Tax

10 Apr

Posted at 18:05h in News, Related Services, Tax

The availability of temporary full expensing of depreciating assets for business has been extended for another year until 30 June 2023. This measure was originally introduced in 2020 as a part of the Federal Government’s COVID-19 business rescue package, aimed at encouraging business investment by providing a cash flow benefit. As originally introduced, the measure was due to end on 30 June 2022.

Businesses with an aggregated turnover below $5 billion or those that meet an alternative eligibility test can deduct the full cost of eligible depreciating assets of any value that are first held and first used or installed ready for use for a taxable purpose from 6 October 2020 until 30 June 2023.

For small business entities with an aggregated turnover of less than $10 million, the temporary full expensing of depreciating asset rules has been effectively replaced with simplified depreciation rules for any assets first held and used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023. This means that the full cost of eligible depreciating assets, as well as costs of improvements to existing eligible depreciating assets, can be fully deducted.

Not all costs relating to assets qualify for temporary full expensing. For example, building and other capital works, as well as software development pools do not generally qualify. Second-hand assets that would otherwise meet the eligibility conditions also do not qualify for temporary full expensing if the entity that holds them has an aggregated turnover of $50 million or more.

Special rules also apply to cars, where the temporary full expensing is limited to the business portion of the car limit.

Tip: If you want to take advantage of temporary full expensing, contact us first to make sure the assets your business is planning to purchase will meet the eligibility requirements.

30 Mar

Posted at 08:24h in Business Advisory, News, Related Services, SMSF, Tax

Please note, these are the announcements of the measures that the current Government intends to introduce and they are not yet law and may change upon debate in Parliament and also due to the outcome of Federal election.

 

PERSONAL TAXATION

Personal tax rates unchanged for 2022–2023

In the Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.

The 2022–2023 tax rates and income thresholds for residents are unchanged from 2021–2022:

  • taxable income up to $18,200 – nil;
  • taxable income of $18,201 to $45,000 – 19% of excess over $18,200;
  • taxable income of $45,001 to $120,000 – $5,092 plus 32.5% of excess over $45,000;
  • taxable income of $120,001 to $180,000 – $29,467 plus 37% of excess over $120,000; and
  • taxable income of more than $180,001 – $51,667 plus 45% of excess over $180,000.

Stage 3: from 2024–2025

The Stage 3 tax changes will commence from 1 July 2024, as previously legislated. 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. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. The 37% tax bracket will be entirely abolished at this time.

Therefore, from 1 July 2024, there will only be three personal income tax rates: 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.

Low income offsets: LMITO temporarily increased, LITO retained

The low and middle income tax offset (LMITO) will be increased by $420 for the 2021–2022 income year so that eligible individuals will receive a maximum LMITO benefit up to $1,500 for 2021–2022 (up from the current maximum of $1,080).

This one-off $420 cost of living tax offset will only apply to the 2021–2022 income year. Importantly, the Government did not announce an extension of the LMITO to 2022–2023. So it remains legislated to only apply until the end of the 2021–2022 income year (albeit up to $1,500 instead of $1,080).

The Government said the LMITO for 2021–2022 will be paid from 1 July 2022 to more than 10 million individuals when they submit their tax returns for the 2021–2022 income year. Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. That is, the proposed one-off $420 cost of living tax offset will increase the maximum LMITO benefit in 2021–2022 to $1,500 for individuals earning between $48,001 and $90,000 (but phasing out up to $126,000). Those earning up to $48,000 will also receive the $420 one-off tax offset on top of their existing $255 LMITO benefit (phasing up for incomes between $37,001 and $48,000).

All other features of the current LMITO remain unchanged (including that it will only apply until the end of the 2021–2022 income year). Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.

As already noted, the Government has proposed that eligible taxpayers with income up to $126,000 will receive the additional one-off $420 cost of living tax offset for 2021–2022 on top of their existing LMITO benefit.

Currently, the amount of the LMITO for 2021–2022 is $255 for taxpayers with a taxable income of $37,000 or less. Between $37,000 and $48,000, the value of LMITO increases at a rate of 7.5 cents per dollar to the maximum amount of $1,080. Taxpayers with taxable incomes from $48,000 to $90,000 are eligible for the maximum LMITO of $1,080. From $90,001 to $126,000, LMITO phases out at a rate of 3 cents per dollar.

