Stewart, Tracy & Mylon Blog, Wodonga VIC, Australia

Missed or Late Super Payments? Here’s What You Need to Know

Tue, 28 Oct 2025 03:33:02 GMT

As an employer, you’re required to pay super guarantee (SG) contributions for your eligible employees on time and to the correct fund. If payments are missed or delayed, there are important steps you need to take — and penalties can apply if you don’t act quickly.

A super payment is only considered “paid” once it’s received by the employee’s super fund — not the date you send it.
If you use a clearing house, make sure you allow enough processing time so your payments reach the fund before the quarterly due date.

Quarterly Super Due Dates

Super payments are due 28 days after the end of each quarter:

28 October – for July to September
28 January – for October to December
28 April – for January to March
28 July – for April to Jun

If your payment isn’t made on time or to the right fund, you must:

Lodge a Super Guarantee Charge (SGC) statement with the ATO; and pay the SGC — which includes the unpaid super, interest, and an administration fee.

Even if you can’t pay straight away, lodge the SGC statement by the due date to avoid extra penalties. The ATO can help you set up a payment plan if needed. Get in touch with us immediately if you need help with these steps, or you require more information.

Late Payment Options

If you’ve made a late super payment, you can:

Offset the payment against your SGC for that quarter (by making a Late Payment Offset election in your SGC statement), or
Carry it forward to cover a future quarter (within 12 months).

Note that late payments aren’t tax deductible, even if they’re later offset against the SGC.

ATO Compliance & Support
The ATO regularly checks payroll and super data to identify missed or late payments. If they contact you, it’s best to review your records and respond promptly.

If you’re struggling to meet your SG obligations:

Lodge your SGC statement (even if you can’t pay in full).
Call the ATO on 13 10 20 to discuss a payment plan or get help with your situation.

Failing to lodge an SGC statement on time can lead to a Part 7 penalty — up to 200% of the amount owed.
Penalties may be reduced if you’ve made a genuine effort to comply or have a good compliance history.

Set a reminder a few days before each due date and check your clearing house’s processing times. Paying a few days early can help you avoid costly penalties and paperwork later.

Need help managing your super obligations or lodging a Super Guarantee Charge?

Our team can assist with compliance, catch-up payments, and setting up reminders to keep you on track.
Contact us anytime for support.

A win for those carrying student debt

Wed, 22 Oct 2025 05:50:21 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% reduction 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.

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.

Interest deductions: risks and opportunities

Wed, 22 Oct 2025 05:39:54 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 accounts

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.

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.

To 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.

Government Review of Supermarket Unit Pricing: What It Could Mean for Your Business

Wed, 22 Oct 2025 03:16:21 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 [name of accounting firm], 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.

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.

Should you have any questions or concerns relating to proposed access to your superannuation please reach out to us.

Accessing superannuation funds for medical treatment or financial hardship

Tue, 21 Oct 2025 22:55:18 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.

ATO Interest Charges Are No Longer Deductible – What You Can Do

Mon, 20 Oct 2025 00:32:19 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.

Refinancing ATO debt

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.

Individuals

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.

Trust Resolutions – Why Timing and Evidence Matter

Sun, 19 Oct 2025 23:59:07 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.

Start the New Financial Year with Clarity and Focus: Why Your Business Needs a Budget That Goes Beyond the Numbers

Mon, 28 Jul 2025 01:40:58 GMT

Start the New Financial Year with Clarity and Focus: Why Your Business Needs a Budget That Goes Beyond the Numbers

As we are underway in the new financial year, now is the ideal time to take stock and set clear direction for your business. One of the most critical tools to support sustainable business performance and growth is a strategic budget — one that does more than just estimate income and expenses. A successful budget incorporates financial targets, key performance indicators (KPIs), and capacity planning to ensure your business is well-positioned to meet its cash commitments and long-term goals.

Why Budgeting Matters Now More Than Ever

Budgeting isn’t just about increasing last year’s revenue number, it’s about clarity, control, and confidence. When done well, budgeting allows you to:

Set measurable targets that align with your strategic goals
Track your performance against KPIs to spot opportunities and weaknesses early
Ensure cash flow stability , helping you meet your obligations and commitments
Plan your resource allocation, from staffing and production to capital investments
Anticipate bottlenecks that may limit your growth potential

Integrating Capacity Planning for Growth

The best business budgets map your available capacity and operational constraints. This goes beyond simply projecting revenue. It considers:

What maximum level can be achieved with the current level of resources
Where are our constraints are, whether time, staffing, cashflow, infrastructure etc
What our current level of utilisation is running at

These insights help transform your budget from a passive forecast into a proactive decision-making tool. It can help you to better understand where to allocate your resources and where to focus operational improvements to boost profitability.

The Outcome

Businesses that budget effectively:

Make informed decisions
Can adapt more quickly to unforeseen changes
Can grow with greater predictability on results and cashflow
Enjoy greater peace of mind knowing the impact of their decisions and their likely position at the end of the year

If you would like support building a budget that integrates cash flow, KPIs, and capacity planning, our team can guide you through the process. Please call our office on 02 60241655 or email advisory@st-m.com.au

Accounting Software Price Increases from 1 July 2025

Fri, 25 Jul 2025 00:36:46 GMT

Xero

Ignite: Current $35/month | Price from 1 July $35/month (no change)
Grow: Current $70/month | Price from 1 July $75/month (increase $5)
Comprehensive: Current $90/month | Price from 1 July $100/month (increase $10))
Ultimate 10: Current $115/month Price from 1 July $130/month (increase $15)
Ultimate 20: Current $145/month Price from 1 July $162/month (increase $17)
Ultimate 50: Current $200/month Price from 1 July $222/month (increase $22)
Ultimate 100: Current $245/month | Price from 1 July $272/month (increase $27)

MYOB Business

Price effective as at 1 July 2025
What’s changing: Payroll will no longer be included in the subscription price for MYOB Business Lite and Business Pro and will be an additional $2 per month per employee.
MYOB Business Lite: Price from 1 July $34/month
MYOB Business Pro: Price from 1 July $63/month
MYOB Business AccountRight Plus: Price from 1 July $150/month

QuickBooks Online

Price effective as at 1 July 2025
Simple Start: Price as at 1 July $29/month
Essentials: Price as at 1 July $45/month
Plus: Price as at 1 July $60/month
Advanced: Price as at 1 July $110/month

What Should You Do?

- Review your current usage. Are you using all the features of your plan? You might be able to downgrade—or need to upgrade.
- Speak to us. We can help you evaluate the right accounting software and ensure it's set up correctly for your business and compliance needs.
Please call Perrie on 02 6024 1655 or email bookkeeping@st-m.com.au .

Victoria Farm Drought Support Grant

Fri, 25 Jul 2025 00:12:46 GMT

The Victorian Government has established the Farm Drought Support Grants program to assist primary production businesses to implement on-farm infrastructure improvements & undertake essential business activities that help in the management of current drought conditions and enhance the preparedness and long-term viability of their business in a changing climate.

This program is available to eligible primary production businesses in all Local Government Area’s (LGAs) of Victoria and the unincorporated area of French Island.

Eligible primary production businesses are required to provide dollar for dollar matching funding co-contribution.

A grant of up to $5,000 (excluding GST) per eligible primary production business is available statewide. Grants will be available from the date the program opens until program funds are fully allocated or 30 June 2026, whichever occurs first.

Eligible activities include:

Items to construct a new, or upgrade an existing, stock containment area (SCA) – such as fencing, gates, troughs, piping, tanks & pumps
Reticulated water systems using pumps, piping, tanks & troughs for livestock
Irrigation system upgrades (e.g. automated systems)
Purchase or repair of fixed infrastructure (e.g. irrigation pumps, repairing piping, replace troughs, upgrade tanks)
Improved on-farm water infrastructure for stock management (e.g. consolidating/enlarging/desilting farm dams)
Technologies to improve drought management efficiencies to farm production systems (e.g. soil moisture monitoring, weather stations, telemetry sensor equipment)
Grain & fodder storage (e.g. silos, silage bunkers, hay sheds)
Internal fencing to better match property layout with land capability or improve management
Fencing for the exclusion of wildlife to protect and manage crops & pastures
Addition of shelter belts for shade, wind brakes and erosion control
Drilling of new stock water bores and associated power supply such as generators
Improving waste water and effluent management systems
Upgrading of areas (e.g. laneway upgrades, repairs or expansion) to deliver lasting benefits directly linked to productivity and profitability
Feeding system upgrades (e.g. feed pads or feed troughs)
Pasture/crop restoration (e.g. associated seed and fertilizer costs, contractor costs such has cultivation and sowing, direct drilling, smudging or harrowing, rolling etc)
Water carting for livestock & essential business activities (e.g. dairy washdown)
Testing (such as soil, water or feed testing) to support drought management decisions
Professional advice to support business planning & drought management decisions, including for animal welfare

Who can apply?

The grant of up to $5,000 (excluding GST) is available per eligible primary production business with an additional $5,0000 (excluding GST) for those in eligible LGA’s is south west Victoria.

Eligible applications must meet the following requirements:

Own, share or lease a primary production business in Victoria
Hold a current Australian Business Number (ABN) and have held that ABN at the time of the program announcement (30 September 2024)
Devote part of their labour to the primary production business
Derive more than 50% of gross income from the primary production business in an average year OR generate more than $75,000 gross income from the primary production business in an average year

SGC set to rise on 1 July 2025

Wed, 21 May 2025 01:50:29 GMT

The Australian Government’s long-planned increase to the Superannuation Guarantee (SG) rate is set to reach its final legislated milestone on 1 July 2025 , when the rate will rise from 11.5% to 12% of an employee’s ordinary time earnings.

This change represents the final step in a series of incremental increases outlined in the Superannuation Guarantee (Administration) Act 1992, aimed at improving retirement outcomes for Australian workers.

What Is the Superannuation Guarantee?

The Superannuation Guarantee is a compulsory system in Australia where employers must contribute a set percentage of an employee’s earnings into a complying superannuation fund. This system is designed to help Australians save for retirement over the course of their working life.

What This Means for Employers

From 1 July 2025 , employers will need to contribute 12% of eligible employees’ ordinary time earnings to their superannuation fund. This change applies to all employees eligible for SG contributions under Australian law, including casual, part-time, and full-time workers.

Key considerations for employers:

Payroll systems will need to be updated to reflect the 12% contribution rate from the first pay cycle in July 2025.
Employment contracts that include a “total remuneration” or “salary package” approach may require adjustment, as the super increase could impact the breakdown between take-home pay and super contributions.
Cash flow planning should take into account the higher SG obligation, particularly for small to medium enterprises.

What This Means for Employees

For employees, the SG increase is a significant step towards a more secure retirement. An increase in super contributions—even by 0.5%—can have a substantial impact over the course of a career, thanks to the power of compounding interest.

Planning Ahead

The upcoming change presents an opportunity for both employers and employees to review their superannuation arrangements and ensure compliance and understanding.

Employers should:

Communicate clearly with employees about how the SG increase may affect them.
Ensure HR and finance teams are ready for the change.
Consult with payroll providers or advisors if needed.

Employees should:

Review their superannuation statements.
Consider seeking financial advice to understand how this increase can support their retirement goals.

Final Thoughts

The increase of the Superannuation Guarantee rate to 12% is a significant milestone in Australia’s long-term retirement strategy. While it may present short-term adjustments for some businesses and workers, it ultimately aims to build stronger financial security for Australians in their retirement years.

If you require any additional information, or assistance with these changes, call our office on 02 6024 1655 or email advisory@st-m.com.au

Why Your Business Needs a Personal Leave Policy

Thu, 01 May 2025 08:10:58 GMT

Managing employee absences can be a challenge for any business. Here we explore a key foundational element in managing employee absences: a clear and effective personal leave policy .

Understanding Personal/Carer’s Leave

Personal/carer’s leave—commonly known as sick leave—is an entitlement under the National Employment Standards (NES) for all employees except casuals. Under the NES, full-time employees are entitled to 10 days of paid leave per year, with part-time employees receiving a pro-rata amount.

This leave can be used when an employee is unwell, injured, or needs to care for an immediate family or household member dealing with illness, injury or an emergency.

Yet many businesses face recurring questions:

Do employees and managers fully understand how personal leave works?
Are there ongoing issues with absenteeism?
Are expectations clear across your organisation?

That’s where a solid policy comes in.

What Is a Personal Leave Policy?

A personal leave policy outlines the procedures, expectations, and documentation required when an employee accesses personal leave. It ensures all staff are aware of their rights and responsibilities, and helps managers handle leave requests fairly and consistently.

We’ll delve into exactly what should be included in a personal leave policy in next week’s edition—but first, here’s why you need one.

Why Every Business Should Have a Personal Leave Policy

A well-structured personal leave policy supports your business in multiple ways:

1. Supporting Employee Wellbeing

Employees should feel comfortable taking time off for health or family needs without fear of consequences. A clear policy demonstrates your commitment to staff welfare and helps reduce stress, burnout, and long-term absenteeism.

2. Ensuring Legal Compliance

Leave entitlements are legally mandated. Having a documented policy helps ensure your business complies with the NES and other employment obligations, reducing the risk of legal issues or Fair Work penalties.

3. Improving Productivity and Engagement

When employees feel supported, they’re more likely to stay engaged, motivated, and productive. A transparent policy can increase trust and alignment between staff and management.

4. Providing Clarity and Consistency

A personal leave policy eliminates guesswork by setting out clear steps for:

Notifying managers of an absence
Providing evidence, if required
Applying for leave—whether in advance or after the absence

Consistency in how leave is handled reduces friction and builds a culture of fairness.

Can a Personal Leave Policy Help Prevent Absenteeism?

Yes—when implemented properly, a leave policy can actually reduce absenteeism. By outlining clear processes and expectations, employees are less likely to take unauthorised time off or feel unsure about what’s allowed.

It also encourages employees to use leave responsibly, take the time they need when they need it, and return to work feeling supported and refreshed.

Final Thoughts

Establishing a personal leave policy isn’t just about compliance—it’s about creating a healthy, respectful, and efficient workplace. When employees know where they stand, everyone benefits.

If you need assistance developing or reviewing your workplace policies, our team at Stewart, Tracy & Mylon is here to help. Email advisory@st-m.com.au or phone us on 02 6024 1655 to discuss your personal circumstances.

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.

The proposed ban on non-compete clauses

Thu, 01 May 2025 07:54:07 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.

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 [1] .

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.

The ATO’s updated small business benchmarking tool

Thu, 01 May 2025 01:32:09 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.

email advisory@st-m.com.au or call us on 02 6024 1655

Property subdivision projects: the tax implications

Thu, 01 May 2025 01:30:51 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.

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.

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.

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.

You can find the ATO’s guide and examples here

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risk. Email advisory@st-m.com.au or call us on 02 6024 1655

Instant asset write-off threshold finally confirmed

Thu, 01 May 2025 01:28:17 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 & 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.

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risk. Email advisory@st-m.com.au or call us on 02 6024 1655

Tax Planning

Thu, 01 May 2025 01:25:31 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 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.

Charitable donations

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

Work from home expenses

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

Landlords beware

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.

For your business

Opportunities

Write-off bad debts

Obsolete plant & equipment

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

Professional firm profits

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risk. Email advisory@st-m.com.au or call us on 02 6024 1655

Ban on foreign property purchases

Thu, 17 Apr 2025 03:27:41 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.

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.

Need more information or advice specific to your needs? Get in touch today advisory@st-m.com.au or phone us on 02 6024 1655

Threshold for tax-free retirement super increases

Thu, 17 Apr 2025 02:44:02 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. Email advisory@st-m.com.au or call us on 02 6024 1655

Super guarantee rules catch up with venues and gyms

Wed, 16 Apr 2025 22:40:18 GMT

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.

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

Are contractors entitled to SG?

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.”

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).

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:

· 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.

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”

Is a gym instructor a sportsperson?

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.

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. Email advisory@st-m.com.au or call us on 02 6024 1655

Company Director Penalties

Wed, 19 Feb 2025 02:47:30 GMT

Why Company Directors need to ensure that tax lodgements and payments are made on time.

Obligations in relation to being a Company Director can sometimes be onerous, but in the current ATO environment with regard to debt collection, one responsibility may even outweigh all of the others.

Company Directors are legally responsible for ensuring that a company’s tax and superannuation obligations are reported and paid on time. And the ATO can currently utilise legislative provisions to force the Director(s) of a company to personally pay outstanding:

Pay As You Go Withholding ( PAYGW )
Goods and Services Tax ( GST )
Superannuation Guarantee Charge ( SGC ).

A Director becomes liable to a penalty at the end of the day on which the company is due to meet its obligation. At this time, the penalty is created automatically. The ATO does not need to issue any notices or take any action to create the penalty. However, the Commissioner of Taxation (or the appropriate Delegate of the Commissioner), must not commence proceedings to recover a director penalty until 21 days after a Director Penalty Notice (“ DPN ”) is issued to a Director. Even if you resign as a Director of the Company, you can be liable for director penalties for liabilities of the Company. Similarly, if you are appointed as a new company Director, you can become personally liable for any unpaid amounts.

There are two types of DPN’s: non-lockdown DPN and lockdown DPN.

Non-lockdown DPN
A non-lockdown DPN can be issued to a Director of a company that has lodged its business activity statements ( BAS ), instalment activity statements ( IAS ) and/or superannuation guarantee charge statements within three (3) months of the due date for lodgement, however the PAYG withholding, GST and/or SGC debts remain unpaid. The notice gives the Director 21 days to take one of the following actions:

pay the debt in full; or
appoint a Voluntary Administrator ( VA ) over the Company; or
appoint a Small Business Restructuring ( SBR ) Practitioner over the Company; or
appoint a Liquidator over the Company.

There is a misconception that Directors can avoid personal liability by entering into a payment plan with the ATO within 21 days, however this is not correct. The payment plan simply allows the Director to repay the liability by way of instalments, however the Director becomes personally liable for the whole debt after the end of the 21-day period. In the event the Company (or the Director) defaults on the payment plan, the ATO can commence proceedings against the Director personally, seeking recovery of the relevant tax debt(s).

Lockdown DPN

A lockdown DPN can be issued to a Company's Director where the Company has failed to lodge its BAS, IAS and/or SGC statements within three (3) months of their due date for lodgement. In this case, the penalty permanently locks down on the Director and there is no ability to remit the penalty (i.e. avoid personal liability), except by paying the debt in full.

It has been reported that the ATO intends to utilise the DPN regime more often as the ATO ramps up its actions to recover $30 billion in overdue small business tax.

We have recently become aware that the ATO can (and will) issue lockdown DPN’s on company Directors even after the Director has:

placed the Company into Liquidation ; or
appointed a Voluntary Administrator over the Company; or
appointed a Small Business Restructuring Practitioner over the Company.

It is important to understand your obligations as a company Director and, in particular, how you may not be able to avoid personal liability of certain company debts, including tax debts, even if you appoint an insolvency practitioner over the Company.

Our takeaway from this is we want you to understand is that, before it gets to this point, even if you cannot pay, you will much better off by lodging all tax forms ie BAS/IAS/SGC on time (or within 3 months of the due date) as by lodging late will expose Directors to hard lockdown DPN’s. These need to be avoided as Directors are still liable even if the company goes into liquidation.

The moral of the story is to have your lodgements up to date and seek specialist advice sooner rather than later!

Want more information or discuss your personal circumstances? Call us on 02 6024 1655 or email advisory@st-m.com.au and we'll contact you.

Is there a problem paying your super when you die?

Tue, 18 Feb 2025 22:12:41 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 but instead, is 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 3 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 your 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:

1. 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.

2. 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.

3. 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.

4. 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 I 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.

Will credit card surcharges be banned?

Tue, 18 Feb 2025 22:08:00 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 with the Australian Banking Association’s (ABA) submission to the RBA review saying, “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 business pays 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:

Card type Fee

Eftpos less than 0.5%

Visa and Mastercard debit between 0.5% and 1%

Visa and Mastercard credit between 1% and 1.5%.

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

Why the ATO is targetting babyboomer wealth

Tue, 18 Feb 2025 21:56:47 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 babyboomer 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, then you risk the ATO taking a very close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules in Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities.

“We’re seeing that succession planning behaviour is primarily done 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 lodgment.

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 – changes to share structures, changes to the trustee and appointor of a trust, changes to partnership structures – or 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.

SMSF & Clearance Certificates

Wed, 05 Feb 2025 00:52:37 GMT

Recent changes to the requirement for clearance certificates for Australian property sales may impact your SMSF, if you sell property owned within that entity.

Like all other property owners in Australia, SMSF trustees must obtain a Clearance Certificate when selling or disposing (including in specie transfers) Australian real property and give it to the purchaser at, or before settlement. Without a clearance certificate, the purchaser must withhold up to15% of the sale price (or market value if not sold at arm’s length).

The purpose is to prevent foreign residents from avoiding the capital gains withholding rules and assumes that all property owners are foreign residents unless proven (by way of certification) otherwise. Prior to 1 January it was only a requirement for $750k plus properties (and the rate was 12.5%) but now includes all direct property, irrespective of value, such as:

vacant land, buildings, residential and commercial property
mining, quarrying or prospecting rights where the material is situated in Australia
Indirect Australian real property interests (IARPI), where the holder has a right to occupy land or buildings on land.

