax rules can change quickly
Ensure your retirement planning is flexible enough to adjust if needed or talk to us to help you
Talk to us if you’ve got exposure to US investments, but you might need some input from a US tax specialist.

There’s undoubtedly a bit to consider in the world of tax / finance at the moment, the environment’s changing at pace. As always please reach out if you have any questions and concerns. We’re here to help.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Trust funds: Are they still worth the effort?

Tue, 15 Jul 2025 07:41:46 GMT

For decades, trust structures have been a cornerstone of the Australian tax and financial system, prized for their asset protection and flexibility when it comes to income distributions.

However, with regulatory changes and mounting administrative complexity the shine has been wearing off lately, prompting some businesses and investors to rethink their use.

Is there a shift away from trusts?

In recent years, we have noticed a slight trend of businesses transitioning from trust structures to corporate entities. This shift is largely due to increasing scrutiny on how trusts are used and the growing complexities involved in managing trusts, particularly when it comes to documentation and compliance requirements. Trustees and directors of trustee companies are realising that they need to devote more time and resources to ensure compliance with evolving and complex regulations.

One of the primary challenges in utilising trusts for business purposes is the need for timely and accurate decision making. Trustees are normally required to make decisions about distributions by the end of the financial year to prevent the profits of the trust from being taxed at penalty rates. This timing can be problematic as it might not align with the availability of complete financial information, especially for businesses that are actively trading. This can lead to difficulties in making informed decisions regarding the distribution of trust income and to achieve optimal tax outcomes.

The ATO has also intensified its focus on trust arrangements, especially when it comes to the use of integrity rules which have formed part of the tax system for many years, but haven’t tended to be applied all that often. The risk of making mistakes and being detected is probably higher than ever before.

All is not lost (we're here to help)

While the landscape around trusts is evolving and the scrutiny is high, this doesn’t mean that trust structures don’t still have their place. With the right support (support that we can provide in conjunction with other experts) trusts can still offer advantages that other structures can’t. They can still be a useful platform for passive investment activities, estate planning and as part of a business structure.

This isn’t the time to give up on trusts. But it is important to seek advice before setting up a trust to make sure it is the most appropriate option and to fully understand the advantages, disadvantages and practical issues that will need to be managed when using a trust structure.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Finfluencers: Bad tax advice could cost you thousands

Tue, 15 Jul 2025 07:33:42 GMT

They’re advising from your Instagram and TikTok feeds; they’ve got huge followings; and they speak with conviction. They're known as financial influencers or ‘finfluencers’.

Please heed our caution, taking advice from unqualified sources can have serious consequences. We’re seeing examples of misleading claims, exaggerated deductions and outright misinformation.

Relying on this advice could not only leave you out of pocket but also expose you to ATO penalties, fines or in the worst case scenario, prosecution.

What’s the problem?

Many finfluencers make money by promoting financial products on behalf of companies, which means that they don’t necessarily have your best interests in mind when sharing information or insights. Finfluencers aren’t always qualified to provide advice on tax or financial products. You just can’t expect to receive solid, reliable or tailored guidance.

Unfortunately, we’re seeing some influences share tax hacks that are either completely false or apply only in extremely limited situations.

The ATO and some of the accounting professional bodies have sounded the alarm on some recent false claims, including:

Claiming your pet as a work related guard dog.
Writing off luxury handbags as laptop bags.
Deducting fuel costs without any documentation.
Trying to claim swimwear as a work uniform.

These kinds of suggestions might sound plausible but following them could get you into serious trouble. The ATO uses sophisticated data matching tools to detect suspicious or inflated claims.

The potential consequences of making false claims

If your deductions don’t meet the legal criteria, this could trigger an audit and if mistakes are found, the consequences can include:

An increased tax liability.
Interest charges.
Fines.
A criminal record and in the most serious cases, imprisonment.

How to stay safe and tax-smart

Here’s how to stay safe and tax smart:

If it sounds too good to be true, it probably is. Dodgy deduction tips on social media are best ignored, at least until they can be verified.
Stick to trusted sources. For official tax guidance, visit ato.gov.au
Don’t risk your business or personal reputation for a quick deduction.

If you aren’t sure, please reach out to us and we can help you stay compliant, no filters or hashtags!

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Important tax update: Deductions for ATO interest charges scrapped

Tue, 15 Jul 2025 07:22:38 GMT

If you're carrying an Australian Taxation Office (ATO) debt there is a good chance that it will cost you even more from 1 July 2025 onwards. This is because from 1 July 2025 two types of interest charges imposed by the ATO are no longer deductible.

What are the interest charges?

There are two main types of interest that are charged by the ATO. These are:

General Interest Charge (GIC): This applies when you pay your tax liability late. The ATO applies GIC to encourage tax liabilities to be paid on time and ensure taxpayers who pay late don’t have an unfair advantage over taxpayers who pay on time. GIC is calculated on a daily compounding basis on the overdue amount. The GIC annual rate for the July – September 2025 quarter is 10.78%.

Shortfall Interest Charge (SIC): This is applied when there is a shortfall in tax paid because of an amendment or correction to your tax assessment. SIC is also calculated on a daily compounding basis. The SIC annual rate for the July – September 2025 quarter is 6.78%. The ATO applies SIC to the tax shortfall amount for the period between when it would have been due and when the assessment is corrected.

What's changing?

Historically, both GIC and SIC amounts could be claimed as a deduction. This has meant that the net after-tax cost of the interest charges has been reduced for taxpayers who have a positive income tax liability for the relevant income year.

However, the Government has passed legislation to ensure that GIC and SIC amounts incurred on or after 1 July 2025 are no longer deductible, even if the interest relates to a tax debt that arose before this date.

As these interest charges are no longer deductible, this means that the after-tax impact of the charges is higher for many taxpayers. The impact becomes greater as your tax rate increases.

For example, let’s take a look at two individuals who have the same level of tax debt owed to the ATO and the same GIC liability of $1,000 for a particular income year:

Sally is a high income earner and subject to a 45% marginal tax rate (ignoring the Medicare levy). Under the old rules the net cost of the interest charge was only $550 because she could claim a deduction for the GIC amount and this reduced her income tax liability by $450. Under the new rules no deduction is available and the full cost to Sally will be $1,000.

Adam is subject to a 30% marginal tax rate (again, ignoring the Medicare levy). Under the old rules the net cost of the interest charge was $700 because he could reduce his income tax liability by $300 by claiming a deduction for the GIC amount. As with Sally, under the new rules no deduction is available for the GIC and the full cost to Adam is $1,000.

What can I do to minimise the impact of this change?

The simple answer is to pay down ATO debt as quickly as possible. As you can see, the GIC rate is relatively high and continues to accrue on a daily basis until the debt is paid off. The faster you can pay off that debt, the lower the interest charges that will accrue.

If you can’t afford to pay off your ATO debt in the short term then you might want to explore other options, including whether you would be better off borrowing money from another source at a lower interest rate to pay off the ATO debt. In some cases it is possible to claim a deduction for interest accruing on a loan that is used to pay tax debts, although this is normally only possible if the debt arose from business activities. It isn’t normally possible to claim a deduction for interest accruing on a loan that is used to pay a tax debt that arose from investment or employment activities.

While the ATO will sometimes allow taxpayers to enter into a payment plan so that tax debts can be paid through instalments, tax debts that are subject to a payment plan still accrue GIC.

On a more proactive basis, a better option is to plan ahead to ensure that upcoming tax payments can be made on time. This will sometimes mean setting aside funds regularly for tax instalments, GST, PAYG withholding and other amounts that need to be paid to the ATO. Keeping these amounts separate will help to ensure you’re ready when the ATO bill arrives.

If you're currently carrying tax debt or need help staying ahead of your obligations, we're here to help. Let’s work together on a strategy that keeps you compliant and protects your bottom line.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Div 296 super tax and practical things to consider

Tue, 15 Jul 2025 07:14:43 GMT

Division 296 super tax is a controversial Federal Government proposal to impose an extra 15% tax on some superannuation earnings for individuals if their total superannuation balance (TSB) is over $3 million as at 30 June of the relevant income year.

This measure is not yet law and must still pass both Houses of Parliament. At the time of publication, the start date had not been confirmed, although the Government was originally hoping that the measure would apply from 1 July 2025, with the first tax bills to be sent out sometime after 30 June 2026.

How does it work?

While we are waiting to see whether the measure will become law, let’s assume for the moment that the Government passes legislation which is consistent with the Government’s announcements to date. If so:

If your TSB is over $3 million at 30 June, a portion of your annual superannuation earnings above that threshold will be taxed at an additional 15%.
The tax is assessed to you personally and can be paid from your super or your own funds.
Superannuation earnings for this purpose reflect the increase in your net super balance for the year, adjusted for certain contributions (eg, inheritance via death benefit pension) and withdrawals.
Some exclusions apply: children on super pensions, structured settlements (personal injury), and the deceased.

It is important to remember that your TSB is the aggregate of all Australian superannuation interests (including balances with APRA funds, SMSFs and defined benefit schemes) held at the end of the income year.

If the start date is 1 July 2025, then the first test date will be 30 June 2026. An individual’s TSB at this date, and each following 30 June, will determine whether they will have a Division 296 tax liability for that income year. Only where the individual has a TSB on 30 June in excess of $3 million will they have a Division 296 tax liability for that income year.

Examples

Example 1: Sam’s account

30 June super balance: $4 million.
Annual growth: $120,000.
Portion above $3m: ($4m–$3m)/$4m = 25%
Taxable earnings: $120,000 × 25% = $30,000
Extra tax: $30,000 × 15% = $4,500

Example 2: Chris withdraws

Chris withdraws $200,000 before 30 June so his TSB is below $3 million at year end.
Chris will not pay Division 296 tax for that year.

Example 3: Lisa’s inheritance

Lisa’s balance rises from $2m to $4.5m after receiving a death benefit pension.
Only new investment growth (not the transferred amount) is taxed as earnings, but a total balance over $3m means she may still have a liability.

What can you do?

Review your super fund liquidity and cashflow planning for future tax payments.
Ensure your asset valuations are up to date.
Estimate your combined super balances and plan for any large transactions.
Document asset values, especially for SMSF members.
Seek tailored professional advice before making any changes.

While we are waiting to see whether the legislation passes through Parliament and whether any significant amendments or adjustments are made to the proposed measures, if you have any questions or concerns around this in the meantime, reach out – we’re here to help.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

How we communicate with you

Tue, 01 Jul 2025 06:08:44 GMT

With the rise in online fraud and phishing attempts, it's important to us that you feel confident about the communications you receive from our team. Below is an overview of how we communicate with you and how to identify legitimate messages from Goodwin Chivas & Co.

Our verified email addresses

Please ensure the following email addresses are saved to your safe senders list to prevent our messages from being marked as spam.

Admin - admin@goodwinchivas.com.au

You may receive emails from this address regarding:

ATO correspondence that we forward to you for your attention.
GCC monthly Newsletter – containing important information.
GCC quarterly email – our business clients will receive an email outlining important due dates and any other relevant information for business. Please take your time to read them so that you stay on top of your reporting obligations.
Land Tax correspondence.
Credit card payment receipts.
GCC MYOB portal communication.
Engagement letters.
SMSF clients in Pension – quarterly email in relation to TBAR reporting. Within this email we have
a link to answer a question about withdrawals and contributions. It is safe to use this link to let us
know if this applies to your SMSF.
Other general communication from us.

Accounts - accounts@goodwinchivas.com.au

Used for financial and billing matters, such as:

Invoices
Debtor Statements and Debt Collection
Credit Card payment receipts

Corporate Administration - corpadmin@goodwinchivas.com.au

Used specifically for ASIC related matters, including:

ASIC Annual Company Statements (signed via DocuSign). The "Pay Debt Now" link included is legitimate and directs you to the Postbillpay website, with the amount and reference number prefilled for your convenience.
ASIC forms (e.g. changes to directorship or shareholdings).
ASIC automated reminder emails.

Client Solutions - clientsolutions@goodwinchivas.com.au

Used to communicate with our ongoing bookkeeping clients, or when our bookkeeping team is assisting you with a specific task.

Electronic Signing of your Financial Accounts & Income Tax Returns

These documents are sent by your assigned manager or team member and will always come from our official domain: @goodwinchivas.com.au

The email will include a secure link directing you to the MYOB Portal, where you can view and electronically sign your documents.
Approving a task via this portal is considered legally binding —no wet signature is required.
If you lose the original link or want to review documents at any time, you can log into your portal using the following address: gcc.portal.accountants . We recommend bookmarking this URL for easy future access.

How to Identify a Legitimate Email from Us

To help ensure your security, here are some tips to identify genuine emails from Goodwin Chivas & Co.

We will never ask for sensitive personal information such as passwords or bank details via email.
All legitimate emails will come from our official domain: @goodwinchivas.com.au
Please check the sender address for each email you receive.
Any links or attachments we include will directly relate to the services you’ve engaged us for. If a login is required, they will direct you to secure, trusted platforms—such as the MYOB secure client portal, where you’ll sign in with your own password.
We never include a QR code for scanning.

If You’re Ever Unsure

If you receive any communication that seems suspicious or you’re unsure about its authenticity do not click on any links or provide personal information.

Instead, please contact us directly to verify the message on 02 9899 3044 .

Your security and trust are important to us. Thank you for your continued confidence in our services.

Economic crossroads: US shrinks, China stimulates, Australia holds steady

Thu, 05 Jun 2025 05:48:23 GMT

The US economy experienced a notable slowdown in the first quarter of 2025. The latest GDP data showed the economy contracted at an annual rate of -0.3%.

Businesses stockpiling goods (which increased import volumes) ahead of the implementation of President Trump's shemozzle of a tariff policy was one of the reasons for the contraction in GDP. The other was a decline in Government spending. Mr Trump’s tariffs are deflationary for the world and inflationary for the US. The sharp weakening in soft economic data points to rising recession risks, although markets still only seem priced for a mild slowdown which now seems right given the backdown.

China's new stimulus package

It is no surprise that China announced a new stimulus package including interest rate cuts and a significant liquidity injection, as the Government looks to boost an economy that has been hit by the collapse in the property market and now the trade war with the US.

China’s factory activity contracted at its fastest pace in 16 months in April following the frontloading of orders to beat the tariffs. Trade talks between the US and China have driven market optimism over the past few weeks and sentiment has turned positive. The US-China deal has 30% import taxes on Chinese goods, which could still stem trade flow.

The trade announcement with the UK has disappointed many in the market as it kept the 10% tariff on imports into the US up from 3.4%. The EU hasn’t even begun negotiations with the US.

Mild growth expected for Australia

In Australia, the election has come and gone fairly uneventfully for financial markets. We are waiting on GDP data to be released in the next few weeks which should confirm a sluggish economy given consumer spending remains weak. The RBA has cut interest rates and this should underpin mild growth.

F inancial outlook

The outlook for financial markets remains one of uncertainty reflected by the increase in volatility. Tight policy, lingering inflation risks and tariff-related drag still weighs on markets.

What seems to have been achieved so far is a whole lot of volatility and the realisation the US needs China as much as China needs the US. Within the Australian share market there was a notable softening in outlook statements by company management in the recent reporting season. With full-year forecasts being revised lower, it is reasonable to suggest that market-wide earnings growth is slowing, with expectations moderating for the rest of this year and potentially into the next.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

New ATO requirements for NFPs

Thu, 05 Jun 2025 05:41:18 GMT

If you are involved with running a not for profit (NFP) organisation it is important to be aware of key obligations and requirements.

In particular, if the NFP qualifies as a tax exempt entity there are some specific conditions that need to be satisfied and a relatively new ATO reporting obligation which needs to be undertaken to maintain that income tax exempt status.

Annual NFP self-review return

From the 2023–24 income year, non-charitable NFPs with an active Australian Business Number (ABN) are required to lodge an annual NFP self-review return with the ATO. This return notifies the ATO of the organisation's eligibility to self-assess as income tax exempt.

The return has three sections:

Organisation details: standard information on the NFP.
Income tax self-assessment: confirmation of the organisation's income tax exempt status.
Summary and declaration: acknowledgement of the information provided.

When the return is being completed the NFP must answer ‘yes’ or ‘no’ to the question: ‘Does the organisation have and follow clauses in its governing documents that prohibit the distribution of income or assets to members while it is operating and winding up?’ This requirement needs to be satisfied in order for the NFP to self-assess its position as a tax exempt entity.

If a NFPs governing documents don’t have these clauses then it can still self-assess as income tax exempt for the 2024 income year as long as no income or assets have been distributed to members. As a transitional arrangement, the ATO is allowing NFPs until 30 June 2025 to update their governing documents. Failing to do this will mean that the organisation cannot self-assess as income tax exempt from 1 July 2024 for the 2025 income year, which would lead to the organisation being treated as a taxable entity that might then need to lodge a tax return.

Mandatory clauses in governing documents

Governing documents are the formal documents which set out the purpose of the organisation, its character and the rules and requirements for how decisions are made, how it operates and how long it operates for.

As noted above, NFPs must include specific clauses in their governing documents to self-assess as income tax exempt. These clauses must:

Prohibit the distribution of income or assets to members during the organisation's operation and on winding up.
Ensure that any surplus assets are transferred to another NFP with similar purposes upon dissolution.

NFPs should also ensure that there are sufficient controls in place to ensure that members don’t receive income, property or assets which belong to the organisation, except where they are receiving remuneration for work performed for the entity or a reimbursement of expenses incurred on behalf of the organisation.

The advises that NFP governing documents should be reviewed at least annually or whenever there is a major change to the structure or activities of the organisation. An annual general meeting is a good time to review governing documents.

Taking a proactive approach helps identify any issues and reinforces your organisation's commitment to good governance.

If you need more information or have any questions please contact us - email us or phone our team on 02 9899 3044 .

From air fryers to swimwear: Tax deductions to avoid

Thu, 05 Jun 2025 05:09:15 GMT

With the 2025 tax season fast approaching the Australian Taxation Office (ATO) is reminding taxpayers to be careful when claiming work related expenses. This is in reaction to a spate of claims that didn’t quite pass the ‘pub test’.

To give you a few examples of what didn’t get through…

A mechanic attempting to claim an air fryer, microwave, two vacuum cleaners, TV, gaming console and gaming accessories as work related expenses
A truck driver seeking to deduct swimwear purchased during transit due to hot weather
A fashion industry manager attempting to claim over $10 000 in luxury branded clothing and accessories for work related events

These claims were deemed personal in nature and lacked a sufficient connection to income earning activities. The advice here would be - if in doubt leave it out or run it by us.

2025 priorities

The ATO is focusing on areas where frequent errors occur including:

Work related expenses: as above, claims must have a clear connection to income earning activities and be substantiated with records including receipts or invoices. Even if an expense seems to relate to income earning activities, it can’t normally be claimed if it is a private expense. There are a wide range of common expenses that normally don’t qualify for a deduction.
Working from home deductions: taxpayers must prove they incurred additional expenses due to working from home. The ATO offers two methods for calculating these deductions: the fixed rate method and the actual cost method (more detail below).
Multiple income sources: all sources of income, including side hustles or gig economy work must be declared. Each source may have different deductions available.

Working from home deductions

For those working from home there are two methods to calculate deductions:

Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate isn’t enough.
Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous.

It's important to note that double dipping is not allowed. For instance, if you claim deductions using the fixed rate method you can’t separately claim a deduction for your mobile phone costs.

As always, if you’re unsure or need help with your tax return please contact us - email us or phone our team on 02 9899 3044 .

Labor's victory: Unpacking the promises and priorities

Thu, 05 Jun 2025 05:02:32 GMT

As Labor party Members settle back into their seats having secured a majority in the House of Representatives, we look at the campaign promises and the unfinished business from the last term.

Individuals

Personal income tax cuts: the 2025-26 federal budget introduced a modest income tax cut for all taxpayers from 1 July 2026 and again from 1 July 2027.
The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.
Legislation enabling the tax cut passed Parliament on 26 March 2025.

$1,000 instant work-related expenses tax deduction

The Government has committed to providing taxpayers who earn labour income with a $1,000 shortcut work related deduction claim on their tax return.
Taxpayers who are likely to have claims higher than $1000 can claim in the usual way.
The simplified tax deduction is only available to those earning labour income. Those earning business or investment income only will not be able to claim this shortcut deduction.
Taxpayers will be able to claim other non-work related deductions in addition to the instant work related deduction.

Energy rebat e extended

The 2025-26 federal budget extended energy rebates . From 1 July 2025, households and small business will be eligible for a further $150 energy rebate until the end of the 2025 calendar year. The rebates will automatically apply to electricity bills in quarterly instalments.

Cheaper home batteries

The Government has committed to reducing the cost of home batteries from 1 July 2025. Through the scheme, households will be able to purchase a typical battery with a 30% discount on installed costs – saving around $4,000 on a typical battery. The initiative extends the existing Small-scale Renewable Energy Scheme .

5% deposit scheme for first home buyers

The Government has committed to a 5% deposit scheme for all Australian first home buyers . Under the scheme the Government will underwrite eligible first home buyers, enabling them to purchase a property with a 5% deposit without the need for Lenders Mortgage Insurance.

Expanding the existing first home buyer scheme, the media release says, “there will be higher property price limits and no caps on places or income, in a major expansion of the existing scheme.”

The existing Home Guarantee Scheme is limited in places and subject to income tests. The scheme is open to Australian citizens or permanent residents who have never owned property or land in Australia, or have not owned property or land in Australia in the last 10 years, and available to owner occupiers only.

Superannuation

Legislation enabling the proposed Division 296 tax on superannuation balances above $3m lapsed when Parliament dissolved. The question now is whether the Government will seek to push this reform through the Senate with the support of The Greens.

Greens Senator Nick McKim has previously advocated for the Division 296 threshold to be lowered to $2m and indexed to inflation. In addition, the Senator tied his support for the tax to a “prohibition for super funds to borrow to finance investments.”

Originally intended to apply from 1 July 2025, if enacted, Division 296 will increase the headline tax rate to 30% for earnings on total superannuation balances (TSB) above $3m. The proposed calculation captures growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.

National small business strategy

The Government has released its National small business strategy for consultation. The strategy primarily addresses how different government jurisdictions work with small business and how to relieve some of the friction when dealing across government systems and requirements.

Energy

Green Aluminium Production Credit: The Government has $2bn set aside for a new Green Aluminium Production Credit to support Australian aluminium smelters switching to renewable electricity before 2036 (there are four of them).

If you are wondering why the aluminium industry has been singled out, the reason is two-fold; aluminium is the second most used metal in the world and according to the Institute of Energy Economics and Financial Analysis, represents about 10% of Australia’s electricity demand - Tomago Aluminium just north of Newcastle in NSW, is the largest single user of electricity in the country with electricity making up about 40% of its costs. Transition from brown to green energy is not just a consumption issue for the industry, it’s a re-creation of the value chain.

Under the initiative, smelters will be able to negotiate an emissions linked credit contract payable per tonne of green aluminium produced for up to 10 years. The final credit rates will be based on individual facility circumstances and be dependent on reducing Scope 2 emissions. Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling. They account for around 85% of emissions from aluminium smelting.

See Aluminium to forge Australia's manufacturing future and Department of Industry, Science and Resources. New Green Aluminium Production Credit will support the transition to green metals .

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Denying deductions for ATO interest charges

Thu, 15 May 2025 21:55:26 GMT

After 1 July 2025 taxpayers will no longer be able to claim an income tax deduction for ATO interest charges.

On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it would amend the tax law to deny income tax deductions for ATO interest charges incurred in income years starting on or after 1 July 2025. This measure is now law. These amendments deny deductions for ATO interest charges (being the general interest charge (GIC) and the shortfall interest charge (SIC)). This means that taxpayers can no longer deduct GIC or SIC incurred on or after 1 July 2025.

When are ATO interest charges incurred?

Whether you can claim a deduction will depend on when GIC or SIC is incurred. This is when you become liable for the interest charge, for example:

GIC imposed on unpaid tax liabilities is incurred on a daily basis.

SIC imposed on an unpaid income tax shortfall is incurred in the year you are served a notice of amended assessment.

ATO interest charges incurred on or after 1 July

Any GIC or SIC incurred on or after 1 July 2025 is not deductible. This includes all GIC and SIC in respect of outstanding or late payments of tax for income years both before and after 1 July 2025.

As they are not deductible, any GIC or SIC that is later remitted will no longer need to be included as assessable income.

ATO interest charges incurred before 1 July

Any GIC or SIC incurred prior to 1 July 2025 is not impacted by the changes to the law and will continue to be deductible for the 2024-25 and earlier income years.

If you have (or can) deduct GIC or SIC for the 2024-25 or an earlier income year and it is later remitted, the amount that is remitted will need to be included in your assessable income in the year in which the remission occurred.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

The ATO’s updated small business benchmarking tool

Thu, 15 May 2025 21:50:09 GMT

The ATO has updated its small business benchmarks with the latest data taken from the 2022–23 financial year.

These benchmarks cover 100 industries and allow small businesses to compare their performance, including turnover and expenses, against others in their industry.

While the ATO doesn’t use the benchmarks in isolation, small businesses who fall outside the ATO’s benchmarks are more likely to trigger a closer examination from the ATO. The ATO uses information reported in business tax return with key performance benchmarks for the relevant industry to identify potential tax risks.

Aside from determining the risk of unwanted attention from the ATO, the benchmarks can also be used to compare your business performance against other businesses in the same industry. The benchmarks could help you spot areas where you might be able to reduce costs or improve efficiency.

The small business benchmarks can be accessed here .

Aside from the small business benchmarks, the ATO also has a business viability assessment tool which can help business owners identify whether there are any obvious financial risks. The ATO consider a business to be viable if it is generating sufficient profits to meet commitments to creditors and provide a return to the business owners. If a business isn’t generating profits, the ATO looks at whether the business has sufficient cash reserves to sustain itself.

The business viability assessment tool can be found here.

Please let us know if you would like us to review your business performance and make recommendations on ways that performance could be improved.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Property subdivision projects: the tax implications

Thu, 15 May 2025 21:42:02 GMT

As the urban sprawl continues in most major Australian cities, we are often asked to advise on the tax treatment of subdivision projects. Before jumping in and committing to anything, it is important to understand the tax liabilities that might arise from these projects.

Unfortunately, many people make incorrect assumptions about the way that subdivision projects will be taxed, often believing that any tax exposure will be minimal. However, the reality is that there are a number of important issues that need to be considered and that could have a significant impact on the overall profitability of the project.

Common tax pitfalls in subdivision projects

For example, when someone buys a property with the intention of subdividing it into smaller lots and selling them at a profit in the short term this will normally mean that any profit is taxed as ordinary income, rather than being taxed under the CGT rules. This means that the general CGT discount would not be available to reduce the tax liability, even if the property has been held for more than 12 months and it would not be possible to apply capital losses to reduce the taxable amount.

Also, in situations like this the sale of the subdivided lots will often trigger a GST liability, further reducing any after-tax profits generated from the project.

Many people fail to properly estimate the income tax and GST liabilities that will arise from property projects and can end up with a nasty shock when they realise the impact this has on the economic viability of the project.

How the ATO assesses different subdivision scenarios

The ATO has recently updated its guidance in this area, adding a number of new and practical examples to demonstrate how the tax rules will typically apply. The ATO’s examples cover the income tax and GST consequences of common property transactions such as property flipping, subdivision projects and property development activities.

For example, in one of the examples the ATO looks at a scenario where the taxpayer repeatedly buys, renovates, and sells properties. They engage in market research, seeking professional advice, taking out business loans, and then carrying out renovations in a business-like manner. The ATO takes the view that the taxpayer is running a business, since the taxpayer’s primary intention is to make a profit from the renovations and reselling of the property.

The profits are treated as ordinary income and taxed on revenue account. The CGT provisions don’t apply here since the property is held as trading stock. However, GST doesn’t apply on this particular situation as long as the properties have not undergone “substantial renovations”, which needs to be considered carefully.

When subdivision may qualify for CGT discount

On the other hand, in another example the ATO deals with a taxpayer who subdivides the vacant land from their main residence because of ill health and growing debt levels. Since they didn’t initially intend to profit from the subdivision and sale of the vacant land, the sale is viewed as the mere realisation of a capital asset rather than a business venture.

The activities related to the subdivision are limited to necessary actions for council approval, reflecting a low level of complexity and small scale. The sale of the subdivided lot is taxed on capital account under the CGT rules, qualifying for the general CGT discount if the land has been held for more than 12 months. However, the main residence exemption cannot apply because the land is not being sold together with the dwelling that has been used as the taxpayer’s main residence.

View the ATO's guidance and examples .

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Instant asset write-off threshold finally confirmed

Thu, 15 May 2025 21:32:46 GMT

It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30 June 2025 to $20,000.

This was announced back in the 2024-25 Federal Budget but the Government faced a number of hurdles in terms of passing the legislation.

This basically means that individuals and entities who carry on a business with turnover of less than $10m can often claim an immediate deduction for the cost of depreciating assets (eg, plant and equipment) that are acquired during the 2025 financial year as long as the cost of the asset, ignoring GST credits that can be claimed, is less than $20,000.

If you are thinking about purchasing an asset before 30 June 2025 with the hope of claiming an immediate deduction, then please reach out to us to confirm the position. The rules contain a number of tricks and traps which we can help you to navigate.

