News

13 May

Posted at 14:06h in News, Tax

A new working Australians tax offset (WATO) will be introduced to provide a permanent annual $250 tax offset from 1 July 2027 to all eligible Australian workers for their income derived from work (such as wages and salaries and the business income of sole traders).

The WATO will increase the effective tax-free threshold for income derived from work by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the LITO. The Treasurer said this is the largest permanent increase in the effective tax-free threshold since 2012–2013. The offset will apply for income earned from work for the second half of 2027 and will automatically reduce workers’ tax liability for the 2027–2028 income year.

The WATO is in addition to the already-legislated tax cuts that apply from 1 July 2026 and 1 July 2027, and the previously-announced $1,000 instant tax deduction for work-related expenses from the 2026–2027 income year. The Government believes that the combined benefit to a worker on average earnings of the tax cuts, new tax offset and instant tax deduction will be up to $2,816 from 2027–2028 (or $54 per week).

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

13 May

Posted at 14:04h in News, Tax

The Government will reintroduce the loss carry-back regime for most businesses and start-ups, first introduced during the COVID pandemic, and removed in 2023. From 1 July 2026, companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid up to two years earlier. Loss carry-back will apply to revenue losses only and will be limited by a company’s franking account balance.

This measure is expected to directly benefit up to 85,000 companies each year.

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

13 May

Posted at 13:55h in News, Tax

The Government will permanently extend the $20,000 instant asset write-off for small businesses with a turnover of up to $10 million. The current $20,000 threshold was set to expire on 30 June 2026, with the threshold then reverting to a $1,000 threshold. However, with this permanent extension, small businesses will have more certainty over asset purchases going forward.

Assets valued $20,000 or more can continue to be placed into the small business simplified depreciation pool. Pool deductions are broadly 15% in the first year an asset is added to the pool and 30% for later years. The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will also continue to be suspended until 30 June 2027.

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

13 May

Posted at 13:52h in News, Tax

The Government proposes to restrict negative gearing deductions to newly constructed dwellings from 1 July 2027, with a carve-out for currently owned properties.

From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties. Excess losses will be carried forward and able to be offset against residential property income in future years. However, there will be no restrictions affecting investment properties owned at the time of this Budget (7:30 pm AEST on 12 May 2026), until they are sold.

There are a number of broad exemptions, notably for new residential property investments.

There appears to be no limitation on the number of properties that an investor can negatively gear.

Background

Negative gearing occurs when the costs of owning a rental property exceed the rental income it generates, resulting in a net rental loss. These costs can include loan interest, rates, insurance, maintenance and other expenses. The net rental loss can be offset against other income derived by the taxpayer, notably salary and wage income.

Negative gearing can apply to any type of investment (eg shares). However, the Government’s proposal will only apply to investment properties used for residential purposes.

Exclusions for certain residential premises

There are three broad exclusions from the proposed negative gearing restrictions:

  • residential properties owned at Budget time;
  • eligible new builds of residential premise (designed to ensuring the benefits of negative gearing are directed to investment that increases the housing stock) – there is no indication of how long such an exception will run for (eg multiple ownership); and
  • properties in widely held trusts and superannuation funds (alongside targeted exemptions for build-to-rent developments and private investors supporting government housing programs).

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

13 May

Posted at 13:50h in News, Tax

From 1 July 2028, trustees will pay a minimum tax of 30% on the taxable income of discretionary trusts. Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee. The minimum tax will not apply to other types of trusts, such as:

  • fixed and widely held trusts (including fixed testamentary trusts);
  • complying superannuation funds;
  • special disability trusts;
  • deceased estates; and
  • charitable trusts.

Exclusions for some types of income are also proposed, including:

  • primary production income;
  • certain income relating to “vulnerable minors”;
  • amounts to which non-resident withholding tax applies; and
  • income from assets of discretionary testamentary trusts existing at announcement.

