February 2024

This Newsletter discusses financial strategies related to Australian taxation and superannuation:

CGT Discount:

• Delaying the sale of a Capital Gains Tax (CGT) asset for at least 12 months can qualify you for a 50% CGT discount.
• CGT assets include various items such as land, buildings, shares, leases, cryptocurrency, and more.
• The discount is applicable if you are an Australian resident for tax purposes and have owned the asset for at least 12 months.
• The CGT event (e.g., sale) date is crucial, and the discount is not available for capital gains made by foreign or temporary residents after May 8, 2012.

Super Tax Offset for Spouse Contributions:

• Making non-concessional contributions to your spouse’s superannuation can lead to a tax offset.
• Eligibility criteria include being married or in a de facto relationship, both being Australian residents, and the receiving spouse’s income being $37,000 or less for the full tax offset.
• Contributions of up to $3,000 can qualify for an 18% tax offset, with a maximum offset of $540.
• Contribution limits exist, and certain restrictions apply based on the partner’s super balance and income.

Joint Tenants vs. Tenants in Common:

• Explains the differences between joint tenants and tenants in common when buying property with another person.
• Joint tenants own the property equally, and on the death of one, the survivor(s) automatically inherit the deceased’s share.
• Tenants in common have defined ownership shares, and the deceased’s share passes to their beneficiary as per their will or state law.
• Both ownership structures can coexist if there are three or more owners on the title.

Superannuation Downsizer Contribution:

• The downsizer contribution rules allow individuals aged 55 and over to sell their home and contribute up to $300,000 ($600,000 for a couple) to their superannuation.
• No work test requirement, and there is no upper age limit for making downsizer contributions.
• Eligibility criteria include owning the property for at least 10 years, it being the main residence, and being in Australia.
• Not required to buy a new home with the sale proceeds.

If you would like to read the full newsletter, please click on the link.

November 2023

This newsletter provides a comprehensive overview of the tax treatment of Christmas parties and gifts, as well as the considerations and implications of refinancing loans and consolidating superannuation accounts.

Christmas Gifts and FBT

The key concepts highlighted include the criteria for fringe benefits tax (FBT) on Christmas parties, distinguishing between on-site and off-site events and the tax implications for employees, associates, and clients. The treatment of gifts as “entertainment” or “non-entertainment” items is also discussed in detail, with a focus on FBT and tax deductibility.

Refinancing

The newsletter goes on to explore the pros and cons of loan refinancing, emphasizing the potential benefits of lower interest rates and access to additional loan features, while also addressing the associated fees and potential impacts on credit scores.

Furthermore, it explains the tax implications of loan refinancing, emphasizing that interest deductibility remains unchanged when switching loans, and how interest on a new loan can be deductible when used to repay an existing loan in an income-producing activity.

Consolidating Your Superannuation

The topic of consolidating superannuation accounts is covered, explaining the advantages of having a single super account to reduce fees and simplify management. The preservation rules and potential tax implications are also discussed.

The newsletter concludes by offering guidance on how to initiate the transfer of superannuation accounts and highlights the importance of considering various factors such as fees, insurance, and restrictions when making this decision.

October 2023

Cryptocurrency

Crypto assets are a digital representation of value that you can transfer, store, or trade electronically. Crypto operates independently of central authorities but is subject to standard tax rules; no special rules exist. Tax treatment depends on acquisition, holding, and disposal methods. For tax purposes, crypto assets are not a form of money.

Taxation

Using or transacting with crypto assets will determine how you treat them for tax purposes. The most common use of crypto assets is as an investment (investors acquire and hold crypto assets to make a financial profit from holding or disposing of them). Generally, for investors:

• crypto assets are taxed as CGT assets, including for self-managed super funds (SMSFs) investing in crypto assets.
• Rewards for staking crypto are ordinary income for tax purposes.

Other considerations for businesses that trade in crypto assets are noted in the newsletter.

Cashflow Forecasting

Cash flow forecasting is a method of predicting cash inflows and outflows to see how much money you’ll have in the future. It provides a window into your business’s financial health and can help plan spending.