The threshold is due to drop back to $1,000 from 1 July 2025 unless further legislation is passed to provide another temporary increase to the threshold or a permanent modification.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Year-end tax planning opportunities & risks

Thu, 15 May 2025 21:26:03 GMT

With the end of the financial year fast approaching we outline some opportunities to maximise your deductions and give you the low down on areas at risk of increased ATO scrutiny.

Opportunities

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $30,000 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super and any amounts you have contributed personally that will be claimed as a tax deduction.

If your total superannuation balance on 30 June 2024 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2024-25 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at your personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and receive an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 74, you can only claim a deduction on a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

If your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.

If you are likely to face a tax bill this year and you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe.

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts of $2 and above as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy).

To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR.

Philanthropic giving can be undertaken in a number of different ways. Rather than providing gifts to a specific charity, it might be worth exploring the option of giving to a public ancillary fund or setting up a private ancillary fund. Donations made to these funds can often qualify for an immediate deduction, with the fund then investing and managing the money over time. The fund generally needs to distribute a certain portion of its net assets to DGRs each year.

Investment property owners

If you do not have one already, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help to maximise your deductions.

Risks

Work from home expenses

Working from home is a normal part of life for many workers, and while you can’t claim the cost of your morning coffee, biscuits or toilet paper (seriously, people have tried), you can claim certain additional expenses you incur. But, work from home expenses are an area of ATO scrutiny.

There are two methods of claiming your work from home expenses; the short-cut method, and the actual method.

The short-cut method allows you to claim a fixed rate of 70c for every hour you work from home for the year ending 30 June 2025. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates.

The alternative is to claim the actual expenses you have incurred on top of your normal running costs for working from home. You will need copies of your expenses, and your diary for at least 4 continuous weeks that represents your typical work pattern.

Landlords beware

If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property normally needs to be rented or genuinely available for rent to claim the expenses.

Sounds obvious but taxpayers claiming investment property expenses when the property was being used by family or friends, taken off the market for some reason or listed for an unreasonable rental rate, is a major focus for the ATO, particularly if your property is in a holiday hotspot.

There are a series of issues the ATO is actively pursuing this tax season. These include:

Refinancing and redrawing loans: you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses.
The difference between repairs and maintenance and capital improvements: while repairs and maintenance costs can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets).
Co-owned property: rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses.

Gig economy income

It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, YouTube, etc., is declared in your tax return.

The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. If you are a content creator for example, this is when your account is credited, not when you direct the money to be paid to your personal or business account. Squirrelling it away from the ATO in your platform account won’t protect you from paying tax on it.

Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime so expect the ATO to utilise data matching activities to identify unreported income.

Other sharing economy platforms have been required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest.

For your business

Opportunities

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June to claim a deduction this year. Ensure you document the fact that you have written off the bad debt on your debtor’s ledger or with a minute.

Obsolete plant and equipment

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June if you don’t use it anymore.

For companies

If it makes sense to do so, bring forward tax deductions by committing to pay directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Risks

Tax debt and not meeting reporting obligations

Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf.

Professional firm profits

For professional services firms - architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Threshold for tax-free retirement super increases

Sat, 05 Apr 2025 22:50:05 GMT

The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.

Each year, advisers await the December inflation statistics to the be released. The reason is simple, the transfer balance cap – the amount that can be transferred to a tax-free retirement account – is indexed to the Consumer Price Index (CPI) released each December. If inflation goes up, the general transfer balance cap is indexed in increments of $100,000 at the start of the financial year.

In December 2024, the inflation rate triggered an increase in the cap from $1.9m to $2m.

Complexity associated with transfer balance caps

The complexity with the transfer balance cap is that each person has an individual transfer balance cap. If you have started a retirement income stream, when indexation occurs, any increase only applies to your unused transfer balance cap.

Considering retiring in 2025?

If you are considering retiring, either fully or partially, indexation of the transfer balance cap provides a one-off opportunity to increase the amount of money you can transfer to your tax-free retirement account. That is, if you start taking a retirement income stream for the first time in June 2025, your transfer balance cap will be $1.9m but if you wait until July 2025 your transfer balance cap will be $2m, an extra tax-free $100,000.

Already taking a pension?

If you are already taking a retirement income stream, indexation applies to your unused transfer balance cap - so you might not benefit from the full $100,000 increase on 1 July 2025.

Where can I see what my cap is?

Your superannuation fund reports the value of your superannuation interests to the ATO. You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov .

If you have a self-managed superannuation fund (SMSF), it is very important that your reporting obligations are up to date.

For more information about the 2025-2026 Federal Budget, see our Budget summary: Show me the money .

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

The proposed ban on non-compete clauses

Sat, 05 Apr 2025 22:38:16 GMT

In the 2025-26 Federal Budget the Government announced a ban on non-compete clauses and “no poach” agreements.

In the 2025-26 Federal Budget, the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on high incomes (under the Fair Work Act the high income threshold is currently $175,000).

The reason? A recent Australian Bureau of Statistics (ABS) report found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

Economic consequences of non-compete clauses

From an economic perspective, declining job mobility impacts wage growth and innovation as restraints prevent access to skilled workers within the economy. Productivity is a key concern as Australia’s productivity has declined in the last 20 years.

Treasury’s consultation paper Non-compete clauses and other restraints states that, “the direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

A Productivity Commission report estimates the effect of limiting the use of unreasonable restraint of trade clauses will be increased wages for workers - by up to up to 2.4% in industries with high use of non-compete clauses and up to 1.4% in others.

Non-competes: The state of play

Non-compete clauses in Australia are generally enforced under common law. For all regions except New South Wales, restraints are generally presumed to be against the public interest and therefore void and unenforceable except where they are deemed to be reasonably necessary to protect the legitimate interest of the employer.

In NSW, a restraint of trade is valid to the extent to which it is not against public policy.

When non-competes are contested, the courts consider the nature and extent of the business interest to be protected (e.g., confidential client information) and whether the scope of restriction the business wants imposed is reasonable including its geographic area, time period and activities which the restraint seeks to control.

Interests considered ‘legitimate’ by courts include the protection of trade secrets or other confidential information; protection against solicitation of clients with whom the former worker had a personal connection; and protection against key staff being recruited by a former colleague. An employer is not entitled to protect themselves against mere competition by a former worker.

What now?

The ban on non-compete clauses was announced in the 2025-26 Federal Budget. The Government has stated that it intends to consult on policy details, including exemptions, penalties, and transition arrangements. Following consultation and the passage of legislation, the reforms are anticipated to take effect from 2027, operating prospectively.

There is a lot of uncertainty at this stage about this measure, despite the enthusiasm of the Treasury economists, not least of which is the impending election.

We’ll bring you more as further information is available.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Super guarantee rules catch up with venues and gyms

Sat, 05 Apr 2025 21:39:18 GMT

The superannuation guarantee rules are broad and, in some circumstances, extend beyond the definition of common law employees to some directors, contractors, entertainers, sports persons and other workers.

Employers need to pay compulsory superannuation guarantee (SG) to those considered employees under the definition in the SG rules. But, the SG definition of an employee is broad and just how far this definition extends has sparked debate of late about the rights of performers, gym instructors and others not typically considered employees.

For employers and business owners, it is crucially important that if there is any uncertainty about the rights of workers to SG, your position is confirmed. This might be an initial assessment of the position by us, confirmed by an employment lawyer, or clarified by applying for a ATO private ruling covering your specific workplace arrangements.

One of the things that employers find most alarming is that there is no tangible time limit on the recovery of outstanding SG obligations. In theory, the ATO can go back as far as it determines necessary to recover unpaid superannuation contributions for workers who are classified as employees for SG purposes. One of the key features of the SG system is to ensure that appropriate contributions are being made for employees and deemed employees, to adequately support them in their retirement. The SG laws, and complimentary director penalty regime, ensure that every cent owing to an employee for SG is paid.

Who is not paid super guarantee?

Super guarantee does not need to be paid to:

Under 18s who do not work more than 30 hours a week.
Private and domestic workers who do not work more than 30 hours a week.
Non-resident employees who perform work outside of Australia.
Employees temporarily working in Australia covered by an agreement.
Some foreign executives who hold certain visas or entry permits.

Generally, SG is not payable if you have entered into a contract with a company, trust or partnership.

If you have Australian employees temporarily working outside of Australia in a country with a bilateral social security agreement , for example, the United States, you should continue paying SG and apply for a certificate of coverage to avoid paying super (or the equivalent) in the country where the employee is temporarily located.

SG’s broader definition of an employee

There is a section of the SG rules, section 12, that specifies who is deemed to be an employee for SG purposes. This section extends the definition of an employee beyond common law to cover:

Company directors who are remunerated for performing duties;
Contractors working under a contract wholly or principally for their labour;
Certain state and Commonwealth government contracted workers; and
Those paid to perform or present any music, play, dance, entertainment, sport or other similar promotional activity. This includes people who provide services in connection with these activities or people paid in relation to film, tape, disc or television.

Are contractors entitled to SG?

If your contractor holds an Australian Business Number (ABN), this of itself will not prevent SG from applying. Where the arrangement looks like it is a contract for the provision of an individual’s labour and skills, it is likely they will meet the definition of an employee and SG will be payable.

The SG rules state if, “a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.”

This definition is alarming to many employers as the rate paid to contractors, and often the terms of the agreement, factor in an uplift for super guarantee and other entitlements that would normally be paid if the person was an employee. But for SG purposes, it does not matter what the contract says, if the person is deemed to be an employee under the rules, they are entitled to SG and the employer is obligated to pay it.

The Australian Taxation Office (ATO) states that SG needs to be paid to contractors if you pay them:

Under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
For their personal labour and skills (payment isn't dependent on achieving a specified result)
To perform the contract work (work cannot be delegated to someone else).

In a recent ruling , the ATO says that where the worker is required to use a substantial capital asset (such as a truck) this will help in arguing that the contract is not mainly for the labour of the worker, but this will always depend on the facts.

Are directors paid SG?

Yes. Directors (members of executive bodies of bodies corporate) should be paid SG if they are remunerated for performing duties for the company.

Entertainers, performers and sportspeople

Generally, if a performer operates through a company, trust, or partnership then there is not an employment relationship and SG is not payable.

However, individual artists, performers and sportspeople are captured as employees under the SG rules ( section 12(8) ) where they are paid to:

Perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills;
Provide services in connection with an activity referred to above;
Perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast.

Whoever is paying the individual for their labour, is generally responsible for the payment of that individual’s SG. For example, a music festival operator that contracts a sole trader to perform at a festival might be liable for SG for that performer. Likewise, if the sole trader contracts band members to perform with them at the festival, then the sole trader is responsible for the SG of the band members. If however, the music festival worked with an agency to supply the performers (the music festival pays the agency, the agency pays the performers), then the agency is likely to be responsible for the SG of the artists if there is a liability. If the agency only charges a booking fee and the festival pays the performers directly, then the festival is likely to be responsible for the performer’s SG.

You can see from this how important it is to determine who meets the definition of an employee for SG purposes, and if so, to understand the parties to the deemed employment relationship.

What’s a service “in connection to”

The definition of an employee for SG purposes captures workers who work with performers, for example individuals that are producers, videographers, editors, etc. If the person meets the definition of an employee under the SG rules, then it is likely SG is payable.

Is a gym instructor a sportsperson?

A gym instructor may be captured under the definition of a deemed employee under the SG rules. Whether the gym is liable to pay the instructor SG really depends on the facts of the individual arrangement.

Let’s look at the example of a gym instructor operating as a sole trader under an ABN.

There is a contract between the instructor and the gym stating that the instructor is an independent contractor and is responsible for their own SG payments and other employment obligations.
The instructor is paid per class, and per training session with clients, covering their time and labour.
The instructor utilises the equipment of the gym and its scheduling system.
The instructor wears the uniform of the gym.
The instructor is trained by the gym in how to deliver the services of the gym.

Employee? Most likely because the ATO places a heavy significance on whether an individual is working to build their own business or someone else’s. If the instructor “..works under a contract that is wholly or principally for the labour of the person” then this also brings them into the SG net.

If the employer, the gym, had not been paying SG, is it exposed to SG payments for the instructor since the employment relationship began.

Concerned about your workplace SG liability? Please contact us for an initial review.

Personal tax cuts

Sat, 05 Apr 2025 21:22:17 GMT

From 1 July 2026, personal income tax rates will change. On the last sitting day of Parliament, the personal income tax rate reduction announced in the 2025-26 Federal Budget was confirmed.

The modest reduction of 1% applies to the $18,201-$45,000 tax bracket, reducing from its current rate of 16% to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.

With a 1 July 2026 start date, the outcome of the Federal election on 3 May 2025 and subsequent budgets will determine whether this change comes to fruition.

Medicare levy threshold change for low-income earners

Low-income earners do not pay the compulsory 2% Medicare levy until their assessable income reaches the threshold. The threshold is different depending on whether you are a single taxpayer, pensioner, and the number of children you have that are dependent on you.

Parliament has confirmed the increase to the Medicare levy threshold announced in the Federal Budget. The threshold change is backdated to 1 July 2024, which means that taxpayers will benefit when they lodge their 2024-25 tax return.

See our Budget 2025-2026 summary for Individuals and families for details.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Budget 2025-2026: The economy

Wed, 26 Mar 2025 01:15:45 GMT

Growth

Australia’s economy is expected to grow, albeit slowly, at 2.25% in 2025-26 and 2.5% in 2026-27.

The direct impact of Ex-Tropical Cyclone Alfred on economic activity is estimated to be up to 0.25% of GDP.

We're back in a deficit

The underlying cash balance will be a deficit at -$42.1bn in 2025-26, before improving but remaining in the red for several years.

Debt is also higher, rising from 18.4% of GDP in 2023-24 to an estimated 21.5% in 2025-26, rising to 23.1% by 2028-29.

Employment

The unemployment rate has stayed low, the participation rate remains elevated, and employment has grown by more than one million people since May 2022 with around 80% of jobs created in the private sector since the June quarter 2022. Unemployment is expected to peak at 4.25%.

Wages

Annual real wages have grown for five consecutive quarters and are forecast to grow by 0.5% in 2024-25. The Wage Price Index (WPI) grew by 3.2% through the year to the December quarter 2024 and is expected to grow by 3% through the year to the June quarter of 2025 and 3.25% to June 2026.

Inflation

Inflation is expected to be 2.5% through the year to the June quarter 2025.

The moderation of inflation was helped by cost of living relief and a decline in petrol prices towards the end of 2024. Electricity rebates and indexation of rent assistance (Commonwealth and State) reduced headline inflation by 0.75% through the year to the December quarter of 2024.

Global tensions

Economically, trade tensions have magnified global uncertainty. Global growth is already subdued. The indirect effect of tariffs is estimated to be nearly four times as large as the direct effect on Australia, reflecting the relative importance of affected trade flows between Australia, China, and the United States. Retaliatory tariffs, if they occur, will only amplify losses in real GDP.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Budget 2025-2026: Government and regulators

Wed, 26 Mar 2025 00:55:39 GMT

Almost $1bn to the ATO for tax compliance

From 1 July 2025

The Government has set aside $999m over 4 years for the ATO to expand its compliance programs:

• Tax Avoidance Taskforce

• Shadow Economy Compliance Program

• Personal Income Tax Compliance Program

• Tax Integrity Program (medium and large businesses and wealthy groups)

The compliance programs are expected to deliver a threefold return of $3.2bn.

$700m external contractor cost cutting

The Government intends to further pair back its use of consultants, contractors and labour hire. The budget estimates that the Government will save $718m in 2028-29 by continuing cuts to external labour.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Budget 2025-2026: Business and employers

Wed, 26 Mar 2025 00:42:39 GMT

Non-compete clauses to be banned

From 2027

The Government has announced that it will ban non-compete clauses for low and middle-income employees (under the Fair Work Act high income threshold is currently $175,000). Non‑compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor.

Back in April 2024, Treasury released an issues paper for consultation on Worker non-compete clauses and other restraints. The review stated that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

The Government is also make changes to competition law to prevent businesses from:

Fixing wages by making anti‑competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers.
Using ‘no‑poach’ agreements to block staff from being hired by competitors.

More details: Cracking down on non-compete clauses to boost wages and productivity .

An nounced: Beer tax paused and benefits for wine and alcohol producers

From August 2025 (beer excise) and 1 July 2026 (other measures)

Indexation on the draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025. This just means that the price of beer won’t go up because of tax.

Support is also provided under the Excise remission scheme for manufacturers of alcoholic beverages increasing caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026 (up from $350,000).

More details: Government to freeze draught beer excise .

Trade tariffs extended on Russia and Belarus

The Government has extended additional 35% trade tariffs imposed on goods that are the produce or manufacture of Russia or Belarus. The measure is symbolic support for Ukraine as it delivers a negligible increase in revenue over five years.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Budget 2025-2026: Individuals & families

Wed, 26 Mar 2025 00:28:38 GMT

“Modest” two stage personal income tax cut

From 1 July 2026

The Government will provide a “modest” tax cut to all taxpayers from 1 July 2026 and again from 1 July 2027.

The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28 at a cost of $648m over four years.

The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.

Fact Sheet: Personal income tax cuts .

Medicare levy thresholds increased for low-income earners

From 1 July 2024

The Medicare levy low-income threshold exempts low-income earners from having to pay the levy. From 1 July 2024, the threshold for the exemption will increase - see table below for details.

The change will mean low-income earners will pay less when they lodge their income tax returns for 2024-25.

The threshold changes come at a cost of $648m over 5 years.

$150 energy bill relief

From 1 July 2025

Households and small business will receive an additional automatic credit of $150 on their energy bills in quarterly instalments between 1 July 2025 and 31 December 2025.

The extension of energy bill rebates will cost $1.8 billion over two years.

More information: More energy bill relief for every Australian household and for small business .

Foreign resident CGT amendments delayed

From 1 July 2025, the way in which foreign residents interact with the tax system were scheduled to come into effect. These changes have now been delayed.

The start date for proposed amendments to the capital gains tax (CGT) rules for foreign residents has been delayed until 1 October 2025 at the earliest, and potentially later depending on the passage of the reforms through Parliament.

The changes would broaden the range of assets subject to CGT for foreign residents when they dispose of them, amend the rules which determine whether the sale of shares in a company or units in a trust are subject to CGT and require foreign residents to disclose transactions involving shares or trust interests with a value of at least $20 million to the ATO before they occur.

More information: Strengthening the foreign resident capital gains tax regime .

Announced: 2 year ban on foreign ownership of established homes

From 1 April 2025, the Government has banned foreign and temporary residents, and foreign-owned companies, from purchasing established dwellings to prevent ‘land banking’. The ban applies for 2 years but is subject to some limited exceptions.

More information: Banning foreign purchases of established dwellings .

MIT amendments delayed

The extension of the cleaning building management investment trust (MIT) withholding tax concession was due to commence from 1 July 2025. This has now been delayed until the first 1 January, 1 April, 1 July or 1 October after the Act receives Royal Assent.

The Government will also amend the tax laws to clarify arrangements for MITs to ensure that legitimate investors can continue to access concessional withholding rates. The changes will apply to find payments from 13 March 2025 and will complement the ATO’s increased focus in this area to prevent misuse.

More information: Taxpayer alert

'Help to buy' program extended

The Government’s ‘Help to Buy’ program reduces the deposit required to buy a home by providing an equity contribution. Under the program, Housing Australia provides eligible participants with a Commonwealth equity contribution of up to 30% of the purchase price of an existing home and up to

40% of the purchase price of a new home. That is, they will give you the money and take a stake in your home.

Originally, to be eligible for the program, the income threshold for a single was $90,000 and, for joint participants, $120,000. The Budget increases this threshold to $100,000 and $160,000 respectively. Additional conditions apply.

The program is not currently available to applicants.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Budget summary: Show me the money

Tue, 25 Mar 2025 23:56:36 GMT

The Federal Government handed down its 2025-2026 Budget last night, earlier than usual due to the upcoming Federal election.

Budget 2025-26 is a budget for voter appeal with over $7bn in additional spending measures in 2025-26 and over $20bn across five years. Most measures extend previously announced and Budgeted items for another year.

We’ve broken down the key announcements so you can quickly find what matters most to you - please see the links below or read on for a summary of the key budget measures.

Personal income tax cuts

The Government’s big moment in the 2025-26 Federal Budget was the personal income tax cuts. Income tax cuts are a dazzling headline but in reality they deliver a tax saving of up to $268 in the 2026-27 year, with a tax saving of up to $536 from the 2027-28 year.

At the same time, the Australian Taxation Office has been allocated almost $1bn in funding to extend and enhance its compliance programs.

Two previously announced measures of note that have not passed Parliament but remain in the budget are:

Tax on super accounts above $3m (a 30% tax on future earnings for superannuation balances above $3 million); and
The $20,000 instant asset write-off for small business for 2024-25.

Both of these measures have stalled in Parliament and, assuming they are not approved in the final days of Parliament, will lapse when an election is called.

Key budget initiatives

Energy

$180bn to deliver a $150 energy bill rebate extension until the end of 2025.

Healthcare

$8.5bn on Medicare for increases to Medicare payments, 50 new urgent care clinics, and a bulk billed GP service.
$1.8bn over 5 years for cheaper medicines on the Pharmaceutical Benefits Scheme.
$240m for women’s health - reproductive health and menopause.

Education

$500m to provide a 20% cut to HECS-HELP debt for students, and a realignment of the repayment schedule to reduce the amount required to be paid (from 1 July 2025).

Housing

$800m to expand the ‘Help to Buy’ scheme reducing the size of the deposit required to buy a home by co-buying with the Government.

Families

Three days of subsidised childcare for families with young children (income tested) from 1 January 2026 replacing the Child Care Subsidy activity test.

Lifestyle

From August, the excise on beer will be frozen for 2 years.

The economy and trade

Economically, trade tensions have magnified global uncertainty. Global growth is already subdued.
The indirect effect of tariffs is estimated to be nearly four times as large as the direct effect on Australia, reflecting the relative importance of affected trade flows between Australia, China, and the United States.
Australia’s economy is expected to grow, albeit slowly at 2.25% in 2025-26 and 2.5% in 2026-27.
The Budget will be in deficit at -$42.1bn in 2025-26, before improving marginally but remaining in the red.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Ban on foreign property purchases

Sun, 09 Mar 2025 23:17:53 GMT

The Government has announced a temporary ban on investors buying established homes between 1 April 2025 to 31 March 2027. The measure aims to curb foreign “land banking.”

From 1 April 2025, foreign investors (including temporary residents and foreign-owned companies) will be prohibited from acquiring established dwellings unless they qualify for specific exemptions. While exemptions exist, they are limited.

In addition, foreign investors purchasing vacant land will be required to meet development conditions that require the land to be used productively within a reasonable timeframe.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Trade wars and tariffs

Sun, 09 Mar 2025 22:33:42 GMT

Global Google searches for the word “tariffs” spiked dramatically between 30 January and 2 February 2025, a +900% increase to the previous 12 months. We look at what tariffs really mean.

Who pays for tariffs?

Tariffs increase the price of imported goods and reduce trade flows of that good or service.

Traditionally used to protect specific domestic industries by reducing competition, tariffs increase the price of foreign competitors and reduce demand. In his first term, President Trump imposed a 25% global tariff on steel and a 10% tariff on aluminium (which Australia managed to reduce to zero with supply limits imposed instead). The impact was reportedly a 2.4% increase in the price of aluminium and 1.6% increase in the price of steel in the domestic US market. T

he cost of tariffs is not borne by overseas suppliers but indirectly through a reduction in trade and domestically through higher prices, particularly where those goods and services are common.

For the US however, the negative impact of tariffs will be felt less abruptly than many of its trading partners as trade only represents around 24% of US gross domestic product (GDP) – whereas trade accounts for 67% of Canada’s GDP.

Where we are at with US trade tariffs ?

While talking to shock jock Joe Rogan during his election campaign, Donald Trump stated, “this country can become rich with the proper use of tariffs.”

In his second week of office, President Trump used emergency powers to curb the “extraordinary threat” of illegal aliens, drugs and fentanyl into the US, by imposing the following tariffs :

Canada - 25% additional tariff on imports from Canada (except energy resources that have a reduced 10% additional tariff). Canada responded by imposing its own 25% tariffs on a range of predominantly agricultural products and household goods. Canada is a trading nation and exports represent two-thirds of its GDP. In 2023, the US represented 77% of Canada’s total goods export .
Mexico - 25% additional tariff on imports from Mexico . Mexico has responded with its own 25% tariff on US goods.
China - 20% additional tariff on imports from China. The US trade deficit was over $900bn in 2024 of which China accounts for around $270bn. The additional tariff on postal shipments from China to the US has since been temporarily suspended for items with a value under $800 until the US postal service is able to collect the tariff. China’s response has been to impose additional tariffs on certain US imports including a targeted 15% tariff on agricultural products including chicken, wheat, corn and cotton, and a 10% tariff on fruit, vegetables, dairy products, pork, beef and sorghum. Export controls have been placed on some critical minerals. In addition, China has filed a complaint to the World Trade Organization.

Industry specific tariffs and investigations

Steel imports – from 12 March 2025, the original 25% steel tariff is set to resume without the bi-lateral agreements reached over time with many nations including Australia watering down the tariff.
Copper imports – while no actions on tariffs, the President has ordered an investigation into the threat to security of copper imports .
Imports of timber, lumber products – while no action or impositions as yet, the President has ordered an investigation into the threat to security of imports of timber, lumber and derivative products such as paper.
US tech giants – it seems that the President is concerned by digital services taxes (DST) imposed on US technology companies and has vowed to respond with tariffs and other measures. Australia does not impose a DST and instead is aligned to the OECD reforms of digital taxing rights.

Will Australia face US tariffs?

Australia has a large trade surplus with the US which would normally make the imposition of tariffs less likely. However, specific industries may be impacted by product or industry based tariffs, such as steel and aluminium.

The largest American imports into Australia are financial services, travel services, telecoms/ computer/ information services, royalties and trucks. Australia’s largest exports to the US are financial services, gold, sheep/goat meat, transportations services and vaccines.

Impacts of trade wars on Australia

Australia is impacted indirectly by demand. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade in 2023. If Chinese demand slows as a result of a trade war, Australia’s economy will slow. But there is a pattern in President Trump’s approach to international and trade relations that suggests that an all-out trade war might not occur: a bold line or policy is stated - a statement that tells a story to the US public consistent with his election sentiments; then, wound back either partially or fully after concessions have been secured or concessions stated. For Australia, there is a risk in these policy machinations that China again agrees to reduce the US trade deficit by purchasing more from the US, potentially to the detriment of Australian suppliers.

For Australian business, uncertainty and volatility is the problem. Uncertainty slows the economy and impacts business revenue while at the same time, costs may increase.

For those in the business of selling product manufactured and distributed from China or through other trading partners directly impacted by tariffs, watch for more supply chain issues and potential cost increases.

If the US export markets retracts, there is also a risk other trading nations look to dump their products to help offset losses.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

FBT 2025: What you need to know

Sun, 09 Mar 2025 22:24:42 GMT

The Fringe Benefits Tax (FBT) year ends on 31 March. We’ve outlined the hot spots for employers and employees.

FBT exemption for electric cars

Employers that provide employees with the use of eligible electric vehicles (EVs) can potentially qualify for an FBT exemption. This should normally be the case where:

The car is a zero or low emission vehicle (battery electric, hydrogen fuel cell or plug-in hybrid electric)
The car is both first held and used on or after 1 July 2022; and
The value of the car is below the luxury car tax threshold for fuel efficient vehicles (which is $89,332 for 2024-25 financial year).

Plug-in hybrid vehicles no longer FBT exempt

From 1 April 2025, plug-in hybrid electric vehicles will no longer qualify for the FBT exemption unless:

The use of the vehicle was exempt before 1 April 2025, and
There is a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025.

If there is a break or change to that commitment on or after 1 April 2025 then the exemption normally won’t be available any more.

Working with the exemption

Even if the FBT exemption applies, your business will still need to work out the taxable value of the benefit as if the FBT exemption didn’t apply. This is because the value of the exempt benefit is still taken into account when calculating the reportable fringe benefits amount of the employee. While income tax is not paid on this amount, it can impact the employee in a range of areas (such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments).

This means the employee’s own home electricity costs incurred on charging the electric vehicle will often need to be worked out. This figure can generally be treated as an employee contribution to reduce the value of the benefit.

While this can be practically difficult to determine, the ATO has issued some guidelines that provide a 4.20 cent per km shortcut rate that can potentially help with the calculation. These guidelines do not apply to plug-in hybrid vehicles.

Many electric vehicles are also packaged together with electric charging stations. Just be aware that the FBT exemption for electric cars does not extend to charging stations provided at the employee’s home.

Providing equipment to work from home

Many businesses continue to offer flexible work from home arrangements. employees are often provided with work-related items to assist them to work from home. In general, where work related items are provided to employees and used primarily for work, FBT shouldn’t apply.

For example, portable electric devices such as laptops and mobile phones provided to employees shouldn’t trigger an FBT liability as long they are primarily used by your employees for work. Multiple similar items can also be provided during the FBT year where required – for example multiple laptops have been provided to the employee – but only if the business has an aggregated turnover of less than $50m (previously, this threshold was less than $10m).

If the employee is using equipment provided by the business for their own private use, normally FBT would apply to the private use. However, the FBT liability can be reduced based on the business use percentage.

