Client Alert – May 2024

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 22 April 2024.

Reactivating old debts: new guidelines for government agencies – In response to the ATO’s recent actions on old tax debts, the Commonwealth Ombudsman/ACT Ombudsman and the Inspector-General of Taxation and Taxation Ombudsman have issued new guidelines to improve how Australians are notified about debts they owe to the government.
 
Serious Financial Crime Taskforce targets false invoicing – The ATO and Australian Federal Police have executed search warrants at properties in various Sydney suburbs in relation to a billion-dollar money laundering investigation.
 
ATO’s use of small business benchmarks – The ATO uses small business benchmarks along with other risk indicators to select businesses for further compliance activities. New benchmarks are now available.
 
FBT: alternatives to employee declarations – From 1 April 2024, employers will have the option to rely on existing or other alternative records (besides prescriptive declaration formats) for certain classes of fringe benefits.
 
More information: super on paid parental leave – “Paid parental leave is not a welfare payment – it is a workplace entitlement just like annual and sick leave”, Minister for Social Services Amanda Rishworth has said.
 
Changes proposed for annual super performance test – The government has released a consultation paper on changes to the fund performance test to improve its sophistication while still ensuring the test holds trustees to account for delivering the best outcomes.
 
R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.
 
Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.
 
Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.
 
Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.
Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.
Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.
 
Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.
 
Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.
 
Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – April 2024

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 20 March 2024.

Revised stage 3 tax cuts now law – The new rates will apply from 1 July 2024, so it’s a good time to understand how these changes will affect you.

Refresher on deductibility of self-education expenses – Generally, work-related self-education expenses are tax-deductible if they enhance skills and knowledge, or lead to an income increase, related to your current income-producing work.

ATO scrutinising novated leases – The ATO will once again be running a data matching program on novated leases, covering the 2023–2024 to 2025–2026 income years.

Paying super on expanded government paid parental leave – The Treasurer has announced that the Federal Government will pay superannuation on paid parental leave from 1 July 2025.

Small Business Superannuation Clearing House and SMSF bank account validation – To safeguard retirement savings held in SMSFs from fraud and misconduct, the ATO is rolling out new security features and alerts.

R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.

Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.

Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.

Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.
Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.
Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.

Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.

Holidays
The office will be closed on the following days:

Tuesday 23^rd April – Jewish Holiday
Wednesday 24^th April – Jewish Holiday
Thursday 25^th April – ANZAC Day
Friday 26th April – Staff Holiday
Monday 29^th April – Jewish Holiday
Tuesday 30^th April – Jewish Holiday

Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – February 2024

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 25 January 2024.
 
Proposed changes to stage 3 tax cuts announced – New proposed tax rates have been flagged to come into place from 1 July 2024.
 
ATO areas of focus on businesses for the coming year – The ATO has highlighted three focus areas: taking steps to address cyber security and increased protection of personal data, addressing the growth in the collectable debt book and improving overall tax performance.
 
Employees versus contractors: new rules – Following two prominent High Court decisions which dealt with the distinction between employees and independent contractors, the ATO has provided guidance to businesses in the form of a new taxation ruling.
 
ATO’s continued focus on illegal early release of super – As in previous years, the greatest area of concern for the ATO in the area of SMSFs continues to be taxpayers illegally accessing their super before meeting a condition of release.
 
R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.
 
Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.
 
Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.
 
Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.
Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.
Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.
 
Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.
   
Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Client Alert – December 2023 & January 2024

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 29 November 2023.

The next edition will be published in February 2024. We wish you all the best for the festive season and new year.

ASIC’s new alert list offers guidance on suspicious investment “opportunities” – The latest list aims to help consumers identify whether entities they’re considering investing with could be fraudulent, running a scam or unlicensed.

ATO pauses “debts on hold” awareness campaign – The ATO has apologised for any “unnecessary distress” caused to taxpayers with its recent awareness campaign around tax debts that were previously put on hold.

Simplified payroll reporting and STP Phase 2: employers take note – STP Phase 2 doesn’t change which payments employers need to report directly to the ATO, but it does change how those amounts need to be reported.

$20,000 instant asset write-off for small business: beware timing – Legislation is currently before Parliament that proposes to raise the instant asset write-off amount for small business assets acquired from 1 July 2023.

JobKeeper assessment: Treasury report released – The report records lessons learned from the design and implementation of JobKeeper, with a view to informing future policy responses.

R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.

Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.

Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.

Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.

Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.

Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.

Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.

Client-agent linking –The ATO has introduced new Client-to-agent linking requirements.  