The following has been discussed in the newsletter:

• Difference between a cashflow forecast and a cash flow statement.
• Benefits of cashflow forecasting.
• Key components of cashflow forecasting.
• How often should businesses do a cashflow forecast.

CGT Discount

• One of the most generous features of the capital gains tax (CGT) regime – which may apply to the disposal of assets is the CGT general discount. It can reduce your CGT liability by up to 50% if applicable.
• Eligible taxpayers include individuals, superannuation funds, and trusts (depending on the beneficiary’s eligibility). The most notable omission is companies – they do not qualify for the 50% discount.
• This newsletter points out how crucial timing can be for an entity to be eligible for the 50% discount along with other important details which help identify the assets that are Taxable Australian property.

Deduction for Superannuation Contributions

You’re eligible to claim a deduction for personal super contributions if:

1. You made the contributions to your fund that was not a:

• Commonwealth public sector super scheme in which you have a defined benefit interest.
• constitutionally protected fund (CPF) or other untaxed fund that would not include your contribution in its assessable income.
• super fund that notified us before the start of the income year that they elected to treat all member contributions to the super fund as non-deductible.

2. You meet the age restrictions. If you are under 67, you meet the limits. If you are 67 to 74, you must meet the work test, meaning you must work 40 hours or more in a consecutive 30-day period in the financial year to make contributions.
3. You have given your fund a notice of intent to claim in the approved form.
4. Your fund has validated your notice of intent form and sent you an acknowledgement.

Gifts and Donations

You can only claim a tax deduction for a gift or donation if you satisfy the following conditions.

• You donated to an organisation with the status of a deductible gift recipient (DGR). Not all charities are DGRs.
• You voluntarily transfer money or property without obtaining or expecting any material benefit or advantage in return
• The donation was in the form of money or property. This can include financial assets such as shares.
• You maintained appropriate records for your gift or donation.

eInvoicing

eInvoicing is the digital exchange of standardised invoice information between suppliers’ and buyers’ software through the secure Peppol network. eInvoicing is more efficient, accurate and safe and is different from sending and receiving invoices as PDFs and emails.

Functionality of eInvoicing:

• Eliminates the need for printing, posting, or emailing paper-based or PDF invoices for suppliers.
• Eliminates manual entry or scanning of invoices into software for buyers.
• Businesses can connect once and immediately transact with everyone on the same network, no matter what eInvoicing-enabled software they use.

Benefits of eInvoicing:

• Cost saving since eInvoicing reduces manual data entry and enables process automation.
• Enhances overall business security by countering common scams like payment redirection and false billing.
• Improves cash flow through faster processing and quicker payments.

September 2023

GST refresher for your business

Most businesses are familiar with how GST works. But here are a few reminders to make sure you’re being compliant and maximising your GST claims.

GST is paid at each step in the supply chain, and businesses charge GST in the price of goods, services or anything else they supply. If an entity is registered for GST, it can claim input tax credits from the ATO for any GST included in the price paid for goods, services or anything else bought for the business. However, GST-registered enterprises’ liability to pay GST rests on the supplier of goods and services, not on the consumer. In other words, even if the business does not include the GST in the price of goods and services supplied, it is still liable to pay it to the ATO.

A few of the key issues related to GST have been detailed in this newsletter which include second-hand goods, deposits, purchasing a car for more than the car limit and cancelling your GST registration.

Allowances

Do your employees travel for work?

The ATO has issued new guidance to help employers determine whether to pay employees a travel or living-away-from-home allowance (LAFHA). There are some key differences between the treatment of the two types of payments:

• A travel allowance will generally need to be included in your employee’s assessable income and may require tax withheld. It covers accommodation, food, drink or incidental expenses an employee incurs when they stay away from their home overnight or for a short period to carry out their duties. It’s generally deductible to the employer.
• A LAFHA payment you provide to your employees may be considered a LAFHA fringe benefit. Where this is the case, it must be reported in your annual fringe benefits tax (FBT) return. LAFHAs are paid to compensate employees for additional living expenses they incur if they’re required to live away from home for an extended period for work purposes. In certain circumstances, such payments may be exempt from FBT for the employer and not taxable to the employee!