Does FBT apply to your contractors?

The FBT rules tend to apply when benefits are provided to employees and certain office holders, such as directors. FBT should not apply when benefits are provided to genuine independent contractors but, you need to be sure that your contractors are in fact contractors.

Are your contractors really contractors?

Following two landmark decisions handed down by the High Court, the ATO has now finalised a ruling TR 2023/4 that helps determine whether a worker is an employee or an independent contractor.

If the parties have entered into a written contract, then you need to focus on the terms of that contract to establish the nature of the relationship (rather than looking at the conduct of the parties). However, merely labelling a worker as an independent contractor doesn’t necessarily mean that they won’t be treated as an employee if the terms of the contract suggest that the parties have entered into an employment relationship.

The ATO has also issued PCG 2023/2 that sets out four risk categories. Arrangements will tend to be viewed in a more favourable light where:

There is evidence to show that you and the worker have agreed on the classification;
There is a comprehensive written agreement that governs the relationship;
There is evidence that you and the worker understand the consequences of the classification;
The performance of the arrangement hasn’t deviated significantly from the terms of the contract;
Specific advice has been sought confirming that the classification is correct; and
Tax, superannuation, and reporting obligations have been met when the worker is classified as an employee or independent contractor (whichever relevant).

If your business employs contractors, you should have a process in place to ensure the correct classification of the arrangements and to determine the ATO’s risk rating. These arrangements should also be reviewed over time.

Even when a worker is a genuine independent contractor, just remember that this doesn’t necessarily mean that the business won’t have at least some employment-like obligations to meet. For example, some contractors are deemed to be employees for superannuation guarantee and payroll tax purposes.

Reducing the FBT record keeping burden

Record keeping for FBT purposes can be onerous. From 1 July 2024 however, your business will have a choice to keep using the existing FBT record keeping methods, use existing business records where those records meet the requirements set out by the legislative instrument, or a combination of both methods:

Travel diaries – see LI 2024/11
Living-away-from-home-allowance – FIFO/DIDO declarations – see LI 2024/4
Living-away-from-home – maintaining an Australian home declaration – See LI 2024/5
Otherwise deductible rule – expense payment, property or residual benefit declaration – See LI 2024/6
Otherwise deductible rule – private use of a vehicle other than a car declaration – See LI 2024/7
Car travel to an employment interview or selection test declaration – See LI 2024/14
Remote area holiday transport declaration – See LI 2024/10
Overseas employment holiday transport declaration – See LI 2024/13
Car travel to certain work-related activities declaration – See LI 2024/9
Relocation transport declaration – See LI 2024/12
Temporary accommodation relating to relocation declaration – See LI 2024/8

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Threshold for tax-free retirement super increases

Sat, 22 Feb 2025 22:34:52 GMT

The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.

The transfer balance cap - the amount that can be transferred to a tax-free retirement account – is indexed to the Consumer Price Index (CPI) released each December. If inflation goes up, the general transfer balance cap (TBC) is indexed in increments of $100,000 at the start of the financial year.

In December 2024, the inflation rate triggered an increase in the cap from $1.9m to $2m.

Everyone has an individual transfer balance cap. If you have started a retirement income stream, when indexation occurs, any increase only applies to your unused transfer balance cap.

If you are already taking a retirement income stream, indexation applies to your unused TBC - so, you might not benefit from the full $100,000 increase on 1 July 2025.

Where to find your cap

Your superannuation fund reports the value of your superannuation interests to the Australian Taxation Office (ATO). You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov .

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Is there a problem paying your super when you die?

Sat, 22 Feb 2025 22:28:55 GMT

The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?

The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate. Instead it's paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made.

Complaints to the Australian Financial Complaints Authority (AFCA) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within three months, for others it can take well over a year. The super laws do not specify a time period, only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member.

How to make sure you super goes to the right place

Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. If you don’t make a decision, or let your nomination lapse, then the fund has the discretion to pay your super to any of your dependants or your estate.

There are four types of death nominations:

Binding death benefit nomination: Directs your super to your nominated eligible beneficiary, the trustee is bound by law to pay your super to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.
Non-lapsing binding death benefit nomination: If permitted by your trust deed, a non-lapsing binding death benefit nomination will remain in place unless you cancel or replace it. When you die, your super is directed to the person you nominate.
Non-binding death nomination: A guide for trustees as to who should receive your super when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay your super to someone else or to your estate.
Reversionary beneficiary: If you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years.

Who is eligible to receive your super?

Your super can be paid to a dependant, your legal representative (for example, the executor of your will), or someone who has an interdependency relationship with you. A dependant for superannuation purposes is “the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship”. An interdependency relationship is where someone depends on you for financial support or care.

What happens if you don't make a nomination?

If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will be a superannuation dependant or the legal representative of your estate to then be distributed according to your Will.

Where it can go wrong

There have been a number of court cases over the years that have successfully contested the validity of death nominations. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name. If your super is to be directed to your estate, ensure the wording uses the correct legal terminology.

One of the reasons for delays in paying death benefit nominations cited by the funds is where there is no nomination (or it is expired or invalid), there are multiple potential claimants, and the trustee needs to work through sometimes complex family scenarios.

The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place, and it is valid and correct. While there still might be a delay in getting your super where it needs to go if you die, the process will be a lot quicker and less onerous for your loved ones.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Will credit card surcharges be banned in Australia?

Sat, 22 Feb 2025 22:20:00 GMT

If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point.

In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But is the issue as simple as it seems?

The push for change

The Reserve Bank of Australia (RBA) launched a review in October 2024 of Merchant Card Payment Costs and Surcharging . The review explores whether existing regulatory frameworks are still fit for purpose given the rate of technological change and complexity, and if there is a need for greater transparency – surcharges, transaction fees, and the way in which payments are regulated, are all up for review. Ultimately, the review is about reducing costs to merchants and consumers.

In general, customers dislike surcharges and would be happy to see them go – they represent a personal loss of value in much the same way a discount is seen as a personal gain. And, they have support for a ban from the large credit card providers and financial institutions.

The Australian Banking Association’s (ABA) submission to the RBA review said, “The current surcharging framework is clearly not working and requires targeted reform. Consumers should never be surcharged for bundled costs like POS systems, business software products or other business incentives.” The reference to “business incentives” is where a higher fee is charged by the payment service provider to provide the merchant with reward points and other incentives.

The push for a ban accelerated when the government announced that it would ban debit card surcharges from 1 January 2026, subject to the outcome of the RBA review later this year.

If surcharges are banned for some or all payment methods, businesses currently charging surcharges will need to either absorb the cost of merchant fees or increase prices. The issue for many businesses is not whether to charge a fee, but the costs of accepting what is now the most common payment method – cash is free to transact, cards are a facility to transact legal tender, not legal tender in and of themselves.

Small businesses pay 3 times more

While the average card payment fee in Australia is lower than the United States (which is close to double Australia’s rates), we pay a higher rate than in some other jurisdictions such as Europe. The RBA have flagged there might be room to improve this by capping interchange fees and/or introducing competition into how debit card payments are routed (allowing systems to default to the ‘least cost’ option available).

In Australia, it is not a level playing field when it comes to card transaction fees with a large disparity between fees paid by small and large merchants – small merchants pay around three times the average per transaction fee than larger merchants (large merchants are able to secure wholesale fees or utilise ‘strategic’ interchange rates). But even within the small business sector, fees vary dramatically with the cost of accepting card payments ranging from less than 1% to well over 2% of the transaction value.

How we use cards and digital transactions

The RBA are generally in favour of allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers. And, this might be true for large purchases, but do we really notice when we’re tapping our phones or watches to grab that morning coffee?

Cards (including debit, prepaid, credit and charge cards) are the most frequently used payment method in Australia, accounting for three-quarters of all consumer payments in 2022.

According to the Australian Banking Association:

Contactless payments now account for 95% of in-person card transactions, compared to less than 8% in 2010.
Online payments, as a share of retail payments, have grown from 7% in 2010 to 18% in 2022.
Mobile wallet (Apple Pay, Google Pay, etc.,) usage has grown from 1% of point-of-sale payments in 2016 to 44% in October 2024.
Buy Now, Pay Later (BNPL) services, virtually unknown 8 years ago, are now used by nearly a third of Australians.

When are surcharges allowed?

In the days before the RBA’s surcharge standard , it was not uncommon for businesses to apply a flat 3% surcharge.

The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”.

This means:

A business can only charge a surcharge for paying by card/digital wallet, but the surcharge must not be more than what it costs the business to use that payment type. These costs, measured over a 12 month period, can include gateway costs, terminal costs paid to a provider, and fraud prevention etc., if they relate directly to the card type being surcharged.
Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type.
If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated.
If the surcharge applies to all payment types regardless of type, it must not be more than the lowest surcharge set for a single payment type.
If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. That is, if your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge.

The RBA estimates that, on average, card fees cost:

(Source: RBA)

Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit. The Australian Competition and Consumer Commission (ACCC) reportedly stated that excessive surcharge complaints increased to close to 2,500 in the 18 months from the start of 2023.

Tax on surcharges

If your business charges goods and services tax (GST) on goods or services, then GST should also apply to any surcharge payments made.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Why the ATO is targeting baby boomer wealth

Sat, 22 Feb 2025 21:55:37 GMT

“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke

The Australian Taxation Office (ATO) thinks that wealthy baby boomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations.

If you are within the ATO’s Top 500 (Australia's largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control.

A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets.

Generally, under tax law, you can legitimately structure assets if there is a good reason to do so - like for asset protection. But if you tip across the line and the only viable reason for a structure is to reduce tax, you risk the ATO taking a close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules (Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities).

“We’re seeing succession planning behaviour primarily by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update.

Key areas of concern include:

Division 7A loans being settled. That is, a company has been paying money to a shareholder or an associate under a loan account. The ‘loan’ is quickly settled, often via a distribution, to remove it from the accounts.
Assets moving around the group. Often the true value of an asset is not recognised raising the question, why the change if not to avoid capital gains tax on disposal or for some other benefit.
Family member interests being restructured.
Trust deeds being amended.
A restructure is cited as a reason for late lodgement.

Use of trusts

Trusts are also a key area of concern in 2025. Where a trust which has made a family trust election (FTE) or interposed entity election (IEE) makes a distribution outside of the family group, a 47% Family Trust Distribution Tax applies (tax at the top marginal tax rate plus Medicare).

In addition, the ATO has recently tightened its approach to trust tax returns for closely held trusts to ensure that trustee beneficiary (TB) statements are being completed. These are required when a trust makes a distribution of income or assets to the trustee of another trust, unless an exclusion applies.

For example, a trust which has made an FTE or IEE doesn’t need to make a TB statement. The TB statement will then be used to cross reference against what the beneficiary has declared in its tax return. Where a valid TB statement is not made on time this can trigger a hefty 47% Trustee Beneficiary Non-Disclosure Tax.

Reducing risk

Where you or your family have control over multiple entities, particularly where the value of these entities is significant, it is important that the connections between these - be it in Australia or overseas - are looked at closely to avoid any nasty surprises or lost opportunities.

Transferring control of your business may involve restructuring your business operations, such as changes to share structures, changes to the trustee and appointor of a trust, or changes to partnership structures. It may also include transferring assets to family members via the creation of trusts or other entities. All these events have legal and tax implications that need to be carefully considered.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Tax deduction denied for signature basketball shoe R&D

Wed, 11 Dec 2024 22:51:50 GMT

The Federal Court has denied a sports company’s appeal to claim research and development incentives for the creation of an Australian signature basketball shoe.

The Movie Air highlighted the importance of the signature Air Jordan shoe to Nike. While expected to sell around $3 million worth of shoes by its fourth year, the signature shoe eclipsed expectations raking in $126 million in its first year. Nike sold 1.5 million in the first six weeks following clever marketing suggesting that the colourful shoes were in breach of the NBA regulations.

Nike’s recent fourth quarter results to 31 May 2024 show the Jordan brand worth $7 billion, and the bright spot in the company’s results with a 6% sales gain.

In Australia, Peak Australia created the Delly1. Peak worked with Australian Olympian and NBA Champion, Matthew Dellavedova, on the final shoe design. Dellavedova has stated in interviews that he had, “...a whole lot of involvement with the shoe… I wanted a low-cut shoe that was light and close to the ground because I need to guard all these quick guards that are tough to defend over here [in the NBA]. They [Peak] did a great job with that, and as we went through the process of me testing it we just made minor adjustment.”

But did the process undertaken to create the Delly1 meet the requirements to access research and development (R&D) concessions?

Accessing R&D concessions

The R&D tax incentive program encourages research and development that companies might not otherwise undertake. The incentive offers a tax offset which is calculated with reference to qualifying R&D expenditure. The rate of the tax offset and whether it is refundable or non-refundable depends on the company’s situation.

To access the incentive, R&D activities have to be “core” or “supporting.”

Active Sports Management Pty Ltd lodged applications with Industry Innovation and Science Australia (IISA), to register activities relating to the development of a customised basketball shoe (Delly1) as “core R&D activities.” A core activity is one that can’t be determined in advance, can only be determined by systematic progression through scientific principles and experimentation, and is conducted for the purpose of generating new knowledge.

Unfortunately for Active Sports Management, the ATO, Administrative Appeals Tribunal, and now the Federal Court did not see the development of Delly1 as core R&D.

The claim was denied on the basis that the outcome did not appear to have technical or scientific uncertainty, just subjective views.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Cheques are being phased out but cash is here to stay

Wed, 11 Dec 2024 22:39:13 GMT

The Government has announced a transition plan to phase out the use of cheques. Under the plan, cheques will stop being issued by 30 June 2028 and stop being accepted on 30 September 2029.

The use of cheques has declined dramatically over the last 10 years, declining by around 90%. In response, banks have stopped issuing chequebooks to new customers. However, financial institutions have a legislated requirement to accept cheques until the Government no longer requires them to do so.

Danish banks stopped accepting cheques in 2017 and New Zealand's banks in 2021.

Cheques out but cash remains king

While Australians have moved to digital payment methods, the Government has been careful to maintain cash as a payment method.

Around 1.5 million Australians use cash to make more than 80% of their in‑person payments. Cash also provides an easily accessible back‑up to digital payments in times of natural disaster or digital outage.

According to the most recent data, up to 94% of businesses continue to accept cash.

The Government has stated that they will mandate that businesses must accept cash when selling essential items, with appropriate exemptions for small businesses.

Currently, businesses don’t have to accept cash – business can specify the terms and conditions that they will supply goods and services.

The issue of card surcharges often comes up when a business adds a surcharge rather than recognising this cost of doing business in their pricing. A business can charge a surcharge for paying by card, but the surcharge must not be more than what it costs the business to use that payment type.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

What's ahead in 2025? Changes and challenges

Wed, 11 Dec 2024 22:28:16 GMT

The last few years have been a rollercoaster ride of instability. 2025 holds hope, but not a guarantee, of greater stability and certainty. We explore some of the key changes and challenges.

An election

Welcome to political advertising slipping into your social media, voicemail, and television viewing - most likely with messages from the opposition asking if you are better off, and from the incumbents telling you all the reasons why you are.

The 2025-26 Federal Budget has been brought forward to 25 March 2025. This suggests an election will be held in either March or May 2025 but no later than 17 May 2025.

Legislation in limbo

The Senate pushed through 32 Bills on the final sitting day of parliament for 2024 including seven of direct relevance to business and to the financial interests of some Australians. However, two key announcements remain in limbo:

$3m tax on earnings in a superannuation fund: The proposed Division 296 tax, which imposes a 30% tax rate on future earnings for superannuation balances above $3 million, is proposed to commence from 1 July 2025. The Bill enabling the new tax is stalled in the Senate. It’s unlikely this tax will pass parliament prior to the election; at which point, the Bill lapses. It then becomes a question of whether the elected Government chooses to rectify the concept or let it fade into oblivion as a bad idea.

$20,000 instant asset write-off for small business: In the 2024-25 Federal Budget, the government announced the extension of the $20,000 instant asset write-off threshold for small business for a further year to 2024-25. The concession enables businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Without this measure, the threshold returns to $1,000. This concession was removed by amendment from the enabling legislation at the last minute in the final sitting of Parliament of 2024. The removal of this measure is unfortunate, as once again, SMEs now have no confidence about the tax treatment of investments in assets that they might be looking to make, or have made, in the current financial year.

Tax and super changes

Foreign resident capital gains withholding changes on sale of property

One of the Bills pushed through Parliament at the end of 2024 changes how capital gains withholding applies to foreign residents from 1 January 2025.

Currently, residents selling taxable Australian property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more. If applicable, the withholding is then made available as a credit against any tax liability. The vendor only receives any refund due after their next income tax return is processed at tax time.

From 1 January 2025 however, the threshold will be removed and the withholding rate increased so that:

The withholding is increased from 12.5% to 15%; and
The withholding applies to the sale of all Australian land and buildings by foreign residents, regardless of the value of the assets.

The reforms apply to acquisitions made on or after 1 January 2025.

Superannuation rate increases to 12%

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025 - the final legislated increase.

Super on Paid Parental Leave

From 1 July 2025, superannuation will be paid on Paid Parental Leave payments. Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments), as a contribution to their superannuation fund.

Interest rates

At the last Reserve Bank Board (RBA) meeting, RBA governor Michele Bullock recognised the easing of headline inflation from 5.4% to 2.8% over the year to September 2024 but suggested that the economy still has some way to go before inflation is sustainably within the 2% to 3% target range.

The RBA appears wary of volatility and wants to see inflation sustainably trending down before making any move. Commbank is predicting a February 2025 rate cut, ANZ and Westpac May 2025, and NAB June 2025.

Cost of living pressures

The National Accounts released in early December took economists by surprise with living standards growing by a mere 0.2% in the September quarter – the expectation was much higher. Discretionary spending only increased by 0.1%.

The personal income tax cuts that came into effect from 1 July 2024 helped households, as did energy subsidies, but the impact is still working its way through the system. At the same time, mortgage costs continue to rise as past increases continue to impact.

Through the year, Australia’s economy grew 0.8%, the lowest rate since the COVID-19 affected December quarter 2020. Economic activity in the Australian economy right now is heavily dependent on Government spending.

Slow and steady is the expectation for 2025.

The ‘Trump effect’

President-elect Trump will recite his oath of office on 20 January 2025. The Trump administration will hold the presidency, Senate and the House.

For Australia, the question is the likely impact of some of President-elect Trump’s stated policy objectives including the imposition of tariffs.

On social media, Trump has said:

“…as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders.”
“…we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.” This in response to claims that China is responsible for massive amounts of drugs, in particular Fentanyl being sent into the US.

The issue for Australia is the secondary impact of a trade war. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade with the world in 2023. A slowdown in the Chinese economy impacts Australia and the region generally.

An immediate impact of the idea of a trade war has been the decline of the AUD/USD, currently sitting at around 64c.

Fuel efficient cars

New standards for vehicle manufacturers come into effect from 1 January 2025. Vehicle manufacturers will have a set average CO2 target for all new cars they produce, which they must meet or beat. The target will be reduced over time and car companies must provide more choices of fuel-efficient, low or zero emissions vehicles.

Suppliers can still sell any type of vehicle they choose but with more fuel-efficient models offsetting any less efficient models. If suppliers meet or beat their target, they'll receive credits. If they don’t, they will have two years to either trade credits with a different supplier, or generate credits themselves, before a penalty becomes payable.

Wage theft criminalised

As of 1 January 2025, the intentional underpayment of workers will be criminalised.

Employers will commit an offence if:

They’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument; and
hey intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid.

Employers convicted of wage theft face fines of up to 3 times the amount of the underpayment and $7.825 million.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Tax and tinsel: Business Christmas expense Q&As

Wed, 11 Dec 2024 22:08:25 GMT

Can you avoid giving the Australian Tax Office a gift this Christmas? Read through our top Christmas party and gift questions below to find out.

What can I do to make the staff Christmas party tax deductible or tax-free?

Not have one? Ok, seriously, it’s likely that you will pay tax one way or another; it’s just a question of how. If you structure your celebrations to avoid fringe benefits tax (FBT), then you normally can’t claim a tax deduction for the expense or goods and services tax (GST) credits.

No FBT

If you host your Christmas party in the office on a working day, then FBT is unlikely to apply to the food and drink. Taxi travel that starts or finishes at an employee’s place of work is also exempt from FBT - helpful if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer.

If you host your Christmas party outside of the office and keep the cost per head under $300 (the FBT minor benefit limit) then FBT often won’t apply to the cost of entertaining your employees.

But, if you do not incur FBT, you cannot claim GST credits or a tax deduction for the Christmas party expense.

Tax deductible

If your business hosts slightly more extravagant parties away from the business premises and the cost goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Are the costs of client gifts deductible?

It depends on the gift and why you’re giving it. If you send a client a gift, the gift is tax deductible if you have an expectation that the business will benefit; it’s marketing. While this seems like a mercenary way to look at Christmas giving, it is the business giving the gift, not you personally. This assumes that the gift is not a gift of entertainment like golf, or restaurants, which would not be deductible.

What about gifts for staff? Are they tax deductible?

The key to Christmas presents for your team is to keep the gift spontaneous, ad hoc, and from a tax perspective, below the $300 FBT minor benefit limit.

So, no ongoing gym memberships or giving the same person several of the same gift that adds up to $300 or more unless you want to give a gift to the ATO at the same time. But, you can give gifts at different times throughout the year without triggering FBT as these are counted separately for the minor benefit limit.

A cash bonus will be treated as income in much the same way as salary and wages.

I like to catch up with clients for lunch or a drink (or two) at Christmas. These expenses are deductible, right?

Regardless of whether it’s for Christmas or at any other time of the year, the cost of entertaining your clients – food, drink or other entertainment – is not deductible. The ATO is keen to ensure that taxpayers are not picking up part of the cost of your long lunches or special events while you’re bonding with clients.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044 .

Succession: The Series - Part 1

Wed, 23 Oct 2024 23:47:45 GMT

Ok, not that Succession series. Each month we’ll bring you a new perspective on transferring property. Be it estate planning, managing an inheritance, or the various forms of business succession. This month, we look at the tax consequences of inheriting property.

Beyond the difficult task of dividing up your assets and determining who should get what, it’s essential to look at the tax consequences of how your assets will flow through to your beneficiaries.

When assets pass from a deceased individual to a beneficiary of the estate, the tax impact will generally depend on the nature of the asset and the tax characteristics of the beneficiary, such as their residency status.

Inheriting cash

When cash passes from a deceased individual to their estate and then to a beneficiary, generally, there should not be any direct tax issues to deal with, assuming that the cash is denominated in AUD.

Inheriting assets

Death is a taxing event. When a change of ownership of an asset occurs, generally, a capital gains tax event (CGT) is triggered. However, the tax rules provide some relief from CGT when someone dies. The basic rule is that a capital gain or loss triggered by a death is disregarded unless the asset is transferred to one of the following:

An exempt entity (although there are some exceptions to this where the entity is a charity with deductible gift recipient status);
The trustee of a complying superannuation fund; or
A foreign entity and the asset is not classified as taxable Australian property.

The exemption applies if the asset passes to the deceased’s legal personal representative (i.e., executor) or to a beneficiary of the estate, which is not one of the entities listed above.

Once the asset has been transferred to the beneficiary, the beneficiary will need to manage the tax impact when they sell the asset.

Inheriting shares

Let’s assume you inherit an ASX listed share portfolio under your mother’s will. The tax outcome will depend on whether your mother was an Australian resident for tax purposes when she died, and whether the shares were acquired by your mother before or after 20 September 1985 (i.e., pre-CGT or post-CGT).

If your mother was an Australian resident for tax purposes when she died, and the shares were acquired post-CGT, then the cost base of the shares is normally based on the original purchase price. That is, the tax rules treat the inherited shares as if you purchased them. For example, if your mother purchased BHP shares for $17.82 on 2 January 1997, when you sell the shares, the gain is calculated based on your mother’s purchase price of $17.82.

If your mother was a resident of Australia when she died, and the shares were acquired pre-CGT, then the cost base of the shares is normally reset to their market value at the date of death. That is, if your mother passed away on 1 October 2024, the share price at close was $45.96. If you subsequently sold the shares in three years, the gain or loss is calculated using this value.

If your mother was a non-resident when she died, then the cost base of the shares is normally based on their market value at the date of death.

But it’s not all about the tax. Managing shares in your will can be difficult as prices and allocations change over time, and the companies you are invested in evolve. A portfolio that was once worth a small amount 20 years ago, might be worth significantly more when you die.

Inheriting property

Let’s assume you inherit an Australian residential property from your father under his will. For certain tax purposes, you are taken to have acquired the property at the date of his death.

The general rule is that the executor and/or beneficiaries of the estate inherit the cost base and reduced cost base of the CGT assets (the house) owned by the deceased just before their death, but this isn’t always the case, especially when it comes to pre-CGT properties and a property that was the main residence of the deceased individual just before they died.

Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. If the house was your father’s main residence before he died, he did not use the home to produce income (did not rent it out or use it as a place of business) and he was a resident of Australia for tax purposes, then a full CGT exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met:

The house is disposed of within two years of the date of death; or
The dwelling was the main residence of one or more of the following people from the date of death until the dwelling has been disposed of:
The spouse of the deceased (unless they were separated);
An individual who had a right to occupy the dwelling under the deceased’s will; or
The beneficiary who is disposing of the dwelling.

For example, if the house was your father’s main residence and was eligible for the full main residence exemption when he died, if you sell the house within the 2 year period, no CGT will apply. However, if you sell the house 10 years later, the CGT impact will depend on how the property has been used since the date of your father’s death.

An extension to the two year period can apply in limited certain circumstances, for example when the will is contested or is complex.

If your father did not live in the property just before he died, it still might be possible to apply the full exemption if your father chose to continue treating the home as his main residence under the ‘absence rule’. For example, if he was living in a retirement village for a few years but maintained the property as his main residence for CGT purposes (even if it was rented out).

If your father was not an Australian resident for tax purposes when he died, the cost base for CGT purposes will normally be based on the purchase price paid by your father if he acquired it post-CGT.

Inheriting foreign property

If you are an Australian resident who has inherited a foreign property or asset from an individual who was a non-resident just before they died, the cost base is normally taken to be the market value at the time of death.

For example, if you inherited a house from your uncle in the UK, the cost base is likely to be the value of the house at the date of his death.

If a taxable gain arises on sale, then it is necessary to consider whether the CGT discount can apply, but the discount will sometimes be less than 50%. If the gain is also taxed overseas, then a tax offset can sometimes apply to reduce the amount of tax payable in Australia.

Managing an inheritance can become complex. For assistance with estate planning, or to understand the tax implications of an inheritance, please contact us. Send us an email or phone our team on 02 9899 3044 .

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

More women using ‘downsizer’ contributions to boost super

Wed, 23 Oct 2024 23:13:16 GMT

If you are aged 55 years or older, the downsizer contribution rules enable you to contribute up to $300,000 from the proceeds of the sale of your home to your superannuation fund (eligibility criteria applies).

In 2023-24, over 57% of people making a ‘downsizer’ contribution to super were women. And, the average value of the contribution was marginally higher at $262,000 versus $259,000 contributed by men.

Downsizer contribution trends

The most likely age someone makes a downsizer contribution is between 65 and 69. From age 65, a downsizer contribution can be withdrawn from super if your circumstances change, even if you are still working. Those aged 55 to 64 generally won’t have access to these funds until they are at least 60 and retired.

Downsizer contributions are excluded from the existing upper age test, work test, and the total super balance rules (but the amount that can be moved to a retirement pension is limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you or your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

To be eligible to make a downsizer contribution you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one and make a downsizer contribution if you have access to other funds.

Please contact us if you would like the facts about downsizer contributions. Talk to us today - email us or phone our team on 02 9899 3044 .

The ban on genetic test insurance discrimination

Wed, 23 Oct 2024 23:03:38 GMT

The ability for life insurers to discriminate based on adverse predictive genetic test results will be banned under a new Government proposal.

Predictive genetic tests detect gene variants associated with heritable disorders that appear after birth, often later in life, but are not clinically detectable at the time of testing.

To overcome concerns about discrimination by life insurers, the Government has announced a total ban on predictive genetic testing.

Life insurance and genetic testing

Voluntary insurance, including life insurance is individually underwritten and ‘risk-rated’. The cost of premiums is proportionate to the unique risks of the person seeking the cover. Most of us would be familiar with the questions about family history, personal medical history and habits.

As life insurance is a guaranteed renewable product, once a policy has been underwritten and commenced, the life insurer cannot change or cancel a person’s cover, provided they pay all future premiums when due – premium prices will change across a risk pool, for example based on age. This is why it’s important to carefully assess changing life insurance policies if health issues or conditions have arisen since you put the original policy in place.

In 2019, Australia’s life insurance industry introduced a partial moratorium on the requirement to disclose genetic test results. The moratorium, which is in place for life insurance applications received from 1 July 2019, prevents genetic results being used for certain types of insurance cover below certain thresholds.

However, using APRA data, when compared to the average sum insured, the moratorium coverage thresholds are well below par:

* Any combination of income protection, salary continuance or business expenses cover.

Genetic test discrimination

Despite the moratorium, there is evidence that people are not undertaking genetic tests or participating in scientific research because of concerns about obtaining affordable life insurance. And, discrimination still exists.

