Rudd Mantell Accountants Blog, Darra, QLD, Australia

Reducing your tax bill while topping up your super

Tue, 10 Feb 2026 04:28:00 GMT

Let’s say you’ve just sold the house you inherited from your parents 12 years ago for $1.3 million. You’ve been renting it out for most of that time, but the property market has been hotting up and you were told by several real estate agents that they could get you a good price.

But what about the tax consequences?

At age 50, you’re still working (salary of $120,000 per annum), having returned to the workforce in July 2023 following a five-year absence for personal reasons. You don’t expect to retire from paid employment until age 65 at the earliest. Your total super balance on 30 June 2025 was $300,000, sitting in a retail fund.

Your accountant has calculated the net capital gain on selling Mum’s house as $600,000. After applying the 50% CGT discount, this results in a taxable income of $420,000, and a whopping tax bill of $163,538 to go with it.

Can anything be done?

Depending on your superannuation history, there may be a legitimate way of taking a big chunk out of that tax bill while topping up your super at the same time.

Concessional super contributions are subject to an annual cap, which is set at $30,000 for the 2025-26 income year. That figure is well above the mandatory employer super guarantee amount for most income levels. Many people don’t go close to using up their concessional contribution caps, which can leave them with carry-forward concessional contributions.

To help people with modest total super balances (below $500,000 on the previous 30 June), the government gives them the option of using some or all of their previously unused concessional contributions cap on a rolling basis for five years – ie, the five previous income years from 2020-21 to 2024-25, plus the current year (2025-26).

Conveniently, the ATO keeps track of your carry-forward concessional contributions balance, which you can look up on myGov.

The beauty of this arrangement is that you can use your catch-up concessional contributions to make personal deductible contributions, which can offset part of the CGT gain from the sale of the inherited property. Instead of being taxed at the top marginal rate of 47%, the amount of the catch-up contribution is taxed at the normal rate of 15% in your super fund, which creates a net saving of 32% on the contributed amount.

It is not unusual for someone to have carry-forward concessional contributions in excess of $100,000, which would take your taxable income down to $320,000, with tax payable of $116,538, or $47,000 less than what your tax bill would be without making the tax deductible catch-up contribution. That tax saving has to be reduced by $15,000 in contributions tax payable by your super fund, for a net saving of $32,000.

Remember, however, that any super contributions you make at age 50 will not be accessible until you reach preservation age (60 if retired or 65 if you’re still working). If you have other plans for that $100,000 (and you did pocket $1.3 million on the house sale) you will need to weigh up your options. But locking up a small part of the house proceeds seems like a small price to pay for a $32,000 tax saving.

On the other hand, if you have an appetite for putting even more money into your super, you might want to consider also making a non-concessional contribution of up to $360,000. This is not tax deductible and there is no 15% contributions tax when paid into your fund.

That covers the tax side of things but since you have received a life-changing windfall, you should consider getting advice from a licensed financial adviser.

If you find yourself in this situation, come in and see us well before 30 June 2026. If you decide to go ahead with making a catch-up contribution the super fund has to be notified, which we can help you with.

Surviving (and maybe avoiding) an ATO audit

Tue, 10 Feb 2026 04:24:58 GMT

This piece is aimed at self-employed clients, so if you’re a salary earner or a retiree you can safely move on to the next item.

For others, it goes without saying that at tax time you should disclose all your assessable income and only claim legitimate business deductions. Failure to do so exposes you to the risk of penalties and interest on top of the underpaid tax.

And the chances of popping up on the ATO’s radar are not negligible. It runs an active small business compliance program that uses industry benchmarks and other information, including “dob ins” received from community members.

Cash jobs

Offering a discount for cash for a lower price might seem tempting, but it suggests an intention of under reporting income. Tradies and the like occasionally fall out with their clients, some of whom might then report them to the ATO and those “dob ins” can lead to audits being conducted. The practice remains widespread, but you should avoid doing cash jobs – there’s a good chance they will come back to bite you.

Benchmarks

The ATO keeps extensive data of industry benchmarks for many industries, tracking gross income, expenses and profits margins. Its website suggests this data enables you to see how you compare with your peers and perhaps identifies areas for improvement. But it also gives the ATO a way of identifying potential audit cases.