The certification process is free and rather straight forward but must be attended to. A clearance certificate can be applied for well in advance of selling a property as they are valid for a year (can be longer for delayed settlement contracts) – unless there is a change of residency status. They can take up to 28 days (can be longer if there are complications) to issue so early action is advisable as they must be provided to the purchaser before settlement date to avoid the 15% deduction. Processing may take longer if:

the vendor hasn’t lodged income tax returns recently
there’s a change in residency status
the names on the ATO’s records don’t match the names on the Certificate of Title
the property is owned by complex entity structures and determining the residency takes longer.

The deducted amount is remitted to the ATO. If the vendor is not a foreign resident, but just failed to provide the certificate in time, they will not be able to access the withheld amount until they have lodged their tax return for the year in which the contract was signed. This cash flow delay can have significant commercial consequences.

Where the vendor involves multiple parties, each must provide certification, or the withholding will be applied to their share.

In addition to the vendor (who can apply on MyGov), clearance certificate applications can be made by, legal practitioners, tax agents, conveyancers, real estate agents and solicitors and registered tax agents representing the vendor on their behalf.

The entity that has legal title to the property applies for the clearance certificate. For an SMSF this should be the trustee of the fund but there may be some instances where another entity is holding the property title in trust for the SMSF. The name on the Certificate of Title and clearance certificate must match.

Early applications are advisable.

If you require assistance with this, or need more information, please contact our team via email advisory@st-m.com.au or call us on 02 6024 1655

2025 tax & super changes

Wed, 05 Feb 2025 00:47:07 GMT

Clearance certificates required for all Australian property sales

From 1 January 2025, all Australian residents (for tax purposes) selling or disposing of Australian real property (land and buildings) must have a clearance certificate and give it to the purchaser at, or before settlement.

If a clearance certificate is not provided, 15% of the sales price (or market value if not at arm’s length) will need to be withheld (up from 12.5%).

Previously, clearance certificates were only required where the value of the property is $750,000 or more.

For foreign resident vendors, the withholding is 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.

For a more detailed overview specific to SMSF, read our blog post here

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.

Wage Theft Criminalised

Wed, 05 Feb 2025 00:22:35 GMT

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
they 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.

See the Fair Work Ombudsman for further details.

Future Made: Hydrogen Production and critical minerals

Wed, 05 Feb 2025 00:02:59 GMT

The Future Made in Australia is the Government’s plan for a net zero economy. The Hydrogen Production Tax Incentive and the Critical Minerals Tax Incentive form part of that plan. The Senate Economics Legislation Committee is due to report on the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 enacting the incentives on 30 Jan 2025. These incentives seem a long way off with a start date of 1 July 2027.

The hydrogen production tax offset is a new offset that provides a refundable tax offset available at a rate of $2 for a kilogram of eligible hydrogen for companies satisfy the eligibility requirements. It is intended to be available for income years commencing on or after 1 July 2027 and ending before 1 July 2040.

The Critical Minerals Production Tax Incentive is another new tax offset focussed on minerals that are, “essential to modern technologies, economies and national security.” There are currently 31 of these minerals on the government’s list. The amount of the offset for an eligible company is equal to 10% of the eligible expenditure of the company and is intended to be available for income years that start on or after 1 July 2027, and end on or before 30 June 2040.

Lost Legislation 2025

Tue, 04 Feb 2025 23:45:58 GMT

Lost Legislation

Parliament has resumed for 2025 and whilst the Senate pushed through 32 Bills on the last sitting days of 2024 , there are a few anticipated…dreaded, Bills yet to pass.

Zombie tax: Division 296 $3m super tax

Division 296, 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 implementing the measure, Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 , was divided into two by the Senate to remove the less controversial measures.

Unless there is a concerted effort to negotiate the Bill’s passage through the Senate in February, pundits have their money on this tax disappearing as a bad idea. However, the MYEFO continued to recognise the revenue from the new tax in the budget and the Government, at least at this stage, is not formally backing away from it.

Peter Dutton has vowed to abolish the tax.

No certainty on the $20k instant asset write off threshold

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 for 2024-25…yes, current year.

This concession was removed by amendment from the enabling legislation at the last minute in the final sitting of Parliament of 2024. The intent is to pick it up in 2025 in a new Bill. 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.

Luxury car tax and fuel-efficient cars

Amends the Luxury Car Tax (LCT) rules to:

Tighten the definition of a fuel-efficient vehicle - reducing the maximum fuel consumption for a car to be considered fuel-efficient for the LCT to 3.5 litres per 100 kilometres from the current 7 litres per 100 kilometres. For car enthusiasts, that gets you a Toyota Yaris (the Lexus UX for example is 4.2 litres per 100 kilometres).
Align the indexation rates for LCT thresholds. Under this revision, the LCT threshold for the 2024-25 is $80,567 and will be indexed annually using the index number for the motor vehicle purchase sub-group of the CPI. Currently, the LCT uses the threshold from 30 June 2012 and is indexed using the ‘All Groups’ CPI. Of late, motor vehicles have grown at a faster rate than CPI generally.

Deductions denied for interest charges

This measure would prevent deductions being claimed on the general interest charge (GIC) and shortfall interest charge (SIC), incurred in income years starting on or after 1 July 2025.

Extending ATO notification period for retaining BAS refunds

After the ‘TikTok' GST refund scam that saw $1.7 billion paid out in fraudulent refunds and another $2.7bn in fraudulent claims stopped, the time period for the ATO to notify that they are retaining a refund will be extended from 14 days to 30 days.

Senate 2024 Bill

Tue, 04 Feb 2025 23:44:54 GMT

The Senate pushed through 32 Bills on the last sitting day of the calendar year clearing the way for an election.

The Government secured the passage of 32 Bills on the last sitting day of the calendar year with the support of The Greens . For their support, The Greens secured electrification upgrades to 50,000 social homes, and removed support for coal, oil and gas under Future Made in Australia and commercial investments and programs of Export Finance Australia.

Not on the Senate Bill freight train was Div 296 - the $3m tax on earnings in a superannuation fund that was announced to commence from 1 July 2025. A Bill that is unlikely to see the light of day pre-election.

And, the extension of $20,000 instant asset write-off by 12 months until 30 June 2025 was removed at the last minute .

Among the Bills passed were a number relevant to business and personal clients:

Objective of superannuation enshrined
Foreign resident capital gains withholding, change in tax amendment periods for SMEs, and ATO able to retain refunds
Anti-money laundering Bill draws in professional services
Aged care Bill changes funding structure
Build to rent incentives
Restructuring the Reserve Bank of Australia

Tax and tinsel Q&A's

Thu, 12 Dec 2024 22:59:53 GMT

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.

Tax deduction denied for signature basketball shoe R&D

Thu, 12 Dec 2024 03:17:25 GMT

The Federal Court has denied a sports company’s appeal to claim research & 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.

Phasing out cheques

Thu, 12 Dec 2024 03:06:57 GMT

Phasing out Cheques

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.

What's ahead in 2025?

Thu, 12 Dec 2024 02:45:41 GMT

What’s ahead in 2025?

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 that 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 & 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

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 CO ₂ 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
they 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.

Tax on Concessional Contributions

Thu, 17 Oct 2024 05:55:43 GMT

We get a lot of questions from our SMSF clients regarding tax payable on concessional contributions. The below information is provided to assist you in understanding how the contributions are taxed, and at what rate.

All Concessional Contributions made by each member of the SMSF must be deposited into a bank account established for your SMSF. Tax is payable on Concessional Contributions made into an SMSF at the rate of 15%.

Additional 15% tax on Concessional Contributions for high-income earners

Those earning more than $250,000 a year will have their Concessional Contributions taxed at 30% rather than the standard 15%. The definition of "income" is: Taxable income + concessional contributions + adjusted fringe benefits + total net investment losses.

Concessional Contributions (i.e. your employer's contribution, salary sacrifice contributions and contributions by a self-employed person claiming a tax deduction) will count as income. For example, if your taxable income is $280,000 and your employer makes $25,000 in concessional contributions, you will trigger the threshold because your income will be assessed as $305,000 (i.e. $280,000 + $25,000 = $305,000). The additional tax of 15% (30% in total) will apply to those concessional contributions that take your income over $250,000, which in this case is on the extra $55,000.

Income includes investment losses including losses on borrowing money to buy shares or from negatively geared property. For example assume your taxable income is $200,000, which has been calculated after deducting a net $90,000 loss on investment properties. You also receive $10,000 in fringe benefits, and your employer makes super contributions of $18,000. Under the rules, your income is $318,000. This is $68,000 above the $250,000 income trigger, which means your concessional contributions will now be taxed at 30% instead of 15%.

Low income earners won't pay contributions tax

Effectively, a person whose income is less than $37,000 will have the contributions tax on concessional contributions returned to their Fund, meaning they won't pay any contributions tax. Worth a maximum of $500, the Australian Taxation Office (ATO) will pay the Low Income Super Tax Offset refund to the SMSF. Like the co-contribution, a key eligibility requirement is that at least 10% of the person's income must come from employment.

Need more information regarding your personal circumstances? Email super@st-m.com.au or call us on 02 6024 1655

Hubdoc - free for Xero users!

Thu, 17 Oct 2024 02:53:32 GMT

We would like to introduce you to HubDoc , a great tool that can help simplify how you store and manage your receipts.

Managing financial documents can be time-consuming, but HubDoc makes it easier than ever. With this tool receipts, bills, and bank statements can be captured digitally and stored securely in the cloud, reducing manual entry and the risk of errors. HubDoc also integrates seamlessly with Xero and is free to use for Xero subscribers.

If you’re looking to streamline your financial management, HubDoc could be the solution. For more information visit Xero's Hubdoc centre

Interested in learning more or getting started? Please reach out to the bookkeeping team who can assist with setup and training. Call Perrie on 02 6024 1655 or email bookkeeping@st-m.com.au

myGovID is changing its name to myID

Thu, 17 Oct 2024 02:46:04 GMT

Soon, myGovID will be changing to myID. The app will have a new name and new look, but you’ll continue to use it in the same way.

What you need to know

There’s nothing you need to do to prepare for the change. You’ll still have:

your same details – there’s no need to set up a new myID. Your login details (including email address) and the identity strength you’ve set up on your device, and any other devices, will remain the same

continued use – your existing app should automatically update to myID or you can manually update it from the App Store or Google Play. You can download the myID app any time once it’s available

access to services – you can still use the app to securely access a range of government online services (find out where to use it ).

When the change happens, you might see both myID and myGovID when using your app to log in to participating government online services. This won’t affect your access, and your Digital ID will remain fully functional and secure during this time.

Why the change

The change from myGovID to myID aims to reduce the ongoing confusion between the myGovID app and myGov.

The new name for the Australian Government’s Digital ID app reflects the community’s understanding of Digital ID and demonstrates how a whole-of-government ID provider can help protect Australians from identity theft and fraud.

Avoid scams and fraudulent websites and apps

It is important to be aware of fraudulent websites, apps and phishing scams.

Scammers can make fake websites or apps that look just like myGovID or myID.

To help protect yourself:

don’t click on suspicious links, open attachments or download any files from suspicious emails or SMS; Government agencies will never send an unsolicited SMS that contains a hyperlink

only download the myGovID (soon myID) app from the official app stores (Google Play and the App Store).

Find out how myGovID protects your identity, what you can do to manage the security of your myGovID and how to stay safe online.

01 Succession: the series

Mon, 14 Oct 2024 05:16:08 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:

o The spouse of the deceased (unless they were separated);

o An individual who had a right to occupy the dwelling under the deceased’s will; or

o 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.

Please contact us if you would like the facts about downsizer contributions. Call us on 02 6024 1655 or email advisory@st-m.com.au

More women using ‘downsizer’ contributions to boost super

Mon, 14 Oct 2024 05:10:50 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.

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. Call us on 02 6024 1655 or email advisory@st-m.com.au

The ban on genetic test insurance discrimination

Mon, 14 Oct 2024 05:08:27 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:

Policy Cover Moratorium limit APRA average

Death $500,000 $713,959

Total permanent disability $500,000 $849,128

Trauma and/or critical illness $200,000 $207,414

Disability income insurance $4,000* a month $7,706 a month

* 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 accidently). 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.

If you need more information get in touch now to discuss your circumstances and next steps. Email advisory@st-m.com.au or call 02 6024 1655.

Payday super: the details

Mon, 14 Oct 2024 04:52:25 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:

Outstanding SG shortfall - Calculated based on OTE, rather than total salaries and wages as it is currently.
Notional earnings - Daily interest on the shortfall amount from the day after the due date, calculated at the general interest charge rate on a compounding basis
Administrative uplift - An additional charge levied to reflect the cost of enforcement and calculated as an uplift of the SG shortfall component of up to 60%, subject to reduction where employers voluntarily disclose their failure to comply.
General interest charge - Interest will accrue on any outstanding SG shortfall and notional earnings amounts, as well as any outstanding administrative uplift penalty.
SG charge penalty - Additional penalties of up to 50% of the outstanding unpaid SG charge, that apply where amounts are not paid in full within 28 days of the notice of assessment.

As you can see, if the proposed SGC becomes law, late SG payments can 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.

If you need more information get in touch now to discuss your circumstances and next steps. Email advisory@st-m.com.au or call 02 6024 1655.

Superannuation Obligations - what to do if you pay your superannuation late?

Wed, 18 Sep 2024 05:50:18 GMT

The ATO has recently increased their focus on superannuation payments. The due date for all superannuation payments is 28 days after the end of the quarter for which it was processed: ie super for quarter ending 30 September 2024 is due by the 28th of October 2024.

We always recommend that the super is physically paid at least 10 business days before that due date (ideally no later than the 18 ^th ) so that it clears into the super funds by the 28 ^th .

If you do not pay your super by the 28 ^th and you notice that you have paid it late you are meant to lodge a Super Guarantee Charge Statement with the ATO within 1 month of the payment date (ie: the 28 ^th of November 2024 in the above scenario).

We would recommend that an SGC Statement is lodged voluntarily or you run the risk of the ATO asking you to lodge an SGC Statement at a future date. The reason why we recommend voluntarily lodging an SGC statement is that the interest on the late super payments is calculated at a rate of 10% from the first date of the quarter that the superannuation was not paid until the SGC Statement is lodged.

Example Scenario

Client A has accrued a super obligation of $5,000 for the quarter ended September 2024 and employs 5 employees. They do not pay the super amount by the due date of the 28 ^th of October, but pays the super by the 10 ^th of November.

Client A doesn’t worry about lodging an SGC Statement because they believe they have met their obligations by paying the super, even if it was paid late.

In May 2025 the ATO thinks that the client may have paid super late for the September 2024 QTR so they ask the client to lodge an SGC Statement. An SGC Statement is lodged and calculated as per the below:-

The SGC Statement calculates the liability as:-
$5,000 for the super paid late
Nominal Interest of $456.84 (Calculated as $5,000 x 10% annual rate of interest x 11 months)
Administration Fees $100 ($20 admin fee per each employee)
A total of $556.84

If the SGC Statement had been lodged in November 2024 when client A noticed they had paid super late then the interest would only be $204.92 (unfortunately the admin fees remain un-changed). This would mean that an extra $251.92 in interest will need to be paid because the SGC Statements were lodged in May 2025 instead of November 2024.

Although the difference in interest in this scenario does not seem like a large amount the ATO can target multiple quarters at a time and there is no limit on how far back the ATO can review super payments.

In addition to the late payment penalties if the super has not been paid yet and the ATO discover this then they can apply “Part 7 penalties” which start at 200% of the liability. Voluntarily disclosing this information to the ATO before they ask you to provide evidence is often the best course of action.

If you are struggling to pay your super on time due to cash flow issues please get in touch sooner rather than later as we can often help mitigate these risks. Get in touch now to discuss your circumstances and next steps. Email advisory@st-m.com.au or call 02 6024 1655.

$81.5m payroll tax win for Uber

Thu, 12 Sep 2024 23:00:01 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.

Want more information or to discuss your personal circumstances? Get in touch today.

Is the RBA to blame? The economic state of play

Thu, 12 Sep 2024 22:52:45 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.

Want more information or to discuss your personal circumstances? Get in touch today. Contact details here

Property and 'lifestyle' assets in the spotlight

Thu, 12 Sep 2024 06:19:39 GMT

Own an investment property or an expensive lifestyle asset like a boat or aircraft? The ATO are 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.

It Wasn't Me: the tax fraud scam

Thu, 12 Sep 2024 06:06:49 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 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.

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 to do 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 use external agency recoveriescorp for debt collection but we will advise you if you have a tax debt outstanding.

Avoiding the gift tax trap

Wed, 28 Aug 2024 05:19:14 GMT

A gift of money or assets from an individual is generally not taxed if the gift is given voluntarily, nothing is expected in return, and the gift giver does not materially benefit.

However, there are some circumstances where tax might apply.

Gifts from a foreign trust

If you are a tax resident of Australia and the beneficiary of a foreign trust, it’s possible that at least some of the amounts paid to you (or applied for your benefit) will need to be declared in your tax return. This applies even if you were not the direct beneficiary of the foreign trust, for example, a family member received money from a foreign trust and then gifted it to you. This applies to cash, loans, land, shares, etc.

Inheritances

Money or property you inherit from a deceased estate is often not taxed. However, there are circumstances where capital gain tax (CGT) might apply when you dispose of an asset you inherited. For example, if you inherit your parents’ house, CGT generally does not apply if:

· The property was their main residence; and

· Your parents are Australian residents for tax purposes; and

· You sell the property within 2 years.

However, CGT is likely to apply if for example:

· You sell your parents former main residence more than 2 years after you inherit it; or

· The property you inherit was not your parents’ main residence; or

· Your parents were not Australian tax residents at the time of their death.

Managing the tax consequences of an inheritance can become complex quickly. Please contact us for assistance when planning your estate to maximise the outcome for your beneficiaries, or managing the tax implications of an inheritance. These issues are often not taken into account if you are drafting or updating a will.

Gifting an asset does not avoid tax

Donating or gifting an asset does not avoid CGT. If you receive nothing or less than the market value of the asset, the market value substitution rule 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 when calculating any CGT liability.

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 CGT liability. It does not matter that Mum & Dad did not receive any money for the land. Mum & Dad might have a CGT bill for land they gifted with nothing in return.

Donations of cryptocurrency might also trigger CGT. 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.

For more information or to discuss your personal circumstances, please call our office on 02 6024 1655 or email advisory@st-m.com.au

Is your family home really tax free?

Mon, 10 Jun 2024 03:03:30 GMT

Is your family home really tax free?

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?

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.”

For more information, or to understand your particular circumstances, get in touch for tailored advice. Email advisory@st-m.com.au or call us on 02 6024 1655.

What's ahead for 2024-25?

Mon, 03 Jun 2024 02:53:52 GMT

What's ahead for 2024-25?

Personal tax & 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 & 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 & 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 a myriad of 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.

Budget 2024-25

Fri, 31 May 2024 02:46:25 GMT

The Price is Right - Budget 2024-25

STM is pleased to provide you with our Budget recap for 2024-25.

To view it, click here

This article is provided for information only and is not advice. If you need advice for your individual circumstances, please contact our office on 02 6024 1655.

STM celebrates 50 fabulous years!

Mon, 27 May 2024 02:42:55 GMT

50 Fabulous Years, with lots more to come...

Recently we joined with our past Directors, team members and clients to celebrate our 50th year of STM.

Enjoy our video presentation of the celebrations.

Getting back what you put in: Loans to get a business started

Mon, 20 May 2024 02:30:13 GMT

Getting back what you put in: Loans to get a business started

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.

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.

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.

This article is provided for information only and is not advice. If you need advice for your individual circumstances, please contact our office on 02 6024 1655.

How to take advantage of the 1 July super cap increase

Mon, 13 May 2024 00:26:44 GMT

How to take advantage of the 1 July super cap increase

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)

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.

This article is provided for information and is not designed to be advice. If you require specific advice, please contact us.

We're here to help if you need it, email stm@st-m.com.au or call us on 02 6024 1655.

The ATO Debt Dilemma

Mon, 06 May 2024 00:17:21 GMT

The ATO Debt Dilemma

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.

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 tax debt blows out

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.

This article is provided for information only and is not advice. If you need advice for your individual circumstances, please contact our office on 02 6024 1655.

The Fringe Benefits Tax traps

Wed, 01 May 2024 00:07:22 GMT

The Fringe Benefits Tax traps

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

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.

The 'Airbnb' Tax

Sun, 01 Oct 2023 03:37:54 GMT

Property investors that choose to utilise their property for short-term stays (or leave it vacant) are firmly in the sights of the regulators.

The Victorian Government’s recent Housing Statement announced Australia’s first short-stay property tax. The additional tax, which is scheduled to come into effect from 1 January 2025, is expected to generate $70 million plus annually. The Short Stay Levy will be set at 7.5% of the short stay accommodation platforms’ revenue – so, a few days in Melbourne at $850 will cost an extra $63.75 taking the stay to $913.75.

According to the statement there are more than 36,000 short stay accommodation places - with almost half of these in regional Victoria. More than 29,000 of those places are entire homes.

Airbnb’s ANZ Country Manager Susan Wheeldon however says that “short-term rentals in Victoria make up less than one percent of total housing stock. Acute housing issues existed long before the founding of Airbnb, and targeting these properties is not a long term solution.”

Property investors are now braced for an onslaught of similar taxes at either the local Government or State level.

For Victorian investment property owners this comes after a temporary land tax surcharge from the 2024 land tax year and for those keeping a property vacant, an increase to the absentee owner surcharge rate from 2% to 4% including a reduction in the tax-free threshold from $300,000 to $50,000 (for non-trust absentee owners).

Some local Government taxes on Airbnb style accommodation will be removed once the new tax comes into effect.