The Australian Genetics and Life Insurance Moratorium: Monitoring the Effectiveness and Response Report by Monash University found that of the consumers surveyed who had undertaken a genetic test, 35% reported difficulties obtaining life insurance including insurers rejecting life insurance applications, financial advisers advising participants that their applications would be rejected, and insurers placing conditions on insurance policies or charging higher premiums.

Alarmingly, a 43 year old woman with a BRCA2 variant and no personal history of cancer, was denied life cover outright despite having her ovaries and fallopian tubes removed, and regular intensive breast imaging.

The government response

The Government has stepped in and announced a total ban on the use of genetic testing in life insurance underwriting. The ban will be subject to a 5 year review. However, the Government has not introduced legislation enabling the reforms nor has it announced the date that the ban will take effect.

And, the total ban impacts predictive genetic testing only – it does not cover clinical diagnostic genetic testing to confirm a suspected condition based on signs or symptoms.

A global issue

Australia is not the first country to grapple with the issue of adapting to the increase in available genetic data.

In the UK, insurers cannot use predictive genetic test results unless the result is favourable, or the result has been given to the insurer (voluntarily or accidentally). Huntington’s disease is a specific exception for life cover worth more than £500,000.

Canada’s Genetic Non-Discrimination Act prohibits any entity (including insurers) from requesting or using genetic test results. The exception is for individuals to voluntarily disclosure a test result showing they do not have a genetic change that runs in the family.

In the USA, the Genetic Information Nondiscrimination Act (GINA), prevents genetic test results being used in health insurance and employment contexts but not life insurance. The US state of Florida however introduced a law prohibiting life insurers from using predictive genetic test results in underwriting.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

Payday super: The details

Wed, 23 Oct 2024 22:44:20 GMT

‘Payday super’ will overhaul the way in which superannuation guarantee is administered. We look at the first details and the impending obligations on employers.

From 1 July 2026, employers will be obligated to pay superannuation guarantee (SG) on behalf of their employees on the same day as salary and wages instead of the current quarterly payment sequence.

The rationale is that speeding up the payment sequence for SG will not only help reduce the estimated $3.4 billion gap between what is owed to employees and what has been paid, but will also improve outcomes for employees – the Government estimates that a 25‑year‑old median income earner currently receiving super quarterly and wages fortnightly could be around 1.5% better off at retirement.

Announced in the 2023-24 Federal Budget, payday super is not yet law. However, given the structural changes required to administer the new law, Treasury has released a fact sheet to help employers better understand the implications of the impending change.

How will payday super work?

Under payday super, the due date for SG payments will be seven days from when an ordinary times earning* payment is made. That is, employers have seven days from an employee’s payday for their SG to be received by their super fund. The only exceptions are for new employees whose due date will be after their first two weeks of employment, and for small and irregular payments that occur outside the employee’s ordinary pay cycle.

Over the last few years, employers have moved to single touch payroll (STP) reporting for employee salary and wages. It is expected that payday super will fold into the existing electronic systems and some changes will be made to STP to collect ordinary times earning data.

The impact for some employers however will not be the compliance cost of administering the regular SG payments, but the cashflow. Employers will not be holding what will be 12% of their payroll until 28 days after the end of the quarter, but instead paying this amount out on the employee’s payday. The upside is that where an employer has either fallen behind or not paying SG, particularly when the business is insolvent, the damage is contained.

What happens if SG is paid late?

The penalties for underpaying or not paying SG are deliberately punitive and this approach will continue under payday super.

Currently, a super guarantee charge (SGC) applies to late SG payments - comprised of the employee’s superannuation guarantee shortfall amount, interest of 10% per annum from the start of the quarter the SG payment was due, and an administration fee of $20 for each employee with a shortfall per quarter. And, unlike normal superannuation guarantee contributions, SGC amounts are not deductible to the employer, even when the liability has been satisfied.

Under payday super, employees are fully compensated for delays in receiving SG amounts and larger penalties apply for employers that repeatedly fail to comply with their obligations. If you make a payment late, the SGC is made up of the below charges.

As you can see, if the proposed SGC becomes law, late SG payments could spiral out of control quickly. This will be a particular issue for employers that pay employees less than their entitlements over time, or have misclassified employees as contractors and have an outstanding SG obligation.

But, unlike the current SGC, the new SGC will be tax deductible (excluding penalties and interest that accrue if the SG charge amount is not paid within 28 days).

Payday super is not yet law. We will keep you up to date as change occurs and work with you to get it right once the details have been confirmed.

*Ordinary time earnings are the gross amount your employees earn for their ordinary hours of work including over-award payments, commissions, shift loading, annual leave loading and some allowances and bonuses.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

$81.5m payroll tax win for Uber

Wed, 11 Sep 2024 00:18:25 GMT

Multinational ride-sharing system Uber has successfully contested six Revenue NSW payroll tax assessments totalling over $81.5 million.

The assessments were issued on the basis that Uber drivers were employees and therefore payroll tax was payable.

The Payroll Tax Act 2007 (NSW) imposes the tax on all taxable wages paid or payable by an employer. The Act also extends to contractors by capturing payments made “by a person who, during a financial year, supplies services to another person under a contract (relevant contract) under which the first person (designated person) has supplied to the designated person the services of persons for or in relation to the performance of work.”

So, are Uber drivers employees? The New South Wales Supreme Court says no. Among the reasons is that, “amounts paid or payable by Uber to the drivers or partners were not for or in relation to the performance of work …and are not taken to be wages paid or payable.”

The payroll tax assessments were revoked.

Uber is a special case because of its method of operation. Businesses working with contractors need to be vigilant that they have assessed the relationship with their contractors correctly.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

Is the RBA to blame? The economic state of play

Tue, 10 Sep 2024 23:51:18 GMT

The politicians have weighed in on the Reserve Bank of Australia’s economic policy and their reticence to reduce interest rates in the face of community pressure. We look at what the numbers are really showing.

Treasurer Jim Chalmers has stated that global uncertainty and rate rises are “smashing the economy”.

Former Treasurer Wayne Swan weighed in and told Channel 9 that the RBA was, “putting economic dogma over rational economic decision making, hammering households, hammering Mums and Dads with higher interest rates, causing a collapse in spending and driving the economy backwards” and that the RBA was, “simply punching itself in the face.”

Australian mortgage holders and renters have had no relief from interest rates following 13 successive interest rate rises to the official cash rate since May 2022.

The Reserve Bank’s position and the flow through effects

The Reserve Bank of Australia (RBA) Board opted to maintain the official cash rates at 4.35% at its September Board meeting. The rationale is that inflation remains persistently high and has been for the last 11 quarters. The consumer price index (CPI) rose 3.9% over the year to the June quarter and remains above the RBA’s target range of 2-3%.

But, it is not persistently high inflation that is causing the politicians to weigh in. RBA Governor Michele Bullock has warned that “it is premature to be thinking about rate cuts” and “the Board does not expect that it will be in a position to cut rates in the near term.”

The Australian Bureau of Statistics (ABS) June Quarter National Accounts paint a bleak picture of the Australian economy. Per capita GDP fell for the sixth consecutive quarter by -0.4% to -1.5%. The longest consecutive period of extended weakness ever recorded.

Household spending weakest since COVID Delta

Household spending fell by -0.2% in the quarter, the weakest growth rate since the Delta-variant lockdown affected September quarter 2021.

Discretionary spending – travel and hospitality impacted most

The ABS says that we spent less on discretionary items (-1.1%), particularly for events and travel. It will come as no surprise that spending on hotels, cafes and restaurants was down 1.5%. Spending on food also fell -0.1% as households looked to reduce grocery bills.

Household savings lowest since 2006

The savings ratio remains low. Households saved only 0.9% of their income over the year. This was the lowest rate of annual saving since 2006-07. Net savings reduce when household income grows slower than household spending.

Economic growth from Government spending

The Australian economy did grow by 0.2%, the eleventh consecutive quarter of growth but the growth rate was unimpressive. The ABS says that, “the weak growth reflects subdued household demand, which detracted 0.1 percentage points from GDP growth while government consumption contributed 0.3 percentage points, the same contribution to growth as previous quarter.”

Government spending increased by 1.4% over the quarter. Commonwealth social assistance benefits to households led the rise, with continued strength in expenditure on national programs providing health services. State and local government expenditure also rose with increased employee expenses across most states and territories.

The RBA’s position on interest rates

The RBA is on a narrow path. It’s trying to bring inflation back to target within a reasonable timeframe while preserving the gains in the labour market over the last few years. The RBA expects to reach this target range by the end of 2025.

Through 2022 and 2023, most components of the CPI basket were growing faster than usual (the CPI is literally a basket of 87 types of expenditure across 11 groups such as household spending, education and transport.) Over the last 18 months, the price of goods has come down as supply disruptions like COVID-19 and the war in Ukraine have eased, and are now growing close to the historical average.

The key problem areas are housing costs and services. In housing, the growth is from increased construction costs and strong increases in rent. For services, while discretionary spending is down, as we can see from the June National Accounts, inflation in this category remains high at 5.3% to the June quarter. Wage increases and lower productivity, combined with the increased costs of doing business (electricity, insurance, logistics, rent etc) are all impacting.

The RBA is keen to point out that inflation causes hardship for the most vulnerable in our community. Lower income households tend to allocate more of their spending towards essentials, including food, utility bills and rent. Higher income households tend to spend more on owner-occupied housing as well as discretionary items such as consumer durables.

Younger households and lower income households have been particularly affected by cost-of-living pressures.

Do you have questions about how this information impacts you or your business? Send us an email or phone our team on 02 9899 3044 .

Property and ‘lifestyle’ assets in the spotlight

Tue, 10 Sep 2024 23:40:18 GMT

Own an investment property or an expensive lifestyle asset like a boat or aircraft? The ATO is looking closely at these assets to see if what has been declared in tax returns matches up.

The Australian Taxation Office (ATO) has initiated two data matching programs impacting investment property owners and those lucky enough to hold expensive lifestyle assets.

Investment property

What investment property owners declare and claim in their personal income tax returns is a constant focus for the ATO. Coming off the back of data matching programs reviewing residential investment property loan data, and landlord insurance, the ATO have initiated a new program capturing data from property management software from the 2018-19 financial year through to 2025-26.

Data collected will include:

Property owner identification details such as names, addresses, phone numbers, dates of birth, email addresses, business name and ABNs, if applicable;
Details of the property itself - property address, date property first available for rent, property manager name and contact details, property manager ABN, property manager licence number, property owner or landlord bank details; and
Property transaction details - period start and end dates, transaction type, description and amounts, ingoings and outgoings, and rental property account balances.

While the ATO commit to specific data matching campaigns, since 1 July 2016, they have also collected data from state and territory governments who are required to report transfers of real property to the ATO each quarter.

This latest data matching program ramps up the ATO’s focus on landlords, specifically targeting those who fail to lodge rental property schedules when required, omit or incorrectly report rental property income and deductions, and who omit or incorrectly report capital gains tax (CGT) details.

Lifestyle assets

Data from insurance providers is being used to identify and cross reference the ownership of expensive lifestyle assets.

Included in the mix are:

Caravans and motorhomes valued at $65,000 or over;
Motor vehicles including cars & trucks and motorcycles valued at $65,000 or over;
Thoroughbred horses valued at $65,000 or over;
Fine art valued at $100,000 per item or over;
Marine vessels valued at $100,000 or over; and
Aircraft valued at $150,000 or over.

The data collected is substantial including the personal details of the policy holder, the policy details including purchase price and identification details, and primary use, among other factors.

The ATO is looking for those accumulating or improving assets and not reporting these in their income tax return, disposing of assets and not declaring the income and/or capital gains, incorrectly claiming GST credits, and importantly, omitted or incorrect fringe benefits tax (FBT) reporting where the assets are held by a business but used personally.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

It wasn’t me: the tax fraud scam

Tue, 10 Sep 2024 23:29:16 GMT

You login to your myGov account to find that your activity statements for the last 12 months have been amended and GST credits of $100k issued. But it wasn’t you. And you certainly didn’t get a $100k refund in your bank account. What happens now?

In what is rapidly becoming the most common tax scam, myGov accounts are being accessed for their rich source of personal data, bank accounts changed, and personal data used to generate up to hundreds of thousands in fraudulent refunds. For all intents and purposes, it is you, or at least that’s what it seems. And, the worst part is, you probably gave the scammers access to your account.

But it’s not just activity statements. Any myGov linked service that has the capacity to issue refunds or payments is being targeted.

Scammers are using the amendment periods available in the tax law to adjust existing data and trigger refunds on personal income tax, goods and services tax (GST), and through variations to pay as you go (PAYG) instalments.

In some cases, the level of sophistication and knowledge of how Australia’s tax and social security system operates is next level.

Once the scammers have access to your myGov account, there is a lot of damage they can do.

So, how does this happen and why is it so pervasive? Humans are often the weakest link.

Common scams

Common scams utilise emails (78.9% of reported tax related scams in the last 12 months) or SMS (18.4% of reported scams) that mimic communication you might normally expect to see. The lines of attack used by tax related scammers are commonly:

Fake warnings about attempted attacks on your account (and requiring you to click on the link and confirm your details);
Opportunistic baiting where some form of reward is flagged, like a tax refund, that you need to click on the link to confirm and access; and
Mimicking common administrative notifications from the Australian Taxation Office (ATO) like a new message accessible from a link.

Approximately 75% of all email scams reported to the ATO to March 2024 were linked to a fake myGov sign in page.

How to spot a fake

Often the first sign that something is amiss is alerts about activity on your myGov account or a change in details - which might seem a little ironic if the way in which scammers got into your account in the first place is via these very same messages.

But, there are ways to spot a fake:

The ATO, Centrelink and MyGov don’t use hyperlinks in messages. If you receive a message with a link, it’s a fake.
The ATO will not use QR codes as a method for you to access your account.
The ATO will never ask for your tax file number (TFN), bank account details or your myGov login details over social media. Some scammers have used fake social media accounts mimicking the ATO and other Government agencies. When a query comes in, they respond by asking for information to verify it’s you. The ATO will never slide into your DMs. ATO Assistant Commissioner Tim Loh said, “it’s like giving your house keys to a stranger and watching them change your locks.”
The ATO do not use pre-recorded messages to alert you to outstanding tax debt. The ATO will not cancel your TFN. Some scammers suggest that your TFN has been cancelled or suspended due to criminal activity or money laundering and then tell you to either pay a fee to correct it, or transfer your money to a ‘safe’ bank account to protect you against your corrupted TFN.
The ATO will not initiate a conference call between you and your tax agent and someone from a law enforcement agency. In one case, the taxpayer was told that the caller was from the ATO and a person from her accounting firm was on the call as well to represent her and work through a problem. The ATO caller and the tax agent were fake. Just hang up and call our office if you are ever concerned. The ATO will never initiate a conference call of this type.
The ATO will also not ask you to reconfirm your details because of security updates to myGov. The link, when activated, takes you to a fake myGov web page that can look very convincing.

In general, you should always log into your myGov account directly to check on any details alerted in messages rather than clicking on links. This way, you know that you are not being redirected to somewhere you should not be.

And, don’t log into your myGov account on free wifi networks. Ever.

Who is getting scammed?

There is a pervasive view that older, technology challenged individuals are the most at risk. And while this might be the case generally, scamming is impacting all age groups.

The ATO says that the demographic who most reported providing personal information to scammers was 25 to 34 year olds. And, the younger generation are more likely to fall for investment scams.

According to the AFP-led Joint Policing Cybercrime Coordination Centre (JPC3), people under the age of 50 are overtaking older Australians as the most reported victims of investment scams. Australians reported losing $382 million to investment scams in the 2023-24 financial year. Nearly half (47%) of the investment scam losses involved cryptocurrency.

Other scams

Scammers are in the business of scamming and they will use every trick and opportunity to part you from your money.

Investment scams

Pig butchering. Pig butchering is a tactic where scammers devote weeks or months to building a close relationship with their victims on social media or messaging apps, before encouraging them to invest in the share market, cryptocurrency, or foreign currency exchanges. Victims think they are trading on legitimate platforms, but the money is siphoned into an account owned by the scammers, who created fake platforms that look identical to well-known trading and cryptocurrency sites. Scammers will show fake returns on these platforms to convince victims to invest more money. Once they have extracted as much money as possible, the scammers disappear with all the invested funds.

Deepfakes. Deepfakes are lifelike impersonations of real people created by artificial intelligence technologies. Scammers create video ads, images and news articles of celebrities and other trusted public figures to promote fake investment schemes, which can appear on social media feeds or be sent by scammers through messaging apps. Unusual pauses, odd pitches, or facial movement not matching their speaking tone are often giveaways but increasingly, the fakes are difficult to spot.

Invoice scams

The names and details of legitimate businesses are used to issue fake invoices with the money transferred to the scammer’s account. These scams are often tied to cyber breachers where hackers have accessed your systems and have identified your suppliers.In the year ending 30 June 2023, overseas migration contributed a net gain of 518,000 people to Australia's population - the largest net overseas migration estimate since records began.

Bank scams

There has been a lot in the media of late about people receiving phone calls purporting to be from their bank, advising them there is a problem with their account, and then walking them through a resolution that involves transferring all their money into a ‘safe’ scammers account. Victims commonly state that they believed the scammer because of the level of personal information they relayed.

Your bank will never send an email or text message asking for any account or financial details, this includes updating your address or log in details for phone, mobile or internet banking.

A CHOICE survey found that four out of five of the victims of banking scams in their report said their banks did nothing to flag a scam before they transferred their money to the perpetrator.

The Australian Banking Association have stated that, if not already, banks will introduce warnings and payment delays by the end of 2024. And, in addition to other measures, they will limit payments to high-risk channels such as crypto platforms.

What do to if you have been scammed?

myGov

If you have downloaded a fake myGov app, have given your details to a scammer, or clicked on a link from an email, text message or scanned a QR Code, contact Services Australia Scams and Identify Theft Helpdesk on 1800 941 126 , or get help with a scam here.

Tax scams

Before acting on any instructions, please contact us and we will verify the information for you. If you have already acted, contact the ATO to verify or report a scam on 1800 008 540. The Government uses external agency recoveriescorp for debt collection but we will advise you if you have a tax debt outstanding.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

Earned an income from the sharing economy?

Mon, 15 Jul 2024 00:51:30 GMT

It’s essential that any income earned from sharing economy platforms such as Airbnb, Stayz, Uber, etc., is declared in your tax return.

2023-24 is the first year that the ATO will have the income tax returns of taxpayers to match to this data.

All other sharing economy platforms will be required to start reporting from 1 July 2024.

This reporting regime, combined with the ATO’s data matching programs, mean that if income is not declared, it’s likely you will receive a “please explain” request from the regulator.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

Is your family home really tax-free?

Mon, 15 Jul 2024 00:37:26 GMT

The main residence exemption exempts your family home from capital gains tax (CGT) when you dispose of it. But, like all things involving tax, it’s never that simple.

As the character of Darryl Kerrigan in The Castle said, “it’s not a house. It’s a home,” and the Australian Taxation Office’s (ATO) interpretation of a main residence is not fundamentally different.

A home is generally considered to be your main residence if:

It's where you and your family live
Your personal belongings have been moved into the dwelling
It is where your mail is delivered
It’s your address on the electoral roll
You have connected services such as telephone, gas and electricity (in your name); and
It is your intention for the home to be your main residence.

The length of time you have lived in the home is important but there are no hard and fast rules. Your intention takes precedence over time spent as every situation is different.

When does the main residence exemption apply to selling your home?

In general, CGT applies to the sale of your home unless you have an exemption, partial exemption, or you can offset the tax against a capital loss.

If you are an Australian resident for tax purposes, you can access the full main residence exemption when you sell your home if:

Your home was your main residence for the whole time you owned it (see Can the main residence apply if you move out?).; and
You did not use your home to produce any income (see Partial exemption below), and
The land your home is on is 2 hectares or less. If your home is on more than 2 hectares, for example on farmland, the exemption can apply to the home and up to 2 hectares of adjacent land.

Partial exemption

If you have used your home to produce income, you won’t normally be able to claim the full main residence exemption, but you might be able to claim a partial exemption.

Common scenarios impacting your main residence exemption include:

Running a business from home (working from home is ok), and
Renting the home or part of the home.

In these scenarios, from the time you started to use the home to generate income, that part of the home is likely to be subject to CGT. And, a word of caution here, as of 1 July 2023, platforms such as Airbnb must report all transactions to the ATO every 6 months. This data will be used to match against the income reported on income tax returns.

Foreign residents and changing residency

Foreign residents cannot access the main residence exemption even if they were a resident for part of the time they owned the property.

If you are a non-resident at the time you enter into the contract to sell the property, you are unlikely to be able to access the main residence exemption. Conversely, if you are a resident at the time of the sale and you meet the other eligibility criteria, the rules should apply as normal even if you were a non-resident for some of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if eligible, access the main residence exemption.

It’s important to recognise that the residency test is your tax residency, not your visa status. Australia’s tax residency rules can be complex. If you are uncertain, please contact us and we will work through the rules with you.

Can the main residence apply if you move out?

You might have heard about the ‘absence rule’. This rule allows you to continue to treat your home as your main residence for tax purposes:

For up to 6 years if the home is used to produce income, for example you rent it out while you are away; or
Indefinitely if it is not used to produce income.

When you apply the absence rule to your home, this normally prevents you from applying the main residence exemption to any other property you own over the same period. Apart from limited exceptions, the other property is exposed to CGT.

Let’s say you moved overseas in 2020 and rented out your home while you were away. Then, you came back to Australia in 2023 and moved back into your house. Then in early 2024, you decided it is not your forever home and sold it. You elected to apply the absence rule to your home and didn’t treat any other property as your main residence during that same period. In this case, you should be able to access the full main residence exemption assuming you are a resident for tax purposes at the time of sale.

The 6 year period also resets if you re-establish the property as your main residence again, but later stop living there. So, if the time the home was income producing is limited to six years for each absence, it is likely the full main residence exemption will be available if the other eligibility criteria are met.

Timing

Your home normally qualifies as your main residence from the point you move in and start living there. However, if you move in as soon as practicable after the settlement date of the contract, that home is considered your main residence from the time you acquired it.

If you buy a new home but haven’t yet sold your old home, you can treat both properties as your main residence for up to six months without impacting your eligibility to the main residence exemption. This applies if the old home was your main residence for a continuous period of 3 months in the 12 months before you disposed of it and you did not use your old home to produce income in any part of that 12 months when it was not your main residence.

If the sale takes more than six months and if eligible, the main residence exemption could apply to both homes only for the last six months prior to selling the old home. For any period before this it might be possible to choose which home is treated as your main residence (the other becomes subject to CGT).

If your new home is being rented to someone else when you purchase it and you cannot move in, the home is not your main residence until you move in.

If you cannot move in for some unforeseen reason, for example you end up in hospital or are posted overseas for a few months for work, then you still might be able to access the main residence exemption from the time you acquired the home if you move in as soon as practicable once the issue has been resolved. Inconvenience is not a valid reason and you will need to ensure that you have documentation to support your position.

Can a couple have a main residence each?

Let’s say you and your spouse each own homes that you have separately established as your main residences. The rules don’t allow you to claim the full CGT exemption on both homes.

Instead, you can:

Choose one of the dwellings as the main residence for both of you during the period; or
Nominate different dwellings as your main residence for the period.

If you and your spouse nominate different dwellings, the exemption is split between you:

If you own 50% or less of the residence chosen as your main residence, the dwelling is taken to be your main residence for that period and you will qualify for the main residence exemption for your ownership interest;
If you own greater than 50% of the residence chosen as your main residence, the dwelling is taken to be your main residence for half of the period that you and your spouse had different homes.

The same rule applies to your spouse. The rule applies to each home that the spouses own regardless of how the homes are held legally, i.e., sole ownership, tenants in common or joint tenants.

What happens in a divorce?

Assuming the home is transferred to one of the spouses (and not to or from a trust or company), both individuals used the home solely as their main residence over their ownership period, and the other eligibility conditions are met, then a full main residence exemption should be available when the property is eventually sold.

If the home qualified for the main residence exemption for only part of the ownership period for either individual, then a partial exemption might be available. That is, the spouse receiving the property may need to pay CGT on the gain on their share of the property received as part of the property settlement when they eventually sell the property.

The main residence exemption looks simple enough but it can become complex quickly. You will need more than a ‘vibe’ to work with the exemption. In the words of the character of Dennis Denuto in The Castle, “it’s the vibe of it. It’s the constitution. It’s Mabo. It’s justice. It’s law. It’s the vibe and ah, no that’s it. It’s the vibe. I rest my case.”

Do you have questions about how this information affects you? Talk to us today - email us or phone our team on 02 9899 3044 .

Instant asset write-off passes Parliament

Sun, 14 Jul 2024 22:29:02 GMT

Legislation increasing the instant asset write-off threshold from $1,000 to $20,000 for the 2024 income year passed Parliament just five days prior to the end of the financial year.

Purchases of depreciable assets with a cost of less than $20,000 that a small business makes between 1 July 2023 and 30 June 2024 can potentially be written-off in the year of purchase.

The instant asset write-off is a major cashflow advantage because the tax deduction can be taken in the year of purchase instead of over a number of years.

To be eligible, the asset must be first used, or installed ready for use, for a taxable purpose between 1 July 2023 and 30 June 2024. For example, you cannot simply have a receipt for an industrial fridge, it must have been delivered and installed to be able to claim the write-off in 2024.

The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets across the 2024 year as long as the cost of each asset is less than $20,000.

A Bill to extend the instant asset write-off threshold increase to 30 June 2025 is currently before Parliament.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

What's ahead for 2024-2025?

Sun, 14 Jul 2024 22:14:36 GMT

Will 2024-25 be another year of volatility or a return to stability?

Personal tax and super

As you would be aware (at least we hope so after a $40m public education campaign), the personal income tax cuts came into effect on 1 July 2024. At the same time, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%.

For employers, it’s critically important to ensure that your payroll system, and all interactions with it, like salary sacrifice agreements, are assessed and updated. Your PAYG withholding will also be impacted.

While we are on the topic of obligations, the ATO have recently warned employers to be vigilant about their super guarantee obligations:

Are you paying super guarantee to the right people? The definition of an employee for SG purposes is broad and, in some cases, extends beyond typical classifications. Temporary residents, backpackers, and some company directors working in the business, family members working in the business, and some contractors must be paid SG. Check your classifications are correct for SG purposes.
Check the fund details are correct for the employee and the employee’s tax file number has been provided to the super fund. It’s the employer’s obligation to ensure that SG for the employee is directed to the correct super fund account.
Ensure SG is paid into the employee’s fund by the quarterly due date (next SG payments are due by 28 July). If your business misses the deadline, the super guarantee charge applies (even if you pay the outstanding amount quickly after the deadline). The SG charge (SGC) is particularly painful for employers because it is comprised of the outstanding SG, 10% interest p.a. from the start of the quarter, and an administration fee. And, unlike normal SG contributions, SGC amounts are not deductible.

Wages

On 1 July 2024, the national minimum wage increased by 3.75% ($24.10 per hour, or $915.90 per week). The increase applies from the first full pay period starting on or after 1 July 2024. Traditionally, there is no correlation between an increase in minimum wages and inflation.

Annual wage growth in the private sector fell slightly to 4.1% in the March quarter 2024 from 4.2% in December 2023 - the first fall since September quarter 2020, suggesting that wages growth is starting to even out.

Interest rates and cost of living

Reserve Bank of Australia (RBA) Governor Michelle Bullock has stated on several occasions that inflation, not interest rates, are at the heart of cost of living pressures. Interest rates are the RBA’s “blunt instrument” to bring inflation under control. With inflation easing more slowly than anticipated, the RBA is not ruling anything out because the path of interest rates is determined by the actions required to bring inflation to target.

Inflation has reduced from its peak of 7.8% in December 2022 to 3.6% in the March quarter, but increased again in May to 4% dampening expectations of an interest rate reprieve.

Business confidence

The latest NAB business survey is not happy reading with business confidence falling back into negative territory in May as conditions continued to gradually soften. Having experienced eight consecutive months of forward order declines, businesses are understandably circumspect over the outlook. GDP grew marginally in the March quarter and consumption per capita continued to decline.

However, labour market conditions are strong with unemployment at 4% for May.

Treasury forecasts that economic growth (GDP) will marginally improve to 2% in 2024-25. Not exciting but credible.

Migration and labour

Always a controversial topic. Post pandemic, Australia’s migration levels surged with the return of international students, working holiday makers, and an influx of temporary skilled labour to meet shortages.

In the year ending 30 June 2023, overseas migration contributed a net gain of 518,000 people to Australia's population - the largest net overseas migration estimate since records began.

The 2024-25 Federal Budget estimates that net migration will fall to 260,000. While demand pressures from migration have been well publicised, particularly on housing, the positive impact was the impact on supply. Post COVID, Australia faced crippling labour shortages that impeded the return and growth of supply.

From 1 January 2025, student visa numbers will be capped, and according to the University of Melbourne Deputy Vice-Chancellor Professor Michael Wesley, student visa grants are already down 34% in March 2024 compared to the same time in 2023.

The Government’s focus is on skilled migration. Employer sponsored places will rise by 7,175, however skilled independent visas will reduce by 13,475.

The minimum salary requirement to sponsor an employee (Temporary Skilled Migration Income Threshold) will also increase to $73,150 on 1 July 2024.

What now?