Low income tax offset (unchanged)

The low income tax offset (LITO) will also continue to apply for the 2021–2022 and 2022–2023 income years. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022–2023, but the new LITO was brought forward in the 2020 Budget to apply from the 2020–2021 income year.

The maximum amount of the LITO is $700. The LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

Medicare levy low-income thresholds increased

For the 2021–2022 income year, the Medicare levy low-income threshold for singles will be increased to $23,365 (up from $23,226 for 2020–2021). For couples with no children, the family income threshold will be increased to $39,402 (up from $39,167 for 2020–2021). The additional amount of threshold for each dependent child or student will be increased to $3,619 (up from $3,597).

For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,925 (up from $36,705 for 2020–2021). The family threshold for seniors and pensioners will be increased to $51,401 (up from $51,094), plus $3,619 for each dependent child or student.

Legislation is required to amend these thresholds, and a Bill will be introduced shortly.

COVID-19 test expenses to be deductible

The Budget papers confirm that the costs of taking COVID-19 tests – including polymerase chain reaction (PCR) tests and rapid antigen tests (RATs) – to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.

This measure was previously announced on 8 February 2022.

COST OF LIVING MEASURES

One-off $250 cost of living payment

The Government will make a $250 one-off cost of living payment in April 2022 to six million eligible pensioners, welfare recipients, veterans and eligible concession card holders.

The $250 payment will be tax-exempt and not count as income support for the purposes of any Government income support. A person can only receive one economic support payment, even if they are eligible under two or more of the eligible categories.

The payment will only be available to Australian residents who are eligible recipients of the following payments, and to concession card holders:

  • Age Pension;
  • Disability Support Pension;
  • Parenting Payment;
  • Carer Payment;
  • Carer Allowance (if not receiving a primary income support payment);
  • Jobseeker Payment;
  • Youth Allowance;
  • Austudy and Abstudy Living Allowance;
  • Double Orphan Pension;
  • Special Benefit;
  • Farm Household Allowance;
  • Pensioner Concession Card (PCC) holders;
  • Commonwealth Seniors Health Card holders; and
  • eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

Temporary reduction in fuel excise

The Government will reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for six months. The excise and excise-equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50% for six months.

The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. Mr Frydenberg said a family with two cars who fill up once a week could save around $30 a week, or around $700 over the next six months. The Treasurer made a point of emphasising that the Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on.

The measure will commence from 12.01 am on 30 March 2022 and will remain in place for six months, ending at 11.59 pm on 28 September 2022.

BUSINESS TAXATION

Deduction boosts for small business: skills and training, digital adoption

The Government announced two support measures for small businesses (aggregated annual turnover less than $50 million) in the form of a 20% uplift of the amount deductible for expenditure incurred on external training courses and digital technology.

External training courses

An eligible business will be able to deduct an additional 20% of expenditure incurred on external training courses provided to its employees. The training course must be provided to employees in Australia or online, and delivered by entities registered in Australia.

Some exclusions will apply, such as for in-house or on-the-job training.

The boost will apply to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2024.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the 2023 income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

Digital adoption

An eligible business will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support its digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.

An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost.

The boost will apply to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2023.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the 2023 income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred.

PAYG instalments: option to base on financial performance

The Budget papers confirm the Treasurer’s earlier announcement that companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments).

The commencement date is “subject to advice from software providers about their capacity to deliver”. It is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date. There are no details yet as to what tax adjustments will be required (although presumably this will involve a reverse, modified form of tax effect accounting).

PAYG and GST instalment uplift factor

The Budget papers confirm the Treasurer’s earlier announcement that the GDP uplift factor for PAYG and GST instalments will be set at 2% for the 2022–2023 income year. The papers state that this uplift factor is lower than the 10% that would have applied under the statutory formula.

The 2% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2022–2023 income year and fall due after the enabling legislation receives assent.

More COVID-19 business grants designated NANE income

The Government has extended the measure which enables payments from certain state and territory COVID-19 business support programs to be made non-assessable, non-exempt (NANE) income for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.

Consistent with this, the Government has made the following state and territory grant programs eligible for this treatment since the 2021–2022 Mid-Year Economic and Fiscal Outlook:

  • New South Wales Accommodation Support Grant
  • New South Wales Commercial Landlord Hardship Grant
  • New South Wales Performing Arts Relaunch Package
  • New South Wales Festival Relaunch Package
  • New South Wales 2022 Small Business Support Program
  • Queensland 2021 COVID-19 Business Support Grant
  • South Australia COVID-19 Tourism and Hospitality Support Grant
  • South Australia COVID-19 Business Hardship Grant.