From 13 November 2023, all types of entities with an ABN (excluding sole traders) need to use the new ‘agent nomination feature’ in ‘Online services for business’ when they:

• engage a new Tax or BAS agent or payroll service provider to represent them; or 
• make changes to existing arrangements

Existing clients currently linked to Guests will not be affected unless linking a new entity.

OFFICE HOURS

Our office will be closed from Friday, 22^nd December 2023 and will re-open at 9.00am on Monday, 8^th January 2024. 

Contacts for Partners: –

Andrew Goldberger                   Mobile No. 0419 155 373

Mory Kalkopf                              Mobile No. 0405 642 458

Abraham Paluch                         Mobile No. 0418 542 606

Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – November 2023

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 27 October 2023.

Upcoming changes for pension and income support recipients – A permanent enhancement to the pensioner work bonus has been announced, along with a doubling of the employment income nil rate period to reduce barriers for income support recipients taking up work.

Sharing economy reporting regime for platform operators – Transactions for supplying taxi travel/ride sourcing and short-term accommodation now must be reported to the ATO under the sharing economy reporting regime.

ATO shifting to firmer debt collection activity – The ATO has flagged a return to firmer debt collection actions after seeing a trend of profitable businesses that have the capacity to pay their tax debts but are actively choosing not to do so.

Tax exempt organisations required to lodge returns with the ATO: a reminder – Some organisations that used to have the option of self-assessing their income tax exemption status will soon be required to submit an annual self-review report to the ATO.

Proposed mechanisms for payday super – In an effort to reduce wage theft and prevent losses in retirement income for many Australians, the government is seeking to legislate the payday super measure proposed in the 2023–2024 Federal Budget.

R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.

Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.

Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.

Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.

Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.

Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.

Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.

Holidays

The office will be closed on the following day:

• Tuesday 7^th November – Melbourne Cup

Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – October 2023

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 25 September 2023.

ASIC calls on lenders to support customers – ASIC’s recent open letter reminds lenders that they must have suitable arrangements in place to respond to requests for assistance from customers and work cooperatively to find sustainable solutions.

Subscriptions included in digital adoption boost: ATO clarification – New and ongoing subscription costs can also qualify as eligible deductible expenditure if it relates to a business’s digital operations.

Small business litigation funding: improvements recommended – A recent Inspector-General of Taxation and Taxation Ombudsman (IGTO) report has recommended improvements aimed at delivering better access to justice and fairness for small businesses.

SMSF compliance activity escalation – The ATO has ramped up its compliance activity in response to an increasing number of funds that have been identified as not complying with superannuation obligations.

R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.

Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.

Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.

Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.

Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.

Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.

Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.

In addition, you’ll find a Due Diligence Checklist to help with various considerations when acquiring a business.

View, print or download [PDF]: Due Diligence Checklist – Purchasing a Business

Holidays

The office will be closed on the following day:

Tuesday 7^th November – Melbourne Cup

Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – September 2023

We are pleased to supply you with the latest edition of Client Alert, which contains information on a number of important developments up to and including 28 August 2023.

Tax time 2023: lodgment period underway – The ATO has given the green light for taxpayers with uncomplicated financial affairs to lodge their returns.

Simplifying individual tax residency: government consultation – Movement may be afoot on the complex issue of individual tax residency in Australia.

ATO crackdown on TPAR lodgments – The ATO has recently issued more than 16,000 penalties for businesses who failed to lodge their TPARs for previous years despite receiving multiple reminders.

Small business bonus deduction: technology investment – Small businesses may be able to get a bonus 20% tax deduction for any business expenses and depreciating assets used to improve their digital operations.

Small business energy incentive – The Federal Government has released plans to introduce an energy incentive to help small and medium businesses electrify and save on their energy bills.

 R & D Grants – Clients undertaking Research & Development projects should contact the office as there may be government grants available.

Confused about Aged Care? – Please contact Guests as we are able to advise and liaise with Aged Care Specialists.

Single Touch Payroll, it’s time to get ready – From 1 July 2018, if you have 20 or more employees, you need to use Single Touch Payroll enabled software to report your tax and super information to the ATO.  Please contact us if you need help.

Audit Insurance – Whilst historically, Tax Audits were targeted at big business and the wealthy, this has changed. Increasingly the ATO are turning their attention to both small to medium businesses and individuals.

Audit Insurance protects you to a degree from the unexpected costs incurred in responding to an audit, reimbursing you for related professional fees and associated with these costs.

Should you wish to discuss Audit Insurance further please contact our office or your Insurance Broker.