Businesses fail (or fail to thrive) for myriad reasons, but the precursor is often a failure to understand what is occurring within the business and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are, then it’s time to find out (we can help you with that).

A lack of profit will erode your business, but not enough cash will kill it stone dead. Businesses often fail because they don’t manage their cash position. Plan, track, and measure your cashflow. This not only means closely monitoring your debtor collections and inventory but also running a rolling three month cashflow position. This should provide an early warning of any brewing problems.

Cash flows, operating budgets, cost control and debt management all need to be part of your business management. The more in control you are the lower your risk position.

Many small businesses also tend to absorb increasing costs. Putting up your prices during difficult times is not an act of social betrayal. If the cost of doing business has increased, you should flow these through unless you are comfortable making less for the same amount of effort, or you are in an industry that is so price sensitive you have no choice but to follow the lead of larger businesses.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

What's changing on 1 July 2024?

Sun, 09 Jun 2024 03:50:38 GMT

Here’s a summary of the key changes coming into effect on 1 July 2024:

Tax cuts reduce personal income tax rates and change the thresholds.
Superannuation guarantee increases from 11% to 11.5% - check the impact on any salary package arrangements.
Superannuation caps increase from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions.
Luxury car tax threshold increases to $91,387 for fuel-efficient vehicles and $80,567 for all others.
Car limit for depreciation increases to $69,674.
$300 energy relief credit for households comes into effect (credited automatically quarterly).

For business

$325 energy relief credit for small business commences (for small businesses that meet the relevant State or Territory definition of a ‘small customer’).
$20k instant asset write-off extended to 30 June 2025 (subject to the passage of legislation).

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

ATO fires warning shot on trust distributions

Sun, 09 Jun 2024 03:06:45 GMT

The ATO has warned that it is looking closely at how trusts distribute income and to whom. The way in which trusts distribute income has come under intense scrutiny in recent years.

Trust distribution arrangements need to be carefully considered by trustees before taking steps to appoint or distribute income to beneficiaries.

What does your trust deed say?

An area of concern is that trustees are not considering the trust deed before income is appointed. The answer to what the trust can do, and who it can allocate income to and how, is normally in the trust deed. This should be your first point of call.

Review your deed

Conduct a review of the trust deed and any amendments to ensure trustees are making decisions consistent with the terms of the deed
Check the trust vesting date. The trust deed will specify what happens when the trust vests. If the trust vests, the trustees might be directed to distribute the income and property of the trust to particular beneficiaries. The trustee may no longer have the discretion to decide who to appoint income or capital to
Check who the intended beneficiaries are, and also keep in mind that some beneficiaries might have different entitlements to income and capital under the trust deed
Timing and requirements for resolutions - Check the deed for any conditions and requirements for trustee resolutions, including the need to have the resolution in writing and the timing of when it’s required to be made. For example, the deed might require trustees to take certain actions before 30 June
If you are looking to stream capital gains or franked distributions to certain beneficiaries, check the trust deed doesn’t prevent this and the streaming requirements have been met.

Family trust and interposed entity elections

A family trust election helps wrap the workings of the trust around a specific individual’s family group. These elections can help protect trust losses, company losses, and franking credits but can also cause significant tax problems if they are used incorrectly.

An interposed entity election makes an entity a member of the family group of an individual.

Where these elections are in place, it is essential that trustees understand the implications before making any decisions on distributions. Distributions of trust income outside the specified individual’s family group will trigger family trust distribution tax at penalty rates.

Who receives the benefit?

The ATO is also on the lookout for arrangements where amounts are allocated or appointed to beneficiaries, but they don’t receive the real financial benefit of the distribution. If the arrangement has the effect of reducing the overall tax paid on the income of the trust, then this will normally increase the level of risk involved and attract the ATO’s attention.

Increased reporting on tax returns

Changes have been made to capture more information on the tax return about how trusts distribute income. These include:

Trust tax return – four new capital gains tax labels have been added. This information should be provided to beneficiaries to match what is reported in their returns.
Beneficiaries – all beneficiaries of trust income will be required to lodge a new trust income schedule. This schedule should align to your distributions as set out in the trust’s statement of distribution.
Trusts can be an excellent vehicle for many reasons including the flexibility to determine how income is distributed. The cost of that flexibility is strong controls and compliance.
The ATO is increasingly strident about how trusts are distributing income, and the tax impact of those distributions. It’s important for trustees to get it right because if trust distributions are found to be invalid, the tax ramifications can be significant.

Do you have questions about this information? Talk to us today - email us or phone our team on 02 9899 3044 .

The Essential 30 June Guide: For Businesses

Sun, 09 Jun 2024 02:48:23 GMT

The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.

Opportunities for businesses

Bonus deductions

There are a series of bonus deductions available to small business in 2023-24, these include the instant asset write-off, energy incentive, and the skills and training boost

Announced in the 2023-24 Federal Budget, the increase to the instant asset write-off threshold enables small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. In the 2024-25 Federal Budget, the Government extended this measure to 30 June 2025.

Without these measures, the instant asset write-off threshold would be $1,000.

However, legislation to enact the 2023-24 measure has not passed Parliament following a disagreement between the House of Representatives and the Senate about the amount of the threshold, and whether the measure should apply to medium businesses as well (up to $50m).

Similarly, the $20,000 energy incentive that provides an additional 20% deduction on the cost of eligible depreciating assets or improvements to existing depreciating assets that support electrification and more efficient use of energy in 2023-24, is not yet law.

Assuming both measures pass Parliament by 30 June 2024, any assets need to be first used or installed ready for use, or the improvement costs incurred, between 1 July 2023 and 30 June 2024 to be written off in 2023-24.

What is certain is the bonus 20% deduction for eligible expenditure for external training provided to your employees. The ‘skills and training boost’ is available to businesses with an aggregated annual turnover of less than $50 million. To claim the boost, the training needs to have been provided by a registered training provider and registered and paid for between 29 March 2022 and 30 June 2024. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June. Ensure you document the bad debt on your debtor’s ledger or with a minute.

Obsolete plant & equipment

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June.

For companies

If it makes sense to do so, bring forward tax deductions by committing to directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Risks for businesses

Tax debt and not meeting reporting obligations

Professional firm profits

For professional services firms – architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risks - email us or phone our team on 02 9899 3044 .

The Essential 30 June Guide: For You

Sun, 09 Jun 2024 02:30:43 GMT

The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.

Opportunities for individuals

Take advantage of the 1 July 2024 tax cuts by bringing forward your deductible expenses into 2023-24. Prepay your deductible expenses where possible, make any deductible superannuation contributions and plan any philanthropic gifts to utilise the higher tax rate.

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction.

And, if your superannuation balance on 30 June 2023 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and get an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 75, you can only make a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

And, if your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.

If you are likely to face a tax bill this year, for example, you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe.

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts over $2 as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy).

To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR.

Investment property owners

Risks for individuals

Work from home expenses

There are two methods of claiming your work from home expenses; the short-cut method, and the actual method.

The short-cut method allows you to claim a fixed 67c rate for every hour you work from home. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates.

Landlords beware

If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property needs to be rented or genuinely available for rent to claim the expenses.

The ATO is actively pursuing a series of issues this tax season. These include:

Refinancing and redrawing loans – you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses.

The difference between repairs and maintenance and capital improvements. While repairs and maintenance can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets).

Co-owned property – rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses.

Gig economy income

It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, OnlyFans, youtube, etc., is declared in your tax return.

Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime. This is the first year that the ATO will have the income tax returns of taxpayers to match to this data.

All other sharing economy platforms will be required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest.

If you have any questions about how this information impacts you, please email us or phone our team on 02 9899 3044 .

2024-25 Budget: The Economy

Wed, 15 May 2024 09:18:50 GMT

This article is part of our 2024-25 Federal Budget series. To view all articles, see The Price is Right: 2024-25 Budget or the bottom of this page.

Four years of economic turmoil and continued uncertainty

The first four years of this decade have tested the economy and the resilience of all Australians: floods and bushfires, a once-in-a-century global pandemic, followed by the most significant international energy crisis in 50 years.

The combined impact of these events resulted in economic consequences on supply chains, energy prices, inflation and interest rates.[1] These events may seem like distant memories but they continue to impact the economy.

Australia is continuing to face ongoing global uncertainty stemming from persistent inflation in North America; growth slowing in China and other major economies; the United Kingdom and Japan both finishing the year in recession; and tensions rising in the Middle East and Eastern Europe.

Key statistics

GDP – Real GDP growth of 1.75% in 2023–24. Growth is expected to remain subdued at 2% in 2024-25 and 2.25% in 2025-26.
Inflation – The Government expects inflation to be within target by the end of 2024. The RBA’s most recent view is that inflation is not expected to return to the target range of 2-3% until the second half of 2025, and to the midpoint in 2026. Global inflation remains elevated and is not expected to return to central bank targets until 2025.
Unemployment – The unemployment rate remaining near its 50 year low at 3.8% - the participation rate is near its record high at 66.6%. Unemployment is expected to rise but remain below pre-pandemic levels.
Wages – Nominal wages over 2023–24 have grown at their fastest rate in nearly 15 years. It is expected to soften to 3.25% in 2024-5 and 2025-6. Real wages are expected to continue to pick up and grow by 0.5% the year to the June quarter 2024.
Business investment – growth of 8.3% last year.

Inflation and cash rate

Inflation is moderating but still high compared to the target range of 2 to 3% required by monetary policy.

Michelle Marquardt, ABS head of prices statistics:

“Annually, the CPI rose 3.6 per cent to the March 2024 quarter. While prices continued to rise for most goods and services, annual CPI inflation was down from 4.1 per cent last quarter and has fallen from the peak of 7.8 per cent in December 2022.” [2]

Inflation has increased the cost of living, as Australian households are paying more to purchase the same goods and services.

The surplus in 2022–23 took some pressure off inflation, allowing the Government to fund their priorities and reduce debt interest. All encouraging signs, but the Government acknowledges it still needs to reduce inflation further and faster. The budget measures seek to ease inflation and not add to it.[3]

As at 7 May 2024, the cash rate is currently at 4.35%. The RBA last raised the cash rate on 7 November 2023 by 0.25% to return inflation to the target range in a reasonable timeframe. The price of goods is moderating but services remain inflated.[4]

Overall, higher interest rates have led people to cut back on spending. This is slowing economic growth and bringing demand into better balance with supply.

References:

Prime Minister, Anthony Albanese, A future made in Australia , 11 April 2024.
Australian Bureau of Statistics (ABS), CPI rose 1.0% in the March 2024 quarter , 24 April 2024.
Treasurer, Jim Chalmers, Annual inflation almost halved under Labor , 24 April 2024.
RBA, Media Release, Statement by the RBA: Monetary Policy Decision , 7 May 2024.

If you have any questions about any aspects of this year's budget, please email us or phone our team on 02 9899 3044 .

2024-25 Budget: Women's Budget Statement

Wed, 15 May 2024 08:58:28 GMT

This article is part of our 2024-25 Federal Budget series. To view all articles, see The Price is Right: 2024-25 Budget or the bottom of this page.

A strategy for gender equality

This year, the Government launched Australia’s first national strategy with an explicit focus on achieving gender equality.

Working for Women: A Strategy for Gender Equality (Working for Women) is the Government’s ten-year commitment to ‘shift the dial’ on gender equality.

Reporting on the implementation of Working for Women

The Women’s Budget Statement is now a reporting mechanism for Working for Women. From this Budget onward, the Women’s Budget Statement will report on the Government’s investments to implement Working for Women.

The 2024–25 Women’s Budget Statement focuses on five priorities, which mirror the priority areas of Working for Women:

Gender-based violence
Unpaid and paid care
Economic equality and security
Health
Leadership, representation and decision making.

New measures announced

The Government has announced measures as part of the Federal Budget to:

Take urgent action through the National Plan to End Violence against Women and Children 2022–2032 to address the epidemic rates of violence in Australia.
Permanently establish ongoing financial support through the Leaving Violence Program for victim-survivors leaving a violent intimate partner relationship.
Increase funding to assist women and children fleeing domestic violence with crisis and transitional accommodation.
Provide cost-of-living relief to all women taxpayers and reduce disincentives to their workforce participation via the legislated tax cuts.
Deliver additional energy bill relief and increase the maximum rates of Commonwealth Rent Assistance.
Invest in women’s health to address the higher health costs faced by women, while ensuring greater choice, access and support.
Reform the HELP debt indexation and introduce a new Commonwealth Prac Payment.
Introduce a superannuation guarantee equivalent payment on Government-funded Paid Parental Leave from 1 July 2025.
Provide funding towards wage increases for aged care workers and early childhood educators.
Introduce the Building Women’s Careers program that will boost women’s participation in construction, clean energy and advanced manufacturing industries, and technology and digital sectors (as part of the Future Made in Australia initiative to reduce industry gender segregation).

If you have any questions about any of these initiatives, please email us or phone our team on 02 9899 3044 .

2024-25 Budget: Government & Regulators

Wed, 15 May 2024 08:43:52 GMT

This article is part of our 2024-25 Federal Budget series. To view all articles, see The Price is Right: 2024-25 Budget or the bottom of this page.

Funding ATO priority targets

Beginning the first income year after Royal Assent of enabling legislation

The Government announced that it will provide $187 million over four years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems.

Specific funding has been provided to the ATO for key targets. These include:

Personal income tax - The ATO’s Personal Income Tax Compliance Program will be extended for one year from 1 July 2027. This measure is estimated to increase receipts by $180.3 million and increase payments by $44.3 million over the 5 years from 2023–24.

Anti-avoidance taskforce - extend the ATO’s Tax Avoidance Taskforce for two years from 1 July 2026. This measure is estimated to increase receipts by $2.4 billion and increase payments by $1.2 billion over the 5 years from 2023–24.

The Tax Avoidance Taskforce has a strong focus on the top 1,100 public and multinational businesses and the top 500 privately owned groups, but also covers all 5,000 high wealth private groups that control net wealth exceeding $50 million and public and multinational businesses outside of the ATO’s justified trust programs.

As of 30 June 2023, the taskforce has assisted the ATO raise $32.7 billion in tax liabilities.

Child care providers - $4.8 million over four years from 2024–25 to ensure satisfactory engagement with the Australian tax system regarding fitness and propriety requirements of existing and new child care providers (relating to the Child Care Subsidy Program).

Pursuing entities in liquidation with unpaid superannuation obligations

Date From 1 July 2024

The Government has announced that it will recalibrate the Fair Entitlements Guarantee Recovery Program to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

The Fair Entitlements Guarantee Recovery Program aims to improve the recovery of employment entitlements advanced under the Fair Entitlements Guarantee (FEG). The FEG is a legislative safety net scheme of last resort with assistance available for eligible employees. [1]

If you have any questions about any of these initiatives, please email us or phone our team on 02 9899 3044 .

References:

Australian Government, Department of Employment and Workplace Relations, Fair Entitlements Guarantee Recovery Program , accessed 14 May 2024.

2024-25 Budget: Business & Employers

Wed, 15 May 2024 08:31:50 GMT

This article is part of our 2024-25 Federal Budget series. To view all articles, see The Price is Right: 2024-25 Budget or the bottom of this page.

$325 energy relief for small business

Beginning 1 July 2024

Around one million small businesses will receive $325 off their energy bills over 2024–25. The support will apply as an automatic quarterly credit to energy bills.

Energy relief will also be provided to households in the form of a $300 rebate.

Costing $3.5bn over three years from 2023-24, the measure extends and expands the Energy Bill Relief Fund .

$20k small business instant asset write-off extended

From 1 July 2023 to 31 June 2025

Small businesses, with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025. This measure extends the 2023-24 Budget announcement to the 2024-25 financial year.

“Immediately deductible” means a tax deduction for the asset can be claimed in the same income year that the asset was purchased and used (or installed ready for use).

If the business is registered for GST, the cost of the asset needs to be less than $20,000 after subtracting the GST credits that can be claimed for the asset. If the business is not registered for GST, it is less than $20,000 including GST.

The write-off applies per asset, so a small business can deduct the cost of multiple assets.

The rules only apply to assets that fall within the scope of the depreciation provisions. Expenditure on capital improvements to buildings that falls within the scope of the capital works rules is not expected to qualify.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter if the asset has been acquired by a small business entity that chooses to apply the simplified depreciation rules.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will continue to be suspended until 30 June 2025.

The increased small business instant asset write-off announced in the 2023-24 Federal Budget is not yet law. Senate amendments proposed increasing the threshold from $20,000 to $30,000 and expanding the measure to apply to medium entities.

The Future Made in Australia initiative

The Government has announced a bold initiative to make Australia a “renewable energy superpower.”

The $22.7 billon series of initiatives is designed to foster and encourage significant private sector investment into priority industries necessary to harnessing the economic and industrial benefits of the move to net zero and securing Australia’s place in a changing global economic and strategic landscape.

The Future Made in Australia Act will establish the policy framework - the focus will be on industries in which Australia has a genuine economic advantage, where it contributes to an orderly path to net zero, where it builds on the capabilities of the people and regions and improves Australia’s national security and economic resilience

The increases to the thresholds take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.[1]

Making Australia renewable energy superpower

From 2027–28 to 2040–41

As part of the Future Made in Australia initiative, the Government will provide an estimated $19.7 billion over ten years from 2024–25 to accelerate investment in Future Made in Australia priority industries including renewable hydrogen, green metals, low carbon liquid fuels, refining and processing of critical minerals and manufacturing of clean energy technologies including in solar and battery supply chains.

This includes two time‑limited tax incentives to invest in new industries:

Critical Minerals Production Tax Incentive from 2027-28 to 2040-41 to support downstream refining and processing of Australia's 31 critical minerals to improve supply chain resilience.
The production incentive will be valued at 10% of relevant processing and refining costs
Applicable for up to 10 years per project for production between 2027-28 and 2039-40 by projects that reach final investment decisions by 2030.

A Hydrogen Production Tax Incentive from 2027-28 to 2040-41 to producers of renewable hydrogen to support the growth of a competitive hydrogen industry and Australia's decarbonisation.
The incentive will be $2 per kilogram of renewable hydrogen produced for up to 10 years per project for production between 2027-28 and 2039-40 by projects that reach final investment decisions by 2030.
Details are subject to consultation.

The tax incentives are proposed to be in effect from the 2027–28 to the 2040–41 income years.

Funding measures

The Government is getting into business with industry to encourage investment in select areas:

$10.2 million in 2024–25 for pre-feasibility studies for critical mineral common-user processing facilities in partnership with state and territory governments to enhance Australia’s capacity to process critical minerals, sovereign capability and economic resilience.
$1.3 billion over ten years from 2024–25 (and an average of $151.6 million per year from 2034–35 to 2038–39) for an additional round of the Hydrogen Headstart program to bridge the green premium for early-mover renewable hydrogen projects.
$17.1 million over four years from 2024–25 (and an additional $2.5 million in 2028–29) to deliver the 2024 National Hydrogen Strategy, including hydrogen infrastructure planning, social license and industry safety training and regulation.
$1.5 billion over seven years from 2027–28 (and an average of $125.0 million per year from 2034–35 to 2036–37) to the Australian Renewable Energy Agency to invest in renewable energy and related technologies.
$1.7 billion over ten years from 2024–25 for the Future Made in Australia Innovation Fund (administered by the Australian Renewable Energy Agency), to pilot and demonstration projects and early stage development in priority sectors, including renewable hydrogen, green metals, low carbon liquid fuels and clean energy technology manufacturing such as batteries.
$1.4 billion over 11 years from 2023–24 (and $66.8 million per year from 2034–35 to 2036–37) to support manufacturing of clean energy technologies including solar and battery manufacturing.$20.9 million over four years from 2024–25 (and $1.2 million per year ongoing) to undertake further consultation on incentives to support the production of, and demand for, low carbon liquid fuels.
$18.1 million over six years from 2024–25 for foundational initiatives to expedite the emergence of Australia’s green metals industry.
$11.4 million over four years from 2024–25 (and $1.1 million per year ongoing) to fast track the initial phase of the Guarantee of Origin Scheme for green hydrogen and bring forward work on green metals, including iron, steel and aluminium.

Small business support services

Date: Over four years from 2024–25

The Government has announced $41.7 million in funding over four years from 2024–25 for a series of initiatives to support small businesses:

Improving payment times to small businesses including naming and shaming - increased resourcing for the Payment Times Reporting Regulator so that it can deliver its expanded functions, which include naming slow paying businesses.
Mental health and financial wellbeing of small business owners –
Extending the NewAccess for Small Business Owners program, which provides tailored, free and confidential mental health support.
Extending the Small Business Debt Helpline.
Franchising sector code changes - In response to the 2023 Schaper Review of the Franchising Code of Conduct, the Government is providing $3 million to:
Remake and improve the Code
Promote best practice conduct between franchisors and franchisees.
Make it easier for small businesses to operate in the sector including through better access to dispute resolution.
Access to justice - $2.6m in funding to the Australian Small Business and Family Enterprise Ombudsman. The ASBFEO assists and advocates for small businesses including helping to resolve disputes.

If you have any questions about any of these initiatives, please email us or phone our team on 02 9899 3044 .

References:

Treasurer, Jim Chalmers, Address to the Lowy Institute , Sydney, 1 May 2024.

2024-25 Budget: Individuals & Families

Wed, 15 May 2024 05:25:11 GMT

This article is part of our 2024-25 Federal Budget series. To view all articles, see The Price is Right: 2024-25 Budget or the bottom of this page.

Personal income tax cuts confirmed

Beginning 1 July 2024

As previously announced, the Government has legislated permanent tax cuts for all Australian taxpayers from 1 July 2024.

Relative to the previous Stage 3 plan, the redesigned cuts broaden the benefits of the tax cut by focussing on individuals with taxable income below $150,000.

New personal income tax rates

Resident individuals

Non-resident individuals

Working holiday-makers

Medicare levy low income thresholds increase

From 1 July 2023

The Medicare levy low-income thresholds will be increased for singles, families, and seniors and pensioners from 1 July 2023.

The increases to the thresholds take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.

*For each dependent child or student, the family income threshold increases by the stated amount.

$300 energy relief for households

From 1 July 2024

Households will receive a credit of $300 on their energy bills credited as automatic quarterly instalments across 2024-25.

Energy relief will also be provided to eligible small businesses in the form of a $325 rebate.

Costing $3.5bn over three years from 2023-24, the measure extends and expands the Energy Bill Relief Fund .

Capping indexation of HELP debts

From loan accounts that existed on 1 June 2023

As previously announced, the Government will cap the HELP indexation rate to be the lower of either the CPI or the Wage Price Index (WPI) with effect from 1 June 2023. The change will apply to all HELP, VET Student Loans, Australian Apprenticeship Support Loans and other student support loan accounts that existed on 1 June 2023.

By changing the calculation of HELP indexation from 1 June 2023, the indexation rate is reduced from:

7.1% to 3.2% in 2023, and
4.7% to around 4% in 2024.

The change resolves an issue for more than 3 million Australians with a HELP debt when the CPI indexation rate spiked to 7.1% last year.

An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation.

Estimated indexation for HELP debts

*Actual credit amount will vary depending on individual circumstances including repayments made during the year. All HELP debts that were indexed in 2023 and are subject to indexation on 1 June 2024 will receive an indexation credit.

Superannuation on paid parental leave

From 1 July 2025

As previously announced, from 1 July 2025 superannuation will be paid on Paid Parental Leave payments.

Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments), as a contribution to their superannuation fund.

This payment is in addition to the changes that saw families provided with an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026.

Improving aged care support

Over the next 5 years

The Government will provide funding of $2.2 billion over the next five years to deliver key aged care reforms and to continue to implement recommendations from the Royal Commission into Aged Care Quality and Safety.

This funding includes the release of an additional 24,100 home care packages in 2024-25.

The Government has also agreed to defer the commencement date of the new Aged Care Act to 1 July 2025.

The Government is currently in the middle of considering and implementing changes to the way aged care is funded on the back of the Royal Commission into Aged Care Quality and Safety report released in 2021.

This will likely impact home care and residential care fees in the future. Generally, with past reform we have seen existing residents and home care recipients ‘grandfathered’ under the rules at the time they entered.

Pharmaceutical benefits scheme (PBS) co-payments

From 1 January 2024

The Government will ensure that the cost of medicines remains low by freezing indexation:

PBS general co-payments to not be indexed between 1 January 2025 and 31 December 2025 (inclusive), with indexation resuming on 1 January 2026
PBS concessional co-payments to not be indexed between 1 January 2025 and 31 December 2029 (inclusive), with indexation resuming on 1 January 2030

The $1 optional discount available on patient co-payments for subsidised prescriptions will be reduced each year by the relevant notional indexation amount until the $1 discount has been reduced from $1 to zero.

From 1 January 2024, you may pay up to $31.60 for most PBS medicines, or $7.70 if you have a concession card. The Australian Government pays the remaining cost (with the exception of brand premiums and certain other allowable charges).

Domestic violence support program

From mid-2025

As previously announced , the Government has committed almost $1bn over 5 years to permanently establish the Leaving Violence Program – so those escaping violence can receive financial support, safety assessments and referrals to support pathways. Those eligible will be able to access up to $5,000 in financial support along with referral services, risk assessments and safety planning.

This makes permanent the Escaping Violence Program trial. More than 45,000 Australians have accessed the EVP payment since 2021. A total of 80 per cent of those accessing the support were self-referrals meaning without this program they may have fallen through the cracks of the support system.

If you have any questions about any of these initiatives, please refer to the links above, email us or phone our team on 02 9899 3044 .

The Price is Right: Budget 2024-25 Summary

Wed, 15 May 2024 04:36:29 GMT

The Treasurer is promising that inflation will decline by 0.75% as a direct result of the 2024-25 Federal Budget initiatives including energy relief for all households, a boost to Commonwealth Rent Assistance, and the freezing of the maximum co-payment on the Pharmaceutical Benefits Scheme.

This is a pre-election budget for the people with everyone getting a little something to ease cost of living pressures. Like the Price is Right gameshow, it will all come down to the price paid at the checkout.

If the consumer price index (CPI) returns to target by the end of 2024 off the back of the Budget initiatives as the Government anticipates, the Reserve Bank of Australia (RBA) may be inclined to reduce interest rates. However, at this stage, the RBA is not expecting inflation to return to the target range of 2-3% until the second half of 2025, and to the midpoint in 2026.

The 2023-24 surplus has increased to $9.3bn but is expected to decline to a deficit of $28.3bn in 2024-25, driven primarily by the Stage 3 tax cuts.

Detailed articles

Use the following links to click through to more detail on a range of different budget initiatives.

Updates for business and foreign residents

For business, the Government is picking winners through targeted public investment with its Future Made in Australia Framework that they are betting will pave the way for private investment in net zero transformation and the strengthening of Australia’s domestic economic resilience.

For small and medium business, there is a little but not a lot - an extension of the $20k instant asset write-off until 30 June 2025 and a $325 rebate to eligible businesses towards 2024-25 energy bills.

For foreign residents, the capital gains tax (CGT) regime will be amended to broaden the type of assets subject to CGT and introduce a modified 365-day principal asset testing period.

Key measures

Previously announced Stage 3 tax cuts
$300 energy bill relief for all Australian households and $325 for eligible small businesses - applied as an automatic quarterly credit.
Student HELP debts will be cut by changing the way indexation is calculated. From 1 June 2023, it will be the lower of the CPI or the Wage Price Index (WPI), reducing the debt accumulated by more than 3 million Australians when the CPI spiked to 7.1%.
Increase to the Commonwealth rent assistance maximum rates by 10% from 20 September 2024.
One year freeze on the maximum Pharmaceutical Benefits Scheme (PBS) patient co-payment for Medicare card holders and a five-year freeze for pensioners and other concession cardholders.

Those with large superannuation balances will be disappointed that the 30% tax on super earnings on balances above $3 million remains in place, this is set to commence from 1 July 2025.

If you have any questions, please email us or phone our team on 02 9899 3044 .

Non-compete clauses and worker restraints under review

Tue, 09 Apr 2024 07:55:19 GMT

A new issues paper from Treasury’s Competition Review questions whether non-competes and other restraints are limiting job opportunities and movement.

A recent Australian Bureau of Statistics (ABS) survey found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

Over the last 30 years, Australia has seen a decline in job mobility. Australia is not alone in this and other advanced economies have experienced the same issue. While restraint clauses are not the only factor contributing to the decline – an ageing population and a rise in post-pandemic market concentration in some industries has also contributed - i t is specifically the role of restraints that is the focus of the Competition Review issues paper (s ubmissions close 31 May 2024).

The impact of declining job mobility

The review states that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

For business however, this is the point - restricting the knowledge developed by a worker during their employment from benefiting a competitor, limiting the likelihood of a ‘mass exodus’ of key workers from the business to a competitor, preventing clients from employing key workers, and protecting the value of the business by preventing employees from walking away with customers that were hard won, at a cost, by the business.

Trend away from restraints

However, the impact of restraints appears to be a psychological deterrent given that most are not contested. Of the 115 matters relating to restraints of trade between 2020 and 2023 dealt with by Legal Aid NSW, only one business commenced proceedings in court against a former worker. And, a further study indicates that where employers seek legal redress in the courts, they are more likely than not to fail.

The international trend is to either ban restraints for workers under a certain income level and time limit restraints for higher paid workers, or to limit the duration of restraints generally but specify a level of compensation to the worker for the restraint period.