The changes are part of an ongoing series of announcements which will continue to have effect until 30 June 2022.

TAX COMPLIANCE AND INTEGRITY

Digitalising trust income reporting

The Budget confirms the Government’s previously announced intention to digitalise trust and beneficiary income reporting and processing.

It will allow all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. There are no other additional details in the Budget papers than in the earlier announcement.

The measure will commence from 1 July 2024 – “subject to advice from software providers about their capacity to deliver”.

The Government advises that it will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.

Taxable payments data reporting: option to link to BAS cycle

The Budget confirms the Treasurer’s earlier announcement that businesses will be provided with the option to report taxable payments reporting system data on the same lodgment cycle as their activity statements, via accounting software. The rules for the taxable payments reporting system are contained in Subdiv 396-B of Sch 1 to the Taxation Administration Act 1953.

The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.

Subject to advice from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024.

SUPERANNUATION

Super guarantee: rate rise unchanged

The Budget did not announce any change to the timing of the next super guarantee (SG) rate increase. The SG rate is currently legislated to increase from 10% to 10.5% from 1 July 2022, and by 0.5% per year from 1 July 2023 until it reaches 12% from 1 July 2025.

With the SG rate set to increase to 10.5% for 2022–2023 (up from 10%), employers need to be mindful that they cannot use an employee’s salary-sacrificed contributions to reduce the employer’s extra 0.5% of super guarantee. The ordinary time earnings (OTE) base for super guarantee purposes now specifically includes any sacrificed OTE amounts. This means that contributions made on behalf of an employee under a salary sacrifice arrangement (defined in s 15A of the Superannuation Guarantee (Administration) Act 1992) are not treated as employer contributions which reduce an employer’s charge percentage.

Super Guarantee opt-out for high-income earners

The increase in the SG rate to 10.5% from 1 July 2022 also means that the SG opt-out income threshold will decrease to $261,904 from 1 July 2022 (down from $275,000). High-income earners with multiple employers can opt-out of the SG regime in respect of an employer to avoid unintentionally breaching the concessional contributions cap ($27,500 for 2021–2022 and 2022–2023). Therefore, the SG opt-out threshold from 1 July 2022 will be $261,904 ($27,500 divided by 0.105).

Superannuation pension drawdowns

The temporary 50% reduction in minimum annual payment amounts for superannuation pensions and annuities will be extended by a further year to 30 June 2023.

The 50% reduction in the minimum pension drawdowns, which has applied for the 2019–2020, 2020–2021 and 2021–2022 income years, was due to end on 30 June 2022. However, the Government announced that the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) will be amended to extend this temporary 50% reduction for minimum annual pension payments to the 2022–2023 income year. Given ongoing volatility, the Government said the extension of this measure to
2022–2023 will allow retirees to avoid selling assets in order to satisfy the minimum drawdown requirements.

Minimum drawdowns reduced 50% for 2022–2023

The reduction in the minimum payment amounts for 2022–2023 is expected to apply to account-based, allocated and market linked pensions. Minimum payments are determined by age of the beneficiary and the value of the account balance as at 1 July each year under Sch 7 of the SIS Regulations.

No maximum annual payments apply, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year.

For the purposes of determining the minimum payment amount for an account-based pension or annuity for the financial years commencing 1 July 2019, 1 July 2020, 1 July 2021 (and 1 July 2022 proposed), the minimum payment amount is half the amount worked under the formula in clause 1 of Sch 7 of the SIS Regs. The relevant percentage factor is based on the age of the beneficiary on 1 July in the financial year in which the payment is made (or on the commencement day if the pension commenced in that year).

For market linked income streams (MLIS), the minimum payment amount for the financial years commencing 1 July 2019, 1 July 2020, 1 July 2021 (and 1 July 2022 proposed) must be not less than 45% (and not greater than 110%) of the amount determined under the standard formula in clause 1 of Sch 6 of the SIS Regs.