Some Councils already impose a surcharge on short stay accommodation. Brisbane City Council for example imposed a 50% rate surcharge on properties listed for short-term rental for more than 60 days a year in their 2022-23 Budget, only to increase it to 65% in 2023-24.

What happens overseas?

Bed taxes in some form are not uncommon internationally but it is unusual to isolate one form of tourist accommodation from another as the Victorian Government have chosen to do. Also unusual is the 7.5% rate – many local taxes on short stay accommodation are in the 5% range (despite California’s Transient Occupancy Tax of up to 15% depending on the region you are staying).

Globally, the idea of taxing vacant and short-term accommodation is also not new.

In British Columbia, the Underused Housing Tax - a 1% tax on the ownership of vacant or underused housing introduced from 1 January 2022 - has been credited with increasing the rental stock by up to 20,000 properties.

Taking the alternative route to freeing up rental stock, New York introduced new rules in September 2023 that severely restrict Airbnb style accommodation options. Hosts need to register with the city if they offer accommodation for less than 30 consecutive days (unless their building is exempt as a hotel or accommodation establishment). Under the new rules the host must permanently reside in the property - entire properties will no longer be available - and, only two guests are allowed. The platforms are responsible for monitoring and enforcing compliance with the new rules.

New York is not alone in curbing the rise of short-term rentals. Amsterdam, Paris and San Francisco limit the number of days in a year an entire residence can be listed – between 30 and 90 days.

Closer to home in Byron Bay, the Byron Bay Council will limit “non hosted holiday letting to 60 days per year for most of the Shire” from 23 September 2024.

But do restrictions on Airbnb create rental stock?

According to Professor Nicole Gurran , from the University of Sydney’s School of Architecture, Design and Planning, if Australia is serious about controlling short-term rentals to solve Australia’s long-term rental crisis, then more needs to be done.

“In comparison to much of the international regulation of the short-term rental market, Australia is very “light touch”. The overarching aim is to encourage the tourism economy.

While this might have been appropriate five years ago when the rental market was in better shape, and long-term housing demand focused on inner city areas, the current crisis demands a new approach. Regulations must be tailored to the conditions of local housing markets, rather than the one-size-fits-all approach that exists today,” Professor Gurran says.

In a 2017 study, Professor Gurran and Professor Peter Phibbs found that, Airbnb absorbed 7% of stock in one Sydney municipality.

So, where is all this going? Governments are unlikely not to take advantage of the opportunity to share in what has become a lucrative short-term rental market. What that looks like will really depend on the States and Territories. Beyond revenue, further regulation is likely to ensure that private gain from short-term rentals is not at the expense of supply of long-term accommodation.

We're here to help if you need it, email stm@st-m.com.au or call us on 02 6024 1655.

$20k deduction for 'electrifying' your business

Sun, 01 Oct 2023 03:28:46 GMT

Electricity is the new black. Gas and other fossil fuels are out. A new, limited incentive nudges business towards energy efficiency. We show you how to maximise the deduction!

The small business energy incentive is the latest measure providing a bonus tax deduction to nudge the investment behaviour of small and medium businesses, this time towards more efficient energy use and electrification. Fossil fuels are out, gas is out, electricity is the name of the game.

Legislation before Parliament will see SMEs with an aggregated turnover of less than $50 million able to claim a bonus 20% tax deduction on up to $100,000 of their costs to improve energy efficiency in the business. But, the tax deduction is time limited. Assuming the legislation passes Parliament, you only have until 30 June 2024 to invest in new, or upgrade existing assets.

How much?

Your business can invest up to $100,000 in total, with a maximum bonus tax deduction of $20,000 per business entity. The energy incentive is not provided as a cash refund, it either reduces your taxable income or increases the tax loss for the 2024 income year.

What qualifies?

The energy incentive applies to both new assets and expenditure on upgrading existing assets. There is no specific list of assets that can qualify. Instead, the rules provide a series of eligibility criteria that need to be satisfied.

First, the expenditure incurred in relation to the asset must qualify for a deduction under another provision of the tax law.

If your business is acquiring a new depreciating asset, it must be first used or installed for any purpose, and a taxable purpose, between 1 July 2023 and 30 June 2024. If you are improving an existing asset, the expenditure must be incurred between 1 July 2023 and 30 June 2024.

If your business is acquiring a new depreciating asset the following additional conditions need to be satisfied:

The asset must use electricity; and
There is a new reasonably comparable asset that uses a fossil fuel available in the market; or
It is more energy efficient than the asset it is replacing; or
If it is not a replacement, it is more energy efficient than a new reasonably comparable asset available in the market; or
It is an energy storage, time-shifting or monitoring asset, or an asset that improves the energy efficiency of another asset.

If you are improving an existing asset the expenditure needs to satisfy at least one of the following conditions:

It enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel;
It enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source; or
It facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source.

What doesn’t qualify?

Certain kinds of assets and improvements are not eligible for the bonus deduction, including where the asset or improvement uses a fossil fuel. So, hybrids are out. Solar panels and motor vehicles are also excluded.

In addition, the following assets are specifically excluded from the rules:

Assets, and expenditure on assets, that can use a fossil fuel;
Assets, and expenditure on assets, which have the sole or predominant purpose of generating electricity (such as solar photovoltaic panels);
Capital works (such as buildings and structural improvements);
Motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;
Assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and
Financing costs, including interest, payments in the nature of interest and expenses of borrowing.

What does qualify?

The legislation contains a few examples of what would qualify:

Electrifying heating and cooling systems
Upgrading to more efficient fridges and induction cooktops (for example replacing gas cook tops)
Installing batteries and heat pumps
Installing an electric reverse cycle air conditioner instead of a gas heater
Replacing a coffee machine with a more energy efficient coffee machine if the manufacturer’s electricity consumption information supports this – keep the documentation!
Thermal storage that can store heat or cold from a renewable source
Solar thermal hot water system (assuming it meets the other criteria)

The legislation to implement the energy incentive is before Parliament. We’ll keep you updated on its progress. If you intend to make a major outlay to take advantage of the bonus deduction, talk to us first just to make sure it qualifies.

We're here to help if you need it, email stm@st-m.com.au or call us on 02 6024 1655.

Shortcut to claiming work-from-home deductions in 2021

Thu, 01 Apr 2021 02:44:35 GMT

WHAT THE TAX?!!

Shortcut to claiming work-from-home deductions in 2021

The ATO has reminded taxpayers about the temporary shortcut method still available to those claiming working from home deductions this year.

Taxpayers that opt to use the shortcut can claim a rate of 80 cents per work hour at home for all working from home expenses. The temporary shortcut method can be used by multiple people living under the same roof and, unlike existing methods, does not require a dedicated work area.

The shortcut is all-inclusive, meaning taxpayers cannot claim expenses under the shortcut method and then claim for individual expenses such as telephone and internet costs.

The alternative existing methods are also available for a taxpayer to either:

• claim a rate of 52 cents per work hour at home for the heating, cooling, lighting and cleaning of their dedicated work area and the decline in value of office furniture and furnishings; then calculate the work-related portion of their telephone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device, or

• claim the actual work-related portion of all running expenses, which needs to be calculated on a reasonable basis.

Irrespective of the method used taxpayers cannot claim:

• personal expenses that are not directly related to earning income

• expenses related to children's education

• assets that cost over $300; these claims should be spread out over a number of years, and

• occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates.

All claims require the taxpayer to have not been reimbursed for money spent, the expense must be directly related to earning income, and the taxpayer must have kept the necessary records.

Information sourced using CCH iknow

Personal tax cuts brought forward

Sat, 17 Oct 2020 22:00:00 GMT

The federal government initially announced a seven year individual income tax plan in the 2018 federal budget. The plan would run over three phases, introducing a temporary low and middle tax offset and eventually removing the 37% income tax bracket.

Subsequent federal budgets have altered this initial plan, and will be as follows for the 2020/21 and following income years.

Australian resident individuals – Tax rates

Australian resident individuals – Tax offsets

Effective tax-free threshold

The new effective tax-free threshold for individual Australian tax residents is $23,226 for the 2020/21 income year.

Individual non-residents

Where relevant, the income tax brackets have also changed for individual non-resident taxpayers. Generally, non-residents pay income tax on every dollar of Australian sourced income. The first bracket at 32.5% tax now has a range of $0 to $120,000.

ATO and tax withholding tables

As this change in tax rates is occurring during the income year, the ATO will subsequently update their tax tables. At the time of writing, the ATO have announced that these tables will be available during the week ending 16 October 2020 as bipartisan support has been declared.

The ATO has also announced that they will be working with payroll software providers to ensure the above changes are reflected in payroll runs as soon as practicable. If you are completing payroll for clients, your payroll software provider should be able to inform you when the update will take place.

Information sourced using CCH iknow

Temporary full expensing of depreciating assets

Thu, 15 Oct 2020 22:00:00 GMT

Announced in the 2020 federal budget, most businesses may be able to take advantage of an ability to fully deduct the cost of new depreciable assets. The temporary measure is only available between 7:30pm AEDT on 6 October 2020 through to 30 June 2022. Before and after these dates, other depreciation rules apply, including instant asset write-offs, Backing Business Investment regime and uniform capital allowances.

Business qualification

To be eligible to claim the full expense of an eligible depreciating asset, the business must have an aggregated annual turnover of less than $5b.

Aggregated turnover takes its meaning from ITAA s 328-115, and generally is the sum of all the annual turnovers of the following entities:

• the test entity (in this case, the one claiming the deduction)

• any entity that is connected with the test entity, and

• any entity that is affiliated with the test entity.

An entity is connected to the test entity if either entity controls the other entity, or both are controlled by a third entity. An entity is affiliated with the test entity if they act, or could reasonably be expected to act, in accordance with the test entities wishes in relation to the business affairs of the test entity.

Aggregated turnover is reduced by any dealings (or intragroup transactions) between the test entity and any connected or affiliated entities.

Annual turnover takes its meaning from ITAA s 328-120 and is the total of ordinary income derived in the income year in the ordinary course of carrying on a business. Non-assessable non-exempt income and GST collected from taxable supplies are excluded.

Asset qualification

To qualify for an immediate deduction, the eligible depreciable asset must be first held, and first used or installed ready for use for a taxable purpose between 7:30pm AEDT on 6 October 2020 and 30 June 2022. This is wording that is similar to other provisions in the legislation such as the instant asset write-off and accelerated depreciation within Backing Business Investment.

There are no deduction limits relating to the cost of the asset. That is, an asset of any value is eligible for an immediate deduction (subject to other conditions).

Businesses are also able to deduct the full cost of improvements to these assets and to other existing eligible depreciating assets made during the "full expensing" period.

The general rule in relation to holding an asset is that the "owner" of the asset "holds" it. However, another entity may be the holder of the asset under one of the specific items listed in the table at ITAA 1997 s 40-40.

Another general rule exists in situations where a larger entity ($50m or more in aggregated turnover) entered into a commitment to incur a cost in relation to an asset before 7:30pm AEDT 6 October 2020. No full expensing deduction is allowed if, before the budget time, the entity:

• entered into a contract under which it would hold the asset

• started to construct the asset, or

• started to hold the asset in some other way.

However, if the entity incurs costs relating to the second element of cost during the full expensing period, they will be allowed a full deduction.

An option to enter into a contract to hold an asset is not considered a commitment because an option does not require an entity to, in fact, enter into the contract.

Excluded assets

The following types of depreciating assets are excluded from qualifying as eligible depreciating assets for the purposes of full expensing:

• Buildings or capital works (under ITAA 1997 s 40-45).

• Assets allocated to a low-value pool, or expenditure allocated to a software development pool.

• Assets where the taxpayer can deduct amounts under Subdiv 40-F (some primary production assets).

Importantly, an asset is only eligible for full expensing if it is reasonable to conclude that the asset will be used principally in Australia for the principal purpose of carrying on a business. This test (on usage) applies when the asset is first used or installed ready for use.

Subsequent balancing adjustments may need to be considered if an asset becomes ineligible at a point in time after first usage.

Second hand assets

Only entities with an aggregated turnover less than $50m are able to utilise the full expensing option for second hand assets.

However, an entity with aggregated turnover over $50m will be entitled to full deduction for the second element of cost incurred between the eligible full expensing dates.

Small business entities

Small business depreciation pools are allowed for entities with aggregated turnover under $10m. Current rules allow assets costing less than $150,000 to be immediately deducted from the pool. Also, small business entities can deduct the second element of cost, up to $150,000, of assets incurred in the period.

The current deadline for assets under $150,000 to be installed ready for use by 31 December 2020 to get the immediate deduction has been extended to 30 June 2021. This amendment relates to assets purchased prior to 7:30pm AEDT on 6 October 2020.

The temporary full expensing rules allow a small business entity to claim an immediate deduction for the cost of an asset of any value. This includes both the first element and second element of cost.

Also, small business entities can deduct the entire balance of their general small business pool during the full expensing period. This would include the 2020/21 and 2021/22 income years.

Risk mitigation steps

Under decline in value rules, an entity is required to be using the asset (or be installed ready for use) during the income year to claim a deduction. Therefore, if an asset is purchased in the 2020/21 income year, but not used until 2021/22, the full deduction (on cost and any installation) is not available until the 2021/22 income year.

Practically, if an entity purchased an asset in 2020/21 under Backing Business Incentive, but before budget time, the allowable deduction for the 2020/21 income year is:

• 50% of the cost of the asset (BBI regime), plus

• depreciation on the remainder of cost of the asset and any second element amounts before 7:30pm AEDT on 6 October 2020 (uniform capital allowances), plus

• full expense of any second element amounts between 7:30pm AEDT on 6 October 2020 and 30 June 2021.

Other considerations

Cost is generally reduced for any non-taxable use.

Cost limit for motor vehicles still applies. The full expensing regime amends an entity's ability to claim decline in value. No such amendment exists to the Subdivision relating to the first and second elements of cost (which limits the deduction for luxury cars).

Where a balancing adjustment applies in the same year of purchase/installation, full expensing cannot apply (as balancing adjustment rules apply instead).

Information sourced using CCH iknow

Active asset test passed for “vacant” land used for storage

Tue, 29 Sep 2020 23:00:00 GMT

A recent decision from the Full Federal Court has allowed small business CGT concessions for a taxpayer after previously being denied by the Commissioner of Taxation. The particular area in question was whether a parcel of residential land was an active asset under ITAA 1997 s 152-40.

Facts of the case

The residential land in question was vacant of a residence, however had two sheds constructed on the property. Also, a 2 metre high block wall and a gate secured the property, which was in a residential area.

The taxpayer argued that, during the time of ownership, those sheds were used for the storage of work tools, equipment and materials. The open space of the property was also used to store materials that did not need to be stored under cover. This included bricks, pavers, mixers, wheelbarrows, drums, scaffolding and iron.

The taxpayer conducted a building, bricklaying and paving business, located at the adjacent property which also doubled as the taxpayer's main residence. The structure of the business was a family trust, however for the purposes of the case all entities were connected for small business purposes.

There was no business signage on the property, and the property was used for this purpose for the entire ownership period. In all other necessary components, the taxpayer qualified to be able to use the small business CGT concessions.

Commissioner's arguments

The Commissioner of Taxation rejected the claim that the property was an active asset, stating that there must be more than a mere incidental use of the land. Particularly, the Commissioner relied on the decision of Jakjoy where references are given to the extent of the activities were "in the course of carrying on a business". However, Jakjoy was solely holding the land passively as an investment.

Also, the Commissioner argued that the taxpayer does not explicitly state the day-to-day running of the business in the private binding ruling application. No mention is made of the use of the tools and equipment in the business either. As such, it is improper for the courts to make inferences of fact which supplement the original private binding ruling application. However, the court overruled by stating that the inferences drawn were both obvious in nature and no other possible competing inferences could be made.

Full Federal Court decision

The court ruled that the small business CGT concessions should be construed beneficially for the taxpayer rather than restrictively. This interpretation promotes the purpose and use of the concessions, which are duly described in the original Explanatory Memorandum accompanying the enacting legislation.

Due to the beneficial construction, the Full Federal Court could not infer that 'in the course of carrying on the taxpayer's business' means the asset needs to be 'integral' in order to be active. Nor does it need to be used in the ordinary course of business or in the day to day running of the business. The Full Federal Court expressly states that "it is sufficient if the asset is used at some point in the course of carrying on of an identified business." It is at this point that an asset is an active asset.

The Full Federal Court also concluded that storage of the plant and equipment of the business is directly related to the day to day running of the business anyway.

Client opportunities

It was declared by the Full Federal Court that the legislation does not limit the availability of the small business CGT concessions outside of the words "used in the course of carrying on a business". Therefore, if the asset has no other use, such as earning passive income, or other minimal or incidental uses, it may qualify as an active asset. It is not required that the asset be "necessary", "integral" or "essential" to carrying on a business.

An opportunity exists for practitioners to relay this message to individuals who may be in a similar position with ownership of assets in an around their business.

Importantly, there may be a situation where you would be able to go back and review a previous capital gains tax event for a taxpayer. The intention with a full review of a previous CGT event is to apply the small business CGT concessions, which may even include the 15-year CGT exemption or retirement rollovers.

Risk mitigation steps

One important point to draw from the private ruling application itself is that it is used as the basis of identifying the facts of the case. In this case, an argument was made by the Commissioner that a court cannot infer facts that are not previously stated.

This could have been a problem as the facts taken from the private binding ruling did not clearly state how the business was carried on. The ruling simply stated that the taxpayer conducted a building, bricklaying and paving business.

Although not fatal to this particular case, it is prudent to take the advice of the court for future private binding ruling applications.

Information sourced using CCH iknow

Bitcoins and CGT

Sat, 01 Aug 2020 23:00:00 GMT

WHAT THE TAX?!!

Bitcoins and CGT exemption for personal use assets

The ATO considers that digital currencies, including bitcoin, are CGT assets ( Taxation Determination TD 2014/26 ). That determination refers to the detailed description of bitcoin contained in TD 2014/25, and concludes that bitcoin holding rights amount to property. As such, a person holding bitcoin is considered to hold a CGT asset.

A private binding ruling demonstrates that bitcoins (or other similar cryptocurrencies) a taxpayer purchased as a hobby during the very early stages of their existence could fall within the CGT exemption for personal use assets.

A capital gain made from a personal use asset (a CGT asset used or kept mainly for personal use or enjoyment) is disregarded if the first element of the cost base is $10,000 or less. Any capital loss made from a personal use asset is disregarded.

A private binding ruling shows that a taxpayer who is not carrying on a business of trading bitcoins were holding bitcoins on capital account and that the bitcoins fell within the CGT regime.

The ruling said that the taxpayer purchased bitcoins informally and/or mined them personally in the very early stages of their existence as a hobby, rather than to obtain a speculative profit. Accordingly, these bitcoins could fall within the CGT exemption for personal use assets.

However, bitcoins mined as part of a pool would not be personal use assets because:

• at the time of acquiring the bitcoins, the taxpayer was no longer required to support the Bitcoin network, as evidenced by the higher difficulty which led to the need to use a pool, and

• a pool involves cooperation in order to obtain something of value, which puts the activity closer to the commercial end of the spectrum rather than the personal.

Similarly, bitcoins purchased through an online exchange would not be personal use assets because:

• at this stage, the bitcoin market and ecosystem was maturing, as evidenced by the existence of exchanges where bitcoins could be readily bought and sold, and

• it is more difficult to characterise the taxpayer's purchase was part of a hobby; the taxpayer was more likely to have a substantial aspect of seeking an exchange gain or at least storing value, as opposed to personal use or enjoyment.

Information sourced using CCH iknow

JobKeeper Payment and income support extended

Tue, 21 Jul 2020 23:00:00 GMT

JobKeeper Payment

The JobKeeper Payment will continue to be available to eligible businesses (including the self-employed) and not-for-profits until 28 March 2021. From 28 September 2020, eligible employees and business participants working less than 20 hours per week on average will receive the payment at a lower rate.

Average hours per week will be based on the four weekly pay periods ending before 1 March 2020.

The following payment rates per fortnight (currently $1,500) will apply for eligible employees and business participants.

Employers will be required to nominate the payment rate claimed for each of their eligible employees or business participants. The ATO will provide guidance on circumstances that are not addressed under the general rules for determining average hours per week.

From 28 September 2020, employers will also be required to reassess their eligibility by reference to their actual June and September quarter turnovers. Employers will be required to reassess their eligibility again for the March 2021 quarter. An entity's eligibility prior to 28 September 2020 will not be affected if the additional turnover tests for the extension period are not met.

The new arrangements for the JobKeeper Payment are expected to cost an additional $16.6b. An independent evaluation will be conducted at the conclusion of the program, as recommended under the Treasury's JobKeeper Payment.

Coronavirus Supplement

The payment period of the temporary Coronavirus Supplement has been extended to 31 December 2020.

Eligible income support recipients will continue to receive the payment at a rate of $550 per fortnight up to and including the period ending 24 September 2020. The payment rate will be reduced to $250 per fortnight for the period from 25 September 2020 to 31 December 2020. The Coronavirus Supplement will continue to be paid to existing and new recipients of certain income support payments.

The Treasury fact sheet also outlines the following changes to apply from 25 September 2020:

Adjusted income taper test

The income free area for the JobSeeker Payment and Youth Allowance (other) will increase to $300 per fortnight for both. Recipients can earn up to $300 per fortnight and still receive the maximum payment rate of the JobSeeker Payment and Youth Allowance (other). The Coronavirus Supplement will remain outside the income testing, meaning anyone eligible will receive the full rate of the Supplement.