If your trading results are well below the industry average, you might want to think about what some of the reasons for that might be. These could include:

Ill health suffered by yourself or a close family member
A long holiday
Your café or retail business is not in the best location
Competition from similar businesses operating nearby
You’re inexperienced or just not a great business person.

Averages are just that, and some businesses will be under while others are over. Having an idea of where you sit on the spectrum and why may help you engage with the ATO if and when the time comes.

Lifestyle factors

Another way of identifying cases suitable for audit is for the ATO to assess whether your apparent lifestyle matches the net income disclosed in your tax returns. If you drive a flash car, take expensive holidays, have your children in private schools, have had major home renovations done or get around wearing a Rolex while your disclosed income doesn’t support such a level of spending, you might have some explaining to do.

The audit

If, for whatever reason, the ATO isn’t satisfied that the taxable incomes you have disclosed are correct, they can make their own estimate using whatever information is available. Any amended default assessments will generally be based on a bank account analysis, as well as estimates of private spending. They can’t just pluck a figure out of the air, but they don’t have to prove where the discrepancy came from either.

Those without complete and accurate records of both their business and private finances are vulnerable to adjustments that involve double counting, especially from a bank analysis that assumes that every unexplained deposit represents undisclosed income and every unexplained withdrawal was used to fund private expenditure. As often as not the two are offsetting but the taxpayer can’t prove it.

To challenge a default assessment a taxpayer has to show not only that the ATO’s estimate is wrong in some respect - they also have to show what their correct taxable income is. The courts and tribunals are littered with default assessment cases where the taxpayer has failed in this regard, leaving them with a very large tax bill.

Protective measures

Here are some of the practices that might assist you in an ATO audit. Most of them would need to be in place before an audit even starts:

Keep your private and business accounts separate
Avoid using cash for business transactions
Never run private expenditure through your company account
Keep documentary evidence of gifts, loans and other non-taxable receipts that flow through your bank accounts. Create a written record of such transactions as they occur
Be prepared to explain any apparent discrepancies between your lifestyle and the income disclosed in your tax returns
If you have made a mistake or two, consider making a voluntary disclosure when you are notified of the audit but before it starts. This could help reduce penalties
Ensure you have books of account and bank records that verify the taxable income disclosed in your tax returns.

Come and see us to help get you ready for an ATO audit (or avoid one altogether).

Forgiveness of a debt - What are the tax consequences?

Tue, 10 Feb 2026 04:22:46 GMT

If you are owed money and you forgive that debt, potentially there are some important CGT consequences.

This is because the debt owed to you is a “CGT asset” in your hands and its forgiveness gives rise to a “CGT event” – potentially resulting in a capital loss to you (as calculated by reference to the value of the debt owed to you).

This typically occurs where you forgive the debt because the debtor does not have the capacity to repay and the debt has no value at all. On the other hand, where the debt is forgiven, but the debt could be repaid to a greater or lesser extent, then the amount of the capital loss will be reduced accordingly.

However, crucially, the tax law excludes from this, those debts which are not connected with any income producing activity or business – that is, essentially, debts of a “private nature” which typically arise between family members and friends (and even, possibly, in relation to dealings with a family company).

On the other side of the coin is the person who does not have to repay the debt (“the debtor”). In this case, there is no taxable gain to the person because they have not derived income or made a gain. Rather, they have merely had their obligation to repay the debt relieved or extinguished by the forgiveness of it.

Nevertheless, there can be tax law consequences to the debtor in this case.

But once again, there is generally a carve out for debts that do generate assessable income – that is, “non-commercial” debts where either no interest charged or any interest charged on the debt would not have been deductible to the borrower/debtor.

Again, such debts typically arise between family members and related parties.

However, on the other hand, where interest is payable on the debt is and would be deductible to the debtor then the tax rules come into play. And this includes the situation where interest is not charged but, if it had been it would have been deductible to the debtor.

This may arise in various situations and where it does the “commercial debt forgiveness” rules in the tax law come into play.

While these rules do not result in the debtor making any taxable income or gain, they do require the debtor to reduce some existing “tax advantages” they may have by the amount of the debt forgiven.

These tax advantages may include any prior year tax losses or capital losses that they could otherwise carry forward to reduce tax they may have in the future.

Likewise, it can also include the value of depreciable assets that would otherwise give rise to deduction for depreciation used.