Note that the 50% reduction in the minimum annual pension payments are not compulsory. That is, a pensioner can continue to draw a pension at the full minimum drawdown rate or above for 2019–2020, 2020–2021, 2021–2022 (and 2022–2023 proposed), subject to the 10% limit for transition to retirement pensions. However, it will generally be inappropriate to take more than the minimum annual drawdowns in the form of a pension payment given the pension transfer balance cap. Rather, it generally makes more sense to access any additional pension amount above the minimum drawdown in the form of a partial commutation of the pension instead of taking more than the minimum annual drawdowns. This is because a commutation will generate a debit for their pension transfer balance account, while an additional pension payment above the minimum will not result in a debit.

 

 

03 Mar

Posted at 09:40h in Accounting, Business Advisory, Tax

Businesses that need a little more financial help will have one last opportunity to claim the loss carry-back in their 2021–2022 income tax returns. And businesses that have an early balancer substituted account period (SAP) for the 2021-22 income year are eligible to claim the loss carry-back offset before 1 July 2022.

The loss carry-back is a refundable offset that effectively represents the tax that the business would save if it had been able to deduct the loss in an earlier year using the loss year tax rate. It may result in a cash refund, a reduced tax liability, or reduction of a debt owing to the ATO. Eligible businesses include companies, corporate limited partnerships and public trading trusts.

A business may be eligible if it made a tax loss in 2021, carried on a business with an aggregated turnover of less than $5 billion, had an income tax liability in 2019 or 2020, and has met all of its lodgment obligations for the five prior income years.

Loss carry-back can either be claimed through standard business reporting enabled software, where it has the additional loss carry-back labels required, or by using the paper copy of the company tax return 2021 and attaching a schedule of additional information to report the extra aggregated turnover and loss carry-back labels required.

The ATO has developed a loss carry-back tax offset tool to assist businesses claiming the loss carry-back before 1 July 2022. Once all of the relevant information is provided, the tool will first determine whether the business is eligible to claim the loss carry-back tax offset, then calculate the maximum amount of tax offset available. It will also provide a printable report of the labels which will need to be completed.

02 Mar

Posted at 09:26h in Business Advisory, News, Tax

The ATO has recently finalised its stance on the issue of commercial debt forgiveness – in particular, the “natural love and affection” exclusion.

A commercial debt is any debt where interest payable is deductible, or would be deductible if interest were payable, but for certain statutory restrictions. Under the commercial debt forgiveness provisions, if a taxpayer’s obligation to pay their debt is released, waived, or otherwise extinguished, the amount forgiven will be deducted from the taxpayer’s current and future tax deductions. Specifically, the amount forgiven will reduce prior-year revenue losses, prior-year net capital losses, undeducted balances of other expenditure being carried forward for deduction, and the CGT cost base of other assets held, in that order.

Given that forgiving commercial debts may mean a business will have to pay more tax, it can be advantageous if debts the business has forgiven are not captured under the commercial debt forgiveness provisions. The exclusions available include forgiveness of some debts relating to bankruptcy or by will, and a person’s forgiveness of a debt for reasons of natural love and affection for the debtor.

The natural love and affection exclusion to commercial debt forgiveness previously didn’t require the creditor who forgave a debt to be a “natural person”. This meant that a company, through its directors, could forgive the debts of an individual, giving the reason of natural love and affection for the individual, and this would not have been considered a commercial debt forgiveness, meaning a lower tax bill for the company.

Tip: The term “natural person” is usually used to distinguish individual human beings from corporations (which can still be “legal persons”).

In February 2019 the ATO released a draft determination which explicitly stated that the exclusion for debts forgiven for reasons of natural love and affection requires the creditor to be a natural person.

This has recently been confirmed in the finalised determination.

While the ATO states that a debt-forgiving creditor must be a natural person and the object of their love and affection must be one or more other natural persons, there is no requirement that the debtor must also be a natural person. For example, this means that the exclusion could apply in circumstances where the debtor is a company, such as where a parent forgives a debt they are owed by a company that is 100% owned by their child or children.

According to the ATO, whether a creditor’s decision to forgive a debt is motivated by natural love and affection for a person needs to be determined on a case-by-case basis.

01 Mar

Posted at 09:23h in News, Tax

After the recent furore over the non-existent supply of rapid antigen tests (RATs) and the reduced availability of polymerase chain reaction (PCR) tests at many COVID-19 testing sites, the Federal Government is hoping for some good press with the announcement that it intends to legislate to make both PCR tests and RATs tax-deductible for individuals who buy them for a work-related purpose.