Acquisition of property in trusts – If you are contemplating purchasing a property in a trust, please contact your Partner at Guests for advice prior to acquisition.

Holidays

The office will be closed on the following days:

– Monday 25^th September – Jewish Holiday
– Friday 29^th September – Grand Final Public Holiday

Feel free to contact our office anytime by phone or email – to discuss any of the points raised in this Client Alert that may affect you.

Guests Pty Ltd – 234 Balaclava Road, Caulfield North, Vic., 3161
(03) 9509 7033
info@guests.com.au

Client Alert – August 2023

ATO motor vehicle data matching program extended

The ATO has extended its motor vehicles data matching program once again to encompass the 2022–2023 to 2024–2025 financial years. For each financial year, the ATO will acquire information from all eight of the state and territory motor registries regarding where a vehicle has been transferred or newly registered during the applicable period, and where the purchase price or market value is $10,000 or more. Records relating to approximately 1.5 million individuals will be obtained each financial year.

While the program is being used to obtain intelligence about taxpayers that buy and sell motor vehicles so the ATO can identify risks and trends of non-compliance with various tax and super obligations, the ATO will also be using the data obtained as an indicator of risk. For example, the motor vehicle data (along with other data) will be used to identify taxpayers who have purchased vehicles with values that don’t align with the income they have reported.

Other uses of the data will include identifying taxpayers who may have not met their obligations in terms of GST, FBT, luxury car tax, fuel schemes and income tax.

Using the cents per kilometre method for claiming car expenses

The cents per kilometre method is a simple way to work out how much you can deduct for car-related work or business expenses. Only individuals, including sole traders, or partnerships (where at least one partner is an individual) can use the cents per kilometre method. So if you operate your business through a company or trust, the business will have to use the actual costs method to claim car and vehicle running expenses.

The cents per kilometre rate takes into account all your car running expenses (including registration, fuel, servicing and insurance) and depreciation.

To work out how much you can claim, you simply multiply the total work/business kilometres you travelled by the appropriate rate. The rate for the 2022–2023 tax year is 78 c/km, and the rate for the 2023–2024 tax year is 85 c/km.

Importantly, you can’t claim more than 5,000 work/business kilometres per car, per year using this method – if you use your car for more than 5,000 kilometres a year for work or business, you need to use the logbook method to calculate your deductible car expenses.

You don’t need formal written evidence to show exactly how many kilometres you travelled, but if you use the same vehicle for both work/business and private use, you must be able to correctly identify and justify the percentage that you claim for work/business. You can’t claim a deduction for the private use. You can use a logbook or diary to record private versus work/business travel.

Tip: Travelling between your home and your place of work/business is considered private use, unless your home is considered your place of work, or you operate a home-based business and your trip was for work/business purposes.

Paying contractors? Get ready for your TPAR

Businesses that make payments to contractors may need to report these payments and lodge a taxable payments annual report (TPAR).

You will need to lodge a TPAR if your business made payments in the last financial year (ending 30 June 2023) to contractors providing the following services:

• building and construction;
• cleaning;
• courier and road freight;
• information technology (IT); or
• security, investigation or surveillance.

Contractors can include subcontractors, consultants and independent contractors. They can operate as sole traders (individuals), companies, partnerships or trusts.

If reportable services are only part of the services your business provides, you need to work out what percentage of the payments you receive are for taxable payment reporting (TPR) services each financial year. You do this to determine if you need to lodge a TPAR.

This doesn’t apply to building and construction services you provide.

If the total payments you receive for TPR services are 10% or more of your business income, you must lodge a TPAR. If they are less than 10% of your business income, you don’t need to lodge a TPAR.

TPARs are due on 28 August each year. If you don’t lodge on time, you may have to pay a penalty. You can help prepare for your TPAR by keeping records of all contractor payments.

If you’ve previously lodged a TPAR but you don’t need to lodge one this year, you can submit a TPAR Non-lodgment advice to let the ATO know.

Instant asset write-off: is your business eligible?

Remember temporary expensing, which allowed just about every business (unless annual turnover was at least $5 billion) to immediately write off the cost of an eligible depreciating asset? Well, that is no longer available. To use temporary full expensing, you had to acquire and use, or install ready for use, an eligible depreciating business asset by 30 June 2023.

The good news for small businesses is that the instant asset write-off is still available.

What is the instant asset write-off?

Eligible businesses can claim an immediate deduction for the business portion of the cost of a depreciating asset in the year the asset is first used or installed ready for use.