This newsletter specifies some key differences between the two types of payments.

Accommodation Sharing and Tax

The ATO has reminded taxpayers of the sharing economy tax implications when providing accommodation.

The sharing economy provides an excellent opportunity for individuals with spare rooms or spare entire properties to rent out space and earn rental income using facilitators such as Airbnb. The ATO has announced a new data-matching program specifically targeting around 190,000 taxpayers receiving income from short-term rentals. The ATO said it would examine the information provided by online platforms like Airbnb to identify taxpayers who had left out rental income and over-claimed deductions.

If you are renting out rooms of your home, or indeed entire properties – whether via Airbnb or another facilitator or certainly just privately – there are many tax issues which has been stated in this newsletter.

If you would like to read more, please click on the newsletter link.

2023-2024 Federal Budget

The 2023-24 Federal Budget was handed down on 9 May. It contains changes to business and personal taxation, superannuation, social security entitlements, as well as the cost of living relief. Following are some of the headline measures, many of which are subject to enabling legislation.

Business

Less generous depreciation

Temporary full expensing (TFE) will cease and be replaced by a $20,000 instant asset write-off (IAWO) from 1 July 2023.

Under this change, small businesses (aggregated annual turnover of less than $10 million) will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that is first used or installed ready for use between 1 July 2023 and 30 June 2024. Assets valued at $20,000 or more (which cannot be immediately deducted) will be placed into a small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

For larger businesses, the write-off threshold is cut to $1,000.

TFE, which allows eligible businesses with a turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, is however still available up to 30 June 2023.

Small business lodgement penalty amnesty

A lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system. The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

Individuals

No change to the Stage 3 tax cuts

The government did not propose any changes to the legislated Stage 3 tax cuts whereby from 1 July 2024, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. The 37% tax bracket will be entirely abolished at this time.

On the face of it, lowering the 32.5% to 30% and removing the 37% tax bracket altogether seems like a big win for middle and upper- middle-income earners. But it will actually be a much bigger win for higher-income earners in dollar terms. For example, an individual who earns:

• $75,000 will be better off by $750 per year compared to now
• $125,000 will be better off by $2,225
• $200,000 will be better off by $9,075.

Low-and middle-income tax offset (LMITO) not extended

This tax offset ceased from 1 July 2022. The LMITO was introduced by the former Coalition government in 2018. It was only meant to be paid out once but was twice extended due to the pandemic. This offset was not extended on Budget night, and no replacement tax relief was offered to low- and middle-income earners.

Consequently, low-income earners may face an increased tax liability of up to $1,500 when upcoming 2022/23 tax returns are lodged.

Social security and cost of living

Boost to Centrelink payments

A base-rate increase of $40 per fortnight for about 1.1 million Australians on support payments, including JobSeeker, Austudy and Youth Allowance.

Jobseeker increased

A JobSeeker payment increase of $92.10 per fortnight will kick in for about 52,000 people aged over 55 who have been on the allowance for nine or more straight months. This currently applies only to those aged over 60.

Power bill rebates

$500 energy rebates for 5.5 million households and 1 million businesses. Relief will be targeted to pensioners, Commonwealth Seniors Health Card holders, and households receiving income support, including Family Tax Benefit A and B. Income limits apply.

Sole parents

Sole parents will be able to receive the single parenting payment until their youngest child turns 14 – up from the current age of eight.

Rent assistance

15% increase to the rate of Commonwealth. Rent Assistance, providing up to an additional $31 a fortnight for about 1.1 million eligible households.

July 2022

PRIORITIES FOR THE ATO THIS TAX TIME

Record Keeping 

There are still some weeks left until tax time, but if you start organising the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to.

Work-related expenses

Focusing on deductions that are different where one is high the other should be lower;

• Large work from home deductions should result in a lower motor vehicle claim.
• Only claiming a deduction for the actual use of your mobile and internet.