Means testing

Assets testing for all payments will be reinstated for existing and new recipients. The Liquid Assets Waiting Period for all payments will also be reinstated.

Partner income testing

The partner income test cut-out will increase to $3,086.11 per fortnight, or $80,238.89 per annum, for individuals with no personal income. The taper rate will increase from 25 cents to 27 cents on 25 September 2020 and apply until 31 December 2020. The partner income test taper rate was reduced on 26 April 2020 and was previously 60 cents to the dollar.

Expanded eligibility criteria

JobSeeker Payment and Youth Allowance (other) criteria will continue to include permanent employees who are stood down or lose their employment and sole traders, the self-employed, casual workers and contract workers who meet the income and assets tests until 31 December 2020.

Reduced waiting times

The Ordinary Waiting Period, Newly Arrived Resident's Waiting Period and Seasonal Work Preclusion Period will continue to be waived until 31 December 2020.

The new arrangements for the Coronavirus Supplement are expected to cost an additional $3.8b.

Information sourced using CCH iknow

Division 7A Loan Extensions

Sat, 27 Jun 2020 23:00:00 GMT

Under Division 7A rules, an outstanding loan from a private company to an associated entity can be an unfranked deemed dividend to that associated entity. One commonly used measure to stop an unfranked deemed dividend is to put the outstanding loan into a "complying loan agreement".

These loan agreements between the private company and the borrower are required to have clauses which state that a minimum interest rate and maximum loan term applies. A minimum yearly repayment is required to be made each year under the loan.

The ATO has released a statement which acknowledges that, as a result of the COVID-19 pandemic, some borrowers may be unable to make such a repayment in the 2019/20 income year. Using the discretion available, borrowers can apply for a one-time extension to make the minimum yearly repayment to the ATO.

Requesting the extension

The ATO has advised that applying for an extension to make the minimum yearly repayment can be completed using a streamlined online application.

The shortfall of the minimum yearly repayment must be confirmed, and borrower must state that they have experienced adverse effects from COVID-19 situation.

Specifically, the ATO has detailed the following as examples of having an adverse effect:

•         the borrower or a person close to them contracted COVID-19

•         the borrower does not have the funds available for repayment, because their employment or business income has reduced because of COVID-19

•         the borrower has needed to incur greater costs to conduct or preserve their income earning activities during COVID-19, or

•         another entity is experiencing adverse economic effects from the disruption, and the borrower needs to support that entity.

Also, in order to receive the extension, the borrower must answer that they are unable to pay the minimum yearly repayment in full for the 2019/20 income year.

Examples provided by the ATO in the request form include:

•         the borrower is unable to pay as they have become sick with the COVID-19 virus

•         the borrower does not have funds readily available (including other liquid assets) to make the payment, or

•         the borrower does have the funds , but they are needed to continue operating their business, or to meet other personal needs and the needs of the people that the borrower is responsible for.

The ATO has advised, on their website, that it will not be necessary to submit additional evidence, apart from the declarations, with the application.

Response by ATO

A response will be given within five business days. This will mean that all decisions will be made after 30 June 2020 .

When the application is approved, the borrower will not be considered to have an unfranked deemed dividend, provided they pay the shortfall prior to 30 June 2021. This will mean that, for some Div 7A loans, a double payment will be required in the 2020/21 income year.

Information sourced using CCH iknow

Under Division 7A rules, an outstanding loan from a private company to an associated entity can be an unfranked deemed dividend to that associated entity. One commonly used measure to stop an unfranked deemed dividend is to put the outstanding loan into a "complying loan agreement".

These loan agreements between the private company and the borrower are required to have clauses which state that a minimum interest rate and maximum loan term applies. A minimum yearly repayment is required to be made each year under the loan.

The ATO has released a statement which acknowledges that, as a result of the COVID-19 pandemic, some borrowers may be unable to make such a repayment in the 2019/20 income year. Using the discretion available, borrowers can apply for a one-time extension to make the minimum yearly repayment to the ATO.

Requesting the extension

The ATO has advised that applying for an extension to make the minimum yearly repayment can be completed using a streamlined online application.

The shortfall of the minimum yearly repayment must be confirmed, and borrower must state that they have experienced adverse effects from COVID-19 situation.

Specifically, the ATO has detailed the following as examples of having an adverse effect:

• the borrower or a person close to them contracted COVID-19

• the borrower does not have the funds available for repayment, because their employment or business income has reduced because of COVID-19

• the borrower has needed to incur greater costs to conduct or preserve their income earning activities during COVID-19, or

• another entity is experiencing adverse economic effects from the disruption, and the borrower needs to support that entity.

Also, in order to receive the extension, the borrower must answer that they are unable to pay the minimum yearly repayment in full for the 2019/20 income year.

Examples provided by the ATO in the request form include:

• the borrower is unable to pay as they have become sick with the COVID-19 virus

• the borrower does not have funds readily available (including other liquid assets) to make the payment, or

• the borrower does have the funds , but they are needed to continue operating their business, or to meet other personal needs and the needs of the people that the borrower is responsible for.

The ATO has advised, on their website, that it will not be necessary to submit additional evidence, apart from the declarations, with the application.

Response by ATO

A response will be given within five business days. This will mean that all decisions will be made after 30 June 2020 .

When the application is approved, the borrower will not be considered to have an unfranked deemed dividend, provided they pay the shortfall prior to 30 June 2021. This will mean that, for some Div 7A loans, a double payment will be required in the 2020/21 income year.

Information sourced using CCH iknow

Covid-19 Stimulus

Sun, 22 Mar 2020 22:00:00 GMT

Tips for the myGovID switch

Mon, 17 Feb 2020 22:00:00 GMT

myGovID is a multifactor authentication service that allows the users to prove who they are online. It is available as an app through the Apple App Store or Google Play Store and is compatible with Apple devices using iOS 10 or above and any Android devices using Android 7.0 or above. You will be able to authenticate your login to the online services through the phone app.

myGovID is separate from the more familiar myGov and cannot be used to access myGov yet.

In order to setup your myGovID, you will need:

•         A smart device ( iOS 10 or later, or Android 7.0 or later).

•         An email address, that is unique to you, and not shared with other parties.

The steps required to set up myGovID are as follows:

1. Download the myGovID application, either from Apple App Store or through Google Play .

2. Open the myGovID app, and enter your details such as full name, date of birth and email address.

3. Attach your identity documents through the myGovID app. myGovID has two identity strengths: Standard and Basic.

A Standard identity strength allows you to access all participating government online services, once you have attached two of your Australian identity documents:

•         driver's license or learner's permit

•         passport

•         birth certificate, and

•         medicare card.

A Basic identity strength will allow you to access some participating government online services if you have added one or no identity documents. Many government online services will not accept this identity strength.

Suggested actions

Clients who regularly deal with government agencies online (eg ATO business portal), to lodge activity statements or to access other services, and assist with the transition from AUSkey.

We recommend clients register for myGovID at the earliest opportunity prior to the retirement of AUSkey in late March. This is to allow ample time to transition from one login system to the other, so that any issues can be resolved before AUSkey will be phased out for good.

Implementation process

Once your myGovID is setup, you can link your myGovID to a business via Relationship Authorisation Manager (RAM), by logging to the RAM website.

Once in there, you can link your business' Australian Business Number (ABN) to your myGovID account. (Note: If your business is new and not yet on the ABR, you may need to wait until this process is completed first.)

The principal authority of the business will have to link their myGovID to their ABN in RAM first. Then they can set up and import authorisations for other employees via RAM.

Risk mitigation

If you do not register for a myGovID past the end of March, AUSkey will cease working and you will lose access to the relevant government agency portals.

Information sourced using CCH iknow

myGovID is a multifactor authentication service that allows the users to prove who they are online. It is available as an app through the Apple App Store or Google Play Store and is compatible with Apple devices using iOS 10 or above and any Android devices using Android 7.0 or above. You will be able to authenticate your login to the online services through the phone app.

myGovID is separate from the more familiar myGov and cannot be used to access myGov yet.

In order to setup your myGovID, you will need:

• A smart device ( iOS 10 or later, or Android 7.0 or later).

• An email address, that is unique to you, and not shared with other parties.

The steps required to set up myGovID are as follows:

1. Download the myGovID application, either from Apple App Store or through Google Play .

2. Open the myGovID app, and enter your details such as full name, date of birth and email address.

3. Attach your identity documents through the myGovID app. myGovID has two identity strengths: Standard and Basic.

A Standard identity strength allows you to access all participating government online services, once you have attached two of your Australian identity documents:

• driver's license or learner's permit

• passport

• birth certificate, and

• medicare card.

A Basic identity strength will allow you to access some participating government online services if you have added one or no identity documents. Many government online services will not accept this identity strength.

Suggested actions

Clients who regularly deal with government agencies online (eg ATO business portal), to lodge activity statements or to access other services, and assist with the transition from AUSkey.

We recommend clients register for myGovID at the earliest opportunity prior to the retirement of AUSkey in late March. This is to allow ample time to transition from one login system to the other, so that any issues can be resolved before AUSkey will be phased out for good.

Implementation process

Once your myGovID is setup, you can link your myGovID to a business via Relationship Authorisation Manager (RAM), by logging to the RAM website.

Once in there, you can link your business' Australian Business Number (ABN) to your myGovID account. (Note: If your business is new and not yet on the ABR, you may need to wait until this process is completed first.)

The principal authority of the business will have to link their myGovID to their ABN in RAM first. Then they can set up and import authorisations for other employees via RAM.

Risk mitigation

If you do not register for a myGovID past the end of March, AUSkey will cease working and you will lose access to the relevant government agency portals.

Information sourced using CCH iknow

Tradespersons register launched for bushfire relief

Tue, 04 Feb 2020 22:00:00 GMT

The Insurance Council of Australia has opened an online disaster-affected trades register, starting from 14 January 2020, to assist with disaster recovery and rebuilding. Qualified tradespeople and builders who are operating in the disaster-affected areas that have the capacity to work on property repairs and rebuilds are invited to register at www.disasters.org.au .

Details on the registration requires the business to navigate to the disaster trade register by clicking on the "Bushfire Trades Register" on the home page of the Insurance Council of Australia website. The business will have to provide responses to all the following in order to proceed:

• Registered business name

• Registered business address

• Registered Australian Business Number/Australian Company Number

• Business website

• Business E-mail address

• Main contact number

• Preferred mobile phone number

• List of insurance the business holds (eg Professional Indemnity, Public Liability)

• Brief description of the services the business can provide, which will form the basis of search terms used by potential customers

• Number of years the business has been operated continuously

• Number of employees currently employed by the business

• Number of apprentices or trainees working with the business

• Area(s) that the business is willing to provide service to, and

• Brief description of the business itself, which includes the experience and specialities of the business.

This is mainly to illustrate to insurers and individuals why they should engage the service.

Once the form is completed, the details of the business will then be posted to the ICA trades register database, for insurers and individuals to search and access the details provided.

While the register may give preference to tradespersons who were directly affected by the fires, applicants from outside those areas may still apply.

Information sourced using CCH iknow

Bushfire tax assistance

Sun, 02 Feb 2020 22:00:00 GMT

A bill to provide the tax assistance previously announced by the Government in relation to the 2019/20 bushfires and to update the list of deductible gift recipients has been introduced into parliament.

Bushfire assistance

Schedule 1 of the Treasury Laws Amendment (2019/20 Bushfire Tax Assistance) Bill 2020 amends ITAA 1997 to make:

• Government support payments to volunteer firefighters in relation to the 2019/20 bushfires non-assessable non-exempt income, and

• all relief and recovery payments and benefits provided by Australian governments in relation to the 2019/20 bushfires non-assessable non-exempt income.

Affected payments include payments of Disaster Recovery Allowance relating to the bushfires under the Social Security Act 1991 and payments by the states or territories relating to the bushfires under the Disaster Recovery Funding Arrangements 2018.

These amendments will apply to the 2019/20 income year and later income years.

The non-assessable non-exempt income tax treatment for payments to volunteer firefighters was announced by the Prime Minister on 29 December 2019 and the Treasurer announced the non-assessable non-exempt income tax treatment for all relief and recovery payments and benefits on 8 January 2020.

Deductible gift recipients

Schedule 2 of the Bill amends ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

• Australian Volunteers Support Trust, and

• Community Rebuilding Trust.

These amendments will apply to gifts made in relation to the 2019/20 income year and later income years.

This measure has not been previously announced.

Information sourced using CCH iknow

Director Identification Number

Thu, 05 Dec 2019 22:00:00 GMT

WHAT THE TAX?!!
Director Identification Number

The federal government has introduced legislation which will implement a Director Identification Number (DIN) for company directors in Australia. The objective of the new system is to promote good corporate conduct.

Once enacted, it will be up to the registrar to announce when the operation of the DIN system will commence. This provides the organisation who will be charged with administering the system time to install a program that will handle the operations. However, it will be operational within two years of receiving Royal Assent.

Transitional rules/current directors

For current directors and officeholders of Australian companies, there will be no immediate obligation to apply for a DIN once legislation is enacted. Similarly, to the commencement of the DIN regime, the registrar will announce transitional arrangements via legislative instrument once the particulars have been arranged.

Requirements

An individual who is a director or an acting alternate director is required to obtain a DIN. At the initial stage of this regime, no other officeholders will be required to register. However, this may change with the abilities of the registrar to keep additional registers in the future.

Four obligations will exist for individuals who are appointed as a director, being:

• requiring to apply for a DIN before being appointed as a director

• requiring to apply for a DIN within 28 days of being directed by the registrar to apply for a DIN

• prohibiting a person from knowingly applying for multiple DINs, and

• prohibiting a person from misrepresenting a DIN to a government body or registered body.

A transitional rule will apply for the first 12 months of operation of the new legislation. A new director will have 28 days after an appointment to register for a DIN.

A person may apply for a DIN if they are not a director but intend to become a director within the ensuing 12 months. It is not compulsory for a person to do this, but nevertheless they are allowed to.

However, the DIN allocated to a prospective director will be cancelled if the person does not become a director within 12 months of issue.

Identification of directors

A key component of this proposed legislation relates to the new registrar being able to separately identify different directors to give them a unique identifier. Via the proposed legislation, the registrar has little or no discretion in the exercise of obtaining information which would identify people separately.

However, additions to ITAA 1936 s 202 will allow the new registrar to request the tax file number (TFN) of an individual in order to verify their identity. It should be noted that, like other applications, it is not mandatory in the draft legislation for an individual to quote their TFN, if they have one.

As noted above there is little or no discretion given in the proposed legislation to the operation of the registrar. However, similar registrars already exist for the administration and handling of other identifiers such as TFN's, ABN's, ACN's and TAN's.

There is also proposed merger of certain registers held by ASIC and the Commissioner of Taxation. This intends to make rules relating to these systems more uniform. With that in mind, it is conceivable that the new register relating to DINs will be similar to that of the current ACN or ABN process.

Therefore, it should be acknowledged that any forms that are lodged on behalf of directors relating or applying to DIN's would need to have the same standards applied to them as what already exists for an ABN or ACN application.

Information sourced using CCH iknow

Budgeting and cashflow forecasting

Thu, 14 Nov 2019 22:00:00 GMT

WHAT THE TAX?!!

Is budgeting and cashflow forecasting necessary for businesses?

It is recommended that every business prepares an annual Budget and Cashflow Forecast.

Analyse previous year's performance to prepare budgets

When preparing a budget, you should firstly analyse the previous financial year's performance. What you need to consider is whether you propose to increase turnover during the forthcoming 12 months, whether you will employ the same number of staff or increase your staff and what other events are likely to occur in the next 12 months.

Detailed consideration to all aspects of the business

This will require you to give detailed consideration to a number of separate areas, including:

• Sales

• Production Forecasts

• Labour Productivity Budgets

• Gross Profit Percentages that you believe are achievable Investments in Stock

• Investment in Debtors

• The payment of Creditors

• Key expenses such as advertising, wages and salaries, rents and superannuation contributions.

Cashflow forecast

In preparing the Cashflow Forecast you should have regard to:

• Loan Repayments

• Taxation Payments

• GST Payments

• Income tax instalments

• Any Capital Expenditure that you wish to undertake

• Any funds (dividends) that you wish to withdraw from the business.

Blueprint for the next twelve months

The whole concept of preparing a Budget and Cashflow Forecast is to prepare a blueprint for what you would like to see your business achieve during the next 12 months.

Budgeting should highlight potential troublespots

If you are realistic in your estimates, then the forecast should highlight any potential troublespots during the year, eg you may be going to experience a shortage of funds from the payment of income tax in March or from stock build-ups in November for Christmas trading. There could also be other times during the year when you anticipate problems due to seasonal conditions.

Measure actual performance against Budgets/Cashflow Forecast

You will then have Budgets and Cashflow Forecasts against which to measure your actual performance during the year, so as to determine whether you are on track in your business performance.

Budgets help you get a clear indication of where you are

No one expects you to be able to actually achieve budget estimates in every segment of the business. That is a virtual impossibility. What the budget does give you is a blueprint against which to measure your actual performance. This will give you a clear indication as to where you actually stand on current day-to-day trading as compared to your expectations at the beginning of the year when the budget was prepared.

Budgets give businesses a better chance of success

There is no doubt that the businesses which prepare Budgets and Cashflow Forecasts and compare this to their actual performance, give themselves a far greater chance of business survival.

Information sourced using CCH iknow

Overtime meal allowances

Wed, 09 Oct 2019 22:00:00 GMT

A recent case at the Administrative Appeals Tribunal has highlighted the current ATO practice in identifying and scrutinising overtime meal allowance deduction claims. In the case, an individual who was in receipt of an allowance also made a claim under D5 claiming a deduction for the allowance.

An individual taxpayer is not bound to show substantiation where the amount claimed as a deduction is at or below the reasonable amount outlined in public rulings (the ruling for the current year is TD2017/19, however as the case related to the 2013 income year the necessary ruling was TD 2012/17).

However, the individual must be in receipt of an allowance to make the claim. Also, for overtime meal deductions, an individual would claim in item D5 of the tax return which can be include many other items. It is only upon further ATO scrutiny where they can determine if an amount has been claimed above the reasonable limit declared.

Relevant facts and circumstances

Mitchell was a site surveyor who was in receipt of payments which included an allowance for overtime meals. The allowance was part of the union-assisted signed EBA, and provided an individual $15 per day where 1.5 hours or more overtime was worked.

He made a claim of the maximum reasonable amount, being $27.10 per day for 300 days. The argument for making the claim was based around the usual working hours for the taxpayer. On further examination, the usual working hours were:

• 7am - 5.30pm Monday to Thursday

• 7am - 3.30pm Fridays

• "Seven to eight" hours on Saturdays

• Early starts after a concrete pour

• Occasional Sundays, and

• Every second Monday was a Rostered Day Off.

An 'ordinary work day' listed in the EBA was 8 hours per day Monday to Friday and 4 hours Saturday and Sunday. Therefore, it is conceivable that Mitchell's regular 10.5 hour day, after taking into consideration breaks, would include 1.5 hours overtime. Thus, an overtime meal allowance would be paid.

The basis of the ATO's investigation centred on whether it was conceivable that Mitchell's worked 300 days of overtime in the year in question. While there are many items which can come under the banner of D5 Other work-related expenses , the ATO gave particular attention to the $8,130 claimed for overtime meal expenses.

The taxpayer rightfully argued that an exemption from substantiation is available if the claim is not greater than reasonable amount provided in a public ruling. However, the ATO challenge in the 300 days where an overtime meal allowance was paid to the individual was the basis of the case.

It was revealed on examination by the ATO that the overtime meal allowance was paid to Mitchell for 107 days in the 2013 financial year. Even if he worked overtime as per the EBA on other days, he was not paid an allowance as he mustn't have met the criteria.

Claim over the reasonable amount

After it was discovered that Mitchell received an allowance for 107 days, his claim for overtime meals of $8,130 was over the reasonable allowable amount.

Despite this fact, the ATO granted the taxpayer the ability to make a claim for the amount they received. In this way, the benefit to the taxpayer was a net tax of nil. However, they were unable to make a claim for the reasonable amount over the 107 days, which was available without substantiation.

Risk mitigation steps

This recent case shows the depths the ATO will investigate the working arrangements of individuals to justify the receipt and claim of various employee-related deductions.

Part of the investigations included specifics surrounding the regular working times and when the overtime allowance was payable according to the EBA. Further, details about changes to regular working times were obtained. It was only after this level of investigations could the ATO make a determination about the validity of the claims made by Mitchell.

Taxpayers when in receipt of these types of allowances need to be aware of the level of scrutiny in which the ATO will look into their affairs.

Although it was not the case in this particular instance, the ATO has the ability to completely deny the deduction relating to the expensed allowance amount.

Information sourced using CCH iknow

Super guarantee amnesty

Thu, 19 Sep 2019 23:00:00 GMT

A one-off month amnesty on superannuation guarantee (SG) will apply from 24 May 2018 for employers to self-correct historical SG compliance.

Since 1 July 1992, when the Superannuation Guarantee Assessment Act was enacted, employers have needed to provide a minimum level of superannuation support for employees. Generally speaking, this included making a payment of superannuation guarantee which was calculated as a percentage of an employee's ordinary time earnings for a particular period.

An employer is required to make the superannuation guarantee payment for an employee within 28 days of the end of that particular financial quarter. The payment must be made on an employee's behalf to a complying Australian superannuation fund.