Any small business that uses the simplified depreciation rules can claim the instant asset write-off. A small business is a business with an aggregated annual turnover of less than $10 million.

The instant asset write-off applies to eligible depreciating assets costing less than the specified threshold (these are called low-cost assets).

For 2023–2024, the low-cost asset threshold will be $20,000. To take advantage of the $20,000 threshold, you will need to acquire the asset and first use it, or install it ready for use, between 1 July 2023 and 30 June 2024.

The $20,000 threshold applies on a per-asset basis, so small businesses can instantly write off multiple assets. In certain circumstances, the instant asset write-off also applies to additional expenditure incurred on a low-cost asset.

Developments in GST guidance for crypto assets

The ATO has recently issued new GST guidance specifically relevant to crypto assets.

For GST purposes, the ATO considers that digital currency is a crypto asset utilising cryptography and distributed ledger technology to make secure transactions. The ATO has excluded loyalty points, in-game tokens, non-fungible tokens (NFTs), stablecoins, and initial coin offerings (ICOs) (if they fall under securities or derivatives) from this definition.

Digital currency as payment

If receiving digital currency as payment for a taxable supply, the GST amount must be reported in Australian dollars on the business activity statement. Don’t forget: the tax invoice should include the GST payable in Australian dollars or provide sufficient information to calculate it accurately.

When using digital currency for purchases and claiming GST credits, be sure to report the GST amount in Australian dollars on your business activity statement. Remember, your tax invoice is key and must providing the necessary information.

Buying or selling digital currency

Identifying the location of your trading partners can be difficult. Thankfully, the ATO accepts using the location of the digital currency exchange as a reliable indicator.

When you trade with Australian residents, it falls under the category of input-taxed financial supply. You don’t need to pay GST on these supplies.

When your trades extend beyond Australian borders or involve foreign digital currency exchanges, GST takes a back seat. Trading with non-residents qualifies as a GST-free supply, freeing you from GST obligations.

Be warned! While GST-free supplies spare you from paying GST, there’s a vital checkpoint to remember. If you supply digital currency, carry on an enterprise and exceed the GST annual turnover threshold (generally $75,000), you must register for GST.

Beware SMSF schemes: residential property purchase

The ATO has warned taxpayers against entering into a scheme through their self managed superannuation fund (SMSF) which claims to allow individuals to purchase property using money from their super.

This sort of scheme typically involves the rollover of a member’s super benefits from an existing fund into a new or existing SMSF, which then invests in a property trust for a fixed period and rate of return, being a contributory fund with other investors. However, the money from the property trust is then on-lent to individuals from a third-party in the form of a loan to assist in the purchase of real property secured by mortgages over the property.

Depending on the type of scheme, the money on-lent to the individual may be used for all or part of the deposit, the balance of the purchase price, costs relating to the purchase, or even to help consolidate a member’s personal debts to enable them to secure a home loan. The scheme promoter will usually charge a high fee to the fund and establish both the SMSF and the property investment, as well as organising the purchase of the property (in some cases house and land packages).

The ATO notes that these arrangements are established and promoted under the guise of a genuine SMSF investment with the added benefit of
helping individuals purchase a home, but they are not in fact legitimate investments. They often contravene one or more of the super laws by providing members with a current day benefit while also being set up in ways that don’t comply with the sole purpose test.

Tip: The “sole purpose test” means that the SMSF needs to be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement.

The ATO will apply a “look through” approach when considering this type of scheme. That means if an SMSF’s fund money is used to help purchase a property for a member, whether it be indirectly through the SMSF’s investment in other entities, it will be treated as an illegal early access of super benefits by the member. The amount used to help purchase a property will be included in the member’s assessable income and taxed at their marginal rate, and tax shortfall penalties may apply.

People who may have been persuaded by slick marketing or promoters and inadvertently entered into these schemes are urged to contact the ATO to make a voluntary disclosure, which will be taken into account.

Client Alert – July 2023

Key tax considerations this tax time

As the financial year draws to a close, it’s time to start thinking about whether your year-end tax planning is in order. Tax planning requires consideringyour income and deductions for the whole financial year, as well as you’ve met your obligations – for example, whether you’ve made tax-related elections on time and prepared other appropriate documentation and records. Here are some key considerations for this tax time.

Working from home deductions

The shortcut method of claiming a rate of 80 cents per hour worked from home is no longer available – the measure was temporarily introduced during the COVID-19 pandemic and ended on 30 June 2022.