Suffice to say these commercial debt rules are quite intricate – even in terms of working out if such a debt exists in the first place. Likewise, the CGT

rules that apply to the creditor on forgiving a debt require close consideration.

So, if you are a debtor or creditor in any debt forgiveness scenario (or are thinking of forgiving a debt), you must come and speak to us about the possible tax consequences – including those that maybe advantageous to you.

Permanent incapacity and super - what it means if you're totally and permanently disabled

Tue, 10 Feb 2026 04:19:54 GMT

Most people think of superannuation as money they can’t touch until retirement, but there are important exceptions. One significant exception is the permanent incapacity condition of release, which can allow people who are totally and permanently disabled to access their super earlier.

Understanding how this works can make a real difference at a time when income, medical costs, and financial security are often under pressure.

What is permanent incapacity?

Under superannuation law, permanent incapacity generally means that, because of physical or mental ill-health, you are unlikely to ever work again in a job for which you are reasonably qualified by education, training, or experience.

To meet this condition of release, your super fund usually requires certification from two medical practitioners confirming that your condition is permanent and prevents you from returning to suitable employment.

Once this condition is satisfied, your super can be released to you, even if you are well below preservation age.

You can access super even without insurance

A common misconception is that you can only receive money from super if your fund held Total and Permanent Disability (TPD) insurance. That’s not the case.

Even if your super fund did not have any insurance cover at all, you may still be able to access:

· Your existing super balance

· Employer contributions

· Personal contributions and earnings

The permanent incapacity condition of release applies to your super savings themselves, not just to insurance payouts. This can be especially important for individuals who changed jobs frequently, had low balances, or opted out of insurance.

In other words, the absence of insurance does not prevent access to super if you meet the permanent incapacity rules.

How the money can be paid

Once approved, the released super can usually be taken as:

· A lump sum – which may assist with large expenses like paying off the mortgage

· An income stream which may assist with meeting ongoing living expenses

Tax treatment may vary depending on your age and the components of your super, but in most cases, part of the benefit will be taxed concessionally compared to regular income.

It is important to get advice about your options and any tax implications before payment.

The role of TPD insurance in super

While insurance is not required to access super under permanent incapacity, TPD insurance held inside super can provide significant additional support.

If your fund includes TPD cover and your claim is accepted, the insurance benefit is paid into your super account. This can substantially increase the amount available to you, often at a time when earning an income is no longer possible.

Some key benefits of TPD insurance in super include:

· Premiums are generally deductible to the fund and this benefit is passed on to the member

· Premiums are paid from super, not your take-home pay meaning it won’t impact your cashflow

· You may not have to deplete super savings otherwise set aside for retirement

Final thoughts

The permanent incapacity condition of release from super exists to provide financial support when it’s needed most. If you are totally and permanently disabled, superannuation is not locked away indefinitely and can be accessed to help you manage life after work.

Whether or not insurance is involved, understanding your options can ease financial stress and give you more control during a difficult time. If you think you may qualify, speak to us to help guide you through your next step with confidence.

CGT - Buying a new home before selling the old

Tue, 10 Feb 2026 04:18:07 GMT

If you find yourself in the position of having bought yourself a new home before you sold your existing home, there are important CGT issues to consider – and these centre on the fact that under the CGT rules, you cannot have two or more CGT exempt homes at the same time.

However, there is an important concession that allows you to treat both the new home and the existing home as exempt from CGT for up to a period of six months – provided the new home actually becomes your main residence.

So, for example, in the simple case where you bought your new home on 1 February 2026 and then sell your existing one five months later on 1 July 2026, your existing home won’t be subject to any CGT – and your new home won’t lose any CGT exemption for this five month period.

However, the availability of this concession is subject to a number of important conditions.

Firstly, the existing home must have been your home for a period of at least three months in the 12 months period before you sold it. And, secondly, it must not have been used for the purpose of producing taxable income in any part of that 12 month period when you did not live in it.

So, in the above example, if you rented your existing home in the five month period before you sold it (which vendors sometimes do while waiting to sell it), you could not use this concession to give you an additional five months of exemption on that home.

As a result, you will be subject to a partial CGT liability to reflect the fact that your dwelling could not be treated as a main residence during this five month period.