Failure to make these payments results in the ATO levying the employer with the SG charge. The SG charge is:

• total of the individual SG shortfalls for each employee for the quarter

• a nominal interest component calculated by regulations, and

• an administrative chare which is $20 per employee per quarter.

Unlike regular employer superannuation contributions, SG charge payments are not tax deductible for the employer.

One-off Amnesty

The introduced Bill will allow an amnesty for employers to make good on previous superannuation guarantee non-compliance. To qualify for the amnesty:

• the employer must disclose to the ATO that there is a shortfall in SG for a particular quarter for an employee

• the quarter in which there is a SG shortfall ended at least 28 days before the start of the amnesty period (includes quarters ending up to 31 March 2018), and

• the ATO has not declared an investigation into SG compliance for that particular employer for the quarter in question.

SG charge under the amnesty will not have an administrative penalty applied to the liability. The employer will, however, have to pay the nominal interest charge. However, these payments will be tax deductible.

The amnesty is proposed to commence from 24 May 2018 as this was the date in which the previous government tabled legislation into parliament.

The previous government was unable to enact legislation which included this provision due to stark opposition from non-government parties. Therefore, the components of the 2018 Superannuation Measures No. 1 Bill was split into two new Bills after the 2019 federal election. The other components of the former Bill have since been legislated with the SG amnesty provision omitted.

Client opportunities

If the legislation passes through parliament, an opportunity exists for current businesses to claim large tax deductions in the current year on these additional superannuation payments. In particular, small businesses that have been operating for a long period of time may have unmet SG obligations for business owners, company directors and working family members.

Specifically, for the quarters prior to 1 July 2009, ordinary time earnings included not only salary and wages, but also directors' fees, remuneration while on sick, annual or long service leave, allowance or bonuses.

Interaction with concessional contributions caps

A contribution made by an employer on behalf of an employee is assessable income of the superannuation fund. This will include SG charge payments. Concessional contribution is any contribution that is deductible to the contributor.

Ordinarily, any payment of SG charge from the employer would not count towards the concessional contributions cap for the individual as the payment is not deductible.

The Bill introduces an exception for the Commissioner to disregard a concessional contribution in this situation. Therefore, individual account holders will not breach their concessional contributions cap as a result of a SG payment made under the amnesty provision.

Example

The Jones family have run a small business since 1995. Since inception, the business has been run in a company structure. There were five individuals who worked for the small business between 1995 and 2005, being Jeff and Carol, their children Henry and Sophia, and Henry's spouse Claudia. In 2010 Jeff and Carol sold the business to Henry and Claudia. They have kept all their records.

During the years 1995 to 2005, no superannuation guarantee payments were made. As the small business only employed family members, this error was never picked up by the ATO. After 2005 the business started using computerised software and started paying superannuation for the family members.

Henry and Claudia obtain old records relating to the business from Henry's parents, and calculate the following.

• Salaries paid to Jeff and Carol - $50,000 per annum for ten years.

• Wages paid to Sophia - $25,000 per annum from 1995 to 2000.

• Wages paid to Henry - $35,000 per annum for five years (1995-2000), then $50,000 for five years.

• Wages paid to Claudia - $25,000 per annum from 2000 to 2005.

Overall, the amounts payable on superannuation guarantee is as follows:

1 July 1995 to 30 June 1998 - $160,000 per year for 3 = $480,000 × 6% (SG rate) = $28,800

1 July 1998 to 30 June 2000 - $160,000 per year for 2 = $320,000 × 7% (SG rate) = $22,400

1 July 2000 to 30 June 2002 - $175,000 per year for 2 = $350,000 × 8% (SG rate) = $28,000

1 July 2002 to 30 June 2005 - $175,000 per year for 3 = $525,000 × 9% (SG rate) = $47,250

The total superannuation guarantee which was missed was $126,450. Calculations of the nominal interest component, since 1 July 1996 to now, totalled $90,000. The Commissioner assessed the SG charge in August 2018 to be $216,450. It consisted of $64,417 each for Jeff and Carol, $55,408 for Henry, $15,015 for Sophia and $17,193 for Claudia.

After the legislation was enacted, the Jones family made the payment to the various family SMSFs for the outstanding superannuation guarantee, and claimed a tax deduction of $216,450 in the 30 June 2020 tax return. At the company tax rate of 27.5%, this reduced their tax bill by $59,523.75.

Contributions tax was payable at 15% in the family SMSFs, totalling $32,467.50. Overall, the tax benefit across all family group entities was $27,056.25.

Even though Jeff and Carol had retired, the SMSF was able to accept this contribution for them. Also, the contributions caps for Jeff, Carol and Henry of $25,000 was not breached for the 30 June 2020 financial year.

Information sourced using CCH iknow

Super guarantee and salary sacrificed amounts

Wed, 14 Aug 2019 23:00:00 GMT

Legislation has been introduced into parliament which clarifies the operation of the superannuation guarantee shortfall amount for employers. This clarification ensures that the superannuation contributions made by an employer on their behalf is not reduced by salary sacrificed amounts.

Under the current legislation, an employer is liable for superannuation guarantee charge if they do not pay the minimum amount based on the employee's base for a quarter Superannuation Guarantee (Administration) Act 1992). The base amount is based on the salary and wages for the employee which does not take into consideration any salary sacrificed amount .

This technically allows an employer to reduce the mandatory superannuation guarantee amount. For example, an employee who earns $10,000 per quarter has $2,000 salary sacrificed into super. The minimum superannuation guarantee amount which an employer is liable for is the $8,000 paid as salary and wages. As the $2,000 is already paid by the employer (via a salary sacrifice), it removes a potential liability for superannuation guarantee charge.

Proposed new law

The proposal changes the superannuation guarantee shortfall base amount to specifically include salary sacrificed amounts. Therefore, the new calculation for the shortfall base amount is the sum of:

• total salary and wages paid to the employee each quarter, and

• any salary and wages that would have been paid to the employee if they didn't choose to have super salary sacrificed.

The amended law gives certainty to employees that their superannuation contributions are paid on their pre-salary sacrifice base amount. However, other reductions to the superannuation base still apply.

Example

Jenny is being paid a salary package of $90,000 per annum, inclusive of superannuation and car benefits. The car benefits (after tax) that are provided make up $15,000 of the package, therefore making her package $75,000 inclusive of super. Her employer is liable to pay 9.5% of this package amount as superannuation guarantee.

• Superannuation guarantee (per quarter) $75,000 ÷ 4 × 9.5% = $1,781.25 per quarter.

Jenny chooses to salary sacrifice $2,000 per quarter into superannuation. Therefore, the total amount of contributions in superannuation will equal:

• Superannuation guarantee = $1,781.25 × 4 = $7,125, plus

• Salary sacrificed amount = $2,000 × 4 = $8,000

• Total superannuation paid = $15,125 per annum.

The amount paid to superannuation remains under the concessional contributions cap for the year under superannuation law.

Before the new law comes into effect, the employer would only be liable for SG charge if the minimum base amount is not contributed. This is calculated as:

• $90,000 (package) – $15,000 (car benefit) – $8,000 (salary sacrifice) = $67,000 ÷ 4 × 9.5% = $1,591.25 per quarter.

Closely-held payees

In certain circumstances, the owner of a small business may develop a plan to pay a total "salary and super" component to themselves. Careful considerations must be made to the way these "employment arrangements" are drafted to ensure that superannuation guarantee is provided for.

Best practice is to ensure that the business owners are fully aware that a superannuation guarantee amount is payable on their own salary each quarter. Otherwise, technically the business may be liable for the penalties associated with superannuation guarantee charge (ie interest and the administrative penalty).

The best practice is to have a set amount which is transferred to the business owner each month. Then, calculate the liability for PAYG withholding and superannuation guarantee for each quarter to ensure compliance with the necessary acts. This will:

• avoid any unintended superannuation guarantee charge, and

• provide a clear understanding of the difference between the amounts contributed to superannuation during the year and the concessional contributions cap amount for the business owner.

Risk mitigation steps

Most employers should now have payroll software which incorporates their salary and wages, superannuation requirements and other obligations under Single Touch Payroll.

It is advised that employers review the details surrounding their payroll software to ensure it incorporates the new law correctly and consistently for their employees.

Information sourced using CCH iknow

Large and long overdue tax debts to appear on credit rating

Sun, 14 Jul 2019 23:00:00 GMT

The Australian Taxation Office (ATO) will be given increased disclosure capabilities if new legislation introduced into the parliament receives royal assent. Under the new law, the ATO will be able to report to credit reporting bureaus the tax debts of a business who is not effectively engaged in managing its outstanding debts.

As a result, from the date of royal assent, a tax debt that is greater than $100,000 and more than 90 days overdue may appear on a business' credit rating.

The ATO will be required to notify a business in writing when it intends to disclose the debt to credit reporting bureaus. In these instances, the business will have 21 days to ensure the tax debt does not appear against their credit record.

Risk mitigation steps

For businesses with an outstanding tax debt

To avoid current or future tax debts being reported to a client's credit rating, they can pay the outstanding debt before the due date or enter into a payment arrangement. Under a payment arrangement, the client would need to agree to:

• lodge all outstanding income tax returns and activity statements before commencing the payment arrangement

• make consistent payments towards the debt over a specified and agreed timeframe, including general interest charge, and

• continue to lodge and pay all future debts on time and in full.

• Failure to complete all these points may cause the debt to be referred to the credit reporting bureaus, which could reduce borrowing capacity in the future.

For businesses with large debtors and/or reliance on a particular customer

This new reporting requirement can enhance a business' ability to have greater control over who they extend credit terms to. Cloud-based accounting and third party web services have credit check facilities so users can see if a particular customer should be extended credit.

These types of services are also invaluable for businesses who have a heavy reliance on one customer for a large contract. It may be worthwhile for clients to rethink this strategy when their major customer has a bad credit rating or large secured creditors.

Information sourced using CCH iknow

2019 tax changes for small business

Sat, 11 May 2019 23:00:00 GMT

As 30 June 2019 is fast approaching, we would like to advise you of some key tax changes that your business may be in a position to take advantage of before the end of the financial year.

Company tax cuts

For 2018/19 income year, companies with an annual aggregated turnover under $50m will have a reduced tax rate of 27.5%. To be eligible for the reduced rate, the company must be a base rate entity.

Instant asset write-off increased, extended and allowed for medium-sized businesses

The $20,000 instant asset write-off for small business has been increased to $30,000 from 2 April 2019. The scheduled end date of the write-off has been extended from 30 June 2019 to 30 June 2020.

Also, there is another limit of $25,000 which is available from 29 January 2019 to 2 April 2019.

For medium-sized business, which is defined as being over $10m in aggregated turnover but under $50m, an entitlement to a $30,000 instant write-off is allowed until 30 June 2020. The assets must be purchased after 2 April 2019.

Single touch payroll

Entities who are employers are required to report the following information to the ATO from 1 July 2019:

• withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld

• salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and

• superannuation contribution information on or before the day on which the contribution is paid.

There are some exceptions to the single touch payroll allowed for employers who only make payments to closely held employees.

Non-compliant withholders to be denied tax deductions

From 1 July 2019, businesses will no longer be able to claim deductions for payments to their employees where they have not met their PAYG obligations. This includes where the employer is required to withhold PAYG from gross payments, but fail to report or remit it to the ATO.

PAYG withholders will be required to ensure that all lodgements are made on time to avoid large penalties with denied tax deductions.

Additionally, the deduction for businesses on certain payments to contractors which have not met PAYG obligations will be denied unless a genuine mistake has been made.

Taxable payments reporting system

Beginning with the 2018/19 income year, the following industries have introduced a taxable payments reporting system:

• Couriers

• Cleaners

Starting from 1 July 2019, the taxable payments reporting system will be extended to include the following industries:

• Security services

• Road freight

• IT services

Entities who engage contractors, or subcontractors, will need to provide additional reports to the ATO. This treatment has the same requirements as salary and wage employees.

Fodder storage assets allowed immediate write-off

For primary producers, a new law has been enacted which allows fodder storage assets to be immediately written off.

Fodder storage assets may include silos and hay sheds, and are used to store grain and other animal feed. The immediate write-off will apply if the asset is purchased and first installed ready for use on or after 19 August 2018.

Information sourced using CCH iknow

2019 tax planning opportunities for small business

Sat, 11 May 2019 23:00:00 GMT

As 30 June 2019 is fast approaching, we would like to advise you of some key tax planning opportunities that your business may be in a position to take advantage of before the end of the financial year.

Extension and increase of instant asset write-off

The $20,000 instant asset write-off for small business has been increased to $30,000 from 2 April 2019. The scheduled end date of the write-off has been extended from 30 June 2019 to 30 June 2020.

Also, there is another limit of $25,000 which is available from 29 January 2019 to 2 April 2019.

Company tax cuts

For 2018/19 income year, companies with an annual aggregated turnover under $50m will have a reduced tax rate of 27.5%. To be eligible for the reduced rate, the company must be a base rate entity.

Single touch payroll

Entities who are employers are required to report the following information to the ATO from 1 July 2019:

• withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld

• salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and

• superannuation contribution information on or before the day on which the contribution is paid.

There are some exceptions to the single touch payroll allowed for employers who only make payments to closely held employees.

Fodder storage assets allowed immediate write-off

For primary producers, a new law has been enacted which allows fodder storage assets to be immediately written off.

Trust distributions

Trust tax planning should be undertaken as soon as possible. The resolution appointing or distributing income to beneficiaries needs to be made on or before 30 June 2019, or earlier if required by the trust deed.

Capital gains

Capital losses realised before year's end can be used to offset capital gains of that year.

Deferral of income

Subject to cash-flow considerations and anti-avoidance rules, income could be deferred to the following year, particularly if:

• income in the following year is likely to be lower, or

• tax rates for the following year are expected to be lower.

Note: For cash businesses - deferral of income can be risky, especially when the deferral puts them outside the ATO small business benchmarks.

Prepayments

Subject to cash-flow considerations, deductible purchases could be made by year's end in order to accelerate deductions. This applies particularly if the income in the following year is expected to be lower than in the current year.

Trading stock

For obsolete stock, or in other special circumstances, a special lower valuation could be adopted. Also, no adjustment for closing stock is necessary when a reasonable estimate of closing stock is within $5,000 of opening stock.

Bad debts

A properly authorised resolution is required when writing off a bad debt and claiming a tax deduction. A GST adjustment may also be required on the original invoice.

Directors' fees

To claim a current year deduction for directors' fees, the company should have definitively committed itself to the payment, ie by passing a properly authorised resolution.

Superannuation

For the quarter ending 30 June 2019, employer superannuation contributions must be made before 30 June for a deduction to be available in the 2018/19 year.

For family businesses, it is important that annual caps for concessional and non-concessional superannuation contributions are not exceeded. The caps for superannuation contributions in 2018/19 are:

• Concessional contributions: $25,000

• Non-concessional contributions: $100,000

Information sourced using CCH iknow

2019 planning opportunities for individuals

Sat, 11 May 2019 23:00:00 GMT

As 30 June 2019 is fast approaching, we would like to advise you of some key tax planning opportunities you may want to take advantage of before the end of the financial year.

Superannuation

Personal superannuation contributions

Individuals are able to make a personal deductible superannuation contribution regardless of whether they are self-employed or not. In most cases, individuals should be able to review their payroll reports to determine the difference between the concessional limits and the employer contributions.

Individuals should be reminded that the concessional contributions cap is $25,000 for the 2018/19 income year.

Additionally, individuals earning over $250,000 in taxable income need to be aware that Div 293 tax will apply to concessional superannuation contributions. These additional contributions are taxed at 15% on top of the 15% contributions tax paid by the superannuation fund. The Div 293 tax may be paid from an individual's own money or from their superannuation fund using a release authority.

Catch-up superannuation contributions

The 2018/19 income year is the first year in which individuals can carry forward unused concessional contribution limits for future use. Although a catch-up superannuation contribution is not allowed for the 2018/19 year, an individual may benefit from not making additional deductible contributions.

In order to make a catch-up superannuation contribution in the following year, an individual must have a total superannuation balance under $500,000 at 30 June 2019.

An eligible individual may delay a personal deductible contribution in 2018/19 if they expect to be under $250,000 in income in 2019/20. Therefore, a "catch-up" contribution may avoid a Div 293 liability.

Downsizing contributions

A person aged 65 years or older will be able to make a contribution into superannuation of up to $300,000 from the proceeds of selling their main residence. This contribution is outside of non-concessional contribution rules.

To be eligible to make the contribution, they must have owned their main residence for at least 10 years. Also, the contribution is exempt from the age test, work test and the $1.6m total superannuation balance test.

First Home Super Saver Scheme

Voluntary contributions up to $15,000 can be made by an individual who has yet to purchase their first home into their superannuation account. The scheme allows the individual to withdraw this contribution plus earnings in order to be used for a first home deposit.

Voluntary contributions made after 1 July 2018 may be used for withdrawal in the Scheme.

Spouse contribution

A $540 tax offset is available for after-tax contributions (up to $3,000) to a complying superannuation fund on behalf of a spouse (married or de facto) where the spouse's annual taxable income is less than $37,000. A reduction of the maximum offset is available where spouse's income is between $37,000 and $40,000.

Superannuation government co-contribution

For low income earners, subject to certain conditions, the government makes a co-contribution of up to $500 if a taxpayer makes after-tax contributions of at least $1,000. The co-contribution begins to phase-out at a taxable income of $37,697, and is not available for taxable income above $52,697.

Individuals could also take advantage on increasing the amount that can be withdrawn under the First Home Super Saver Scheme. However, the co-contribution itself would not be included.

Insurance policies in super to become "opt-in"

Superannuation members who are inactive will need to "opt-in" with their life insurance and TPD providers from 1 July 2019 to retain their current policies.

Inactive members are individuals who have not had a contribution or roll-over into their account for 16 months. As at 1 July 2019, this will apply for accounts without a contribution or roll-over since 1 March 2018.

Prepayments

Subject to cash flow considerations, consider making deductible purchases by year's end in order to accelerate deductions. This applies particularly if the income in the following year is expected to be lower than in the current year.

In certain circumstances, an immediate deduction can be available for prepaid expenditure (eg interest on a loan relating to a rental property).

Nearing retirement

A taxpayer who is considering retiring near year end may find it worthwhile to defer discretionary income until after 30 June. In that subsequent year, their income will normally be smaller and the marginal rate may therefore be less.

When considering the timing of retirement, keep in mind the restrictions on the concessional treatment of employment termination payments that apply.

Donations

Donations or gifts of $2 or more to a deductible gift recipient (DGR) are tax deductible. A deduction is also allowed for gifts of publicly-listed shares that have been held for at least 12 months and which are valued at $5,000 or less.

Donors need to be aware of the differences between the various terminologies used in crowdfunding websites to ensure they are making a correct claim. In particular, there has been an increase in crowdfunding sites during the 2018/19 income year for drought assistance.

Where spouses are on different marginal rates, consider ensuring that all deductible gifts are made by the spouse in the higher tax bracket so as to maximise the benefit of the deduction.

Property

Online accommodation providers

Individuals that have or may be engaged in providing accommodation services through an online platform will have that data collected by the ATO. This includes Australian bank account information which may be matched to the individual's tax file number, as well as the address of the property.

Other information to be shared with the ATO includes the number of nights booked. This information may be necessary in pro-rating any allowable deductions for the property during the income year.

Holiday home rental deductions being targeted

The ATO has also stated that an increased focus will be applied to holiday homes that are included as rental properties in income tax returns. In particular, they have identified the following circumstances where they believe a property is not genuinely available for rent:

• Advertising which limits exposure to potential tenants - eg, word of mouth, restricted social media and outside holiday "high-season" periods.

• Location, condition and access to the property is poor.

• Requiring prospective tenants to provide references for short-stay periods.

• Setting the minimum stay for five or more nights but excluding weekends.

• Refusal to rent to interested people without adequate reasons.

• Setting the rent well above the rate for comparable properties in the area.

Vacant land deductions

Claiming tax deductions during a "build-to-rent" investment has been proposed to stop from 1 July 2019. This measure was announced in the 2018 federal budget, but is yet to become law.

A taxpayer may still be prudent to bring forward some payments, where possible, to claim a deduction this year. It is unconfirmed at the time of writing whether this announcement will be introduced into parliament in the future, still with the current expected start date.

Main residence exemption for foreign residents

Under a 2018 federal budget announcement, foreign residents would no longer be able to claim the CGT main residence exemption after 30 June 2019. However, at the time of writing, Treasury Laws Amendment (Reducing Pressure on Housing Affordability No. 2) Bill 2018 has not been given royal assent.

As the parliament has gone into election mode, this Bill has been prorogued. In order for it to become law, it must be re-entered into parliament by the next government.

Capital gains

Where appropriate, consider realising capital losses by year's end so that they may be offset against realised capital gains of that year.

Changes to HELP repayments

Students with a HELP debt may need to start repaying the debt on earning $45,000. This lower threshold is significantly lower than previous years ($51,957 in 2017/18), and is necessary for individuals who have become non-residents.

Deferral of income

Subject to cash flow considerations and anti-avoidance rules, consider deferring income to the following year, particularly if:

• income in the following year is likely to be lower, and

• tax rates for the following year are expected to be lower.

Information sourced using CCH iknow

2019 tax changes for individuals

Sat, 11 May 2019 23:00:00 GMT

Change for low income tax offset and LAMITO

A low and middle income tax offset (LAMITO) was introduced on 1 July 2018. The offset will run in conjunction with the low income tax offset as a targeted reduction of income tax for Australian residents.