Instead, you can now claim deductions using the revised fixed-rate method, at a rate of 67 cents per hour, as long as you incur deductible expenses while genuinely carrying out work from home, and keep appropriate records, like timesheets for your work hours and receipts for the expenses.

If your work from home doesn’t meet these conditions, you won’t be able to rely on the fixed-rate method and will need to calculate and apportion the actual expenses. You can also simply choose the actual expenses method if it suits your situation better.

The fixed-rate method covers work-related costs like electricity/gas, stationery, your mobile/landline phone and internet. If you use the fixed-rate method you can’t also claim additional deductions for any of these categories. Depreciation of furniture and equipment (eg if you buy a desk, computer and printer for work) may be calculated separately (and in addition) to the fixed rate.

Rental properties and holiday homes

The ATO has flagged rental properties and holiday homes as an area of particular focus for this 30 June.

It’s important to remember that the ATO receives information from sources like sharing economy platforms, rental bond agencies and state and territory revenue authorities that enables it to detect under-reporting of income and inappropriate deduction claims.

Temporary full expensing

The immediate deduction for the cost of eligible depreciating business assets that has been available under the temporary full expensing concession since 2020 is coming to an end. To access the concession, your business must use the depreciating asset or have it installed ready for use by 30 June 2023.

From 1 July 2023, an immediate deduction will only be available to small business entities (with aggregated turnover less than $10 million) for assets costing less than $20,000.

Loss carry-back for corporate tax entities

Subject to certain rules being satisfied, corporate tax entities may be entitled to claim a refundable tax offset by carrying back a tax loss arising in the 2022–2023 income year to one or more of the four previous income years (that is, as far back as 2018–2019).

Deductions for superannuation contributions

For an employer to be entitled to a deduction for superannuation contributions, the contribution must be received by the fund on or before 30 June. The super guarantee contribution rate increased to 10.5% of an employee’s ordinary time earnings from 1 July 2022.

Individuals wishing to claim a deduction for personal contributions must provide their fund with a notice of intention to claim a deduction and have that acknowledged by the fund before the earlier of the day the individual’s tax return is lodged and 30 June of the next income tax year.

Stay alert for tax time scams

The Federal Government has warned of scammers targeting Australians ahead of tax time 2023. The number of scam reports received to date this year has topped 19,843 and impersonation scams are becoming increasingly commonplace. These scams typically consist of unsolicited contact through SMS, email, or on social media offering refunds or help to solve tax issues. The ATO recommends not engaging with any unsolicited contact, ending any conversations as soon as possible and independently looking up the ATO’s number to initiate contact in order to verify any communication is genuine.

Tax time scams typically involve the impersonation of the ATO to obtain personal information or solicit unlawful payment. The common tricks tax scammers are using recently include:

• posing as the ATO on social media and offering to help individuals with tax and super questions, which require the individuals to hand over personal information such as tax file numbers, dates of birth, names, addresses etc;
• luring unsuspecting individuals with an offer of a fake tax refund in return for the provision of personal information;
• initiating conversations via phone, social media private messages, email and SMS, attempting to keep the individual engaged for as long as possible through various means including threats and intimidation, offers to help and so on, to either collect personal information or solicit payment.

Many scammers will use spoofing technology to show a real ATO or Australian phone number in the caller ID or call log. The ATO’s genuine calls will be in fact be shown as No Caller ID. The ATO will also never insist on a conference call with a third party, not even your own tax agent or law enforcement officers.

In terms of SMS and emails, the ATO will never send an unsolicited message asking you to return personal identifying information through these channels. It also does not send links or attachments for you to open or download.

If you think you may have fallen victim to a scam, you should contact your bank or financial institution, make an official report to local police, and report the scam through either the ATO’s phone hotline or its specific scams email address.

Tip: The ATO now has a dedicated team that monitors queries and assists taxpayers who have fallen victim to scammers. You can look up and use the ATO’s phone numbers and other contact details on the official ATO website, www.ato.gov.au.

Small business lodgment amnesty: reminder

The ATO has reminded eligible small business taxpayers to take advantage of the lodgment penalty amnesty program announced in the recent 2023–2024 Federal Budget. The amnesty applies to tax obligations covering income tax returns, business activity statements or FBT returns that were originally due between 1 December 2019 and 28 February 2022. Superannuation obligations and penalties associated with the taxable payments reporting (TPAR) system are not included as a part of the program. The amnesty is running for the period 1 June 2023 to 31 December 2023.