(But if this was the first time you rented it and it would otherwise have been entitled to a full main residence exemption just before you rented it, then you would calculate this partial CGT liability by reference to its market value when you first rented it and the amount you sell it for.)

However, the stringency of these conditions about the use of your existing dwelling in the 12 month period before you sell it can be alleviated by using another concession (the “absence concession”) to continue to treat it as your main residence, even if you rent it in this period.

In a similar fashion, you can use another concession (the “building concession”) to treat any land you acquire on which to build a new home as your new home for the purposes of this six month overlap rule.

However, in both these cases the application of these particular concessions, and their interaction with the rule that allows you to treat an existing home and new home as CGT exempt for up to six months, can be quite complex. And much will depend on the precise facts of the case.

If you find yourself in the position of having bought yourself a new home before you sold your old one (or are intending to do this) come and speak to us – and we will show you how the rules operate in your circumstances, and how they can be applied most advantageously.

Six changes impacting your super in 2026

Tue, 10 Feb 2026 04:11:39 GMT

Superannuation rules are always evolving, and 2026 is shaping up to be another year of important changes. Some of these updates may only affect a small group of people, while others could impact almost everyone with super.

Whether retirement feels a lifetime away or it’s already on the horizon, understanding what’s changing can help you make smarter decisions and avoid costly mistakes. Here are six key changes to keep on your radar.

1. Possible tax changes for large super balances

One of the most talked-about changes is the government’s proposal to increase tax on large super balances, also known as Division 296 tax.

Here’s how it’s expected to work (if the legislation passes):

· Balances up to $3 million: no change. Earnings continue to be taxed at 15% as they are now.

· Balances between $3 million and $10 million: an extra 15% tax on earnings, bringing the total to 30% on that portion.

· Balances above $10 million: the total tax rate on earnings will rise as high as 40%.

It’s important to note:

· These changes are not law yet

· Only a small number of Australians would be affected

· Withdrawing super prematurely can be hard to undo because of contribution limits

If this may apply to you, the best approach is patience. Wait until the rules are final and get professional advice before making any big moves.

2. Payday super is locked in

One change that is definitely happening is payday super.

Currently, employers only have to pay super at least once every three months. From 1 July 2026, that changes.

Under the new rules:

· Employers must pay super at the same time as salary or wages

· Contributions must reach your super fund within 7 business days of payday

· For new employees, the first contribution must be paid within 20 business days of the salary or wages being paid

This is good news for workers. Paying super more frequently means:

· Your money gets invested sooner

· Less chance of unpaid or forgotten super

· Better long-term outcomes thanks to compounding

If you’re an employer, now is the time to start preparing for these changes ahead of their commencement on 1 July 2026. Reviewing your payroll systems and internal processes early will help ensure a smooth transition. This may involve speaking with your payroll software provider, accountant, or registered tax professional to confirm your systems are compliant. If you need support, we’re here to guide you through the process and help you get ready with confidence.

3. Contribution caps are expected to increase

Thanks to rising wages, super contribution limits are expected to increase from 1 July 2026.

While final confirmation depends on official figures released in late February 2026, the changes are widely expected to be:

· Concessional (before-tax) cap increasing to $32,500

· Non-concessional (after-tax) cap increasing to $130,000

These caps are linked to wage growth, and based on recent data, it would take a significant and unlikely drop in wages for indexation not to occur.

This change could create opportunities for:

· People topping up their super

· Those who arrange with their employer to salary sacrifice part of their income into super

· Individuals planning larger after-tax contributions

Once the new caps are confirmed, we’ll let you know and help you understand what they mean for your super strategy.

4. Transfer balance cap: what’s happening next?

The transfer balance cap (TBC) limits how much super you can move into a retirement-phase pension. Unlike contribution caps, the TBC is indexed to inflation (CPI) rather than wages.

Based on the latest December CPI figures, the TBC is set to increase from $2 million to $2.1 million from 1 July 2026.

This change will mainly affect people who haven’t yet started a retirement pension. If you already receive a retirement pension from your super, you may still benefit from a partial increase, depending on your individual circumstances and how much of your cap you’ve already used.

5. More flexibility for legacy pensions

Good news for people stuck in older super pension products.

New rules now allow greater flexibility for certain legacy pensions, such as lifetime, life expectancy and market-linked pensions held in SMSFs.