Capital gains from crypto assets, property and shares

The ATO has extensive data collection processes, if any trading has been done for crypto, property and shares it will need to be declared to the ATO. The ATO expects more capital gains or losses reported this year.

Double Dipping

The ATO looks closely at the motor vehicle and work from home deductions to ensure people are not accidently double dipping deductions.

• Claiming deductions in relation to the work from home 80c an hour shortcut method and claiming additional costs for mobile, internet and other home office expenses.
• Claiming motor vehicle deductions using the cents per km method and also trying to claim a deduction for fuel, insurance and registration.

Changes to single-touch payroll reporting

As an employer, it’s important that you’re across the changes required, and you’re getting ready to start Phase 2 reporting. This includes:

• checking if you need to make changes to payroll pay codes/categories so they align with Phase 2 requirements
• reviewing allowances, you pay and how they need to be reported in Phase 2
• understanding changes to salary sacrifice reporting
• understanding how to assign an income type to each payment.

JUNE 2022

EOFY – Year End Tax Planning Tips 2021 – 2022

Small Business

Below are some tax planning tips that are covered in more detail in our newsletter:

• Check eligibility for small business tax regime
• Maximise depreciation deductions
• Prepayment of expenses
• Review salary sacrifice arrangements
• Make trust resolutions by 30 June
• Seeking professional advice when starting a business
• Write-off bad debts

Ongoing Tax Planning Issues

Our newsletter covers other tax strategies that should be considered such as:

• Salary Sacrifice Bonus into Superannuation
• Superannuation – government co-contribution
• Eligibility for super concessional contributions
• Transition to retirement income streams
• Medicare Levy Surcharge and Private Health Insurance Rebate
• Prepayment of expenses

ATO Recovery Data Matching

In terms of focus areas for compliance activities, the ATO continues to closely monitor:

• Claims for work-related expenses that are unusually high close to others across comparable industries and occupations
• Excessive rental properties expenses
• Non-commercial rental income received for holiday homes
• Interest deductions claimed for the private proportions of loans
• People who have registered for GST but are not actively carrying on a business
• Contractors not declaring income that is detectable under the Taxable Payments Reporting System (TPRS)
• Activity in the sharing/gig economy eg. Uber, Door Dash, AirBnB, Airtasker and many others

MAY 2022

CENTS PER KM RATE: DRAFT LEGISLATIVE INSTRUMENT

On 3rd March 2022, the ATO issued draft Legislative Instrument LI 2022/D8TD, which applies to eligible taxpayers who elect to use the cents per kilometre method and then calculate income tax deductions for their work-related car expenses.

• The Commissioner has determined that the rate is 75 cents per kilometre.

It will apply to the income year commencing 1st July 2022 and remains applicable to subsequent income years until it is varied.

ONE-OFF COST OF LIVING TAX OFFSET

From 1 July this year, over 10 million individuals will receive a one-off $420 cost of living tax offset.

Combined with the low and middle-income tax offset (LMITO), eligible low- and middle-income earners will receive up to $1,500 for a single income household or up to $3,000 for a dual-income household, the base rate of the LMITO is now $675.

This offset is available for tax returns for the year ending 30 June 2022

LOWERING TAX INSTALMENTS IN 2022-23

The government will set the GDP uplift rate that applies to pay-as-you-go (PAYG) instalments and GST instalments to two per cent for the 2022–23 income year. This measure will apply to instalments due after 31 March 2022. This measure is now law.

APRIL 2022

ELIGIBILITY AGE CHANGE FOR DOWNSIZER CONTRIBUTIONS

As part of the 2021–22 federal Budget, the Australian Government announced it will reduce the eligibility age for downsizer contributions from 65 to 60 years old. This measure has now become law, with the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 received royal assent on 22 February 2022.

Changes in eligibility;

• Drop in age from 65 to 60.
• Effective from 1 July 2022.

For contributions made prior to 1 July 2022, eligible individuals must still be aged 65 years or older at the time of making their contribution.