To be eligible for the amnesty, your small business must have had an annual turnover of less than $10 million at the time the original lodgment was due, and lodge the relevant overdue forms and returns during the amnesty period.

Where your eligible business lodges relevant overdue forms and returns during the amnesty period, any associated failure to lodge (FTL) penalties will be proactively remitted – you won’t need to separately request a remission.

Although FTL penalties will be remitted, the ATO emphasises that no other administrative penalties or general interest charge (GIC) amounts will be remitted as a part of the amnesty. So, businesses with an existing debt or that accrue a new debt through late lodgment may still have GIC applied to those debts.

The ATO is also encourages businesses outside of the amnesty to lodge any overdue forms or returns to avoid being classified as “not being actively engaged with the tax system”, which is a red flag that may lead to other action. While FTL and other penalties may apply to those businesses, the ATO will consider the unique circumstances and may remit penalties on a case-by-case basis.

The ATO has a range of support options available for businesses where debts arise out of their lodgment activity, including payment plans, compromise of tax debt, or deferring repayments.

“Buy now pay later” sector facing more regulation

As foreshadowed last year, the “buy now pay later” (BNPL) market will soon be facing more regulation. Assistant Treasurer Stephen Jones recently announced that the government will be moving forward to bring BNPL within the Credit Act’s application to apply a tailored version of the responsible lending obligations to BNPL products.

Late in 2022, the Federal Government released a consultation paper seeking views on options to regulate the BNPL market. The paper outlined three increasingly rigorous options for the regulation of the BNPL market, consisting of: strengthening the BNPL industry code plus an affordability test; limited BNPL regulation under the Credit Act; or full regulation under the Credit Act.

Consultation has since ended, and the Assistant Treasurer has announced that the government will moving forward with law changes to bring in limited BNPL regulation under the Credit Act, applying a tailored version of the responsible lending obligations to BNPL products so that BNPL providers must hold an Australia credit licence or be a representative of a licensee with a requirement to comply with most general obligations, including internal/external dispute resolution, hardship provisions, compensation arrangements and marketing rules.

Under the proposed changes, providers would be required to assess that credit is not unsuitable for an individual, and would be prohibited from increasing a consumer’s spending limit without explicit instructions from that consumer. Fee caps for charges relating to missed or late payments would be required, combined with additional warning and disclosure requirements. Merchants who offer BNPL products to consumers would not be required to be an authorised credit representative of the BNPL provider.

The government will be consulting with the industry and consumer groups in the coming months to bed down the details of the potential legislation. Draft legislation is expected to be released for consultation later this year, and the final Bill is expected to be introduced into Parliament by the end of the year.

Minimum pension payment changes

Retirees who draw an account-based pension from their super need to be aware that the 50% reduction in
the minimum pension drawdown rate for superannuation and annuities which applied for previous years will no longer apply from 1 July 2023.

This temporary measure was introduced by the previous Federal Government as part of its response to the COVID-19 pandemic, which was negatively impacting super and pension/annuity balances.

Most income streams paid from a super account held in an individual member’s name are account-based pensions. These pensions are required to meet minimum standards, including not being able to increase the capital supporting the pension using contributions or rollover amounts once the pension has commenced, and paying a minimum amount at least once a year.

In general, minimum payments need to be made at least once a year and are determined by the age of the beneficiary and the value of the account balance as at 1 July each year. For example, people aged between 65 and 74 will need to apply a 5% standard percentage factor to work out the minimum pension amount for 2023–2024.

While the minimum annual payments are mandated, there are no maximum annual payments, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year. This means that retirees can draw a pension above the minimum pension payment amount, which may be especially welcome given the current cost of living pressures.

Tip: With the cost of living going up every day, you may find that your pension arrangment is no longer fit for your lifestyle. Contact us today – we can help you work out the best strategy for your situation.

Client Alert – June 2023

Federal Budget update

Personal tax rates and offsets for 2023–2024 and beyond

With no announced changes in the Federal Budget to personal tax rates and offsets for the 2023–2024 income year and beyond, now is the time to do some tax planning for the current and future years. For the 2022–2023 and 2023–2024 income years, the rates and income thresholds that have applied since the 2021–2022 income year will continue to apply.

The already legislated Stage 3 tax cuts will reduce the 32.5% marginal tax rate to 30%, leading to one big tax bracket between $45,000 and $200,000, along with the abolishment of the 37% tax bracket from the 2024–2025 income year. The original aim of these changes (under the previous government) was to align the middle tax bracket of the personal income tax system with corporate tax rates.