According to the government’s proposal, deductibility of tests would take effect from the beginning of the 2021–2022 tax year (that is, starting 1 July 2021) and would be ongoing. Individuals will also be able to deduct the cost of a test regardless of whether they are required to attend the workplace or have the option to work remotely. How much you might benefit from this proposal will depend on your individual tax rate and circumstances.

For businesses that can obtain enough RATs for their workforce, the government has also proposed to make COVID-19 tests provided by employers to employees exempt from FBT, if they are used for work-related purposes. This essentially means the tests would be excluded from the definition of a fringe benefit, and employers would not have to pay FBT on the costs of tests given to their employees in a work-related context.

With the Federal election fast creeping up, there doesn’t seem much time for this proposal to be introduced in Parliament and passed into law. There is also uncertainty as to whether a possible Labor government would champion this specific tax-deductibility measure, in particular due to Labor’s election pledge to provide free RATs to all Australians through Medicare.

Tip: In the interim, the ATO recommends that people and businesses incurring work-related expenses for COVID-19 tests keep clear records (eg receipts), to make claiming straightforward should the purchases become deductible in the future.

08 Feb

Posted at 16:01h in News, Tax

As a part of an economic package to help businesses recover from the impacts of the COVID-19 pandemic, the Federal Government provided low-cost credit to qualifying small and medium enterprises (SMEs) through the SME Recovery Loan Scheme. When it was first introduced, and until 31 December 2021, the government essentially guaranteed 80% of the loan amount. However, from 1 January 2022, as restrictions have eased, the government guarantee has been reduced from 80% of the loan amount to 50% of the loan amount. The eligibility conditions have also been slightly fine-tuned, with the scheme now due to end on 30 June 2022.

Eligible small and medium businesses with up to $250 million turnover can access up to $5 million in total from participating lenders.

Loans can be unsecured or secured and will generally be for terms of up to 10 years, with an optional repayment holiday period of up to 24 months. A loan can be used for a range of business purposes, including investment support or refinancing the pre-existing debt of an eligible borrower.

The maximum rate will be capped at around 7.5%, with flexibility for interest rates on variable rate loans to increase if market interest rates rise over time. Participating lenders can offer any suitable product to eligible businesses except for credit cards, charge cards, debit cards or business cards.

01 Feb

Posted at 15:46h in News, Tax, Uncategorized

Amidst the Omicron COVID-19 wave and with our governments shortening booster dose intervals, many businesses are encouraging their employees and customers to get either vaccinated or get their booster dose by offering rewards or incentives. While this is an effective way to help employees and customers stay safe and businesses to stay open, it’s important to consider that there may be some tax consequences involved.

If your business provides free or discounted goods, services, vouchers, gift cards, rewards points or other non-cash benefits to everyone who has had their COVID-19 vaccinations, those benefits will not be subject to FBT, even if your employees take part in the program. This is because the benefit isn’t provided in respect of your employees’ employment. Providing these types of non-cash benefits only to your employees may be subject to FBT; however, a benefit with a value under $300 may qualify for a minor benefit exemption.

If a non-cash benefit provided to your employees doesn’t qualify for the minor benefit exemption, a reduction in taxable value of FBT may be available if the benefit is an “in-house” one. Generally, an in-house benefit is something identical or similar to the benefits you provide to customers in the ordinary course of business – for example, clothes given by a clothing retailer.

TIP: If your business provides transport or pays for an employee’s transport to get their COVID-19 vaccination or booster, the travel would be considered work-related preventative health care, which is exempt from FBT.

If you give your employees a cash payment for getting vaccinated, your business will need to report it via Single Touch Payroll (STP) as part of each employee’s salary or wages, withhold tax from the amount under PAYG withholding, and include the amount in each employee’s ordinary time earnings for the purposes of determining super contributions.

TIP: If you’ve already given vaccination-related benefits or payments to your employees, it’s likely the ATO will need to know. We can assist – contact us today.

08 Dec

Posted at 13:46h in Business Advisory, Related Services, SMSF, Tax

Recently, a number of significant superannuation changes were proposed in Parliament as a part of the government’s plan to enhance super outcomes for Australians.

Work test and bring-forward rule changes

Currently, individuals aged between 67 and 75 either need to pass the “work test” or satisfy the work test exemption criteria if they want to make non-concessional and salary sacrifice contributions to their super. The amendments would allow individuals aged between 67 and 75 to make certain non-concessional contributions and salary sacrifice contributions without meeting the work test. Also, individuals aged under 75 could access bring-forward non-concessional contributions.