Previously, these pensions:

· Couldn’t be easily changed or exited

· Often no longer suited members’ needs

· Had strict limits around reserves and conversions

Under the new rules:

· A five-year window allows eligible members to review and restructure these pensions

· This creates opportunities to simplify super and improve flexibility

Because legacy pensions are complex, professional advice, especially from an SMSF specialist, is strongly recommended before making changes.

6. Better fund performance, transparency and tech

Large APRA-regulated super funds continue to face increased scrutiny, and that’s a win for members.

In 2026, expect to see:

· Ongoing pressure on underperforming funds, including forced mergers

· Clearer reporting on fees, performance and investments

· Better tools to compare super funds and make informed choices

At the same time, technology is transforming how we interact with super. Many funds are rolling out:

· Smarter online dashboards

· Improved mobile apps

· AI-driven tools to help with investment choices and retirement planning

If you haven’t logged into your super account lately, 2026 is a good year to start.

Final thoughts

Superannuation is a long-term game, and even small rule changes can have a big impact over time.

Take the time to review your super, stay informed about potential changes, and consider speaking to a financial adviser if needed. With the right knowledge and strategy, you can make sure your super keeps working hard for your retirement.

Age Pension and CGT implications of caravanning around Australia for 12 months

Fri, 30 Jan 2026 06:26:35 GMT

Many retirees dream of taking a “lap of Australia” in a caravan. A common question is what happens to the Age Pension and the family home if you leave it for a year.

Will the home stay an exempt asset for Age Pension purposes?

For Age Pension means testing, the principal home is generally an exempt asset, but homeowners have lower asset-test thresholds than non-homeowners. This means their Age Pension is reduced sooner depending on their assets.

A person is treated as a homeowner if they (or their partner) have a right or interest in the home they live in that gives them reasonable security of tenure. The definition of “home” is broad and includes houses, units and even caravans and boats.

If you temporarily vacate your principal home, for example, to travel for an extended period, you are generally treated as still being a homeowner for up to 12 months, provided you intend to return. During this time the home continues to be exempt under the assets test. Once the 12-month period is exceeded, you are usually treated as a non-homeowner and the home’s value becomes assessable under the asset test.

So, for a 12-month caravanning trip, where you keep the home and intend to move back in, the home will generally remain an exempt asset and your homeowner status is unchanged. Your caravan itself is an assessable asset, and you should tell Centrelink about its value and any other changes in your assets or income.

What if you rent the home while you’re away?

If you rent out the home while you travel:

The home can still remain exempt for up to 12 months under the temporary vacation rules (assuming you intend to return)
However, the net rental income will be assessed under the Age Pension income test, which may reduce your rate of pension.

You should keep good records of rental income and deductible expenses and notify Centrelink within 14 days of starting or stopping the rental arrangement.

CGT and main residence exemption if you later sell

Capital gains tax (CGT) is a separate issue. Your main residence is generally exempt from CGT. When you move out, you can choose to keep treating the property as your main residence for CGT purposes, even if you’re not living there.

Other factors to consider include:

If you do not use the home to produce income (for example, you leave it vacant while you travel), you can continue to treat it as your main residence for an unlimited period, so the full main residence exemption can still apply on sale
If you do rent it out, you can generally treat it as your main residence for up to six years per absence period. This is commonly called the “six-year rule” or “temporary absence rule”.

For a 12-month trip, most people can still claim a full main residence exemption on sale, whether the home is left empty or rented out, as long as the usual conditions are met and no other property is nominated as their main residence during that period.

Practical take-aways

A 12-month caravanning trip may not jeopardise the Age Pension exemption for your family home, but you must still report changes in your income and assets
Renting the home may improve cash flow but can reduce your Age Pension due to assessable rental income
For CGT, the absence rule means your home can often remain fully exempt from CGT when you sell.

Because these rules are technical and your broader financial position matters, give us a call before you hit the road.

Change to the tax treatment of holiday homes

Fri, 30 Jan 2026 06:14:40 GMT

No doubt noting the growing trend for people to rent out property for short-term accommodation, the ATO has withdrawn a 40-year old ruling and replaced it with a new draft Taxation Ruling accompanied by two draft Practical Compliance Guidelines that between them cover everything relating to renting out all or part of your property without carrying on a business, including income and deductions in a variety of circumstances.