However, some individuals may find themselves paying more tax for the 2022–2023 income year due to the end of the low and middle income tax offset (LMITO). The LMITO applied to individuals with taxable income of less than $126,000.

For the 2022–2023 income year and onwards, only the low income tax offset (LITO) will apply. The maximum amount of the offset is $700 and will apply to individuals with taxable incomes of less than $37,500. Taxpayers earning more than $66,667 are not eligible for the LITO.

It should also be noted that the Stage 3 tax cuts not only apply to Australian residents, but also to foreign residents and working holiday makers from the 2024–2025 income year.

What’s in the Budget for small businesses

For small businesses, the government has proposed to temporarily increase the instant asset write-off threshold from 1 July 2023 to 30 June 2024. In previous years, the temporary full expensing effectively replaced the instant asset write-off regime. This allowed eligible businesses to immediately deduct the business portion of an asset’s cost with no general limit, although specific cost limits on certain assets, such as cars, applied.

With the end of temporary full expensing, eligible small businesses with an aggregated annual 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 limit will apply on a per asset basis, so small businesses can instantly write off multiple assets.

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. In addition, the “lock-out” rule that prevents small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.

The government has also announced a lodgment penalty amnesty program for small businesses (with an aggregate turnover of less than $10 million). The amnesty will remit failure-to-lodge (FTL) penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that had original due dates between 1 December 2019 to 29 February 2022.

ATO target areas for tax time 2023

Tax time 2023 is fast approaching and as with previous years, the ATO has provided some insights to the areas it will be focusing on consisting of rental property deductions, work-related expenses, and capital gains tax. Specifically, the ATO will be targeting loan interest expenses, working from home deductions, and possible capital gains tax where a main residence is also used for income producing purposes. Overall this tax time, the ATO expects fewer individuals to receive refunds or to receive smaller refunds, and more individuals perhaps with tax debts.

A recent ATO review indicated that nine out of 10 rental property owners are getting their returns wrong, so it is no surprise that this area remains as one of the main tax time targets. Common mistakes of taxpayers include rental income not being reported, overclaiming expenses, or claiming improvements to private properties. However, this tax time, the ATO is particularly focused on interest expenses.

Further, the ATO reminds taxpayers of the recent commencement of the residential investment property loan data matching program that spans the income years of 2021–2022 to 2025–2026. Data such as amounts of interest charged and loan repayments from various financial institutions will be used to identify discrepancies in returns lodged.

The other focus area the ATO will be enforcing is work-related expenses. There have been changes to the methods to work out working from home deductions from 1 July 2022. From that date, you can either choose the actual cost method or the fixed rate method, with the 80 cents per hour “shortcut” method no longer available. To use either of the available methods, you’ll need to keep appropriate records, including the total number of hours worked from home.

The ATO’s last area of focus for tax time 2023 is CGT. In addition to the usual disposal of assets such as shares, crypto-assets, managed investments and properties, the ATO will be looking at situations where a main residence or part of a main residence is used to produce income and is then subsequently sold. This applies where you have rented out all or part of your main residence through traditional means or through the sharing economy (using Airbnb, Stayz, etc), or where a business is run from home.

ATO ride-sourcing data-matching program extended

Continuing its theme of closing the tax gap of individuals for budget repair, the ATO has notified the public of the extension of an existing data-matching program on ride-sourcing. The program was previously designed to run from the 2015–2016 to the 2021–2022 financial years, capturing information from individuals engaged in providing ride-sourcing services (through platforms such as Uber); this has now been extended to apply to the 2022–2023 financial year.

It is estimated that records relating to approximately 200,000 individuals will be obtained.

The data obtained will be used to identify and address incorrect reporting of income in terms of income tax returns and activity statements. It will also be used to identify instances where individuals fail to meet registration or lodgment obligations (eg GST).

In addition to potential compliance activities, the ATO will use the program to promote voluntary compliance, understand behaviours and compliance profiles of individuals and businesses providing ride sourcing services and obtain a holistic view of taxpayers’ income.

This particular data-matching program will not be extended beyond the 2022–2023 financial year, given the introduction of the Sharing Economy Reporting Regime, which will require operators of various electronic distribution platforms to indefinitely report identification and payment information to the ATO for data-matching purposes from 1 July 2023 for ride-sourcing and short-term accommodation, and from 1 July 2024 for all other reportable transactions.