The LAMITO provides an additional offset of up to $200 for individuals on a taxable income of $37,000 or less. Taxpayers up to $48,000 will get an increased LAMITO up to the maximum amount of $530.

The maximum LAMITO will be available for incomes up to $90,000, and will phase out for individuals with a taxable income of $125,333.

The LAMITO will be available for four years, ending with the 2021/22 income year. At this point, further income tax reductions will absorb the LAMITO.

Personal income tax cuts

For the 2018/19 income year, the top of the 32.5% tax bracket has moved from $87,000 to $90,000. That means that individuals above $90,000 in taxable income will save $135 in income tax this year compared to last year.

CGT main residence removal for foreign residents still not law

It was announced on 9 May 2017 that foreign residents would no longer have access to the CGT main residence exemption. Coupled with this, a grandfathering arrangement was in place where a foreign resident could still use the main residence exemption up until 30 June 2019.

However, at the time of writing, this legislation has not passed through parliament, meaning no changes have been made for individuals in this situation.

"Catch-up" superannuation contributions

Starting from 1 July 2018, the "catch-up" superannuation contributions rules apply. For the current income year (2018/19), individuals can carry forward unused amounts up to the concessional contributions cap of $25,000.

These rules are only in effect for individuals with a total superannuation balance of less than $500,000.

This means the balance as at 30 June 2019 for individuals wishing to make a "catch-up" concessional contribution in the 2019/20 financial year. Unused amounts can be carried forward for five years.

Individuals who anticipate an increase in income to a higher tax bracket in the 2019/20 financial year may wish to take advantage of a larger tax deduction.

Downsizer contributions now available

An individual who is aged 65 or over may make "downsizer contributions" from the proceeds of the sale of a dwelling that was the person's main residence, applicable to the proceeds from contracts entered into on or after 1 July 2018.

First home super saver scheme

Voluntary contributions made after 1 July 2018 may be used for withdrawal in the Scheme.

HELP repayment levels set to change

From 1 July 2018, students with a HELP debt may need to start repaying the debt on earning $45,000. This lower threshold is significantly lower than previous years ($51,957 in 2017/18), and is necessary for individuals who have become non-residents.

Insurance policies in super to become "opt-in"

Superannuation members who are inactive will need to "opt-in" with their life insurance and TPD providers from 1 July 2019 to retain their current policies.

Work test exemption for low balance retirees

The work test has been removed for recently retired individuals, commencing 1 July 2019. Announced in the 2018 federal budget, this applies to voluntary superannuation contributions for individuals over 65 years of age.

For the first year in which an individual is greater than 65 years of age and does not meet the work test, a voluntary contribution may be made. However, this contribution will only be allowed if the individual met the work test in the previous year, regardless of whether they were under 65 years or not. Also, the member's total superannuation balance at the beginning of the year needs to be under $300,000.

Image rights to be included on individual returns only

The use of "public fame" or "image rights" in a third party entity was due to be removed from 1 July 2019. This meant that using image rights would be restricted to individual returns. However, this proposal from the 2018 federal budget has not become law.

Vacant land expenses no longer deductible for "build-to-rent"

Claiming tax deductions during a "build-to-rent" investment has been proposed to stop from 1 July 2019. This measure was announced in the 2018 federal budget, but is yet to become law.

Information sourced using CCH iknow

Legal expenses and deductibility

Thu, 14 Feb 2019 22:00:00 GMT

Legal expenses from workplace claim found deductible

A recent private ruling has highlighted instances where legal expenses are considered deductible under the general provisions of ITAA 1997 s 8-1. Under the provision, a deduction is allowed for legal expenses which are incurred in order to earn assessable income or in carrying on a business.

However, a deduction is not allowed for legal expenses which are capital expenses or are private and domestic in nature. Working out if a legal expense is deductible or non-deductible capital or private expenditure depends on the facts and circumstances. This question is the subject of much litigation in the courts and tribunals.

The following is a set of circumstances in which legal expenses have been determined to be deductible by the ATO in a recent private ruling.

Relevant facts and circumstances

The taxpayer was employed for a number of years, but began suffering for a medical condition caused by workplace bullying and harassment.

A claim was made for worker's compensation through an agency, which was eventually accepted. The taxpayer was paid 75% of regular salary payments.

The taxpayer made attempts to re-engage with the employer to return to work, under a different supervisor. However, no offer was received.

After a few months, the employer terminated the taxpayer's rehabilitation program. After this termination, the taxpayer made a submission to the agency to review the decision but this was unsuccessful.

The taxpayer sought legal advice. Through the lawyer's advocacy, an offer of a work trial was received by the taxpayer. At this time, the taxpayer's salary returned to 100% of regular payments.

Before the work trial, the agency determined that the taxpayer no longer suffered from the medical condition. As a result, the agency revoked the compensation claim payments. A further review of the agency's decision was submitted by the taxpayer, which was ultimately unsuccessful.

The taxpayer sought legal advice and the lawyers lodged an application with the Administrative Appeals Tribunal for a review of the agency's decision to revoke the compensation payments.

After two months of the work trial, the employer made the taxpayer redundant.

Months later, the AAT made settlement orders where the taxpayer was deemed entitled to compensation payments and medical expenses with respect to the medical condition.

ATO ruling

The taxpayer requested the ATO rule on whether the following legal expenses were deductible:

• Advice and advocacy to gain a return to work opportunity, and

• Out of pocket legal expenses incurred to apply to the AAT to review the agency's decision.

The ATO ruled in both instances that the amounts were deductible under the general provision. Despite the fact that the taxpayer's employment had been terminated, the amounts related to compensation that would have been received as a result of employment.

Client opportunities

Despite this situation being specific to the taxpayer, it shows another example where legal expenses can be deductible for a client.

Many areas for legal expenses are in the "grey-area" when considered for an allowable deduction. This situation shows where a taxpayer has been successful in getting a private binding ruling in their favour.

Information sourced using CCH iknow

SMSF Cryptocurrency investment

Sun, 13 Jan 2019 22:00:00 GMT

An SMSF can invest in crypto and there are many considerations regarding cryptocurrency as an investment in a SMSF.

Investment Strategy and Trust Deed

Firstly, before a SMSF invests in cryptocurrency, this type of investment should be documented in the fund's investment strategy (e.g. risk, liquidity, diversification, etc) and be allowable under the fund's rules (i.e. trust deed).

Ownership

One of the biggest problems for SMSF trustees who wish to invest in cryptocurrency is getting the account and wallet set up in the fund's name. If this isn't possible, the trustees should consider preparing a separate declaration of trust.

It is our understanding that some exchange platforms want you to open a separate bank account to trade out of, and usually these can't be set up in the fund's name either. A declaration of trust should also be considered for that account.

We suggest seeking legal advice in relation to the preparation of a declaration of trust.

Transaction Testing

The auditing of transactions and year end balances can be difficult to test, given the lack of transparency and reporting functionality with some providers/exchanges.

Compliance matters to be considered (which may be difficult to test):

- Are there any related party transactions?

- Has financial assistance been given to members or relatives of members of the fund?

- Have contributions been made (and not recorded)?

- Has the fund borrowed money through the platform/exchange

Preferably, all information should be provided (e.g. initial investment confirmations from Exchange). This information is available or can be downloaded from the Bitcoin/Exchange website (or screenshots are provided if information cannot be downloaded). The information/screenshots must be clearly labelled as Bitcoin/Exchange documents with the investor name/bitcoin details included.

Depending on how the crypto currency is stored will determine the year end holding confirmation. There are challenges in this area as some crypto currency will be stored offline. If screenshots/information is unavailable, then a separate declaration would be required; however, this evidence may not be sufficient if the crypto currency represents a significant proportion of the fund's assets. In this case, if there is insufficient evidence the auditor may not provide an audit opinion for the crypto currency.

Valuation

Another issue for a SMSF investing in cryptocurrency is going to be confirming a valuation at year end.

Obtaining reliable information regarding valuations of cryptocurrency is not easy with some exchanges providing different values. This may improve if financial institutions start servicing this sector, but until then there may be different prices reported with significant volatility in values.

Depending on the amounts involved, the auditor may have to qualify the Audit Report or even raise an Auditor Contravention Report with the ATO depending on what information is received with regards to the value of any cryptocurrency held by the fund.

Conclusion

As you can see from the above there are many factors to consider when it comes to investing in cryptocurrency in a SMSF. We suggest clients seek financial advice to determine if a SMSF is the most suitable structure for them to invest in cryptocurrency.

Information sourced from AFS Audits

No tax deduction for non-compliant payments

Sun, 16 Dec 2018 22:00:00 GMT

From 1 July 2019, you can only claim deductions for payments you make to your workers (employees or contractors) where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.

If the PAYG withholding rules require you to withhold an amount from a payment you make to a worker, you must:

· withhold the amount from the payment before you pay it

· report the amount to the ATO

Any payments you make where you haven't withheld or reported the PAYG tax are called non-compliant payments. You won't be able to claim a deduction if you don't withhold any PAYG tax or report the PAYG tax to the ATO. If you make a mistake and withhold or report an incorrect amount, you will not lose your deduction.

Payments that must comply

You can only claim a deduction for the following payments if you comply with the PAYG withholding rules:

· of salary, wages, commissions, bonuses or allowances to an employee

· of directors' fees

· to a religious practitioner

· under a labour hire arrangement

· for a supply of services (except from supplies of goods and real property) where the contractor has not provided you with their ABN

Non-cash benefits

A non-cash benefit is something you provide instead of paying cash, for example goods or services. In this case, you still need to report the PAYG tax to us in order for this to be classified as a compliant payment and allow you to claim a deduction.

Correcting a mistake

If you withhold an incorrect amount by mistake, you won't lose your deduction. To minimise any penalties you can correct your mistake by lodging a voluntary disclosure in the approved form.

If the correct amount is withheld but a mistake is made when reporting it, the deduction is not lossed. However, these mistakes need be corrected as soon as possible.

Failure to withhold or report

If PAYG tax should have been withheld from a payment but didn't, you will lose your deduction for that payment, unless you voluntarily inform the ATO before they have commenced an audit or review into your compliance activity. You can do this by making a voluntary disclosure in the approved form to the ATO.

If you withheld PAYG tax from a payment but didn't report the amount to the ATO at all, you will lose your deduction for the payment unless you report the amount to before an audit or review has commenced.

Mistaking an employee for a contractor

There may be a situation where you honestly believe your employee is acting as a contractor, so you don't withhold PAYG tax from their payments as they have provided you with their ABN. In this instance, although you have made a mistake and not withheld PAYG tax from payments you made to your employee, you won't lose your deduction for these payments because you complied with the withholding obligations for a contractor.

You can correct your mistake by lodging a voluntary disclosure to the ATO

We recommend you use the ATO's Employee/contractor decision tool to check if your worker is an employee or contractor.

Penalties

If you don't comply with your PAYG withholding and reporting obligations for a payment, deductibility is denied and you may face penalties that apply for failure to withhold and report amounts under the PAYG withholding system.

Information sourced from the ATO

Division 7A proposed changes

Wed, 14 Nov 2018 22:00:00 GMT

A number of recommendations have been made to overhaul the treatment of Division 7A complying loans by the Treasury. The proposals recommend to begin these changes from 1 July 2019.

Proposed changes

Consistent with current practices, the 10-year loans would effectively begin at the end of the income year in which the advance is made. This will allow the taxpayer to put the loan on complying terms before the due date of the tax return. The Benchmark interest rate to compare with a small business variable overdraft at 8.30%.

Transitional rules

7-year unsecured loans

All complying 7 -year loans in existence as at 30 June 2019 must comply with the new proposed loan model. The new benchmark interest rate is to be used, and the existing outstanding term will be retained. As mentioned above, the principal repayment must be in equal instalments over the loan term.

25-year secured loans

Exempt from the majority of changes until 30 June 2021. However, the new benchmark interest rate needs to be used (at a minimum) between 1 July 2019 and 30 June 2021.

On 30 June 2021, the outstanding value of the loan will be a deemed dividend unless it is put on new complying loan terms. At this point, they will become 10-year loans.

Pre-1997 loans

A two-year grace period will also apply to these loans under the new arrangements. Therefore, a pre-1997 loan will be taken to be financial accommodation as at 30 June 2021. At this point, they will become 10-year loans.

Opportunities & Strategic options

Under the proposed transitional rules, currently unsecured 7-year loans will have an increased principal repayment initially and a higher interest rate. Essentially, this will mean an increased minimum repayment generally made as a franked dividend to directors who are also shareholders.

An opportunity exists for directors to turn these loans from unsecured to secured loans before 30 June 2019, as transitional rules are favourable. In order for this to happen, a written loan agreement must be put in place where the outstanding balances are secured against real property owned by the directors.

Also, no mortgage duty will be payable when the secured loan is registered as all states in Australia have abolished this in recent years. However, an additional cost of drawing up the secured loan agreement from a lawyer will be incurred.

A reduced minimum repayment under a secured loan may alleviate future interest on pre-1997 loans as additional room is available for repayments.

Information sourced using CCH iknow

Farm management deposits

Thu, 11 Oct 2018 22:00:00 GMT

WHAT THE TAX?!!

Farm management deposits scheme

The farm management deposits (FMD) scheme is designed to allow primary producers, in effect, to shift income from good to bad years in order to deal with adverse economic events and seasonal fluctuations.

The FMD scheme allows primary producers (with a limited amount of non-primary production income) to claim deductions for FMDs made in the year of deposit (and to reduce their PAYG instalment income accordingly).

When an FMD is withdrawn, the amount of the deduction previously allowed is included in both their PAYG instalment income and their assessable income in the repayment year.

Reforms from 1 July 2016

Increase in farm management deposit cap

The maximum amount that can be held by an individual primary producer in farm management deposits (FMDs) at any time increased to $800,000 from $400,000.

Early withdrawal of farm management deposits within 12 months

An amount withdrawn from an FMD within 12 months of its deposit does not cease to have been an FMD if part of the land used in carrying on the FMD owner's primary production business meets the prescribed rainfall conditions for the prescribed period. The qualifying primary production business must demonstrate that any part of the land of the business has experienced a rainfall deficiency for at least six consecutive months. The deficiency must be equivalent to or worse (ie lower) than 5% of average rainfall (one in twenty year event) for that six-month period based on the most recently available publicly released data from the Bureau of Meteorology at the time of the withdrawal. Therefore the FMD owner remains entitled to the deduction for the deposit and the amount must be included in the assessable income of the FMD owner in the income year the withdrawal occurs.

Use of farm management deposits with qualifying primary production loan offset accounts

The agreement for the making of an FMD can allow the linking of an FMD to a loan or other debt of the FMD owner or their partnership (a loan offset arrangement) to enable the amount of interest charged on that loan or other debt to be less than what it would otherwise be if:

• the FMD owner is carrying on a primary production business, and

• the loan is used wholly for the purpose of that business.

To the extent that an FMD loan offset arrangement results in a lower amount of interest being charged on a loan or other debt used other than for the purposes of a primary production business then an administrative penalty is payable. The administrative penalty equals 200% of the amount of interest that would otherwise have been charged on the portion of the loan used for the non-qualifying purpose.

Client opportunities

The FMD scheme can be useful strategy that a primary production business can use to set aside pre-tax income in good years for use in low-income years. The ability to use the FMD to offset other primary production business loans can also help improve the cash flow and save interest costs.

Primary producers should be encouraged to engage in tax planning services to ensure these strategies are implemented. Contact should also be made with financial institutions to get more information on possible offset arrangements.

Information sourced using CCH iknow

Smart watches confirmed exempt fringe benefit

Thu, 04 Oct 2018 23:00:00 GMT

WHAT THE TAX?!!

Smart watches confirmed exempt fringe benefit

The ATO has made a ruling which allows a popular smart watch to be deemed a portable electronic device for fringe benefits tax purposes. As a result, FBTAA 1986 s58X applies to the watch, which means it is exempt from fringe benefits tax under the following circumstances:

• The watch is provided in respect of employment and is used primarily for the employee's employment; and

• The watch is not considered a second item purchased in the past 12 months that has a substantially identical function.

The ruling is restricted to a specific smart watch which came onto the Australian market in mid-2018. However, from the ruling it appears to be a smart watch which is specifically designed to be paired with a specific mobile phone device. As stated in the Private Ruling, the Smart Watch is designed for use with the iOS operating system, which is owned by a very large US-based technology company.

Despite the fact that the ruling relates to one specific product, the general rules regarding smart watches and the FBT exemption is covered and explained below.

Portable electronic device

Fringe benefits tax law does not define "portable electronic device", despite it being listed as a work-related item eligible for an FBT exemption.

However, this section (s 58X(2)) has been amended over time because of vast changes in technology. Prior to 2008, the former subsection provided a complete list of relevant items which was replaced with the term "portable electronic device". These list of items, which included mobile or car phones, calculators, electronic diaries or laptops became untenable since many items currently available today can do multiple functions.

Despite this, the ATO was satisfied the smart watch was a portable electronic device. Its ability to operate without an external power supply, as well as being designed as a complete unit is enough to satisfy the first leg of the exemption.

Substantially different in function to a mobile phone

The second leg generally applies only to entities who are not small businesses, and is covered by s 58X(3) of the Act. A smart watch would be ineligible for an FBT exemption if another item was previously purchased in the FBT year which had a substantially identical function.

The smart watch has similar functions to that of a mobile phone, however, the Commissioner ruled the functions between the two are substantially different. In this context, which could be utilised for other similar products on the market, the following was identified:

• The watch can receive and display text messages and emails, but sending/replying is limited to pre-set phrases or dictating a reply as an audio file.

• A keyboard cannot be used with the watch as it can with the paired phone.

• Purported seamless transition between the watch and phone when needing to utilise more complex functions.

• The watch cannot download or use the majority of mobile phone applications (ie apps). Only specifically designed applications work on the watch.

• The watch is not capable of viewing complex webpages on the screen, thus requiring use of the phone in a lot of cases.

These limitations of the smart watch were enough for the Commissioner to consider that the device was substantially different to the phone. Therefore, an entity would be able for an exemption where both devices are provided to an employee within the same FBT year. This applies regardless of whether the entity is a small business entity or not.

Information sourced using CCH iknow

Primary producers and fodder storage

Thu, 13 Sep 2018 23:00:00 GMT

WHAT THE TAX?!!

Fodder storage assets allowed immediate write-off

Legislation has been entered into parliament which intends to allow an immediate deduction for fodder storage assets for primary producers. The proposal in the parliamentary bill is to amend ITAA 1997 s 40-548 which allows a fodder storage assets to be written off over three years.

A primary producer's expenditure on a fodder storage asset must have been incurred primarily and principally for use in a primary production business they conduct on land in Australia. If a taxpayer is not a primary producer or the asset is not used primarily in a primary production business, the ordinary capital allowance rules apply instead.

The 'primarily and principally' test refers to the concept that the fodder storage asset is used for the primary producer's own livestock.

Examples

The following is a list of examples of fodder storage assets for primary producers:

• Silos

• Liquid feed supplement storage tanks

• Bins for storing dried grain

• Hay sheds

• Grain storage sheds, and

• Above-ground bunkers.

Client opportunities

To be eligible for the immediate write-off, the fodder storage asset must be first installed and ready for use in the primary production business on or after 19 August 2018.

This change will align fodder storage asset deductions under the capital allowance rules with fencing assets and water facilities.

Information sourced using CCH iknow

Self-education expenses

Thu, 06 Sep 2018 23:00:00 GMT

Self-education expenses generally are deductible when two elements are met. The first of which is that the expense is from a "prescribed course of education". The second element is that the intention of the education is to maintain or improve the skills and knowledge required in the taxpayer's current income-earning activities.

However, typically an expense is not allowable where the intention is for new employment or a new income-earning activity. This includes study in a field in which the taxpayer is not yet engaged. For example, a practicing general medical practitioner would not be allowed to claim self-education expenses for a dermatology course. This would not be allowable as the study is designed to open up a new income-earning activity as a specialist.

Relevant facts and circumstances

A recent ruling from the ATO has discovered that "not yet engaged" doesn't particularly mean an entire course of study. Relevantly, a deduction is allowable for individual units of study within a complete course if it can be shown that all other elements of the self-education rules apply.

In the ruling, an individual was employed to deliver an engineering course with an education institution. Part of the duties required the individual to undertake scholarly pursuits and obtain new knowledge in order to deliver this course.

The individual determined that completing a law degree course was adequate in performing their duties.

The ATO was able to acknowledge that parts of this degree had a sufficient connection with the knowledge required to teach the class they were engaged to teach. This included the courses "Legal Conflict Resolution", "Civil Obligations" and "Construction Law". The reasoning behind this was that sections of the teaching materials related to anti-discrimination, contract terms and project management, which were parts of the engineering course.

Therefore, the individual was able to claim a deduction for self-education for parts of the degree which, on a whole, may be considered the obtaining of new knowledge.

Opportunities

This poses an opportunity to go through a more stringent look for individuals and the tax payers ability to make a claim under D4 in the personal income tax return.

An individual's current working situation may not automatically allow a deduction for a course of study undertaken. However, close scrutiny of these courses may entitle them to a deduction for some of the costs involved.

Information sourced using CCH iknow

Small business restructure roll-over

Thu, 30 Aug 2018 23:00:00 GMT

The purpose of the small business restructure roll-over relief is to make it easier for small business owners to change the legal structure of their business. This greater flexibility allows eligible small businesses to defer capital gains or losses that would otherwise be taxable when transferred. This extends this flexibility to pre-CGT assets, allowing the transferee the ability to deem an acquisition of an active asset to before 20 September 1985.