This article focuses on holiday homes, which have always been a bit of a grey area from a tax perspective. The new guidance material tightens up the rules around the deductibility of ownership costs (mortgage interest, rates, insurance, maintenance and repairs), although not by as much as it might seem at first glance.

The ATO has always maintained that net rental losses from a holiday home are only deductible if the property is genuinely available for rent on commercial terms, particularly around peak seasonal times. Blocking out large slabs of time over Christmas and the school holidays for the owner’s personal use of their beach house or for use by family and friends for free or at below market rates while asking for unrealistically high rents or imposing onerous conditions on would-be renters would not be regarded as making the property genuinely available for rent.

Under the withdrawn guidelines, this issue was addressed by only allowing deductions for holding costs on a time basis – eg, if the holiday home was let to unrelated parties on commercial terms for, say, 18 days in an income year, the owner would have to include all of the rent received as assessable income but could only claim 4.9% of the outgoings, including holding costs. There was no deduction for holding costs attributable to the time spent at the property by the owner, nor for the period when the property was vacant.

The new guidance material uses a different approach. After many years it has occurred to someone in the ATO that a holiday home is a “leisure facility”, and under the law the cost of acquiring or holding a leisure facility is non-deductible. So even the 4.9% that was deductible under the withdrawn guidelines will no longer be deductible. Perhaps not much of a change in the scheme of things, but in the wrong direction for holiday home owners.

But there is an exception to the blanket disallowance of holding costs for leisure facilities, and this is where they are “mainly” used to produce rental income. This opens up the same can of worms that the withdrawn guidelines had to grapple with, but the guidance material does provide some practical examples about the meaning of “mainly” in this context.

A time analysis is a useful starting point, but it is not in itself determinative. Other less tangible factors include the pattern of use of the holiday home and the times it is set aside for the owner’s personal use. The mere fact of advertising the holiday home for rent is helpful, provided the rent being sought is commercial and the home is genuinely available to rent at peak times.

There is also a lot of useful guidance on apportionment where the rental pattern establishes the main use of the holiday home is to produce rental income. One of the examples given makes it clear that the numerator in the apportionment formula is the sum of the number of days the property is actually let plus the number of days it was vacant but genuinely available for rent. That makes it worthwhile clearing the “mainly” requirement if you can.

Because the leisure facility approach is new, the ATO has stated that it will not devote compliance resources to applying the new stricter view to properties owned before 12 November 2025 for the income years ending 30 June 2026 or earlier.

Holiday home owners should keep careful records of their holiday home, including:

· Detailed logs of rental and private use

· Evidence of market-based pricing and booking acceptances and rejections

· Evidence of not blocking peak periods for personal use

As your trusted advisors, it's our job to alert you to tax changes that might affect you. But we also realise there are intangible benefits and priceless memories that can come from the enjoyment of a well located holiday home, whether it’s on the beach or near the snowline. Enjoy what you have and perhaps don’t base all your decision making around a 4 or 5 per cent tax deduction.

Protecting your super from scams

Tue, 27 Jan 2026 23:29:49 GMT

With more than $4 trillion in superannuation, it’s no surprise scammers see it as a goldmine. ASIC has warned Australians to be on high alert after a rise in pushy sales tactics and false promises designed to lure people into risky super switches. Since your super is one of the biggest investments you’ll ever make, protecting it is crucial. Here’s what you need to know to keep your nest egg safe.

Why scammers target super

Superannuation accounts often hold large balances, which makes them a prime target. Fraudsters know that many people don’t regularly check their super fund or may feel uncertain about whether they’re getting the best deal. This makes them vulnerable to slick sales pitches that promise “better returns” or “lost super recovery.”

ASIC has noticed a rise in schemes where consumers are encouraged to switch super funds quickly, often through high-pressure phone calls, clickbait advertising, or “free” online super health checks.

The red flags to look out for

Not every call or offer about super is a scam, but there are some big warning signs to watch out for:

High-pressure tactics – being told you must act immediately. Remember, a genuine super opportunity won’t disappear overnight.
Cold calls or unexpected emails/messages, especially if you’ve never contacted the provider before.
“Free super health checks” or prizes – these are often advertised through social media or websites.
Offers to “find lost super for free” – while this sounds helpful, scammers often use it as a hook. (Tip: you can safely track down lost super yourself via the ATO.)
Unlicensed advisers – people giving advice without proper authorisation.
Mostly phone-based dealings – with little or no opportunity to meet a qualified financial adviser in person.
Promises of guaranteed or high returns – if it sounds too good to be true, it probably is.