VARYING YOUR PAY AS YOU GO INSTALMENTS AND TAX SUPPORT WHEN YOU NEED IT

By paying regular instalments throughout the year, you should not have a large tax bill when you lodge your tax return.

You can vary your PAYG instalments if you think your current payments will result in you paying too much or too little tax for the income year.

• You must make variations on or before the payment due date. Your varied amount will apply for all your remaining instalments unless you make another variation before the end of the income year.
• The ATO encourages taxpayers to review their PAYG instalments regularly, so the amount you prepay is closer to your expected tax for the year.

Even if you can’t pay on time, it’s important to keep lodgements up to date. This will give you a clear idea of your tax position and the ATO can tailor help, such as advice, payment plans, or deferrals, to your situation.

CAR LOGBOOK REQUIREMENTS

Having a valid car logbook is beneficial for both maximising deductions in a personal tax return for work-related travel costs using your own car and minimising the taxable value of a car fringe benefit for FBT purposes when the car is provided by an employer.

The ATO record keeping requirements are strict and often do not pass scrutiny in the event of an audit.

A separate logbook must be kept for each vehicle for a continuous 12-week period and must document:

• When the logbook period begins and ends.
• The car’s odometer readings at the start and end of the logbook period.
• The total number of kilometres the car travelled during the logbook period.
• The number of kilometres travelled for each journey.
• The odometer readings at the start and end of each subsequent income year your logbook is valid for.
• The business-use percentage for the logbook period based on the business use of the vehicle.
• The make, model, engine capacity and registration number of the car.
• The 12-week period may overlap two income/FBT years provided it includes part of the year.

In general, a logbook will be valid for five years assuming business use is consistent, and patterns of usage do not change throughout this period.

For each trip, the following must be recorded:

• The date the trip began and ended
• Odometer readings at the start and end of each trip
• Kilometres travelled during the journey
• Detailed  description of the purpose of the trip
• If the 12-week period is not representative of the whole year, you may have to adjust your business percentage (i.e., upward, or downward). If your pattern has changed substantially during the year, the logbook may no longer be valid, and you may need to keep a new logbook.

MARCH 2022

DEDUCTIBILITY OF COVID-19 TESTS

The government announced that Rapid Antigen Tests (RATs) and PCR tests will be tax deductible for workers who require to undertake a test to attend their place of work.

• PCR and RATs will be tax deductible.
• Backdated to the 1 July 2021

This measure is not yet law. The ATO will provide more detailed advice and guidance once the measure is enacted.

In the interim, if you have incurred expenses in relation to COVID-19 tests you should keep a record of those expenses.

PARLIAMENT PASSES LEGISLATION TO ENHANCE THE SUPERANNUATION SYSTEM

The Federal government passed laws enhancing the superannuation system to ensure it is fair for all workers. This includes;

• Removal of $450 monthly threshold.
• For anyone earning less than $450 will be receiving superannuation guarantee.
• Starts on 1^st July 2022.

The bill also allows for more flexibility regarding contributing to superannuation by allowing individuals aged between 67 and 75 to make non-concessional superannuation contributions under the bring-forward rule.

ARE YOU IN A BUSINESS? SHARING ECONOMY

The sharing economy is the economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee.

If you provide services or assets through a platform for a fee, you need to consider how income tax and goods and services tax (GST) applies to your earnings.

Popular sharing economy activities include:

• Providing Ride-sourcing (also known as ridesharing) for a fare, through platforms such as Uber, Ola, Shebah and GoCatch.
• Providing food delivery services with own vehicle through platforms such as Uber Eats, Door Dash and Deliveroo.
• Renting out a room or whole house on a short-term basis through platforms such as Airbnb, Stayz and Flipkey.
• Providing services including professional and trade services and even odd jobs like furniture assembly through platforms such as Oneflare, Airtasker and Hark Hark.
• Sharing assets like cars, caravans, car park spaces, storage and personal belongings through platforms such as Car Next Door, Spacer, Toolmates and Quipmo.

Income tax, GST and other obligations may apply to you if you earn income from these other activities.