Single Touch Payroll Phase 2: avoid common mistakes

Single Touch Payroll (STP) was introduced as a way for employers to send super and tax information directly to the ATO through the use of STP-enabled software solutions. STP Phase 2 is now in full swing, having commenced on 1 January 2022. It requires more detail on the amounts reported through STP; for example, salary sacrificed amounts must be reported separately. Under STP Phase 2, the ATO also receives information directly from super funds. When employers make a super payment to their employees’ chosen or default funds, the funds will send this information to the ATO so it can be matched with the STP information from the employers to ensure that the correct entitlements are being paid.

The ATO has now identified common STP Phase 2 mistakes to avoid for employers currently entering into the system.

In relation to pay codes, the ATO has noticed that some employers have failed to set up the codes correctly and to ensure that payments including allowances, paid leave and overtime are itemised separately. Another issue the ATO has noticed is employers selecting “not reportable” or “do not report to the ATO” incorrectly. Generally, all amounts paid to employees should be reported, and the “not reportable” or “do not report to the ATO” options should only be selected for travel allowances below the ATO’s reasonable amount thresholds, overtime meal allowances below the ATO’s reasonable amount reimbursements, and post-tax deductions (except for those separately identified).

Employers that transitioned to STP Phase 2 part-way through the financial year need to ensure that continuity of YTD reporting is maintained unless the replacing payroll IDs method is used. This varies with the different software solutions used; some will transition to the amounts automatically, while others may require manual input of YTD amounts. The ATO suggests comparing the first STP Phase 2 report with the last STP Phase 1 report to assist in maintaining the correct figures.

As tax time approaches, the ATO also emphasises the importance of having the correct employee information such as names, tax file numbers and dates of birth transitioned into STP Phase 2. Employers also need to report accurate information about their employees’ employment basis (eg full-time, part-time or casual) each time the payroll is run.

Specifically, the ATO has identified a common issue where the employer omits the cessation date and reason for leaving when an employee’s employment ends. In general, employers should be reporting a cessation date and reason for an employee when there are also payments that are connected to termination (eg employment termination payments, unused leave termination, lump sums). This information will flow through to Services Australia and help streamline interactions with the employee.

Under STP Phase 2, employers are also required to report a country code when payments are made to employees who derive foreign employment income, are inbound assignees to Australia or are working holiday makers. The country refers to the home country of the individual, and differs depending on the type of income. The ATO has noticed employers using the code “na” to denote “not applicable” in these instances; however, “na” has been assigned as the country code for Namibia and should not be used unless the employee is either working overseas in Namibia or is from Namibia.

Victoria to phase out duty on commercial and industrial property

The Victorian Government has announced that transfer duty (formerly “stamp duty”) will be phased out for commercial and industrial properties from 1 July 2024. Instead, an annual 1% tax on the unimproved value of such property (the annual property tax) will be introduced. This was announced as part of the State Budget handed down on 23 May 2023.

In short, under the Victorian measures the first time a parcel of commercial or industrial land is transferred after 1 July 2024, the transferee will still have to pay transfer duty, either:

• as a lump sum; or
• over 10 years, in annual instalments and at interest.

Ten years after the transfer of that property, the annual property tax will apply, locking that property into the new system (apparently, regardless of whether the transfer duty was paid as a lump sum or in annual instalments). This means subsequent transfers of that property will not trigger a transfer duty liability, but will instead be subject to the annual property tax.

The annual property tax will not impact industrial and commercial property acquired before 1 July 2024, but only once such property is transferred (and therefore permanently entered into the new regime).

Employers to pay super at same time as wages

The government has announced that from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages (ie payday super). The three-year lead time is to give businesses, super funds, payroll providers and other parts of the superannuation system sufficient time to prepare for the change.

According to ATO estimates, in 2019–2020, around $3.4 billion worth of super went unpaid. While the onus to chase up unpaid super currently lies with the employee, this is made all the more difficult by the employer only having to show the amount of super they are liable to pay, not the actual amount paid. Currently, employers are only required to pay super for eligible employees on a quarterly basis, meaning that many employees realise far too late that they have not been paid the correct amount of super.

The government hopes that the simple payday super change will make it easier for employees to keep track of their super payments, making it harder for disreputable employers to exploit this loophole.

Treasurer Jim Chalmers MP has noted that more frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books, while also benefitting employees. It is projected that a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5% better off at retirement just with this small change.

It should be noted that legislation related to these measures has not yet been released, let alone passed Parliament. Therefore, these measures are not yet law, but given the broad political support in wake of the announcements, it is likely that these proposals will be introduced as soon as various consultation concludes.