Non-refundable credits for beneficiaries

Beneficiaries, other than corporate beneficiaries, will receive non-refundable credits for the tax payable by the trustee. If implemented as described, this would mean the withholding would operate more like the MIT final withholding tax for non-residents – a minimum floor tax – rather than like the existing credit mechanism where the beneficiary can get a refund if the trustee overpaid.

The marginal rate of 30% applies to taxable income in the range of $45,000 to $135,000. This means that beneficiaries who have taxable income of less than $45,000 would end up paying tax at a higher rate on the trust distribution (ie 30%) than they would on the rest of their taxable income (ie currently 0% or 16%).

The proposal would likely bring forward the collection of the new tax from a timing perspective, as the trustee would presumably have to withhold the tax from distributions and pay that tax to the ATO in a more timely manner than having the tax assessed and collected after the beneficiary lodges their tax return.

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

13 May

Posted at 13:46h in News, Tax

As widely anticipated, the Government will replace the current 50% CGT discount with inflation-adjusted indexation from 1 July 2027. The changes will include a minimum tax rate of 30% on realised gains, and the CGT net will be broadened to include pre-1985 assets (for disposals from 1 July 2027).

These changes will apply to all CGT assets held by individuals, trusts and partnerships for more than 12 months.

The changes take effect from 1 July 2027 and will be prospective; gains accrued on existing investments prior to the start date will retain the 50% discount up to the start date. Transitional arrangements will ensure the changes only apply to gains arising on or after 1 July 2027. This means the 50% CGT discount will continue to apply to gains arising before 1 July 2027.

Capital gains on pre-1985 assets arising before 1 July 2027 will remain exempt from CGT.

New property assets: option to choose

There will be an exception for new builds. Investors in new residential properties will be able to choose either the 50% CGT discount; or cost base indexation and the minimum tax. Income support payment recipients, including Age Pension recipients, will be exempt from the minimum tax.

This is designed to maintain incentives for the construction of new housing.

Proposed minimum tax rate on realised gains

There is little detail on the proposed minimum tax rate of 30% (to be imposed after indexation has been applied). The Budget Papers state that “a minimum tax rate on capital gains will reduce the incentive to hold onto an asset to realise a gain when it’s most tax advantageous and ensure a fair amount of tax is paid on capital gains, in line with lifetime incomes”. Income support recipients, including pensioners, will be exempt from the minimum rate.

This is only an announcement of what the Federal Government is planning to implement – it is not law yet and may change or not proceed subject to its debate and passage through Parliament.

17 Jul

Posted at 17:30h in News, Tax

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

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

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

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

14 Jul

Posted at 17:57h in News, Tax

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

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

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

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

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

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

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

11 Jul

Posted at 17:42h in Accounting, Business Advisory, News, Tax

The immediate deduction for the cost of eligible depreciating business assets that has been available under the temporary full expensing concession since 2020 has now ended.

The instant asset write off method has now been reinstated for the immediate deduction of the cost of an asset.

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

06 Aug

Posted at 17:16h in News

As a part of the ATO’s extensive information-gathering powers, it can compel taxpayers to furnish or produce certain documents. However, information and documents where the underlying communication is privileged do not have to be provided. Legal professional privilege (LPP) operates as an immunity from any obligation to disclose documents created by these powers.

Recently, the ATO released a protocol which contains its recommended approach for identifying communications covered by LPP and making LPP claims. While it’s voluntary to follow the steps outlined, it’s more likely that the ATO will accept LPP claims without further enquiries if the protocol is followed.

The protocol applies to both legal practitioners and non-legal practitioners and all LPP claims, regardless of the firm or business structure within which the service or engagement is provided.

The protocol itself contains three steps for taxpayers who receive an information-gathering notice and wish to make an LPP claim:

  • assessing the full situation and all of the communications involved;
  • explaining the basis of the LPP claim; and
  • advising the ATO how the LPP claim was approached.

Tip: Legal professional privilege is a highly contested area and whether a document or information is subject to LPP can depend on the facts of your individual case. If you’ve been issued a notice under the ATO’s formal information-gathering powers, we can save you time and help you work out which documents are subject to LPP under the new protocol.