Lowered downsizer contributions age

Current downsizer contribution measures allow individuals aged 65 or over to make a contribution into super of up to $300,000 from the proceeds of selling their home. The government is seeking to reduce the lower eligibility age to 60.

Increased maximum releasable amount for first home buyers

The First Home Super Saver Scheme was designed to help first home buyers save for a deposit by allowing them to make voluntary concessional and non-concessional contributions into super, and later withdraw those eligible contributions and associated earnings to purchase a home.

Currently, the maximum amount releasable from super is $30,000. The proposed changes would increase that maximum to $50,000, although the amount of voluntary contributions eligible to be released in any single financial year would not change from $15,000.

Removing super guarantee minimum threshold

Currently, an employer does not have to pay super guarantee for an employee who earns less than $450 in a calendar month with that employer. This threshold was originally introduced to minimise employers’ administrative burden. However, with the technological advancement of single touch payroll (STP), the government no longer sees a need for the threshold, which is increasingly affecting young, lower-income, part-time and female workers, and has proposed removing it, so that employers must pay super guarantee to all employees.

06 Dec

Posted at 13:38h in News, Tax

The ATO has issued an alert warning taxpayers that it is investigating certain arrangements where entities on-sell luxury cars without remitting the requisite luxury car tax (LCT) amount.

Businesses and individuals who sell cars valued over a certain threshold (the luxury tax threshold) in the course of their business are subject to luxury car tax (LCT). This is a requirement if your business is registered or required to be registered for GST. LCT doesn’t just apply to instances where a dealer is selling a car to an individual or a business – it also applies in instances where a business sells or trades in a car that is a capital asset.

Tip: For the 2021–2022 financial year, the luxury car thresholds are $79,659 for fuel-efficient vehicles and $69,152 for all other vehicles. If your business buys a car with a GST-inclusive value above these thresholds, you are generally liable to pay LCT.

If you’re the seller of a luxury car, whether or not it’s within your usual course of business, you’re required to charge LCT to the recipient, report the associated LCT amount in your BAS and remit it to the ATO by your BAS payment date. You can’t legitimately avoid LCT by selling a luxury car to an employee, associate, or employee of your associate for less than market value, or by giving it away. The LCT value of the car in those situations will always be the GST-inclusive market value.

The ATO is currently investigating arrangements where a chain of entities that progressively on-sell luxury cars have improperly obtained LCT refunds and evaded remitting LCT. Usually, in this arrangement, one of the entities claims a refund of LCT while creating a consequential liability to another entity in the supply chain. One or more of the participating entities down the chain will then not correctly report and pay their LCT liabilities. Finally, these entities will be liquidated to thwart ATO compliance or recovery action.

These arrangements are concerning because they can result in luxury cars being sold without income tax and GST obligations being met. For example, luxury cars could be sold to end-users at more competitive prices with generally higher profit margins, disadvantaging legitimate businesses in the market that are meeting all their tax obligations.

05 Dec

Posted at 13:34h in Business Advisory, News, Tax

Recently, the ATO has noticed that some larger and wealthier businesses have mistakenly claimed small business capital gains tax (CGT) concessions when they weren’t entitled. By incorrectly applying the concessions, these businesses were able to either reduce or completely eliminate their capital gains. The ATO has urged all taxpayers that have applied the small business CGT concessions to check their eligibility. Primarily, this means that the business should meet the definition of a CGT small business entity or pass the maximum net asset value test.

Australia’s tax law provides four concessions to enable eligible small businesses to eliminate or at least reduce the capital gain on a CGT asset, provided certain conditions are met.

Tip: If you run a small business and are thinking of retiring or selling the business, we can help you work out whether you qualify for the CGT concessions, and how to use them optimally to reduce or eliminate potential capital gains.

To be eligible to apply these CGT concessions, the business must have a maximum net asset value of less than $6 million. Failing that, the business must qualify as a “CGT small business entity”. That is, it must be carrying on a business, and have an aggregate turnover of less than $2 million.

The CGT asset that gives rise to the gain must be an active asset, which just means it is an asset used in carrying on a business by either you or a related entity. Shares in a company or trust interests in a trust can also qualify as active assets.

Once the basic conditions are satisfied, your small business can choose to apply one or all of the four CGT concessions provided the additional conditions to each concession is also met. Meeting all the conditions means that the concessions can be applied one after another, in some cases eliminating the entire capital gain.