Definitions

Non-compete clauses: prevent workers from joining a competitor or starting a new business in competition with their current employer for a period of time.
Non-solicitation clauses: prevent workers from soliciting former customers and co-workers.
Non-disclosure clauses: prevent workers from disclosing confidential information relating to their employment.

If you have any questions, please email us or phone our team on 02 9899 3044 .

The assault on professional services

Tue, 09 Apr 2024 07:42:18 GMT

The ATO has signalled that it is willing to pursue professional services firms who divert profits to avoid tax. Two new cases before the Administrative Appeals Tribunal demonstrate how serious the Australian Taxation Office (ATO) is about making sure professional services firms - lawyers, accountants, architects, medical practices, engineers, architects etc., – are appropriately taxed.

In both cases, the ATO pursued the practices using Part IVA. Part IVA is an area of the income tax law that enables the Tax Commissioner to attack schemes or arrangements undertaken to obtain a tax benefit, enabling him to cancel any benefit derived by the scheme.

That is, you could have a legally viable structure in place but if the only purpose of that structure is to reduce tax, then the Commissioner can use Part IVA to remove the tax benefit. And, if Part IVA applies, you may end up with an additional tax liability as well as an administrative penalty of either 25% or 50% of the tax shortfall amount.

Tax avoidance schemes exposed

Broadly, the cases involved a solicitor who controlled a number of practice trusts that derived profits through marketing and facilitating tax planning arrangements.

While the arrangement in each case was complex and involved a large number of steps, the practice trusts ensured their business profits weren’t subject to tax by essentially making trust distributions on paper through a series of trusts and ultimately to either a company that had existing tax losses, or a tax-exempt entity. However, the real funds relating to the trust distribution (less a commission paid for the use of these entities) were ultimately received by the solicitor or their associated entities in the form of a loan.

Professional practices have been in the ATO spotlight for many years now for the way they distribute profits. Back in 2021, the ATO finalised its guidance on the allocation of professional firm profits, putting in place a series of risk ratings and gateway tests. These two cases however demonstrate the ATO’s willingness to pursue the issue in the courts using the Commissioner’s powers in Part IVA.

ATO challenging profit distribution arrangements

For professional services firms, it’s important to be aware that there are several ways in which the ATO can potentially challenge arrangements involving the distribution of profits from a professional practice.

For example:

If a trading entity derives personal services income that mainly relates to the skills and efforts of a particular individual, the ATO has certain expectations around ensuring the profits are assessed to the individual performing the work.
If a trading entity doesn’t derive personal services income but income from a business structure involving a professional practice, the ATO has set out its compliance approach to targeting arrangements that don’t result in a reasonable level of profit being taxed in the hands of the individual practitioners.
If a trust makes paper distributions to loss entities to ‘soak up’ deductions or losses, there are integrity rules in section 100A, another area of tax law under intense scrutiny, that need to be considered.

If you have any questions about this article, please email us or phone our friendly team on 02 9899 3044 .

How much is my business worth?

Tue, 09 Apr 2024 07:31:25 GMT

For many small business owners, their business is their largest asset and for many, one that is expected to help fund their retirement. But what is your business really worth and what sets a high value business apart?

Every business owner is naturally curious about just how much their business is worth. However, for every business that sells at an attractive price, there are others that struggle to sell, let alone fetch a premium. The question is, what makes a difference?

When you come to sell a business the first question is, what are you selling? In most cases, this is fixtures and fittings, plant and equipment, stock on hand, and the goodwill of the business. Generally, a buyer won’t want to purchase your liabilities or your business structure, nor will they want to collect your outstanding debtors. Most business sales become a sale of business assets.

Valuing assets...and goodwill

These assets are relatively easy to value with the exception of the goodwill. The value of plant and equipment and trading stock can generally be agreed. The tension tends to be around the value of the goodwill because goodwill is made up of many intangible assets that can’t be readily quantified.

We can all agree that there is value in these assets but the question is, how much? Goodwill is basically the value of the future free cashflow of the business. Based on how your business is structured, it is the value of the profits the business can generate in the future. This is what a buyer is prepared to pay for.

If a buyer has a reasonable certainty of profits and free cashflow in the future, then this is worth something. By comparison, a start-up business will have a higher level of risk and no certainty that profits can be generated. In general, a new business may need to trade for a number of years at a loss before it can establish itself and generate profits. Goodwill is what you are prepared to pay to avoid the risk and the ‘time to establish’ factor.

Influences on business value

So, what influences business value and what will people pay for?

A history of profits, profits, and more profits
Returns on capital invested (better than 30%)
Strong growth and growth prospects
Brand name and value
A business not dependent on the owners
A strong, verifiable customer list
Monopoly income – exclusive territories
A sustainable competitive advantage
Good systems and procedures

It is possible to get a price that is widely different from the norm. Unique businesses, unique circumstances, and unique opportunities can always produce ‘an out of the box’ price. If you can build something unique, then you may achieve a price beyond normal expectations. At the end of the day however, the market will set the price.

If you are planning on selling your business, identify who your buyers might be. There could be a purchaser who is prepared to pay a large premium to own your business because of the accretive value or because it is pivotal to their growth strategy.

And, even if you are not thinking about selling your business, the reality is that one day you will. If you build your business with this in mind, then you should look to do the things that will grow your business value from year to year.

If you have any questions about how you can grow your business for sale, please email us or phone our friendly team on 02 9899 3044 .

Warning on SMSF asset valuations

Tue, 09 Apr 2024 07:14:54 GMT

The ATO has issued a warning to trustees of SMSFs about sloppy valuation practices. ATO data analysis has revealed that over 16,500 self managed superannuation funds (SMSFs) have reported assets as having the same value for three consecutive years. With many of these assets residential or commercial Australian property, you can forgive the ATO for being incredulous.

For trustees of SMSFs, where asset values are consistently reported at the same value, it’s likely your SMSF will be flagged for closer scrutiny by the ATO.

The value of assets in your SMSF impacts on member balances and by default, can impact the amount you can contribute, ability to segregate assets for exempt current pension income, the work test exemption and access to catch-up concessional contributions. And, as we move closer to the implementation of the Division 296 $3m superannuation tax, valuations will be very important for anyone with a member balance close to or in excess of $3m.

If the asset is an in-house asset, for example a related unit trust, then an accurate valuation is essential to ensure the fund remains within the 5% in-house asset limit. If the value of in-house assets rises above 5% of total assets, the asset/s need to be sold to bring the limit back below 5%.

Valuing at market value

Each year, the assets of your SMSF must be valued at ‘market value’ and evidence provided to your auditor. Broadly, market value is the amount that a willing buyer of the asset could reasonably be expected pay to acquire the asset from a willing seller assuming that the buyer and seller are dealing at arm’s length, and everyone acts knowledgeably and prudentially. It’s a common sense test that looks at the value you could reasonably expect to achieve for an asset.

If your SMSF holds collectible and personal use assets like artwork, jewellery, motor vehicles etc., a valuation must be performed by a qualified independent valuer on disposal. This does not necessarily mean that an independent valuation needs to be completed every year but at least every three years would be prudent. If you are not utilising an independent valuer, you will still need to make an active assessment based on market conditions.

For example, if you hold artwork and the artist who created your investment artwork died, has this changed the value? Are the primary and secondary markets for the artwork transacting at a higher value? Leaving the value of the asset at its acquisition price calls into question the rationale for acquiring the asset within the fund in the first place. If the asset is unlikely to add any value to your retirement savings, then should it be held in your SMSF when you could achieve a higher rate of return elsewhere?

In most cases, the ATO require trustees to value an asset based on “objective and supportable data”. This means that you should document the asset being valued, a rational explanation for the valuation, and the method in which you arrived at it.

Valuing real property

Commercial and residential real estate does not need to be valued by an independent valuer. But, if there have been significant changes to the property, the market, or the property is unique or difficult to value, it is a good idea to have a written independent valuation from a valuer or estate agent undertaken (their report should also document the valuation method and list comparable properties).

If you are completing the valuation yourself, ensure that you document the time period the valuation applies to and the characteristics that contribute to the valuation. For example, a 10 year old brick four bedroom property on 640m2 of land in what suburb and any features that make it more or less attractive to a buyer, for example proximity to transport. And, you should access credible sales data either on similar properties in the same suburb that have sold recently or from a property data service. More than one source of data is recommended.

The estimates on a lot of online property sales sites are general in nature and not reliable for a valuation of a specific property. The average price change for the suburb however could be used as supporting evidence of your valuation.

For commercial property, net income yields are required to support the valuation. Where the tenants are related parties, for example your business leases a commercial property owned by your SMSF, you will need evidence that a comparative commercial rent is being paid and the rent is keeping pace with the market.

Valuing unlisted companies and unlisted trust investments

Valuing unlisted companies and unlisted investments can be difficult. The financials alone are not enough. But, if your SMSF invested in an unlisted company or shares in a unit trust, then there is an expectation that the trustees made the decision to make the initial acquisition based on the value of the asset, its potential for capital growth and income generation. That is, if you assessed the market value going into the investment, then it should not be a stretch to value the asset each year.

The difficulty for many investors is that in unlisted companies or trusts, the initial investment was broadly equivalent to the cash requirements of the activity being undertaken.

Generally, the starting point is the value of the assets in the entity and/or the consideration paid for the shares/units. For widely held shares or units, this is the entry and exit price.

Where property is the only asset, then the valuation principles for valuing real property are likely to apply.

Where there is no reliable data or market

We’ve seen a few scenarios where the assets purchased or created by the SMSF have no equal or there is no market – the true extent of the value will only really be known when the asset is realised. These unusual items default to either a professional valuation or a viable market assessment. This might be a derivative of the purchase price or data from a related market.

Valuations and the impending Division 296 tax on super earnings

The value of assets will be particularly important for those with super balances close to or above the $3m threshold for the impending Division 296 tax on fund earnings. Because the tax will measure asset values and tax the growth in earnings above the $3m threshold, accurate valuations will be important to ensure that the fund does not pay tax when it does not need to, and to reduce the likelihood of anomalies artificially inflating tax payable.

If you have any questions about any aspects of this story, please email us or phone our friendly team on 02 9899 3044 .

Case Study: Getting back what you put in - loans to get a business started

Sun, 10 Mar 2024 22:12:55 GMT

It’s not uncommon for business owners to pour their money into a business to get it up and running and to sustain it until it can survive on its own. A recent case highlights the dangers of taking money out of a company without carefully considering the tax implications.

A case before the Administrate Appeals Tribunal (AAT) was a loss for a taxpayer who blurred the lines between his private expenses and those of his company.

The taxpayer was a shareholder and director of a private company that operated a business. Over a number of years, he made withdrawals and paid personal private expenses out of the company bank account, but the amounts were not recognised as assessable income.

Following an audit, the ATO assessed the withdrawals and payments as either:

Ordinary income assessable to the taxpayer, or
Deemed dividends under Division 7A.

Understanding dividends under division 7A

Division 7A contains rules aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. If Division 7A is triggered, then the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes.

The taxpayer tried to convince the AAT that the withdrawals were repayments of loans originally advanced by him to the company and therefore should not be assessable as ordinary income. Alternatively, he argued that the payments were a loan to him and there was no deemed dividend under Division 7A because the company did not have any "distributable surplus” (a technical concept which limits the deemed dividend under Division 7A).

The AAT found issues with the quality of the taxpayer’s evidence, concluding that he failed to prove that the ATO’s assessment was excessive. This was based on a number of factors, including:

The taxpayer produced a number of different iterations of his financial affairs and tax return.
He could not satisfactorily explain how he was able to fund the original loans to the company, especially given he had declared tax losses in multiple years around the time when the loans were made.

While the taxpayer had tried to explain that some of his loans to the company were sourced originally from borrowings from his brother, the AAT considered this was implausible given the brother’s own tax return showed modest income.

Treating repayments of initial business loans

So, how should a contribution from a company owner to get a business up and running be treated? It really depends on the situation, but for small start-ups, the common avenues are:

Structure the contribution you make as a loan to the company, or
Arrange for the company to issue shares, with the amounts paid being treated as share capital.

In making a decision on which is the best approach, it is necessary to consider a range of factors, including commercial issues, the ease of withdrawing funds from the company later and regulatory requirements.

The way you put money into the company also impacts on the options that are available to subsequently withdraw funds from the company. However, the key issue to remember is that if you take funds out of a company then there will probably be some tax implications that need to be carefully managed.

If you have any questions about any aspects of this story, please email us or phone our friendly team on 02 9899 3044 .

How to take advantage of the 1 July super cap increase

Sun, 10 Mar 2024 04:50:13 GMT

From 1 July 2024, the amount you can contribute to super will increase. We show you how to take advantage of the change.

The amount you can contribute to superannuation will increase on 1 July 2024 from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions.

The contribution caps are indexed to wages growth based on the prior year December quarter’s average weekly ordinary times earnings (AWOTE). Growth in wages was large enough to trigger the first increase in the contribution caps in 3 years.

Other areas impacted by indexation include:

The Government super co-contribution – Income threshold
The super guarantee maximum contribution base (the limit for compulsory super guarantee payments)
The tax-free thresholds for redundancy payments
The CGT contribution cap (amount that can be contributed to super following the sale of eligible business assets).

Timing of contributions important for maximising outcomes

For those with the disposable income to contribute, superannuation can be very attractive with a 15% tax rate on concessional super contributions and potentially tax-free withdrawals when you retire. For business owners who might have had an exceptional year or sold their business, it's an opportunity to get more into super. However, the timing of contributions will be important to maximise outcomes.

If you know you will have a capital gains tax liability in a particular year, you may be able to use ‘catch up’ contributions to make a larger than usual contribution and use the tax deduction to help offset your capital gain tax bill. But, this strategy will only work if you meet the eligibility criteria to make catch up contributions and you lodge a Notice of intent to claim or vary a deduction for personal super contributions , with your super fund.

Using the bring forward rule

The bring forward rule enables you to bring forward up to 2 years’ worth of future non-concessional contributions into the year you make the contribution – this is assuming your total superannuation balance enables you to make the contribution and you are under age 75.

If you utilise the bring forward rule before 30 June, the maximum that can be contributed is $330,000. However, if you wait to trigger the bring forward until on or after 1 July, then the maximum that can be contributed under this rule is $360,000.

'Catch-up contributions'

If your super balance is below $500,000 on the prior 30 June, and you want to quickly increase the amount you hold in super, you can utilise any unused concessional super contributions amounts from the last 5 years.

Let’s look at the example of Gary who has only been using $15,000 of his concessional super cap for the last few years. Gary’s super balance at 30 June 2023 was $300,000, so he is well within the limit to make catch up contributions.

Gary could access his $27,500 concessional cap for 2023-24 plus the unused $55,000 from the prior 5 financial years.

If Gary doesn’t access the unused amounts from 2018-19 by 30 June 2024, the $10,000 will no longer be available.

Transfer balance cap unchanged

The general rate for the transfer balance cap (TBC), that limits how much money you can transfer into a tax-free retirement account, will remain at $1.9 million for 2024-25. The TBC is indexed by the December consumer price index (CPI) each year.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

The ATO debt dilemma

Sun, 10 Mar 2024 04:24:21 GMT

Late last year, thousands of taxpayers and their agents were advised by the Australian Taxation Office (ATO) that they had an outstanding historical tax debt. The only problem was, many had no idea that the tax debt existed.

The ATO can only release a taxpayer from a tax debt in limited situations (e.g., where payment would result in serious hardship). However, sometimes the ATO will decide not to pursue a debt because it isn’t economical to do so. In these cases, the debt is placed “on hold”, but it isn’t extinguished and can be re-raised on the taxpayer’s account at a future time.

For example, these debts are often offset against refunds that the taxpayer might be entitled to. However, during COVID, the ATO stopped offsetting debts and these amounts were not deducted.

Pausing action relating to historical debts prior to 2017 (for now)

In 2023, the Australian National Audit Office advised the ATO that excluding debt from being offset was inconsistent with the law, regardless of when the debt arose. And by this stage, the ATO’s collectible debt had increased by 89% over the four years to 30 June 2023.

The response by the ATO was to contact thousands of taxpayers and their agents advising of historical debts that were “on hold” and advising that the debt would be offset against any future refunds. These historical debts were often across many years, some prior to 2017, and ranged from a few cents to thousands of dollars.

For many, the notification from the ATO was the first inkling they had of the debt, because debts on hold are not shown in account balances as they have been made “inactive”. In other words, taxpayers were accruing debt but did not know as the debts were effectively invisible because they were noted as “inactive.”

In a recent statement, the ATO said: “The ATO has paused all action in relation to debts placed on hold prior to 2017 whilst we review and develop a pragmatic and sensible way forward that takes into account concerns raised by the community. It was never our intention to cause frustration or concern. It’s important to us that taxpayers have trust in our tax system and our records.”

For any taxpayer with a debt on hold, it is important to remember that just because the ATO might not be actively pursuing recovery of the debt, this doesn’t mean that it has been extinguished.

Small business debt blows out and ATO resumes BAU debt collection.

Out of the $50bn in collectible debt owing to the ATO, two thirds is owed by small business. As of July 2023, the ATO moved back to its “business as usual” debt collection practices. For entities with debts above $100,000 that have not entered into debt repayment terms with the ATO, the debt will be disclosed to credit reporting agencies.

If your business has an outstanding tax debt, it is important to engage with the ATO about this debt. Hoping the problem just goes away will normally make things worse.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

Fringe Benefit Tax traps

Sun, 10 Mar 2024 03:59:42 GMT

The Fringe Benefits Tax year (FBT) ends on 31 March. We explore the problem areas likely to attract the ATO’s attention.

Electric vehicles causing sparks

In late 2022, the Government introduced a concession that enables employers to provide some electric vehicles to employees without incurring the 47% fringe benefits tax (FBT) on private use.

The exemption applies to the use of electric cars, hydrogen fuel cell electric cars or plug-in hybrid electric cars if:

The value of the car is below the luxury car tax (LCT) threshold for fuel efficient vehicles ($89,332 for 2023-24 financial year) at the time it is first sold in a retail sale; and
The car is both first held and used on or after 1 July 2022.

If your business is planning on acquiring an electric vehicle, be aware that from 31 March 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles unless the vehicle met the conditions for the exemption before this date and there is already a binding agreement to continue to use the vehicle privately after this date.

The problem areas with EVs

The exemption only applies to employees. For the FBT exemption to apply, the vehicle needs to be supplied by the employer to an employee (including under a salary sacrifice agreement). Partners of a partnership and sole traders are not employees and cannot access the exemption personally.

If LCT applies to the car it will never qualify for the FBT exemption. For example, if the EV failed the eligibility criteria in 2022-23 when it was first purchased because it was above the luxury car limit of $84,916, the fact that it resold in 2023-24 for $50,000 does not make it eligible for the exemption on resale. Likewise, if the car was used by anyone (including a previous owner) before 1 July 2022 then it will probably never qualify for the FBT exemption.

Home charging stations are not included in the exemption. The FBT exemption includes associated benefits such as registration, insurance, repairs or maintenance, but it does not include a charging station at the employee’s home. If the employer instals a home charging station at the employee’s home or pays for the cost, then this is a separate fringe benefit.

FBT might not apply but you do the paperwork as if it did. While the FBT exemption on EVs applies to employers, the value of the fringe benefit is still taken into account when working out the reportable fringe benefits of the employee. That is, the value of the benefit is reported on the employee’s income statement. While you don’t pay income tax on reportable fringe benefits, it is used to determine your adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and certain social security payments.

What about the cost of electricity? The ATO’s short-cut method can potentially be applied to calculate reportable fringe benefit amounts and applies a rate of 4.20 cents per kilometre. If you are not using the short-cut method, you need to have a viable method of isolating and calculating the electricity consumption of the car.

The exemption does not apply if the employee directly purchases or leases the EV. If an employee purchases or leases the EV directly, and the employer reimburses them under a salary sacrifice arrangement, the FBT exemption does not apply because this is not a car fringe benefit. However, the exemption can potentially apply to novated lease arrangements if they are structured carefully.

Not all electric vehicles are cars. To qualify for the exemption, the EV needs to be a car – electric bikes and scooters do not count, nor do vehicles designed to carry a load of 1 tonne or more or that carry 9 passengers or more.

Update: Revised Stage 3 personal income tax cuts confirmed from 1 July

Sat, 09 Mar 2024 21:21:47 GMT

The revised stage 3 tax cuts have passed Parliament and will come into effect on 1 July 2024. Before the new tax rates come into effect, check any salary sacrifice agreements to ensure that they will continue to produce the result you are after.

The Prime Minister earlier announced that the Government would amend the legislated Stage 3 tax cuts scheduled to commence on 1 July 2024. Relative to the previous Stage 3 plan, the redesign will broaden the benefits of the tax cut by focussing on individuals with taxable income below $150,000. Passing of the legislation means an additional 2.9 million Australian taxpayers are estimated to take home more in their pay packet from 1 July.

The redesign is expected to increase Government revenues from personal income tax by an estimated $28 billion to 2034-35 as bracket creep takes its toll.

Resident individuals

Non-resident individuals

Working holiday makers

What has changed?

The revised tax cuts redistribute the originally planned reforms to benefit lower income households that have been disproportionately impacted by cost of living pressures.

Under the redesign, all resident taxpayers with taxable income under $146,486, who would actually have an income tax liability, will receive a larger tax cut compared with the existing Stage 3 plan.

For example:

An individual with taxable income of $40,000 will receive a tax cut of $654, in contrast to receiving no tax cut under the current Stage 3 plan (but they are likely to have benefited from the tax cuts at Stage 1 and Stage 2).

An individual with taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3 plan.

However, an individual earning $200,000 will have the benefit of the Stage 3 plan slashed to around half of what was expected from $9,075 to $4,529. There is still a benefit compared with current tax rates, just not as much.

There is additional relief for low-income earners with the Medicare Levy low-income threshold increasing by 7.1% in line with inflation. An individual will not start paying the Medicare Levy until their income reaches $26,000. Seniors and pensioners will now be able to earn up to $41,089 before being liable for the Medicare levy. Couples and families will now be able to earn up to $43,846.

While the redesign is intended to be broadly revenue neutral compared with the existing budgeted Stage 3 plan, it will cost around $1bn more over the next four years before bracket creep starts to diminish the gains.

How did we get here?

First announced in the 2018-19 Federal Budget, the personal income tax plan was designed to address the very real issue of ‘bracket creep’ – tax rates not keeping pace with growth in wages and increasing the tax paid by individuals over time. The three point plan sought to restructure the personal income tax rates by simplifying the tax thresholds and rates, reducing the tax burden on many individuals and bringing Australia into line with some of our neighbours (i.e., New Zealand’s top marginal tax rate is 39% applying to incomes above $180,000).

The three point plan introduced incremental changes from 1 July 2018 and 1 July 2020, with stage 3 legislated to take effect from 1 July 2024.

What now?

If you have any concerns about the impact of the proposed changes, please call us to discuss. For tax planning purposes, for those with taxable income of $150,000 or more, the redesigned Stage 3 tax cuts offer less planning opportunity than the current plan. But, any change in the tax rates is an opportunity to review and reset to ensure you are taking advantage of the opportunities available, and not paying more than you need.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

First published February 15, 2024, updated March 09, 2024.

The problem when the evidence doesn’t match what the taxpayer tells the ATO

Wed, 14 Feb 2024 22:04:28 GMT

A recent case before the Administrative Appeals Tribunal (AAT) highlights the importance of ensuring that the evidence supports the tax position you are taking..

The case involves heritage farmland originally purchased for $1.6m that sold 7 years later for $4.25m and the GST debt that the ATO is now pursuing on the sale.

In 2013, the taxpayer purchased Sutton Farms in Western Australia – 1.47 hectares consisting of an uninhabitable homestead, large barn and quarters.

Over the course of 7 years, the taxpayer rezoned the property, obtaining conditional subdivision approval to subdivide the property into four lots with plans for a further subdivision into approximately 15 lots, as well as undertaking sewerage, water and electrical works. The work was supported by a $1m loan from a bank and a further $1.5m from his brother-in-law.

While the property was never used for this purpose, the taxpayer’s stated intention was to use the property as their home, gift the subdivided lots to his daughter and son for use as their own respective residences, and use the last subdivided lot as a memorial dedicated to another child who had passed away.

Without being subdivided, the property was eventually sold at a profit as a single lot in 2020 for $4.25m.

The ATO audit

When the ATO audited the transaction and issued an assessment notice for GST on the sale transaction, the taxpayer objected. The taxpayer’s argument was that Sutton Farms was intended to be used as a family home and the subdivision application had no commercial purpose. Therefore, GST should not apply as the sale was not made in the course of an enterprise.

However, there were a number of factors and inconsistencies working against the taxpayer’s argument:

Local media articles that outlined the taxpayer’s plan to commercialise the property, “with the plans to lease it out as a restaurant, wine bar or coffee house, turn the barn into an art studio and add 8 – 10 finger jetties in the canal adjacent.”
Statements made to the ATO during the objection stage of the dispute indicating that the taxpayer intended to subdivide the property to sell some of these lots to repay loans owed to the taxpayer’s brother-in-law; and
GST credits were claimed on the original development costs. The taxpayer’s accountant also made representations to the ATO stating that the GST credits were claimed because the intended subdivision and sale of the several lots within the property amounted to an enterprise.

The problem for the taxpayer is that although he did not develop the property in the way he originally intended and ended up selling the property as one lot, through the ownership period he acted as if the project was a commercial venture with a stated commercial outcome.

The importance of objective evidence

Determining the tax treatment of a property transaction can sometimes be a difficult exercise and there are a number of factors that need to be considered. This will often include the intention or purpose of the taxpayer when acquiring a property.

However, merely stating your intention isn’t enough, it needs to be supported by objective evidence. This might include loan terms, correspondence with advisers and real estate agents, the way expenses have been accounted for, or the conversation you have with a journalist.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

Contractor or employee?

Wed, 14 Feb 2024 21:50:46 GMT

Just because an agreement states that a worker is an independent contractor, this does not mean that they are a contractor for tax and superannuation purposes, new guidance from the ATO warns.

Where there is a written contract, the rights and obligations of the contract need to support that an independent contracting relationship exists. The fact that a contractor has an ABN does not necessarily mean that they have genuinely been engaged as a contractor.

Making the distinction

The ATO says that “at its core, the distinction between an employee and an independent contractor is that:

An employee serves in the business of an employer, performing their work as a part of that business
An independent contractor provides services to a principal's business, but the contractor does so in furthering their own business enterprise; they carry out the work as principal of their own business, not part of another.”

Contracts over time

The ATO points out that a contracting agreement at the start of a relationship may not continue to be one over time. For example, if the project the contractor was engaged to complete has finished, but the worker continues working for the company then the classification needs to be revisited

What happens if there 's no contract?

If no contract exists, then it’s important to look at the form and substance of the relationship to come to a reasonable position about whether an employment or contractor relationship exists.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

Can my SMSF invest in property development?

Wed, 14 Feb 2024 21:41:01 GMT

Australians love property and the lure of a 15% preferential tax rate on income during the accumulation phase, and potentially no tax during retirement, is a strong incentive for many SMSF trustees to dream of large returns from property development. We look at the pros, cons, and problems that often occur.

An SMSF can invest in property development if trustees ensure the investment complies with the rules. And, there are a lot of rules. A key is the sole purpose test. Trustees need to ensure the fund is maintained to provide benefits for retirement, ill health or death. Breaches of this fundamental tenet are serious and include the loss of the fund’s concessional tax treatment and civil and criminal penalties.

By its nature property development is high risk and fund trustees need to ensure that the SMSF is not simply a handy cash-cow for a pipe dream, particularly when the developers are related parties.

Directly developing property from fund assets

An SMSF can purchase land from an unrelated party and develop the property in its own right. Common issues that often arise include:

Acquiring the land from a related party - An SMSF cannot purchase land from a related party (unless it is business real property used wholly and exclusively in a business). This means that the lovely block of land inherited by one of the members, or owned by a family trust, that is perfect for development cannot be purchased by the SMSF.

An SMSF cannot borrow to develop property – An SMSF can borrow money to purchase land using a limited recourse borrowing arrangement but it cannot use a loan to improve the asset. That is, borrowings cannot be used to develop the land. And, where the SMSF has borrowed to purchase land, it cannot change the nature of that asset until the loan has been repaid. That is, no development.

Who will develop the property? - Problems often occur when the property developers are related to the fund members. Whilst it is possible to engage a related party builder to undertake the work, there are strict rules that mean that the work and materials must be acquired at market value. That is, there is no advantage from “mates rates”. If you are using a related party builder, ensure that the paperwork is pristine, any transactions are at market value, and all interactions are documented.

GST might apply - Goods and services tax might apply to the development and the sale of any developed property. If the ATO considers that an SMSF is in the business of developing property or is undertaking a one-off development in a commercial manner then GST could potentially apply.

If your SMSF is not undertaking a property development project in its own right, there are a few ways for an SMSF to invest in property development projects.

Related ungeared trust or company

An ungeared company or trust is often used (under SIS Regulation, section 13.22C ) when related parties want to invest in a property development together.