Why these tactics are dangerous

These schemes don’t always look like traditional scams. In fact, they often feel legitimate. A salesperson may sound knowledgeable, polite, and genuinely interested in helping you. Some even refer you to an adviser during the call to make the process seem credible.

The catch? The investments may be complex, high risk, or poorly explained. Even experienced investors can find it hard to spot the pitfalls. Once you’ve switched your super, it can be very difficult and sometimes impossible to reverse the decision.

How to protect yourself

Here are a few simple steps you can take to keep your retirement savings safe:

Don’t rush. Take your time when making decisions about super.
Hang up on pressure. If you feel pushed or uncomfortable, end the call.
Check credentials. Make sure anyone giving financial advice is licensed with ASIC.
Do your own research. Use trusted resources like ASIC’s Moneysmart website to learn about your options.
Talk to your accountant or adviser. Before making changes, get independent advice from someone who knows your situation and isn’t tied to the sales pitch.
Be cautious online. Avoid clicking on random ads or pop-ups offering “free” super reviews.

The bottom line

There can be legitimate benefits to switching or consolidating super, but only after careful consideration of the risks and fees involved. The key is to make sure any decision is made on your terms, not under pressure from a cold call or pushy salesperson.

Your super is too important to risk on false promises. Stay alert, ask questions, and if you’re ever unsure, speak with us before making any changes.

Changes to deductibility of interest on ATO debts

Mon, 01 Sep 2025 00:20:55 GMT

An important reminder: Interest incurred in income years starting on or after 1 July will no longer be deductible, regardless of whether the debt relates to an earlier income year.

However, interest charged by the ATO that was incurred before 1 July 2025 can still be claimed as a deduction this tax time. 

Therefore, if you have overdue tax debts please arrange an appointment with us so we can discuss what options you have to pay these debts in the most expedient manner.

This could include various payment plans arranged with the ATO. And while general interest charge (GIC) will still accrue, paying off the debt will decrease the amount of interest charged.

Therefore, it is more important than ever for you to keep on top of ATO obligations to avoid unnecessary costs.

This can also include trying to make it easier to have funds available when it’s next time to pay. For example, we can discuss considering setting aside GST, pay as you go withholding and super from your business’s cash flow.

Age Pension means test changes - What they mean for you

Fri, 08 Aug 2025 00:00:10 GMT

Starting 1 July 2025, Age Pension means test thresholds will increase, potentially boosting eligibility and payments for retirees. These changes, announced by the Department of Social Services, aim to keep pace with inflation and living costs. Here’s a quick overview of how these changes may impact you.

What are the Age Pension means tests?

The Age Pension, available to residents aged 67, uses income and assets tests to determine eligibility and payment amounts. The test that results in the lower pension payment applies. If your income or assets exceed certain thresholds, you may not qualify for a pension or only receive a part pension. From 1 July 2025, these thresholds are rising, meaning more people may qualify for a full or part pension, and current part-pensioners could see higher payments.

Income test changes

The income test assesses earnings from sources like wages, interest, dividends and rental income. Centrelink uses deeming rates (currently 0.25% for the first $62,600 for singles or $103,800 for couples, and 2.25% above these) to estimate income from financial assets like bank accounts, managed funds and shares. The deeming rate from 1 July 2025 had not been confirmed at the time of writing.

From 1 July 2025, the income test thresholds will increase slightly. The new figures are illustrated in the table below.

Table 1: Fortnightly income test thresholds

*rounded down to nearest dollar

From 1 July singles can now earn $218 per fortnight ($5,668 yearly) for a full pension, and up to $2,516 ($65,416 yearly) for a part pension.

Each dollar above the lower threshold reduces pension entitlements by 50 cents for singles and by 25 cents for partner for couples.

This does not consider the Work Bonus which lets pensioners earn up to $300 per fortnight from work without affecting their pension.

Assets test changes

The assets test evaluates your assets such as shares, bank accounts, investment properties, etc. However, it excludes your family home. The new thresholds from 1 July 2025 are illustrated in the table below.