However, one such structure where ownership is not necessarily easily determined would be a discretionary trust. Since the economic interests in the assets of a discretionary trust are not fixed in proportion, it could not be completely determined that the restructure is eligible. In order for a small business restructure roll-over to apply for CGT purposes, the ultimate economic ownership of the assets must remain the same. Therefore, the assets must remain within the family group just before or just after the transaction.

How this can be completed, without failing the "genuine restructure" requirement necessary for the application of this division, has been shown by a recent private binding ruling.

Relevant facts and circumstances

An individual held pre-CGT land that was used in a primary production business since the date of purchase.

Initially, the business structure for the primary production business was the individual and their spouse.

Many years ago, the structure changed to a discretionary trading trust where the individual was the trustee along with their spouse and child. The individual and their spouse were the appointors of the trust, and the individual is listed as the primary individual in the Family Trust Election.

The proposal is to transfer the pre-CGT land, which is owned under multiple titles, into various discretionary trusts with corporate trustees. For each discretionary trust, a Family Trust Election will be in place with the individual listed as the primary individual.

After the transfer the land will continue to be used in the primary production business run by the family trust started many years ago.

Eligibility for small business restructure roll-over

The taxpayer advised the ATO in the private ruling that the purpose of the restructure is to:

• provide further asset protection by separating the ownership of assets from the individual who is integral to the trading trust, and

• enable additional options with financiers to be negotiated over longer terms to assist in the growth of the primary production operations.

These reasons were considered by the Commissioner of Taxation to be in accordance with a genuine restructure.

The Commissioner did not form the opinion that the transfer of the land to the shareholders was a restructure in the course of winding down or realising ownership interests in the land.

As a result, the Commissioner allowed the restructure to be eligible for roll-over relief. And, as the land was a pre-CGT active asset, the family trusts acquiring the land would retain the pre-CGT status.

LCG 2016/3

LCG 2016/3 deals with the ATO interpretation of the genuine restructure of an ongoing business as it relates to the small business restructure roll-over.

In the guideline, a small business will be taken to satisfy the condition where, among other things, there is no change in the ultimate economic ownership of any of the significant assets of the business for three years following the roll-over.

As mentioned through the ruling above, a client with a similar situation may have a significant opportunity to delay the realisation of a major pre-CGT asset.

Information sourced using CCH iknow

Online accommodation providers to be data matched

Thu, 16 Aug 2018 23:00:00 GMT

A Commonwealth Gazette notice has been issued stating that the ATO intends to collect data of individuals renting a premises via online accommodation websites.

These services are usually run via a platform, and data will be released for the 2016/17 to 2019/20 income years. Electronic data will be linked against Australian financial institution data to provide information regarding individual taxpayers to the ATO.

In particular, the online platform will be required to submit the following data relating to the listed accommodation:

• Name of owners

• Addresses (both rental property and residential)

• Date of birth

• Contact details, and

• Whether the entire premises or part was listed.

Also, the listing's bank account details will be provided as well. It is understood that the ATO will be able to match this bank account to an individual's tax file number. Generally, a tax file number is requested upon opening any bank account.

The activities of the listing from the online accommodation platform that will be made available include:

• number of nights booked

• price per night

• cancellations

• "blocked-out" dates, and

• gross rental income.

Risk mitigation steps

The objectives of the data matching program are based around promoting voluntary compliance of short-term rental income.

Clients need to be made aware that this information will be directly data matched going forward. This correspondence is necessary even if you have specific questions you ask your clients about whether they receive income from these sources.

Principal place of residence

If a client uses their principal place of residence for short-term accommodation, there is:

• a requirement to declare income received, and

• also a potential for capital gains event to apply on the eventual sale.

ITAA 1997 s 118-185 states that only a partial main residence exemption will apply should the property be used for income-producing purposes during the ownership period.

Rental properties

For properties that are not the main residence of the taxpayer, the ATO is making various investigations surrounding the listing dates from each provider. Therefore, the ATO is able to hypothesise the length of time in which the property in question was listed as "available for rent". The timing of when a property is available for rent is important from an income tax perspective.

Voluntary disclosure

Certain clients may not have been aware that these types of items were taxable in the past. As a result, an opportunity exists to amend previous year's returns as necessary.

In various protocols issued by the Commissioner of Taxation, individuals making voluntary disclosures in order to become compliant with the law are looked favourably upon. Generally speaking, individuals are not penalised when they are co-operative with the Commissioner.

Information sourced using CCH iknow

Testamentary trust minor’s distributions

Sun, 24 Jun 2018 23:00:00 GMT

WHAT THE TAX?!! Testamentary trust minor's distribution to be limited Potential changes for testamentary trusts A proposal from the 2018 Federal Budget is to limit testamentary trust income distributed to minors to be from assets solely from the deceased estate. From 1 July 2019, any income distributed to minors which are derived from assets "injected" from outside the deceased's estate may lose concessional tax treatment. At this stage, the proposal is not yet linked to any draft legislation published by the Treasury. This means that the proposal is subject to change, and we are yet to see any major detail surrounding intricate parts of the announcement. However, we will keep you informed when draft legislation and further details are released, and how it may affect you. Information sourced using CCH iknow

Potential changes for insurance in super

Sun, 17 Jun 2018 23:00:00 GMT

Proposed legislation will change life and TPD insurance arrangements for certain superannuation members.

From 1 July 2019, insurances (both life and TPD) for superannuation fund members will be offered on an "opt-in" basis for the following three categories of members:

• members with balances of $6,000 or less

• members under the age of 25 years, or

• members whose accounts have not received a contribution in 13 months and are considered inactive.

If you are in any of these categories, and you want to keep your life insurance or TPD coverage, you will need to "opt-in" when either the superannuation fund or the insurance company asks you to.

If your account would be considered "inactive", you can inform your superannuation fund that you elect to maintain your current insurance policy. This will ensure that your coverage continues in the event that this parliamentary Bill becomes law.

The most practical way to do this is to get in contact with your fund to find out what their preferred method of communication is. Electronic communications will be deemed valid if completed in the correct manner.

Information sourced using CCH iknow

Super guarantee opt-out for high income earners

Thu, 14 Jun 2018 23:00:00 GMT

Super guarantee opt-out for high income earners

The government has recently introduced legislation into parliament which will allow high-income earners to avoid the superannuation contributions cap.

The proposal is to allow an individual with multiple employers to stop one employer from making superannuation guarantee contributions. This option is only available where the individual is earning above $263,157 per year and it is likely they exceed the concessional contributions cap.

Currently, the concessional contributions cap is $25,000 per annum per person. Should the legislation receive royal assent in its current form it will commence from 1 July 2018.

Strict rules may apply in order to receive this allowance, which effectively will reduce paperwork for inadvertent breaches of the contributions cap.

Information sourced using CCH iknow

SMSF Non Arm’s Length Income

Thu, 07 Jun 2018 23:00:00 GMT

2018 tax planning opportunities for small business

Tue, 05 Jun 2018 23:00:00 GMT

As 30 June 2018 is fast approaching, we would like to advise you of some key tax planning opportunities that your business may be in a position to take advantage of before the end of the financial year.

Extension of instant asset write-off

It was announced, and expected to become law, that the instant asset write-off for small business will be extended 12 months to 30 June 2019. Entities with an aggregated annual turnover less than $10m will be able to immediately write-off an asset costing less than $20,000.

The change in the end date of 12 months reduces a potential cash-flow issue for small businesses.

Company tax cuts

Companies with annual aggregated turnover between $25m to $50m will have a reduced company tax rate of 27.5% from 1 July 2018. The change in tax rate will only apply to base rate entities.

Single touch payroll

Entities with 20 or more employees are required to report the following information to the ATO from 1 July 2018:

• withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld

• salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and

• superannuation contribution information on or before the day on which the contribution is paid.

For the first 12 months, reporting entities will not be subject to administrative penalties, unless first notified by the ATO.

Division 7A

Although only due to commence from 1 July 2019, a change to Division 7A rules has been proposed where unpaid present entitlements will be included as a deemed dividend.

This announcement is perhaps part of a bigger regime of changes that may become law. The extension of the Division 7A regime was announced in the 2016 Federal Budget, as well as in the Board of Taxation review into Division 7A.

This may be the best opportunity to put systems in place to ensure a favourable position for Division 7A loan holders.

Trust distributions

Trust tax planning should be undertaken as soon as possible. The resolution appointing or distributing income to beneficiaries needs to be made on or before 30 June 2018, or earlier if required by the trust deed.

Capital gains

Capital losses realised before year's end can be used to offset capital gains of that year.

Deferral of income

Subject to cash-flow considerations and anti-avoidance rules, income could be deferred to the following year, particularly if:

• income in the following year is likely to be lower, or

• tax rates for the following year are expected to be lower.

Note: For cash businesses - deferral of income can be risky, especially when the deferral puts them outside the ATO small business benchmarks.

Prepayments

Trading stock

Bad debts

A properly authorised resolution is required when writing off a bad debt and claiming a tax deduction. A GST adjustment may also be required on the original invoice.

Directors' fees

To claim a current year deduction for directors' fees, the company should have definitively committed itself to the payment, ie by passing a properly authorised resolution.

Superannuation

For the quarter ending 30 June 2018, employer superannuation contributions must be made before 30 June for a deduction to be available in the 2017/18 year.

For family businesses, it is important that annual caps for concessional and non-concessional superannuation contributions are not exceeded.

Information sourced using CCH iknow

2018 tax changes for small business

Mon, 04 Jun 2018 23:00:00 GMT

As 30 June 2018 is fast approaching, we would like to advise you of some key tax changes that your business may be in a position to take advantage of before the end of the financial year.

Company tax cuts from $25m to $50m

The 2017/18 corporate tax rate will be 27.5% for companies that carry on a business and have an aggregated turnover of less than $25m. This turnover threshold will be increased to $50m for the 2018/19 financial year.

Single touch payroll

Single touch payroll has been introduced into the Australian tax system to combat areas of taxpayer non-compliance of PAYG withholding and superannuation guarantee obligations. This new payroll system commences from 1 July 2018 and "substantial employers" are required to be compliant.

A "substantial employer" at 1 July 2018 is a business who has a headcount of 20 or more employee as at 1 April 2018.

Taxable payments reporting system for couriers and cleaners

The taxable payments reporting system for contractors will be extended to entities in the courier and cleaning industries from 1 July 2018.

Entities who engage contractors, or subcontractors, will need to provide additional reports to the ATO. This treatment has the same requirements as salary and wage employees.

GST on offshore suppliers of low value goods

The GST and customs duty exemption for imported low value goods less than $1,000 will end on 30 June 2018. From 1 July 2018, offshore suppliers of low value goods sold directly to consumers will be liable to pay GST on those supplies.

Company tax rate lower for "base rate entities" only (not yet law)

New legislation that restricts the lower company tax rate to base rate entities only is still under the parliamentary process. Pending approval, from the 2017/18 income year the 27.5% tax rate will apply to companies who are considered base rate entities. A base rate entity is a company who has less than 80% of assessable income from passive sources.

ATO debts now sent to credit reporting bureaus (not yet law)

Businesses with a tax debt greater than $10,000 may have that debt reported to credit reporting bureaus from 1 July 2018 by the ATO. This may affect a business' credit rating and their ability to obtain future finance in an attempt to increase the transparency of tax debts throughout business circles.

Similar business test (not yet law)

Legislation surrounding extending the same business test for company tax losses is yet to pass the parliamentary process. A company will be allowed to claim a prior year loss against business profits as long as it satisfies the similar business test from 1 July 2015. This test replaces the same business test, which was less flexible to pass.

The Bill has been blocked by the crossbench due to be similar business test being linked with the proposal for self-assessment of effective life of intangible assets.

R&D tax incentive proposed from 1 July 2018

The R&D tax incentive will be amended for income years commencing 1 July 2018. Under the announcement, the incentive will be based on uplift of the entity's corporate tax rate in the particular income year.

Also, changes will occur to companies that have an aggregated turnover of $20m or more. The rate of the R&D tax incentive will be determined by the company's "R&D intensity percentage". The intensity percentage is the rate of R&D expenditure compared to overall expenditure for the year, where a marginal rate of offset will be applied.

Budget announcements - but not due until 1 July 2019

The recent Federal Budget has plenty of announcements which may affect small businesses. However, these following Budget announcements are not due to commence until 1 July 2019.

– Individual's fame or image

All remuneration provided for the commercial exploitation of a person's fame or image will be included in the assessable income of that individual.

– Cash receipt limit for businesses

Cash receipts for a business will be limited to under $10,000.

– Director Penalty Notice regime

DPN regime to be extended to include GST, luxury car tax and wine equalisation tax, making directors personally liable for the company's debts.

– Australian government tenders

Businesses seeking to tender for large Australian government contracts will be required to provide information on the status of their tax obligations. Under the proposed arrangements, contracts over $4m (including GST) will be affected.

Information sourced using CCH iknow

2018 tax planning opportunities for individuals

Sun, 03 Jun 2018 23:00:00 GMT

As 30 June 2018 is fast approaching, we would like to advise you of some key tax planning opportunities you may want to take advantage of before the end of the financial year.

Deferral of income

Subject to cash flow considerations and anti-avoidance rules, consider deferring income to the following year, particularly if:

• income in the following year is likely to be lower, and

• tax rates for the following year are expected to be lower.

Capital gains

Where appropriate, consider realising capital losses by year's end so that they may be offset against realised capital gains of that year.

Donations

Where spouses are on different marginal rates, consider ensuring that all deductible gifts are made by the spouse in the higher tax bracket so as to maximise the benefit of the deduction.

Prepayments

In certain circumstances, an immediate deduction can be available for prepaid expenditure (eg interest on a loan relating to a rental property).

Personal super contributions

From 1 July 2017, an individual is able to make a personal deductible superannuation contribution regardless of whether they are self-employed or not. Individuals at a lower tax rate would need to make sure what contributions they can make before claiming a deduction. They can review their superannuation accounts to see their employer contributions to date.

Individuals need to be reminded that the concessional contributions cap is $25,000 for the 2018 financial year.

Additionally, individuals earning over $250,000 in taxable income need to be aware that Division 293 tax will apply to concessional superannuation contributions.

Spouse superannuation contribution rebate

Superannuation government co-contribution

For low income earners, subject to certain conditions, the government makes a co-contribution of up to $500 if a taxpayer makes after-tax contributions of at least $1,000. The co-contribution begins to phase-out at a taxable income of $36,813, and is not available for taxable income above $51,813.

Individuals could also take advantage on increasing the amount that can be withdrawn under the First Home Super Saver Scheme. However, the co-contribution itself would not be included.

Proposed changes to HELP repayments

The MYEFO report from December 2017 announced that new HELP repayments level may exist from 1 July 2018. As a result, students with a HELP debt may need to start repaying the debt on earning $45,000. Delaying some deductions where appropriate may remove the repayment in the next financial year.

Nearing retirement

When considering the timing of retirement, keep in mind the restrictions on the concessional treatment of employment termination payments that apply.

Property development and vacant land deductions denial

Using lead-time rules for non-commercial losses, as well as property development interest deductions, may only be available for this and next financial year. An announcement to remove these deductions from 1 July 2019 was announced in the Federal Budget. The proposal will also remove these interest amounts from the cost base of the asset.

Therefore, property development clients may need to act quickly to get their operations started.

Additional CGT discount available for investors

An additional CGT discount of up to 10% is now available for investors who invest in affordable housing from 1 January 2018. Conditions apply to get the additional discount, including holding the asset in affordable housing for three years.

Information sourced using CCH iknow

2018 tax changes for individuals

Thu, 31 May 2018 23:00:00 GMT

As 30 June 2018 is fast approaching, we have briefly summarised the important tax changes to remember when collating your tax information.

Car claims to be closely examined by ATO

As part of a broader focus on work-related expenses, the ATO will be examining large car deductions claimed under D1 for the 2017/18 income year. They are particularly concerned with taxpayers making fraudulent claims which are reimbursed by an employer.

The ATO has stated that enhanced technology and data analytics will identify claims which are unusual, with an intention to increase audit activity.

Travel deductions for rental properties not allowed

2017/18 is the first year in which deductions for travelling to a residential rental property will no longer be allowable for certain taxpayers. A deduction is not allowable for travelling to collect rent, maintain the property or complete an inspection, and extends to individuals, partnerships and trustees of a trust.

This measure will not prevent investors from engaging third parties such as real estate agents for property management services. These expenses will remain deductible.

Plant and equipment depreciation changes for rental property in effect

Deductions for depreciation of residential property fixtures will only be allowable for expenses actually outlaid by an investor, effective 1 July 2017. Plant and equipment purchased by an investor as part of a real property asset can only form part of the cost base.

Special exclusions from this may apply for off-the-plan purchases, owner builders with substantial renovations, and entities who carry on a business of letting residential rental properties.

Change for low income tax offset and LAMITO

A low and middle income tax offset (LAMITO) will be introduced from 1 July 2018. The offset will run in conjunction with the low income tax offset as a targeted reduction of income tax for Australian residents.

The LAMITO will provide an additional offset of up to $200 for individuals on a taxable income of $37,000 or less. Taxpayers up to $48,000 will get an increased LAMITO up to the maximum amount of $530.

The maximum LAMITO will be available for incomes up to $90,000, and will phase out for individuals with a taxable income of $125,333.

The LAMITO will be available for four years, ending with the 2021/22 income year. At this point, further income tax reductions will absorb the LAMITO.

New child care subsidy commencing

Families will need to be aware of the changes associated with the implementation of the new Child Care Subsidy due to be law from 1 July 2018. The new subsidy will replace the Child Care Benefit and Child Care Rebate.

The Child Care Rebate is not income tested and allows a 50% out-of-pocket rebate up to $7,500 per child. The rebate may have been reduced by the Child Care Benefit, which reduced the fee based on a family's income.

CGT main residence denial for foreign residents still in transitional rules

Individuals who are foreign tax residents will no longer have access to the CGT main residence exemption from 9 May 2017. The exemption is removed if the owner is a foreign resident for tax purposes on the date of the event. However, grandfathering rules are still in existence up to 30 June 2019, where foreign residents who held property at the original date can still access the exemption.

"Catch-up" superannuation contributions to begin next year

Individuals with a total superannuation balance of less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2018. Unused amounts will be carried forward on a rolling basis for a period of five consecutive years from 1 July 2018.

Individuals making extra superannuation contributions would be better off this year making the maximum contribution available to them.

Downsizer contributions available from 1 July 2018

Proceeds arising from an exchange of contracts occurring before 1 July 2018 cannot be made as a downsizer contribution, even if the settlement of the contracts occurs on or after 1 July 2018.

Information sourced using CCH iknow

SMSF 2018 planning guide

Tue, 29 May 2018 23:00:00 GMT

The end of the financial year is approaching. There have been significant changes to superannuation in the past two years. Here are key superannuation considerations that need to be made prior to 30 June 2018.

Pensions

Ensure the minimum pension requirements are paid. If the minimum payment is not met, the pension will cease and the fund will lose its tax exemption on earnings.

Transition to retirement pension payments need to fall within the minimum and maximum amount. This information is provided to you annually with your compliance work. As the tax exemption on investment earnings have been removed, consideration needs to be given as to whether the TRIP continues.

Concessional (Tax Deductible) Contributions

The maximum concessional contribution cap for the 2018 financial year is $25,000. This applies to all members as transitional caps have been removed.

Fund members between the age of 65 – 74 need to pass the work test in order to make member concessional contributions.

The removal of the 10% rule means that if eligible, everyone is able to claim a deduction for personal contributions

Individuals with a superannuation balance less than $500,000 will be allowed to make additional catch-up concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2018. Amounts are carried forward on a rolling basis for a period of five consecutive years, and only unused amounts accrued from 1 July 2017 can be carried forward.

Non-Concessional (Non-tax deductible) contributions

The maximum member non-contribution is $100,000. Members can bring forward three years' worth of contributions if under the age of 65. This means that up to $300,000 can be contributed in one year.

Members are not permitted to make non-concessional contributions if their total superannuation balance exceeds $1.6M at 30 June 2017.

Property valuations

Funds are required to value property assets at the end of each financial year. Asset valuations are a key component in preparing accurate financial reports. Depending on the situation, a valuation maybe undertaken by a registered valuer or a person without formal qualifications but who has specific experience or knowledge in a particular area.

Unpaid present entitlements

Sun, 27 May 2018 23:00:00 GMT

The government has announced in the 2018/19 Federal Budget that unpaid present entitlements (UPE) will come within the scope of Div 7A from 1 July 2019. This changes the current guidance that the ATO does not see a provision of financial accommodation where a UPE is held in a sub-trust for a private company.

Background

An "unpaid present entitlement" for the purposes of Div 7A occurs where a closely-held trust (usually a family discretionary trust) distributes income to a "bucket company". The bucket company pays tax usually at 30%, instead of the higher marginal tax rates of the individual beneficiaries.

Division 7A will apply under Subdiv EA if the trust also has a debit loan to the individual beneficiaries. As the private company will also have a debit loan to the trust, it is assumed that a provision of financial accommodation has been granted.

Also of note is when private companies do not "call" the present entitlement from the trust who allocated it to them. It was determined by the ATO on 16 December 2009 that this situation is also a provision of financial accommodation which attracts Div 7A.

Current UPE loan agreements

Under the rules allowed by the ATO from TR2010/3, a UPE can be held on sub-trust for the sole benefit to the private company. In order for Div 7A to not apply, certain provisions must be adhered to, including putting the UPE on commercial terms.