The SMSF can invest in a company or trust that is undertaking a property development as long as the company or trust:

Does not lease to a related party (unless business real property)
Does not borrow money or have borrowings (must be ungeared)
Does not conduct a business
Conducts any dealings at arm’s length
And, the assets of the unit trust or company:
Do not include an interest in another entity (i.e., cannot have shares in a company)
Do not have a charge over them (i.e., mortgage over any asset)
Are not purchased from a related party (or was ever an asset of a related party) unless the asset is business real property acquired at market rates.

See section 13.22C for full details.

Profits from the company or trust are then distributed to the SMSF according to its share.

Using the provisions of 13.22C means that the SMSF can invest in property development with a related party without the development being considered an in-house asset. However, if the criteria are not met (at any point), the in-house asset rules apply, and the SMSF might have to sell the units in the trust or shares in the company to return to the maximum 5% in-house asset limit. Generally, this means the sale of the underlying property or a significant restructure.

Problems arise with 13.22C arrangements where the trust or company:

Needs more money to complete the development and borrows money, or issues more units and sells them (is in business)
Accepts a loan from a member of the SMSF
Overdrafts (may be considered loans and breach 13.22C)
Uses a related party builder who either under charges for the work completed or overcharges and strips the profits that should have been returned to the SMSF.

Warning on conducting a business

One of the criteria for the exemption in 13.22C to apply is that the trust or company cannot be conducting a business. This requirement may prevent short-term property developments that are built and sold for profit.

Typically, 13.22C arrangements are used for long term investments where the development enables the creation of an asset that is then leased by the trust or company. This could be commercial premises leased to a related or unrelated party (e.g., premises for a child care centre or manufacturing), or residential premises leased to unrelated parties (e.g., townhouses or small developments).

Unrelated property developments

Investing in unrelated entities for a property development is attractive as there is no limit to how much of the fund’s assets can be invested (subject to the investment strategy and trust deed allowing the investment), and unlike ungeared entities, the entity is able to borrow money/place charge over the assets.

Where related parties are investing in the same entity, there are rules governing the percentage of ownership the SMSF and their related parties can hold. To meet the definition of unrelated entity for in-house asset purposes, the SMSF and their related parties must not own more than 50% of the units available. This is because the SMSF cannot control or hold sufficient influence over the entity and remain an unrelated entity. If the ATO considers the entity is related to the SMSF, then it would become a related party and the investment an in-house asset.

Joint venture arrangements

An SMSF can potentially invest in a joint venture (JV) property development, but the criteria are necessarily strict and there are a range of issues that need to be considered carefully. One of the issues that needs to be considered up-front is determining the substance of the arrangement between the parties, because the term JV can be used to describe a variety of arrangements. The ATO confirms that care must be taken to ensure that arrangements with related parties are true JVs.

Under a JV, the SMSF invests in and has a share of the property being developed (not the entity undertaking the development). Each party bears the costs (time and/or money) of the JV and receives this same proportionate contribution from the returns. If the arrangement is not structured properly then the SMSF’s stake in the JV could be treated as an investment in or loan to a related party and be treated as an in-house asset. For example, this could be the case if the SMSF only provides a capital outlay for the arrangement and has no rights other than a contractual right to a return on the final investment.

It is also necessary to consider whether the arrangement between the parties could be treated as a partnership for tax, GST and legal purposes. For example, this could be the case if the arrangement involves the sharing of income, sale proceeds or profits, rather than sharing the output from the project.

It's essential to get advice well in advance - tax, legal and financial - before pursuing a JV.

Is your SMSF the best vehicle for property development?

Trustees need to carefully consider any investment decisions and have a sound rationale for the investment.

Any advice on a property development needs to be from a licenced financial adviser. A lawyer should be used for any contracts or agreements between parties. And, compliance assistance from a qualified accountant.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

The instant asset write-off 2022-2023 and beyond

Wed, 24 May 2023 23:34:48 GMT

While the temporary full expensing rules (a COVID-era extension of the instant asset write-off) were extended to 2023, the end date is 30 June 2023 .

Assets purchased under the rules need to be delivered and installed by 30 June 2023. So machinery, equipment or other assets need to be installed and ready to use to qualify.

If there is a backlog or delay in installing the asset, it won’t be eligible for the full deduction in the 2022–2023 financial year and will need to be moved into the next year.

With the temporary full expensing end date in sight, many business owners are considering their options to reap the benefits.

One of the main challenges for many businesses is finding the funds to make asset purchases. While traditional bank loans can be used to finance assets, the application process can be cumbersome. Also, banks typically won’t lend for some assets, such as used machinery and equipment.

Instant asset write-off $20,000 for 2023-24

On 9 May 2023, as part of the 2023–24 Budget, the Australian Government announced it would improve cash flow and reduce compliance for small businesses by temporarily increasing the instant asset write-off threshold to $20,000, from 1 July 2023 until 30 June 2024. This measure is not yet law.

Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

What will the ATO be asking about your holiday home?

Wed, 24 May 2023 23:31:23 GMT

Taxpayers claiming deductions on holiday homes are in the ATO’s sights.

The Australian Tax Office (ATO) is more than a little concerned that people with holiday homes are claiming more deductions than they should.

The ATO has published the startling questions they will be asking to scrutinise claims:

How many days was it rented out and was the rent in line with market values?
Where do you advertise for rent and were any restrictions placed on tenants?
Have you, your family or friends used the property?

The main problem the ATO seeks to highlight is blanket claims for the holiday home regardless of the time the home was rented out or available for rent.

Apportioning holiday home expenses

You will need to apportion your expenses if:

Your property is genuinely available for rent for only part of the year.
Your property is used for private purposes for part of the year.
Only part of your property is used to earn rent.
You charge less than market rent to family or friends to use the property.

Limiting deductions for properties not genuinely available for rent

The ATO has also indicated that deductions might be limited if a property is only made available for rent outside peak holiday times and the location of the property (or other factors) mean it is unlikely to be rented out during those periods.

The regulator is also likely to be suspicious if the owner claims that the property was genuinely available for rent during peak holiday periods but wasn’t deriving any income during those periods. This might indicate that the property was really being used for private purposes or that the advertised rental rate was unrealistic.

Demonstrating a property is available for rent

Whether a property is genuinely available for rent is a matter of fact. Factors that help demonstrate a property is genuinely available for rent include:

It is available during key holiday periods.
It is kept in a condition that people would want to rent it.
Tenants are not unreasonably turned away.
It is advertised in ways that give it broad exposure to possible tenants.
The conditions are not so restrictive that tenants are unlikely to rent the property.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

July super balance increase but no change for contributions

Wed, 24 May 2023 23:28:22 GMT

The general transfer balance cap (TBC) – the amount of money you can potentially hold in a tax-free retirement account, will increase by $200,000 on 1 July 2023 to $1.9 million.

The TBC is indexed to the consumer price index each December and applies individually.

If your transfer balance account reached $1.7m or more at any point before 1 July 2023, your TBC after 1 July 2023 will remain at $1.7m.

If the highest amount in your account was between $1 and $1.7m, then your cap is proportionally indexed based on the highest ever balance your transfer balance account reached.

That is, the ATO will look at the highest amount your transfer balance account has ever been, then apply indexation to the unused cap amount.

For example, if you started a retirement income stream valued at $1,275,000 on 1 October 2022 and this was the highest point your account reached before 1 July 2023, then your unused cap is $425,000 ($1.7m-$1.275m).

This unused cap amount is used to work out your unused cap percentage ($425k/$1.7m=25%). The unused cap percentage is then applied to the indexation increase ($200k*25%=$50k) to create your new TBC of $1,750,000.

But don’t worry, you don’t have to calculate this yourself, you can see your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov.

The caps on the contributions you can make into super however, will remain the same. That is, $27,500 for concessional contributions and $110,00 for non-concessional contributions. The contribution caps are linked to December’s average weekly ordinary time earnings (AWOTE) figures.

If you have any questions on how this may affect you or your family, email us or phone our friendly team on 02 9899 3044 .

What's the deal with working from home? The new ATO approach

Wed, 24 May 2023 23:14:17 GMT

The Australian Taxation Office (ATO) has updated its approach to how you claim expenses for working from home.

The ATO has ‘refreshed’ the way you can claim deductions for the costs you incur when you work from home. From 1 July 2022 onwards, you can choose either to use a new ‘fixed rate’ method (67 cents per hour), or the ‘actual cost’ method depending on what works out best for your scenario.

Either way, you will need to gather and retain certain records to make a claim.

Claiming WFH deductions

The first issue for claiming any deduction is that there must be a link between the costs you incurred and the way you earn your income. If you incur an expense but it doesn’t relate to your work, or only partially relates to your work, you cannot claim the full cost as a deduction.

The second key issue is that you need to incur costs associated with working from home. For example, if you are living with your parents and not picking up any of the expenses for running the home then you can’t claim deductions for working from home as you have not incurred the expenses, even if you are paying board (the ATO treats this as a private arrangement).

Let's look at the detail...

The new 'fixed rate' method

Previously, there were two fixed rate methods to choose from for the 2021-22 income year:

A cover-all 80 cents per hour rate for expenses incurred while working from home (which was available from 1 March 2020). This COVID-19 related rate was intended to cover all additional running expenses incurred while working from home; or
If you had a space dedicated to work but were not running a business from home, you could claim 52 cents for every hour you worked from home to cover the running expenses of your home. This rate doesn’t cover certain items such as the depreciation of electronic devices, which can be claimed separately.

It’s clear that working from home arrangements are here to stay for many workplaces even though COVID restrictions have eased.

So, from the 2022-23 financial year onwards, the ATO has combined these two fixed rate methods to create one revised method accessible by anyone working from home, regardless of whether they have a dedicated space or are just working at the kitchen table.

The new rate is 67 cents per hour and covers:

Your energy expenses (electricity and gas)
Phone usage (mobile and home)
Internet
Stationery
Computer consumables.

You can separately claim the cost of the decline in value of assets such as computers, repairs, and maintenance for these assets, and if you have a dedicated home office, the cost of cleaning the office.

Tip tip: If there is more than one person working from the same home, each person can make a claim using the fixed rate method if they meet the basic eligibility conditions.

What proof does the ATO need that you're working from home?

To use the fixed rate method, you will need a record of all of the hours you worked from home. The ATO has warned that it will no longer accept estimates or a sample diary over a four week period. For example, if you normally work from home on Mondays but one day you have an in-person meeting outside of your home, your diary should show that you did not work from home for at least a portion of that day.

Having said that, the ATO will allow taxpayers to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.

There is nothing in the ATO guidance to suggest that claims are limited to standard office hours. That is, if you work from home outside standard office hours or over the weekend, then make sure you keep an accurate record of the hours you are working so that you can maximise your deductions.

You also need to keep a copy of at least one document for each running cost you have incurred during the year which is covered by the fixed rate method. This could include invoices, bills or credit card statements. Where bills are in the name of one member of a household but the cost is shared, each member of the household who contributes to the payment of that expense will be taken to have incurred it. For example, a husband and wife, or flatmates where they jointly contribute to costs.

You need to keep these records for five years so that if the ATO comes calling, you can prove your claim. If this proof is not available at the time, the deduction will be denied. If your work from home diary is electronic, ensure you can access this diary over time (such as producing a PDF summary of your calendar clearly showing the dates and times of your work at the end of each financial year).

The 'actual' method

Some people might find that the actual method produces a better result if their expenses are higher. As the name suggests, you can claim the actual additional expenses you incur when you work from home (and reduce the claim by any personal use and use by other family members). However, you will need to ensure you have kept records of these expenses and the extent to which the expenses relate to your work.

Using this method, you can claim the work related portion of:

The decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
Electricity and gas (energy expenses) for heating, cooling and lighting.
Home and mobile phone, data and internet expenses.
Stationery and computer consumables, such as printer ink and paper.
Cleaning your dedicated home office.

Be careful with this method because the ATO is looking closely to ensure these expenses are directly related to how you earn your income.

For example, you can’t claim personal expenses such as coffee, tea and toilet paper even if you do use these items when you are at work. Nor can you claim occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates unless your home is a place of business. It is unusual for an employee’s home to be classified as a place of business.

I run a business from home. What can I claim?

Where your home is also your principal place of business and an area is set aside exclusively for business activities, you can potentially claim a deduction for an appropriate portion of occupancy expenses as well as running costs. An example would be a doctor who runs their surgery from home.

The doctor may have one-third of the home set aside as a place of business where they see patients.

It is important to keep in mind that Capital Gains Tax (CGT) might be payable on the eventual sale of the home. While your main residence is normally exempt from CGT, the portion of the home set aside as a place of business will not generally qualify for the main residence exemption for the period it is used for this purpose, although if you are eligible, the small business CGT concessions and general CGT discount may reduce any resulting capital gain.

If you have any questions about WFH deductions, email us or phone our friendly team on 02 9899 3044 .

Changes to minimum drawdown rates for pension accounts

Wed, 24 May 2023 23:03:30 GMT

When you have a Pension account, every financial year you need to withdraw a minimum amount. The amount is set by the government, based on your age and increases as you get older.

The government has applied reduced minimum drawdown rates for all account-based pensions, up to 30 June 2023.

However, from 1 July 2023, the government's standard minimum drawdown rates, will apply to all account-based pensions.

The minimum pension drawdown rate is the amount you’re required to withdraw from your pension retirement or transition to retirement account annually.

You can calculate it as a percentage of your starting balance on from1 July of the current financial year. The percentage applied depends on your age and increase as you enter higher age brackets.

If you have any questions, email us or phone our friendly team on 02 9899 3044 .

'Ace in the Hole': Budget 2023-2024

Wed, 10 May 2023 10:23:45 GMT

The ‘ace in the hole’ of the 2023-24 Federal Budget was the $4.2bn surplus; the first in 15 years.

The surplus was driven by a surge in the corporate and individual tax take. High commodity prices, inflation, and high employment have all pushed up corporate and individual tax receipts.

But the gains can't be relied on long term. The Budget is expected to deliver a deficit of $13.9 billion in 2023-24, and a $35.1bn deficit in 2024-25.Most funding appears to be a reallocation of previous Government initiatives. And, the commodity-driven $54.4 billion improvement in tax receipts has largely been banked, not spent.

Individuals & families

Energy price plan relief – From July 2023

$1.5bn has been provided over 5 years to provide targeted energy bill relief and progressing gas market reform.

The Energy Bill Relief Fund will provide targeted energy bill relief to eligible households and small business customers, which includes pensioners, Commonwealth Seniors Health Card holders, Family Tax Benefit A and B recipients and small business customers of electricity retailers.

In partnership with the states and territories, the plan is expected to deliver up to $500 in electricity bill relief for eligible households and up to $650 for eligible small businesses.some fairly bracing economic expectations:

Household energy upgrade fund

A $1.3bn Household Energy Upgrades Fund will be established to support home upgrades that improve energy performance. No, the Government is not giving out cash for upgrades but providing $1bn to the Clean Energy Finance Corporation to provide low-cost finance and mortgages in partnership with private financial institutions for home upgrades that save energy.

$300m is committed to upgrading social housing in collaboration with states and territories. And, over $36m to upgrade the energy ratings systems.

Incentive to provide Medicare bulk billing to concession card holders and children – From July 2023

As previously announced, the bulk billing incentive benefits for consultations for Commonwealth concession card holders and patients aged under 16 years of age will be tripled from 2022-23.

Less people to pay Medicare Levy

The Medicare levy low-income thresholds for singles, families and seniors and pensioners will increase from 1 July 2022.

For each dependent child or student, the family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619.

Access to home guarantee scheme expanded to friends and siblings

As previously announced, from 1 July 2023, access to the Government’s Home Guarantee Scheme will be expanded to joint applications from “friends, siblings, and other family members” and to those who have not owned a home for at least 10 years.

The Home Guarantee Scheme (HGS) is an Australian Government initiative to support eligible home buyers to purchase a home sooner. The Scheme is administered by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government.

The guarantees had previously been restricted to people that were married or in a de‑facto relationship, in addition to single applicants.

Superannuation & Investors

Confirmed 30% tax on super earnings above $3m – From 1 July 2025

An additional tax of 15% on earnings will apply to individuals with a total superannuation balance over $3 million at the end of a financial year from 1 July 2025. The definition of total superannuation balance (TSB) for the new tax uses the current definition and includes amounts in retirement phase pensions.

The calculation for the tax aims to capture growth in TSB over the financial year allowing for contributions (including insurance proceeds) and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.

Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests.

Individuals will have the choice of paying the tax personally or from their superannuation fund and those with multiple accounts can nominate which fund will pay the tax.

Annual minimum pension payments

There was no mention of continuing the current 50% reduction in minimum pension payments beyond 1 July 2023, so these will return to normal levels in 2023/24.

You need to make sure funds have enough cash to pay much higher pension amounts next year. Or there may be some members considering extra payments now (above the minimum required for 2022/23) who decide to hold off until July 2023 to make up some of next year’s payments.

Total Super Balance increase

There had been murmurings that the Government might freeze the transfer balance cap so that it wasn’t indexed (increased) from $1.7m to $1.9m from 1 July 2023 in line with current legislation. No announcements presumably mean that increase will go ahead as planned.

Remember that even when the standard transfer balance cap is increased, not everyone will have a transfer balance cap of $1.9m – some people will stay on $1.6m or $1.7m and others will receive just some of the $200,000 increase.

Businesses and employers

$20,000 small business instant asset write-off – From 1 July 2023 to 30 June 2024

“Immediately deductible” means a tax deduction for the asset can be claimed in the same income year that the asset was purchased and used (or installed ready for use).

The write-off applies per asset, so a small business can deduct the cost of multiple assets.

This announcement effectively confirms that the temporary full expensing rules, which have provided an immediate deduction for the full cost of assets acquired from 6 October 2020, will come to an end on 30 June 2023.

Top tip: Small business entities that are considering acquiring depreciating assets with a cost of $20,000 or more and business entities with aggregated turnover of $10 million or more should keep the cut-off date in mind as 30 June 2023 approaches.

$20,000 small business incentives for energy efficiency - From 1 July 2023 to 30 June 2024

As previously announced, the Small Business Energy Incentive provides an additional deduction of 20% of the cost of eligible depreciating assets that support electrification and more efficient use of energy.

Up to $100,000 of total expenditure will be eligible, with a maximum bonus deduction of $20,000. The incentive is available to small and medium businesses with aggregated annual turnover of less than $50 million.

Incentive likely inclusions and exclusions

While the full detail of what qualifies for the incentive is not yet available, it is expected to apply to a range of depreciating assets and upgrades to existing assets such as electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Some exclusions will apply including electric vehicles, renewable electricity generation assets, capital works, and assets that are not connected to the electricity grid and use fossil fuels.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus deduction.

‘Payday’ super: Increasing payment frequency of employee super – From 1 July 2026

As previously announced, from 1 July 2026, employers will be required to pay their employees’ super guarantee entitlements on the same day that they pay salary and wages. Currently, SG is paid quarterly.

The Government will undertake a consultation process with the aim of providing details of the final design of the measure in the 2024-25 Federal Budget.

Franked distributions funded by capital raisings revised start date – From 15 September 2022

In 2016-17, the Government announced that it would seek to prevent shareholders from taking advantage of franking credits attached to dividends that are funded by capital raisings. The Budget confirms the Government’s intention to pursue this measure with a revised start date of 15 September 2022.

Under the measure, a distribution (dividend) paid by an entity will be treated as being funded by capital raising if:

The distribution is not consistent with an established practice of the entity of making distributions of that kind on a regular basis;
There is an issue of equity interests in the entity; and
It is reasonable to conclude, having regard to all relevant circumstances, that either:
The principal effect of the issue of any of the equity interests was to directly or indirectly fund all or part of the distribution; or
An entity that issued or facilitated the issue of the interests did so for a purpose of funding all or part of the distribution.

The proposed changes seek to prevent the use of artificial arrangements where capital is raised to fund the payment of franked dividends to shareholders and therefore enable the distribution of franking credits. The Government is concerned that these arrangements can involve a manipulation of the system to allow existing shareholders to obtain the benefit of both the franking credits and the profits that generated those credits being retained in the company.

Small business lodgment penalty amnesty

Small businesses with an aggregated turnover of less than $10m, will be able to access a lodgment penalty amnesty program. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

Do you have questions? We're here to help.

Please let us know if we can assist you to take advantage of any of these Budget measures or risk-protect your position - email us or phone or friendly team on 02 9899 3044 .

As always, we’re here if you need us!

Shuffling the Deck: 2022-2023 Budget 2.0

Thu, 27 Oct 2022 02:39:43 GMT

It's that time again! There is nothing in this week's Federal Budget that would create a UK-style crisis. The Stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned.

Most funding appears to be a reallocation of previous Government initiatives. And, the commodity-driven $54.4 billion improvement in tax receipts has largely been banked, not spent.

With only seven months before the 2023-24 Budget is released in May 2023, this Budget is a shuffling of the deck, not a new set of cards. And to continue the pun, we need to play the hand we have been dealt, buffeted by externalities – war, floods, and global uncertainty. Read on for our summary of the budget essentials.

Tough economic conditions to continue

Cost of living pressures will continue. While some initiatives such as the increase in childcare subsidies will help, the Budget flags some fairly bracing economic expectations:

Inflation is expected to peak at 7.75% in the December quarter and will persist at higher rates for longer than anticipated before easing to 3.5% by June 2024.
Real GDP is forecast to grow to 3.25% in 2022-23, then retract to 1.5% in 2023-24.
Electricity prices are expected to increase nationally by an average of 20% in late 2022, with retail electricity prices expected to rise by a further 30% in 2023-24.
The deficit sits at $36.9bn and while this is better than estimated, it will expand to $49.5bn by 2025-26.

Tight labour market conditions are expected to see annual wage growth rise to 3.75% by June 2023. Even so, high inflation is likely to result in a fall in real wages over 2022-23 before rising slightly over 2023-24. While your wages may increase, the gains will be eaten away by the increasing cost of living.

Total revenue and spending

Total revenue for 2022-2023 is expected to be $625.0 billion. Total expenses are expected to be $650.9 billion. Source: Budget Papers Appendices .

Tax compliance

The ATO gets an extra $80m to extend its personal income tax compliance program, with $674m anticipated in increased receipts and over $80m in increased payments as a result. Tax deductions will be closely watched.

As expected, multinationals are a target. New measures will limit opportunities to shift taxable profits offshore. And the ATO’s Tax Avoidance Taskforce is projected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over four years.

Individuals and families

Child Care Subsidy increase – from 2022-23

As previously announced, the maximum Child Care Subsidy (CCS) rate will increase from 85% to 90% for families earning less than $80,000.

Subsidy rates will then taper down one percentage point for each additional $5,000 income until it reaches zero per cent for families earning $530,000.

The current higher CCS rates for families with multiple children aged five or under in child care will be maintained, with higher CCS rates to cease 26 weeks after the older child’s last session of care or when the child turns six years old.

Paid parental leave reforms – from 1 July 2023

As previously announced, from 1 July 2023, the Government will introduce reforms to make the Paid Parental Leave Scheme flexible for families. This means either parent can claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria.

Parents can also claim weeks of the payment concurrently so they can take leave at the same time.

Paid parental leave eligibility will be expanded with a new $350,000 family income test, under which families can be assessed if they do not meet the individual income test.

From 1 July 2024, the Government will begin expanding the scheme from the current 18 weeks by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026. Both parents will be able to share the leave entitlement, with a proportion maintained on a “use it or lose it” basis, to encourage and facilitate both parents to access the scheme and to share the caring responsibilities more equally. Sole parents will be able to access the full 26 weeks .

Seniors and pensioners

Encouraging pensioners back into the workforce – from 2022-23

Age and veteran pensioners will be able to work and earn more before their pension is reduced, with the Government providing a one-off $4,000 credit to their Work Bonus income bank.

The temporary income bank top-up will increase the amount pensioners can earn in 2022–23 from $7,800 to $11,800 before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.

The Work Bonus increases the amount an eligible pensioner can earn from work before it affects their pension rate.

Under the current rules, the first $300 of fortnightly income from work is not assessed or counted under the pension income test.

The Work Bonus operates in addition to the pension income test-free area. When the work bonus is not used in a fortnight, it accumulates in an income bank where the standard maximum is $7,800. This allows pensioners who work on an ad hoc basis to not be disadvantaged compared to those with regular fortnightly income.

Lifting the income limit on Seniors Health Card

As previously announced, increased income test limits will apply to the Commonwealth Seniors Health Card (CSHC) - see the below table for details.

The CSHC provides subsidised pharmaceuticals and other medical benefits for self-funded retirees that have reached aged pension age.

The income test captures adjusted taxable income plus deeming on account-based pensions unless grandfathered under the pre-1 July 2015 rules. The CSHC is not asset tested. Legislation enabling the increase is before Parliament.

Superannuation

‘Downsizer’ eligibility reduced to 55 - from the first quarter after Royal Assent

As previously announced, the Government will reduce the age at which an individual can make a ‘downsizer’ contribution to superannuation from the current 60 to 55 years of age.

Currently, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home.

Downsizer contributions can be made from the sale of your principal residence in Australia that you have owned for the past ten or more years. These contributions are excluded from the age test, work test, and your total superannuation balance (but not exempt from your transfer balance cap). Legislation enabling the expanding eligibility for downsizer contributions is currently before Parliament.

Businesses and employers

Energy efficiency grants for SMEs - 2022-23 financial year

The Government will provide $62.6m over three years from 2022-23 to help small and medium businesses fund energy-efficient equipment upgrades. The funding will support studies, planning, equipment and facility upgrade projects that will improve energy efficiency, reduce emissions, or improve power demand management. No details of the grants are currently available.

Small business skills and training boost

Businesses with an aggregated turnover of up to $50 million will be able to deduct an additional 20 per cent of expenditure incurred on external training courses provided to their employees.

Small business technology investment boost

Businesses with an aggregated turnover of up to $50 million will be able to deduct an additional 20 per cent of expenditure (capped at $100,000) incurred on business expenses and depreciating assets that support digital adoption. Examples include subscriptions to cloud-based services, cyber security systems and portable payment devices.

Businesses may continue to deduct expenditure that is ineligible for the bonus deduction under the existing tax law. Further details on eligible expenses will be available once the law has passed.

Export support

$80.0 million over four years from 2022-23 to provide additional support for small and medium export businesses to re-establish their presence in overseas markets through the Export Market Development Grants program.

Please let us know if we can assist you to take advantage of any of these Budget measures or risk-protect your position - email us or phone or friendly team on 02 9899 3044 .

As always, we’re here if you need us!

Working from home deductions: Claiming methods and common myths

Thu, 11 Aug 2022 01:57:46 GMT

The ATO has updated its website guidance on claiming deductions for expenses incurred while working from home.

The first key reminder is that taxpayers must genuinely be working from home to fulfil their employment duties or to carry on a business activity in order to claim deductions. Merely carrying out minimal tasks such as occasionally checking emails or taking calls is not sufficient.

The other key reminder is that the taxpayer must personally incur additional expenses as a result of working from home in order to claim deductions.

Claiming working from home expenses

If you are claiming your expenses, there are three methods you can use:

The ATO’s simplified 80 cents per hour short-cut method – you can claim 80 cents for every hour you worked from home from 1 March 2020 to 30 June 2022. You will need to have evidence of hours worked like a timesheet or diary. The rate covers all of your expenses and you cannot claim individual items separately, such as office furniture or a computer.
Fixed rate 52 cents per hour method – applies if you have set up a home office but are not running a business from home. You can claim 52 cents for every hour and this covers the running expenses of your home. You can claim your phone, internet, or the decline in value of equipment separately.
Actual expenses method – you can claim the actual expenses you incur (and reduce the claim by any personal use and use by other family members). You will need to ensure you have kept records such as receipts to use this method.

It is important to remember that taxpayers are not able to claim deductions for general household items (such as coffee, tea, milk), private expenses or for costs that are reimbursed by the employer.

Common myths

The employees guide to work expenses includes a section dealing with common myths that relate to claiming deductions for work related expenses.

This includes clarifying the position when it comes to the substantiation exemption. For example, taxpayers are not automatically entitled to a deduction of $150 for laundry expenses or for 5,000 kilometres under the cents per kilometre method for car expenses). There is no such thing as an 'automatic' or 'standard deduction'.

The guide states that while you don't need receipts for claims under $300 for work-related expenses, $150 for laundry expenses (doesn't include clothing expenses) or if you are claiming 5,000 km or less for car expenses under the cents per kilometre method:

You must have spent the money
It must be related to earning your income, and
You must be able to explain how you calculated your claim.

Another myth is that you don't need a receipt to claim a deduction, only a bank or credit card statement. This is incorrect.

To claim a tax deduction, you need to be able to show that you spent the money, what you spent it on, who the supplier was and when you paid. Bank or credit card statements alone don't have this information.

There's also importance guidance on claiming deductions for gym memberships (available as a deduction to very few people), travel expenses, uniform purchases, buying ordinary clothing for work and television expenses.

Ready to prepare your tax return?

We would love to help. Contact your Goodwin Chivas & Co. representative, email us or phone our friendly team on (02) 9899 3044 .

Cryptocurrency and capital gains tax: When do you pay tax?

Thu, 11 Aug 2022 01:38:14 GMT

If you acquire cryptocurrency to make a private purchase and don’t hold onto it, the crypto might qualify as a personal use asset. But in most cases, that is not the case and people acquire crypto as an investment, even if they do sometimes use it to make purchases.

Generally, a capital gains tax (CGT) event occurs when disposing of cryptocurrency. This can include selling cryptocurrency for a flat currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services.

Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event.

Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of the coin.

Record keeping is extremely important – you need to keep accurate and complete details of the following:

Receipts and details of the type of coin
Purchase price in Australian dollars
Date and time of transactions
Records of any exchanges, digital wallet and keys
What has been paid in commissions or brokerage fees
Records of tax agent, accountant and legal costs.

The ATO regularly runs data matching projects, and has access to the data from many crypto platforms and banks.

If you make a loss on cryptocurrency, you can generally only claim the loss as a deduction if you are in the business of trading.

Gifting an asset may still incur tax

Donating or gifting an asset does not avoid capital gains tax. If you receive nothing or less than the market value of the asset, the market value substitution rules might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted for the purpose of your CGT calculations.

For example, if Mum & Dad buy a block of land then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a capital gains tax liability. It does not matter that Mum & Dad did not receive any money for the land.

Donations of cryptocurrency might also trigger capital gains tax. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency.

Investment questions?

If you have any questions about wealth creation or capital gains tax, please contact your Goodwin Chivas & Co. representative, email us or phone our friendly team on (02) 9899 3044 .

Work-related expenses and tax deductions - the 3 "golden rules"

Thu, 11 Aug 2022 01:38:08 GMT

With tax season upon us, it's important to revisit rules relating to work-related deductions that can be claimed on your income tax return.

In general, there are three ‘golden rules’ when claiming tax deductions:

You must have spent the money and not been reimbursed.
If the expense is for a mix of work related (income producing) and private use, you can only claim the portion that relates to how you earn your income.
You need to have a record to prove it.

To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, and the expense needs to be directly related to your work.

What expenses are related to work?

You can claim a deduction for all losses and outgoings “to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.” That is, there must be a nexus between the expenses you are claiming and how you earn your income.

Three examples

It all sounds simple enough until you start applying this rule.

Take the example of an actor. To land an acting job, she needs to attend auditions. She wants to claim the cost of having her hair and make-up done for the audition. But because she is not generating income at the stage of the audition, she cannot claim her expenses. The expense must be related to how you are currently earning your income, not future potential income.

The same issue applies to upskilling. If you attend investment seminars with the intention of building your investment portfolio, the seminar is not deductible as a self-education expense unless it relates to managing your existing investment portfolio - not a future one.

Or, a nurse’s aide who attendees university to qualify as a nurse. The university degree and the expenses associated with this are not deductible as the nursing degree is not required to fulfil the role of a nurse’s aide.

"Conventional" versus occupational-specific items

The second area of confusion is over what can be claimed for work. If the item is “conventional” it’s unlikely to be deductible.

For example, you can't claim conventional clothing (including footwear) as a work-related expense, even if your employer requires you to wear it and you only wear the items of clothing at work. To be deductible clothing must be protective, occupation specific such as a chef’s chequered pants, a compulsory uniform, or a registered non-compulsory uniform.

Work-related or private?

Another area of confusion is where expenses are incurred for work purposes but used privately. Internet access or mobile phone services are typical.

Many people take the view that the expense had to be incurred for work so what does it matter if it’s used for private purposes? But if you use the service on more than an ad-hoc basis for any purpose other than work, then the expense needs to be apportioned and only the work-related percentage claimed as a deduction. And yes, the ATO does check usage in an audit.

Claims for COVID-19 tests will be a test of this rule. COVID-19 tests are deductible from 1 July 2021 if the purpose was to determine whether you may attend or remain at work. The tax deduction does not apply if you worked from home and didn’t intend to attend your workplace, or the test was used for private purposes (for example, to tests the kids before school).

What changed on 1 July 2022 - For business and individuals

Thu, 11 Aug 2022 01:27:56 GMT

Some substantial changes were made to taxation and superannuation for individuals and businesses from the beginning of the 2022-2023 financial year. We summarise the main changes below.

Business

Superannuation guarantee increased to 10.5%.
$450 super guarantee threshold removed for employees aged 18 and over.
Small business GST and PAYG tax instalments lowered (the total tax liability remains the same, just the amount the business needs to pay through the year is lowered).
ATO guidance on how profits of professional firms are structured comes into effect, introducing new risk criteria.
New guidance on unpaid trust distributions to corporate beneficiaries comes into effect that may treat some unpaid distributions as loans and trigger tax consequences.

Individuals

Superannuation guarantee increased to 10.5%.
Work test repealed for people under 75 to receive non-concessional or salary sacrifice super contributions (the work test still applies to personal deductible contributions).
Age for downsizer super contributions reduced to 60 years and older.
Value of voluntary super contributions that can be withdrawn under the First Home Saver Scheme increased to a total of $50,000.
New ATO guidelines on trust distributions come into effect primarily impacting distributions to adult children.
Home loan guarantee scheme extended to 35,000 per year for first home buyers and 5,000 per year for single parents.

Guidance on COVID-19 related deductions

In completing individual tax returns for the 2022 income year, taxpayers should be aware that there have been some changes with respect to claiming deductions for expenses relating to COVID-19.

One of the key things to remember is that individuals can claim a deduction for the cost of COVID-19 tests that were required for work-related purposes (e.g., to determine if they can attend or remain at work).

Further, some individuals may be able to claim a deduction for the cost of protective items that protect against the risk of illness or injury while performing work duties. This can apply for workers in close proximity to customers and at risk of contracting COVID-19, who may be able to claim a deduction for protective items such as gloves, face masks or sanitiser.

The ATO also confirms the tax treatment of various support payments that may have been received by individual clients including:

JobSeeker: this is included in assessable income.
COVID-19 disaster payment (delivered through Services Australia): this is not taxable.
Pandemic Leave Disaster Payment: this is assessable income.

ATO refocus on debt collection

The ATO has not pursued many business tax debts during the pandemic and allowed tax refunds to flow through even if the business had a tax debt. That position has now changed and the ATO has resumed debt collection and offsetting tax debts against refunds.

If you have a tax debt that has been on-hold, expect the ATO to offset any refunds against this debt, and take steps to actively pursue the payment of the debt. Small businesses account for around two-thirds of the total debt owed to the ATO. If you have a tax debt, it is important that you engage with the ATO to work out how this debt will be paid.

Need help?

If you need some assistance navigating these changes, please get in touch. Email us or phone our friendly team on (02) 9899 3044 .

Record keeping 101: You can't claim it if you can't prove it

Wed, 03 Aug 2022 06:07:59 GMT

The fundamental aspect of Record Keeping 101 is that you can’t claim it if you can’t prove it. If you are audited, the ATO will disallow deductions for unsubstantiated or unreasonable expenses.

According to the ATO , the reason you need to keep specific records that support the claims and declarations you make is that the Australian tax system relies on taxpayer's self-assessment. Best practice is to keep records for all expenses claimed.

Even if the expense is below the substantiation threshold of $300 ($150 for laundry), the ATO might ask how you came up with that number.

For example, if you claim $300 in work-related expenses (right up to the substantiation threshold), how did you determine that figure and not something else? It's a good idea to add all expenses up in a table or Excel spreadsheet that you can refer to later if needed.

Records you need to keep for tax purposes

In addition to the obvious records of salary, wages, allowances, government payments or pensions and annuities, you need to keep records of:

Interest or managed funds.
Expenses for any deductions claimed.
How each expense relates to the way you earn your income. For example, if you claim the cost of RAT tests, you need to be able to prove that the RAT test was necessary to enable you to work. If you were working from home and not required to leave home, it will be harder to prove that the test was essential for your work.
Assets such as shares or units in a trust, rental properties or holiday homes.
If you purchased a home or inherited a property, or disposed of an asset.
Cryptocurrency purchase and sales records.

Print or digital records?

You need to keep your records for five years from the date you lodge your tax return. Records can be digital copies providing they are clear and legible copies of the original. If your records are digital, keep a backup.

Records can be tax invoices, receipts, diary entries or something else that proves you incurred the expense and how it related to how you earn your income.

Claiming deductions as an employee

For most expenses you need a receipt or similar document as evidence of your expenses. To claim a deduction for a work-related expense, as an employee:

You must have spent the money and weren't reimbursed
The expenses must directly relate to earning your income
You must have a record to prove it (usually a receipt).

Keep in mind that you can only claim a deduction for the work-related portion of an expense. You will need to calculate and claim only the relevant proportion. Make a note of how you calculated the figure so you can substantiate the claim if you are audited.

How to claim repairs, maintenance and improvements for investment property

Mon, 16 Aug 2021 06:15:06 GMT

One of the most common mistakes made by property investors when completing their annual tax return is confusing repairs, maintenance and improvements.

It's important to understand and distinguish each deduction in order to correctly lodge your claim and maximise your tax refund. Knowing the difference between repairs, maintenance and capital improvement deductions is particularly important when renovating.

Repairs

According to the Australian Taxation Office (ATO), repairs are considered work completed to fix damage or deterioration of a property, such as replacing part of a damaged fence. This occurs when an asset is already damaged or deteriorated and therefore requires repairing.

Maintenance

Maintenance is work completed to prevent damage or deterioration of an asset. For example, oiling a deck is considered maintenance as it helps to preserve the quality of the property and prevent future corrosion

Any costs incurred to repair or maintain your investment property can be claimed as an immediate tax deduction in the year of the expense. However, the ATO specifies that initial repairs for damage that existed when the property was purchased are not immediately deductible. Instead these costs are used to work out your capital gain or capital loss when you sell the property.

Capital improvements

A capital improvement occurs when the condition or value of an item is enhanced beyond its original state at the time of purchase. This must then be classified as either a capital works deduction or as plant and equipment depreciation.

Capital works refers to the deductions available for the building's structure and items deemed to be permanently fixed to it such as bricks, mortar, sinks and basins. While plant and equipment assets are items which can be easily removed from the property such as carpet, blinds and light fittings.

Getting it right when renovating

Being able to distinguish between the three types of deductions is especially important when it comes to renovating an investment property.

For example, you might decide to renovate the bathroom in your rental property. Retiling the bathroom would be deemed as a capital improvement and can be claimed as a capital works deduction. Residential homes in which construction commenced after 15th September 1987 are eligible to claim capital works deductions at a rate of 2.5 per cent over forty years.

If you decide to replace a light fitting in the bathroom, this will be claimed as a plant and equipment asset and can be deducted based on the asset's effective life. If the purchase was less than $300 it will be 100 per cent tax deductible in the year the expense was incurred.

If you fix a crack in the plaster, this will be considered a repair as you are restoring a damaged asset. You're entitled to claim an immediate deduction for any expenses involved.

Property investors completing renovations should also be aware of legislation introduced in 2017. The legislation stipulates that investors who purchased property after 7:30pm on the 9th of May 2017 are unable to claim deductions for the decline in value of previously used plant and equipment found in second-hand residential properties. If an investor lives in their rental property while renovating, any newly installed assets will be classed as previously used. Therefore, the investor is potentially risking their tax benefits.

If a property is considered to have been substantially renovated by the previous owner for selling purposes, then an investor can claim depreciation on the new plant and equipment assets along with any new or old qualifying capital works deductions available.

Given the complexities, investors considering renovations should contact a specialist quantity surveyor for advice before completing any work.

What can you claim when renovating?

More and more Australian investors are choosing to renovate their investment properties before leasing them out. However, investors who live in the property while renovating risk missing out on thousands of dollars in property depreciation deductions.

Property depreciation is generally the second biggest tax deduction after interest, though it's often missed by investors. This is because it's a non-cash deduction, meaning you don't have to spend money to be eligible to claim it.

The Australian Taxation Office allows owners of income-producing properties to claim depreciation deductions for the natural wear and tear that occurs to a building and its assets over time. Depreciation can be claimed for a building's structure via capital works deductions and for the plant and equipment assets contained within the property.

According to legislation introduced in 2017, investors are unable to claim deductions for the decline in value of previously used plant and equipment found in second-hand residential properties. If an investor lives in their rental property while renovating, any newly installed assets will be classed as previously used. Therefore, the investor is potentially risking their tax benefits.

Move out first to claim maximum depreciation deductions

Unless there is good reason, investors who are planning on installing new plant and equipment assets should make these additions after they move out of the property and it has been listed for rent. This will ensure they're eligible to claim the maximum depreciation deductions available.

It's important to note the 2017 legislation does not affect buyers of brand-new property, residential properties considered to be substantially renovated or commercial properties. With this in mind, brand-new property generally holds the most lucrative value for investors from a tax perspective.

Capital works deductions for structural assets such as new walls, kitchen cupboards, toilets and roof tiles are also unaffected by the legislation changes and can still be claimed by owners of income-producing properties. These deductions typically make up 85-90 per cent of a total depreciation claim.

When removing structural assets there may be remaining depreciation deductions available. A process known as scrapping can often be applied, allowing investors to claim these deductions in the year the items are removed.

Article provided by BMT Tax Depreciation.

Do you have questions about how to claim rental property deductions?

Despite the 2017 rule changes, there are still lucrative tax deductions on offer for most investment properties. To discover what can be claimed for your investment property please email us or phone our friendly team on (02) 9899 3044 .

Important financial information about illness, wills and death

Mon, 02 Aug 2021 23:14:42 GMT

Preparing for the unexpected can seem less important when you're juggling all the challenges of everyday life. It can also feel overwhelming to think about the future. But planning ahead is the best way to protect you and your family and ensure your wishes are known in the event of something going wrong.

We explore why everyone should have a will, what happens in relation to tax if you due and how to obtain assistance if you or a family member are diagnosed with a terminal illness.

The need for a Will

If you die without leaving a Will, you will be considered to have died "intestate". Similarly, if you die leaving a Will which does not dispose effectively of all or part of your estate, you have died wholly or partially "intestate".

As a result, your assets will be distributed according to the intestacy laws operating in the state at the time of your death.

When a sole director of a company dies without leaving a will, the complications and distress can have an even greater impact. The death will usually leave the company without any person properly authorised to immediately manage the company. In this instance, a Will is very important.

If you would like your wishes followed after your death, including leaving money or possessions to family, friends, your church, favourite charity etc. it is essential to have a Will.

Your will should ideally be professionally prepared by an experienced solicitor, and regularly reviewed, especially in the case of any major changes to your assets, health or family.

Taxation and death

In the event of death if an individual was lodging tax returns prior to their death in most cases the accountant will need to prepare a tax return to date of death and a deceased estate tax return will need to be lodged from the date of death till when probate is granted.

A new tax file number will be needed for the estate return. We will also need a copy of the death certificate in order to apply for the new tax file number.

Taxation of the return to date of death is the same as if the individual were alive. You receive the full tax-free threshold and are taxed at individual rates.

If the individual was receiving benefits from the Government a surviving spouse may be entitled to a Bereavement Allowance or a Bereavement Payment. Please visit the Human Services site for more information or contact your manager or partner at Goodwin Chivas and Co.

Terminal Illness Assistance

If you are diagnosed with a terminal illness, you may be eligible to access your superannuation benefits. There is no limit on the amount you can withdraw, although the payment will be subject to any rules set by your super fund.

A payment from your provider will be made as a tax-free super lump sum payment as long as your super is within a complying super provider or with an annuity provider.

For the payment to be tax-free you must have a terminal medical condition that meets the following conditions:

Certification from two registered medical providers (see the ATO website for full details).
At least one of those providers is a specialist practising in an area related. to the illness or injury.
The 24 month certification period has not expired.

There are certain conditions that need to be met and documents required prior to the funds being released. Please visit the

ATO website or speak with your super fund for further information.

If you have any questions, email us or phone or friendly team on 02 9899 3044 .

The importance of asset diversification

Fri, 16 Jul 2021 06:29:22 GMT

We have all heard stories of that one person who made the big bucks buying that one lucky stock that took off, or holding an array of rental properties in the same town. The majority of the things we hear about involve large amounts of risk for a seemingly low initial return.

Not everyone has large sums of capital to throw into the next big tech stock, or the financial stability to invest in one single asset class without putting the remainder of their wealth at risk (gearing). The base of the discussion here is your risk tolerance as an investor; this is your ability to see through the ups and downs in a portfolio.

Diversification is something we have all heard about, however, it seems we tend to stick to single assets as everyday investors because we may not understand the benefits associated with diversification.

Lowering risk

The number one reason for diversifying is that it lowers your overall risk. The more you spread your assets out, the less likely it is that a single event will negatively impact your portfolio.

If you have all of your investments in a single stock and that stock loses 50 percent of its value over the course of a year, you've just lost 50 percent of your portfolio. But if that stock only makes up 3 percent of your portfolio, a 50 percent drop-off won't affect you as much (1.50%)

The Graph below shows how diversification of growth and defensive assets affects the total return of the portfolio in relation to level of risk. Please note, the bond returns used in the graph are based on the Merrill Lynch 7-10 year US Treasuries index and the stocks used in the graph below are based on total return of the S&P 500 index from 1977-2011.

New opportunities

Ultimately, diversification opens you up to more opportunities. This satisfies our natural "fear of missing out", whereby we regret not having invested in a particular investment after the investment has performed well.

The idea is that we expose our capital to multiple sectors of the economy in order to smooth out risk exposure and also increase opportunity or exposure to sectors which are experiencing growth.

Risk tolerance and portfolio diversification

Risk tolerance goes hand in hand with your goals for investment. Therefore, setting a goal for your funds is important in deciding the amount of risk you want to take in our portfolio. Having a diversified portfolio needs to be considered if you are looking to reach these goals over multiple market cycles.

Diversification is not fun as it's an expression of humility, an admission that things will not always go right when investing. However, it strives to smooth out non-systematic risks of investing across a range of opportunistic investments where the positive returns of one asset over one period of time will neutralise the negative performance of others.

If you wish to discuss diversification of your assets and your tolerance for risk, please don't hesitate to contact our offices for more information.

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.

Tax deductions: What you cannot claim

Wed, 30 Jun 2021 22:13:00 GMT

Are you familiar with what you can claim on your tax return for your industry and what you can't? There are some common errors that people make on individual tax returns. The ATO has several guides that provide clarification.

Below is a list items and costs that a lot of taxpayers commonly think of as tax deductible but that are not considered tax deductible by the ATO.

Eviction of a tenant

Expenses incurred by a rental property owner in raising eviction proceedings against a tenant whose term has expired or who has defaulted on rental payments are not generally allowed as a tax deduction to the property owner.

Grooming

Although you may be required to maintain a certain standard of appearance for your job, costs such as hairdressing or cosmetics are still generally not allowed. Laundry is generally acceptable up to a limit of $150 per year and must be diary substantiated.

Conventional clothing

You can’t claim a deduction for buying, hiring, repairing or cleaning conventional clothing you buy for work, such as black trousers. The ATO defines conventional clothing as "everyday clothing worn by people regardless of their occupation – for example, business attire worn by office workers or jeans or drill shirts worn by tradespeople."

Note: You can claim for a compulsory work uniform if certain requirements are met and occupation-specific clothing that distinctly identifies you as a person associated with a particular occupation. For example, the chequered pants a chef wears or a judge's robe. You can also claim for protective clothing in some circumstances. See Clothing, laundry and dry-cleaning for details.

Police and record checks

Some checks are required as a prerequisite to secure certain types of employment, such as a police check or "working with children check", but the cost of these clearance procedures are not allowable deductions if there are required before making an income with a particular job. For example, if you have to pay for a working with children check in order to complete an employment application.

If you need to refresh a working with children check to maintain employment with an existing employer, it's directly connected to your current method of earning an income and therefore could be tax deductible.

Volunteer work

No deductions are available to cover expenditure made while volunteering for a charity, not-for-profit organisation or voluntary emergency services such as Firefighters, voluntary lifesavers or voluntary Coast Guard members. So petrol used while driving to help fight bushfires or other community efforts do not generally qualify.

Driver's licence

Cost of a driver's licence is not generally an allowable deduction, even if it is a condition of your employment.

You can claim a deduction for additional costs you incur to get a special licence or condition on your licence to perform your work duties. For example, the cost you incur to get a heavy vehicle permit.Vehicle expenses such as interest on a loan, repairs, and servicing may be claimable.

Fines and penalties

Fines incurred during the course of your employment are not tax deductible including speeding fines, other traffic offences and parking fines.

Vaccinations

You can't claim a deduction for the cost of vaccinations, even if your employer requires you to be vaccinated. Also, you can’t claim a deduction if you incur expenses when you travel to get your COVID-19 vaccination. The expenses are not incurred in carrying out your employment duties. They are private expenses, even if the vaccination is a condition of your employment.

ATO occupation specific guides

The ATO has developed tailored guides to address common claims and errors in individual occupations and industries. There are two types of guides: occupation/industry guides and deductions summaries.

Some of the occupations covered include:

Agriculture workers
Building and construction
Doctors, specialists and other medical professionals
Fire fighters
Flight crew
IT professionals
Lawyers
Media professionals
Mining site employees
Office workers
Police
Sales and marketing
Tradespeople

Some guides are also available in different languages. For details, check out Occupation and industry specific guides on the ATO website.

If you have any questions, email us or phone or friendly team on 02 9899 3044 .

SMSF investments in cryptocurrencies

Wed, 23 Jun 2021 07:37:12 GMT

The focus on cryptocurrency investments is being closely examined as it becomes more and more popular. It is important to ensure that investing in Cryptocurrencies is covered under the SMSF governing rules and allowable under the investment strategy.

The ATO view is that this type of investment is not classified as money and should be acquired through a reputable exchange and under no circumstances be acquired from its members.

Therefore, if you want to buy Cryptocurrencies as an investment for your self-managed super fund, then you need to ensure the following.

Cryptocurrencies must be purchased in the name of your fund

Under no circumstances should Cryptocurrencies be purchased in the name of an individual SMSF member. It is a legal requirement for the trustees of self-managed super funds to separate the fund's assets from its individual members' personal assets.

This will ensure that the Cryptocurrencies investment satisfies the sole purpose test of SMSFs that is to provide retirement needs for their members. Failure to satisfy this sole purpose test can lead to severe penalties, including fines and the loss of your self-managed super fund's tax concessions.

Ideally, proceeds of the sale of any Cryptocurrencies should be transferred to your self-managed super fund's bank account and that you declare any profit or loss you have made as part of your fund's annual reporting.

Check that your SMSF trust deed has no restrictions on investing funds in assets like cryptocurrencies

Your SMSF trust deed must include Cryptocurrencies investments. As Cryptocurrencies are part of a relatively new asset class, it is unlikely that most SMSF deed would include a provision for investing into these currencies.

Ensure the investment complies with your self-managed super fund's diversified investment strategy

Before you start making investments you must have an investment strategy. It's a legal requirement for SMSFs to have an investment strategy. Your fund's compliance with this strategy is one of the things that is checked as part of your annual self-managed super fund audit.

Make your fund's auditor aware of the investment

It is a legal requirement for your self-managed super fund to be audited each year. Cryptocurrency assets are valued at the prevailing market rate at the end of each financial year.

Ensure your SMSF does not acquire Cryptocurrencies from one of its members or a related party

All self-managed super funds must be arm's length transactions.

It's also important to remember that an SMSF Cryptocurrencies investment is just like any other superannuation investment. You won't be able to access it until you reach your preservation age. The most common superannuation condition of release is retirement, provided you have reached your preservation age.

If you have any questions, email us or phone or friendly team on 02 9899 3044 .

Small business benchmarks and how to use them

Wed, 16 Jun 2021 06:49:15 GMT

The ATO has a list of small business benchmarks which enable you to compare your business's performance against similar businesses in the same industry.

These benchmarks are updated annually to reflect the performance of businesses over time.

The ATO uses these benchmarks and other risk indicators to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income. Information reported in your tax return or activity statements is used by the ATO to compare with the key performance benchmarks for your industry.

Tax return benchmarks

Examples of the tax return benchmarks used include the following:

1. Cost of sales to turnover (excluding labour).

2. Total expenses to turnover.

3. Rent to turnover.

4. Labour to turnover.

5. Motor vehicle expenses to turnover.

Activity statement benchmarks

Examples of the activity statement benchmarks used include the following:

1. Non-capital purchases to total sales

2. GST-free sales to total sales

A-Z benchmark list

The A-Z Benchmark list allows you to select and find details of the key performance benchmarks for each business type and the range within which the ATO would expect your business to sit.

Among the types of businesses included are:

Beauty services
Cement rendering
Delivery services
Grocery retailing
Landscape construction
Physiotherapy services
Restaurants
Tutoring and coaching
Veterinary services

Download the ATO Business Performance Check tool

You can find the business performance check tool by following these steps:

1. Download the ATO app from Google Play, the Windows Phone Store or the Apple App Store

2. Go to Business

3. Select Business performance check

4. Have your information ready and enter the figures into the tool

5. Compare your business performance

The personal information you enter isn't recorded and will only be used for completing the tool.

If you find that your business does not fall within the benchmark range, email us or phone or friendly team on 02 9899 3044 .

Tax tips for Airbnb properties

Wed, 09 Jun 2021 07:19:53 GMT

With many Australians taking the opportunity to rent out that spare room or lease the holiday home, it's a good time to remember that as Airbnb hosts, there are tax implications to consider.

Firstly, and most importantly, the ATO conducts data matching activities through this facility. When you are registered as a host, the ATO matches your information with your Tax File Number and then the information contained in your tax return. This income will be taxed at your marginal rate and can push you into a higher tax bracket.

Capital Gains Tax

Capital Gains Tax may apply when selling your home. CGT is usually not payable on your family home. However , if you rent out your family home or part of it (even just a room), the sale may attract CGT.

Goods and Services Tax

The ATO defines the "sharing economy" as "economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee".

If you provide services in this way, including renting out a room or a whole house on a short-term basis through Airbnb, HomeAway or other similar platforms, you need to consider how income tax and GST apply to your earnings.

Claiming expenses

Though the income from renting a room out needs to be included in your tax return, you can claim expenses for the percentage of the area of your house that is available for rent.

These can include:

Internet & Phone costs
Water, power and council rates
Upkeep and repairs
Interest on your mortgage
Depreciation on the cost of furnishings and equipment

In summary, if you aim to become an Airbnb host, remember:

Don't hide or under declare your income - the ATO can spot the difference
There are tax implications you should be aware of
Save your expense receipts and notes
Talk to your tax agent about how to claim all your expenses

If you have any questions, email us or phone or friendly team on 02 9899 3044 .

Novated lease arrangements: How to reduce your tax liability

Wed, 02 Jun 2021 08:21:38 GMT

A Novated Lease Arrangement is a popular way that employers can reward and incentivise employees. Under the right circumstances, employees can reduce their personal tax liability under a salary sacrifice arrangement involving a novated lease.

Under a Novated Lease Arrangement, the employer takes over all or part of the lessee's rights and obligations under the lease of the employee's car. This transfer of rights and obligations is agreed to in a deed of novation between the employer, the finance company and the employee (lessee). The lease obligation typically reverts to the employee upon cessation of their employment.

Under a novated lease, apart from paying for the car lease repayments, the employer would usually pay for the car's running costs, such a fuel, maintenance, registration and car insurance.

How is FBT involved?

A car fringe benefit arises to the employer under a full novated lease arrangement. The employer is required to determine any FBT liability using the statutory formula method as the default, or alternatively elect to use the log book method.

As FBT is generally borne in the end, via adjustments in a salary package, by the employee, FBT can be reduced by the employee making after-tax contributions towards the running costs. This is referred to as the employee contributions method.

To reduce the FBT payable on the benefit, the running costs will be paid by the employer from a combination of an employee's pre-tax and post-tax income under the salary sacrifice arrangement.

A question commonly asked is whether the running costs incurred by the employee from their after-tax income are deductible to the employee in their personal return. If so, can the employee use one of the two methods prescribed in Division 28 ITAA97 (that is, the cents per kilometre method or the log book method) or otherwise.

Car expense deductions denied under s51AF ITAA36

Broadly, "car expenses" incurred by an employee in respect of a car provided by an employer are specifically denied as a deduction under s51AF ITAA36.

In particular, a deduction for "car expenses" is denied where:

An employer during a period provides a car for the exclusive use of a person who is, or of persons any of whom is, an employee of the employer or a relative of such an employee, and
At any time during that period, the employee or a relative of the employee is entitled to use the car for private purposes.

A "car expense" is defined under s28-13 ITAA97 to include any loss or outgoing to do with a car (including costs in operating the car and its tax depreciation).

Note also that under s51AF ITAA36, the deduction is denied for car expenses that are incurred:

(i) during the relevant period in which the car was provided, or
(ii) is wholly or partly attributed to that period.

Also, as noted, a deduction is not allowed if the car is used by a relative such as a spouse, a parent or a child (see s995-1 for full definition).

In this case, the running costs incurred by the aforementioned employee from their after-tax income in relation to the car fringe benefit would not be deductible due to the operation of s51AF. In other words, they cannot claim a deduction for those costs – whether by using one of the methods in Division 28 ITAA97 or as a general deduction under s8-1 ITAA97.

Section 51AF applies because the vehicle, under the novated lease arrangement, was provided to the employee for their exclusive and private use.

Notwithstanding the above, the employee may still benefit from the arrangement. The after-tax contributions towards the car's running costs reduce the amount of FBT they would have been required to salary sacrifice as a component of their total remuneration.

Note that section 51AF would also be relevant where a company or fleet car is provided by an employer to an employee (or their relative) for their exclusive and private use. In such instances, running costs incurred by the employee such as fuel would not be deductible.

If you have any questions, email us or phone or friendly team on 02 9899 3044 .

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