The first option granted by the ATO is for UPE's at 30 June 2010 to be put into a 7-year interest-only loan at the benchmark interest rate by 30 June 2011. Interest would be charged and payable each year, meaning that the first year of UPE's principal amounts were due to be repaid at 30 June 2018. A further option exists for the principal amount to be moved into a complying loan

Budget announcement

The announcement is clear in that the government's intention is to put unpaid present entitlements on the same footing as a loan for Div 7A purposes. Hence, any trust distribution from a closely-held trust to a private company would commence accruing interest immediately following the distribution announcement, which is usually made on 30 June each year.

What we are unsure of at this stage is how far the measures intend to go. Also of note is the announcement to include 2016 Federal Budget measures along with this announcement as it goes through parliament. One of these measures was to simplify Div 7A loan arrangements, which may include one amalgamated loan to be paid off in 10 years.

Client opportunities

Clients have an opportunity to get their affairs in order prior to commencement of 1 July 2019, the intended start date of any legislation.

This may include getting current UPE's into an interest-only loan, and making sure any UPE loans about to expire are included in a new loan agreement compliant with s 109N.

However, be warned and informed that major change to Div 7A laws may apply from 1 July 2019. This may include widening the scope of Div 7A to include pre-December 1997 loans. Also, the amalgamation of all loans to be repaid by a certain date may introduce a need to make larger repayments to companies from directors.

Further information will be provided when available.

Information sourced using CCH iknow

SMSF audit cycle to change

Thu, 24 May 2018 23:00:00 GMT

An announcement from the 2018 Federal Budget states that the government intends to change the SIS regulations which require an SMSF to be audited by an approved auditor every year.

Currently, the trustee of a superannuation entity must ensure that an approved auditor is appointed to give the trustee a report in the approved form of the operations of the entity for that year.

In addition, the trustee of a superannuation entity must provide the auditor with any document (as may be requested in writing by the auditor) that is relevant to the preparation of the report within 14 days of the request being made.

The approved form of audit report must cover various areas of superannuation law, such as the fund's compliance with areas of the SIS Act 1993. Also, a financial audit must be completed and the auditor must be satisfied that the financials represent a true and fair view of the position of the fund for the year in question.

Proposed changes

The proposed change is that a self-managed superannuation fund may be eligible to get an audit report once every three years should they meet certain criteria.

The first criteria is that they have had three consecutive income years with an unqualified audit report.

The second criteria is that the SMSF must have lodged its annual returns on time in those same three consecutive years.

Risk mitigation steps

There appears to be no change in policy surrounding the stringent record-keeping obligations of SMSF trustees imposed under the SIS Act 1993. This includes:

· keeping accurate and accessible accounting records that explain the transactions and financial position of the fund for a minimum of five years

· preparing an annual operating statement and an annual statement of the financial position of the fund, and keep those records of a minimum of five years

· keeping minutes of trustee meetings and decisions, including changes to trustees for a minimum of 10 years, and

· keeping copies of all annual returns lodged and reports given to members for a minimum of 10 years.

Also, there is a strict penalties that apply to non-lodgement of various superannuation fund reports that are not part of this announcement. That includes events-based reporting, lodgement of annual return and reporting of contributions received to the regulator.

Information sourced using CCH iknow

Vacant land expenses

Thu, 17 May 2018 23:00:00 GMT

From 1 July 2019, a tax deduction will not be allowed for expenses associated with holding vacant land. These denied deductions will not be allowed to carry forward for a later income year. Also, the expenses will not be allowed to be included in the cost base for capital gains tax purposes.

Current treatment

The deductibility of interest expenses under the general deduction provision in ITAA 1997 s 8-1 has been the subject of much litigation. A majority of the High Court concluded in Steele v DFCT 99 ATC 4242 that interest incurred during the construction phase of a development when no income is being derived is of a revenue (not capital) nature, and so potentially deductible. This means that an income tax deduction may be allowable for interest borrowed to construct an income-producing asset, such as a block of flats or a factory, even where the interest is paid during the construction period when no income is being derived from the project.

Also, the third element of the cost base of an asset is the costs of owning the asset, as long as the asset was acquired after 20 August 1991.

Costs of owning an asset consist of any expenditure incurred by a taxpayer to the extent to which it is incurred in connection with the continuing ownership of the asset. These costs include interest on money borrowed to acquire an asset, costs of maintaining, repairing and insuring an asset, rates and land tax, interest on money borrowed to refinance the money borrowed to acquire an asset, and interest on any money borrowed to finance capital expenditure incurred to increase an asset's value.

Proposed new treatment

The 2018 Budget announcement states that any expenses relating to vacant land are not deductible and cannot be added to the asset's cost base. This measure will apply to land held for residential or commercial purposes. However, the "carrying on a business" test will generally exclude land held for commercial development.

Under the proposal, the expenses relating to holding costs will only become deductible where:

· a property has been constructed on the land, it has received approval to be occupied and is available for rent, or

· the land is being used by the owner to carrying on a business, including a business of primary production.

Risk mitigation steps

This announcement shows the intention of the government to stimulate the construction of buildings in a timely manner. Also, it significantly reduces the tax incentives for "land banking", which is an investment strategy to purchase and hold land until such time as it is re-zoned for construction purposes.

For clients who are holding land in this manner, or are preparing to commence a construction project, timing is of crucial importance. As the measure is only intended to commence from 1 July 2019, a window of 13 months exists for construction to get underway and completed.

Despite these future detriments to constructing buildings for rent or sale, it should not be a complete deterrent where large gains could be made. However, adjustments to investment calculations should be factored into future decision making.

Information sourced using CCH iknow

Work test exemption

Sun, 13 May 2018 23:00:00 GMT

From 1 July 2019, an exemption from the work test will apply for the first year in which an individual would be required to pass it.

Under SIS Regulation, a superannuation fund is able to accept a contribution on behalf of a member so long as the member is under 65 years of age. However, if the member is over 65 years of age, varying rules apply.

If the member is over the age of 65, but under the age of 75, a superannuation fund may accept any contribution that is a mandated employer contribution. A mandated employer contribution would include those that are necessary to be made under superannuation guarantee rules.

However, other contributions such as non-concessional contributions can only be accepted if they are in accordance with Part 3 of SIS regulation. It states that the member must have been gainfully employed for at least 40 hours in a 30 consecutive day period in that financial year.

Proposed changes

Under the proposal, an individual over 65 will be able to make contribution in the first year that they do not meet the work test requirements.

Practically, an individual who retires with an Employment Termination Payment does not have to make a quick decision about putting the money into superannuation. They are able to wait and see what their financial situation looks like after their retirement before making any final decisions relating to superannuation.

Example

Peter is 66 years of age and during the 2019/20 financial year, he ceased working from his employer after many years' service. He received a golden handshake, as well as payments for unused leave entitlements.

After finishing employment, Peter was unsure what to do with the final payment he received, as well as the next stage of his life in general. As a result, Peter went on a holiday for a number of months. Upon return, he decided that he would sell his main residence and move from the city to a coastal town elsewhere in the state.

After paying down his debt, transaction and moving costs, Peter had a fair surplus of funds left over.It is now the 2020/21 financial year.

Downsizer contribution - Peter is able to make a downsizer contribution as he is over 65 and has met the other requirements to make the contribution. It is excluded from being a non-concessional contribution.

Non-concessional contributions - Peter is able to make a further contribution to superannuation for the balance of his excess funds. He will be able to utilise an exception to the general rule that you cannot make a non-concessional contribution after age 65. This is because in the 2020/21 financial year, it is the first year he would be ineligible to contribute due to not passing the work test.

After the dust has settled, Peter is able to have all his retirement funds in one easy to understand and review financial product, which is his wishes.

Information sourced using CCH iknow

Personal income tax cuts

Thu, 10 May 2018 23:00:00 GMT

A seven-year personal income tax plan will be implemented in three steps, to introduce a low and middle income tax offset, to provide relief from bracket creep and to remove the 37% tax bracket.

Low and middle income tax offset

A low and middle income tax offset (LAMITO) will be introduced as a non-refundable tax offset of up to $530 per annum to resident low and middle income taxpayers from 2018/19 to 2021/22.

The LAMITO will provide a benefit of up to $200 for taxpayers with taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530. Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530. For taxpayers with taxable income from $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.

This offset will be received as a lump sum on assessment after an individual lodges their tax return. It will run in addition to the existing low income tax offset.

Middle income relief from bracket creep

From 1 July 2018, the top threshold of the 32.5% tax bracket will be increased from $87,000 to $90,000.

From 1 July 2022, the low income offset will be increased from $445 to $645 in accordance with the removal of LAMITO. The increased low income offset will be phased out at a rate of 6.5 cents per dollar for incomes between $37,000 and $41,000. The remaining $385 low income offset will then be phased out at 1.5 cents per dollar for income between $41,000 and $66,667.

The change in the low income tax offset will run in conjunction with a change in the middle income brackets. The top of the 19% tax bracket will increase from $37,000 to $41,000, and the top of the 32.5% tax bracket will increase again from $90,000 to $120,000. These brackets are due to change from 1 July 2022.

Removing the 37% tax bracket

The 37% income tax bracket will be removed from 1 July 2024.

From 1 July 2024, the top threshold for the 32.5% tax bracket will increase from $120,000 to $200,000. Taxpayers will pay the top marginal tax rate of 45% for taxable incomes exceeding $200,000, and the 32.5% bracket will apply from $41,000 to $200,000.

Information sourced using CCH iknow

Instant asset write-off extended

Tue, 08 May 2018 23:00:00 GMT

A small business entity is classified as a business with an aggregated annual turnover (the total normal income of the business and of any associated businesses) of less than $10m. A small business entity can enjoy many income tax concessions, one of which being a simplified depreciation regime.

Under simplified depreciation rules, assets costing less than the "instant asset write-off" threshold are written off in the year they are bought and used, or installed ready-for-use.

In the 2018/19 Federal Budget, the current "instant asset write-off" threshold of $20,000 was extended. Previously due to expire on 30 June 2018, the $20,000 immediate write-off is available for another 12 months to 30 June 2019 .

The instant asset write-off applies where:

• the entire cost , excluding GST, of the asset is less than the threshold

• trade-in amounts are ignored

• the asset may be new or second-hand.

Also, for the instant asset write-off to apply for small business, the amount written off must be in the same proportion of the business use percentage. That is, an asset costing $18,000 which is used 50% of the time for business purposes can only be written off immediately for a total of $9,000.

Clients who were looking to utilise the immediate deduction are not pushed into a cashflow issue prior to 30 June 2018 by having the write-off extended. In particular, there is no need for a "mad rush" to get assets installed prior to 30 June this year .

Another year extension means that certain small businesses may be eligible from 1 July 2018 to write-off the entire amount in their small business depreciation pool.

The entire balance of the pool can be deducted in an income year when the balance before the calculation of depreciation is less than $20,000. The depreciation calculation comes in after adding new additions that would have cost more than $20,000 in the 2018/19 income year.

Also noted in the 2018/19 Federal Budget is that the current suspension of small business depreciation "lock-out" rules will also continue for another 12 months to 30 June 2019.

Generally, a taxpayer who stops using (or opts-out of) simplified depreciation even though they are eligible to do so must stay out of the regime for five years. These lock-out rules currently do not apply as the $20,000 instant asset write-off is in place.

Information sourced using CCH iknow

Car claims to be closely examined

Thu, 03 May 2018 23:00:00 GMT

Work-related car expenses will be closely scrutinised by the ATO for individuals claiming in the 2017/18 income year. A recent media release has highlighted the ATO's concerns that taxpayers are either over claiming or incorrectly calculating car expenses. This concern will be expressed by additional audit resources being used for the upcoming tax lodgment season.

It is the ATO's intention to utilise improved technological enhancements along with data analytics to target unusually high claims based on similar occupational and income models.

The focus of the upcoming ATO scrutiny will be based on three "golden rules" they have identified.

(1) The taxpayer must have spent the money themselves and was not reimbursed.

(2) The car claim must be directly related to earning assessable income.

(3) There must a record to prove it.

This year it is important to ensure that your clients are fully aware of their substantiation requirements when making a car expense claim.

Cents per kilometres method

A deduction is calculated at a prescribed rate and is allowable for up to 5,000 km of income-producing use of the car. The maximum cents per kilometre claim can be made even if more than 5,000 business use kilometres. Under this method, full substantiation is not required, however, the deduction must be calculated based on a reasonable estimate of income-producing kilometres.

"Log book" method

A deduction for a percentage of the total car expenses is allowed as long as odometer records are kept. The odometer records must be kept every five years, and containing details of all business trips for a period of 12 weeks. For the 2017/18 income year, a log book will only be valid if it commences from 1 July 2013.

All expenses relating to the car must be kept in order to substantiate the log book claim, with the exception of fuel and oil costs. Fuel and oil costs can be substantiated by reference to odometer records, using a reliable estimate for distance and bowser price.

Information sourced using CCH iknow

CGT exemption for main residence previously owned solely by spouse

Sun, 22 Apr 2018 23:00:00 GMT

A private binding ruling demonstrates that a taxpayer maybe CGT exempt when disposing their share of a property that they did not own until after they ceased living in it, if their spouse nominates that property as their main residence for the relevant period.

The basic case is that a taxpayer's main residence maybe fully exempt from CGT when they dispose of their interest under ITAA 1997 s 118-110.

In this scenario, the taxpayer's spouse purchased a dwelling, Dwelling A. The taxpayer moved into Dwelling A with the spouse. After a few years, the couple moved out to travel around Australia and rented out Dwelling A to a tenant for less than six years.

On return from travelling, the taxpayer purchased land and built another house. The spouse transferred 50% ownership interest in Dwelling A to the taxpayer. The taxpayer and the spouse subsequently sold Dwelling A.

According to the ruling, there is nothing to prevent either spouse from nominating the other's dwelling as their main residence even though they did not have an ownership interest in that dwelling.

In the present situation, because Dwelling A was the spouse's main residence at relevant times, the taxpayer is entitled to nominate Dwelling A as their main residence for that period as well. This is so notwithstanding that the taxpayer did not acquire a legal ownership interest in the property until after the taxpayer ceased living in the property.

In addition, if the taxpayer nominates Dwelling A as their main residence, the absence choice in ITAA 1997 s 118-145 will also apply, such that the taxpayer will be entitled to a full main residence exemption on their share of the eventual sale of the property.

Consideration should be given as to ownership of main residence between spouses and their entitlement to CGT exemption.

Information sourced using CCH iknow

Fixing interest rates

Wed, 11 Apr 2018 23:00:00 GMT

To fix, or not to fix, that is the question.

With fixed rates as low as they are, and speculation of a rate rise in the later part of 2018, it is understandable why people may be considering fixing their loan.

If you are thinking about fixing the interest rate on part of, or your whole loan, remember that there are many things to think about before locking it in.

Here are some possible pros and cons when fixing a loan.

Pros

· Certainty of monthly repayments for the term of the fixed-rate period

· Insurance against rate rises, which will increase your loan repayments

· The peace of mind that the above two outcomes provide

· You can fix your whole loan or part of it – giving you greater flexibility

Cons

· Additional repayments may attract penalties

· If a loan is paid out during a fixed-rate term, penalties may be incurred

· If interest rates fall, you will not receive the benefits of lower minimum repayments

· Redraw and Offset accounts are commonly excluded from fixed rate offers

So ask yourself.

Are you likely to make additional repayments or sell the property in the short term?
Do you regularly use an offset or redraw facility?
Are you happy to pay a slightly higher rate to secure a stable loan repayment?

Deciding whether to fix or not depends upon your plans for the future.

Moving overseas

Wed, 11 Apr 2018 23:00:00 GMT

WHAT THE TAX?!!

Moving overseas? You may have to pay more tax

A dual citizen has been declared a non-resident of Australia by the Commissioner of Taxation via a Private Binding Ruling request. As a result of this, the employer of the dual citizen is required to withhold tax on salary at the non-resident tax rate.

In order to be classified as a tax resident of Australia, an individual is required to meet the definition as defined in ITAA 1936 s 6(1) . The definition offers four tests to use to ascertain whether an individual is a tax resident of Australia, and includes the:

• resides test

• domicile and permanent place of abode test

• 183-day test, and

• Commonwealth superannuation fund test.

The "resides test" is the primary test for residency. If this test is failed based on relevant factors, then the other three tests are applied.

Relevant facts and circumstances

The individual:

• was a dual citizen of Australia

• moved overseas with their spouse and children

• was employed by an Australian company to complete work serving Australian customers

• maintained an Australian bank account to receive their salary

• had no occupation in the foreign country

• was only renting in Australia before moving overseas

• shared a house with in-laws in the foreign country, and

• advised Medicare that the family had departed Australia

Decision

In the ordinary concepts (resides) test for residency, not one of the eight factors has greater weight to the others when making a determination. The weight usually becomes apparent when looking at everything as a whole.

The eight factors taken into account by the courts and tribunals are:

• physical presence in Australia

• nationality

• history of residence and movements

• habits and "mode of life"

• frequency, regularity and duration of visits to Australia

• purpose of visits to or absences from Australia

• family and business ties with Australia compared to the foreign country concerned, and

• maintenance of a place of abode.

Based on the relevant facts for the individual, residency pointed towards being a citizen of Australia and having all business ties related to Australia via employment. The individual had no other major income from employment or business purposes. The individual was being paid into an Australian bank account presumably in Australian dollars.

Non-residency pointed towards the individual's immediate family (ie spouse and children) living in the foreign country with extended family. While this could be considered usual and non-determinative because circumstances may have been fortuitous, the individual informed Medicare that they were leaving Australia indefinitely.

As noted, all signs generally pointed towards residency, due to all the work being Australian-sourced. Perhaps the individual was working remotely and was back in the foreign country with family for an unknown period for personal reasons.

The individual telling Medicare that the family was leaving indefinitely was the factor which tipped the scales to the individual being a non-resident. The individual also failed the other three tests.

Client application

As the individual is an employee non-resident, their salary is now taxed at the non-resident marginal rates. Also, this higher rate of tax is withheld from the individual's salary as part of the payroll process.

This could result in a few further issues, including:

• whether the individual is able to claim a rebate of Australian tax paid in the foreign country

• the individual no longer be eligible to receive superannuation guarantee, and

• the employer being aware that the PAYG withholding has to occur at the higher rate.

All these factors could considerably change the overall outcome for the individual salary package, including where superannuation guarantee amounts may be taxed at 37% or even higher.

Client opportunities

If applicable, the individual may look to a different structure and provide the Australian company with services under a contractor arrangement. However, this can be tricky in instances where the individual was previously employed as an employee. Payments for contracted services to a foreign contractor typically do not have withholding amounts applied.

The individual may want to review their options in this situation, particularly in the foreign country.

Information sourced using CCH iKnow

Single Touch Payroll

Thu, 05 Apr 2018 23:00:00 GMT

WHAT THE TAX?!!

Single touch payroll for everyone?

Single Touch Payroll (STP) has been introduced into the Australian tax system to combat areas of taxpayer non-compliance of PAYG withholding and superannuation guarantee obligations. Past legislation has been enacted which brings this new payroll system into commencement from 1 July 2018.

Currently as it stands, only "substantial employers" will be necessary to implement STP (TAA 1953 s 389-5). However, new legislation has been tabled in parliament that will mean that every employer will be required to use and lodge STP software. On enactment, all employers will be required to use STP from 1 July 2019.

Headcount

A "substantial employer" is one who employs 20 or more employees, or is a member if a wholly-owned group, and the group has 20 or more employees in total. Contractors and other individuals that are employees under the extended meaning of "employee" in the Superannuation Guarantee (Administration) Act 1992 are excluded from the headcount if they do not meet the ordinary meaning of employee. A checklist on whether an individual is an employee is available here.

The headcount, which determines whether an employer is a "substantial employer", must be undertaken as at 1 April 2018.

Headcount, as defined by the ATO, is as follows as at 1 April 2018:

• full-time employees

• part-time employees

• casual employees who are on the payroll at 1 April and worked at any time during March

• employees based overseas

• any employee absent or on leave (whether paid or unpaid), and

• seasonal employees (if necessary).

Do not include any independent contractors or staff that is provided by a third party labour hire organisation. Also, company directors are not included unless they are also employees.

This reporting will continue indefinitely even if the employer goes below 20 employees during the 2018/19 income year.

Reporting requirements

Employers will need to report the following through their payroll system:

• payments made to individuals and amounts withheld from those payments

• payments of salary or wages and ordinary time earnings (OTE), and

• employee superannuation contributions.

Also, pending the passing of new legislation, other amounts such as "sacrificed ordinary time earnings amounts" and "sacrificed salary and wages amounts" will be reportable. The objective of these additional reporting requirements ensures that superannuation guarantee is not reduced by amounts salary sacrificed. These amounts, along with ordinary time earnings and superannuation contributions can be reported either separately or combined. Either way, the ATO has stated that they will be aware of an employee's overall package from which they work out their superannuation guarantee.

Payments not made through the payroll system (eg contractor payments, payments of superannuation income, payments of dividends, interest and royalties, etc) are excluded.

Employers will not be subject to administrative penalties for the first 12 months, unless first notified by the Commissioner.

PAYG payment summaries

For employers who are required to use STP from 1 July 2018, there will no longer be a requirement to provide employees with PAYG payment summaries at year end.

Essentially, the employees will be able to see their payment summaries at year end online from myGov and also they will be available on the Tax Agent Portal.

Information sourced using CCH iknow