Table 2: Asset test thresholds

From 1 July a single homeowner may receive the full age pension if their assets are below $321,500 and a part-pension if their assets are below $704,500. A couple who are homeowners may have up to $481,500 in assets (combined) to receive the full age pension and may receive a part-pension if their assets are below $1,059,000. Non-homeowners can have more assets before their pension is reduced.

What this means for you

The changes to the Age Pension means test thresholds could significantly impact your retirement income, depending on your financial situation. The increased income and asset thresholds mean more retirees may qualify for the Age Pension or receive a higher part pension.

Remember that your Age Pension entitlement is determined by the lower of the income and asset test. If either test results in zero, you’re ineligible.

If you would like to learn more about your Age Pension entitlements give us a call.

Working from home and occupancy costs

Thu, 07 Aug 2025 23:46:56 GMT

A recent Administrative Review Tribunal (ART) decision on working from home costs during the 2020-21 COVID lockdowns ( Hall’s case ) may widen the scope for claiming additional deductions for occupancy costs such as rent, mortgage interest, home insurances and rates, but only in specific circumstances. This is on top of the hourly rate most people claim to cover additional energy, phone and internet costs.

Like many others, Mr Hall was forced to work from home in order to do his work, which involved the production of an on-line radio sports program for the ABC in Melbourne. The combination of government-imposed restrictions and the ABC’s own rules meant that during the height of the COVID lockdowns in 2020-21, the spare bedroom in a rented apartment which he used exclusively or nearly exclusively to carry out his role for the ABC was his only place of business.

Importantly, Mr Hall was not running a business from his home. He was an employee working remotely, as over a third of Australian employees still do to some extent these days. While Tribunal decisions are not legally binding, and Hall’s case only applies to the 2020-21 income year at the height of the COVID lockdowns, the decision seems well-reasoned and could arguably be applied more broadly.

While the lockdowns are thankfully well behind us now, the principle governing the Tribunal’s decision is that a proportion of a taxpayer’s rent (or mortgage interest) may be deductible where the employer does not provide a work space and the taxpayer has no alternative but to work from home. This can and does happen even today, well after the masks have been put away.

Who might qualify?

An important factor in the Hall case was that there was no element of choice involved. No workplace was legally available to Mr Hall at the ABC Studios and he had no alternative but to use his spare bedroom to produce his radio sports program. Where an employee works under flexible arrangements by choice (eg, three days from home; two days in the office) the reasoning in Hall’s case is not so easily applied since it would be open to the employee to attend the office every day. You could still make a claim, but it could be difficult to sustain.

On the other hand, where there is no longer an office to attend because the employer has chosen to cut back on rental costs, the only option for the employee is to work from home. In other situations employees might interact exclusively online with externals and other parts of the business because they don’t live in the same State as their employer’s office. Again, such an employee has no place to work from other than their home.

To be eligible for a proportional deduction for occupancy costs, the employee would need to work out of a designated area such as a spare room and use that area exclusively or nearly exclusively as their home office. Just setting up the laptop on the dining room table when the dining room is regularly used for other purposes isn’t enough.

Capital gains tax

Employees who might qualify for a proportional deduction for occupancy costs that includes mortgage interest will need to consider the potential impact on the capital gains tax (CGT) exemption on their main residence before deciding to pursue a claim. The main residence CGT exemption is reduced by the same proportion as the claim for occupancy costs, and a valuation is required at the time the home is first used partly for income-producing purposes.

So a home owner without a mortgage or with only a small mortgage may decide that claiming a proportion of occupancy costs isn’t worth compromising their main residence CGT exemption. We can help you weigh up the options. An employee who rents, as Mr Hall did, would have no such concerns.

The Commissioner is unlikely to allow occupancy claims

At the time of writing, the ATO has not responded in any way to the Tribunal’s decision in Hall. However, it is unlikely the ATO will welcome a flood of claims for a proportion of occupancy costs and will most probably disallow any claims that are identified.

In order to avoid the risk of penalties and interest, the best course would be to just claim the normal hourly rate (or actual cost method) to cover additional running costs when lodging your return. Then, after the notice of assessment has been received, lodge an objection claiming the occupancy costs. That way your rights are protected and you are not exposed to penalties or interest.

There may also be scope to revisit earlier assessments if you were locked down for a period and worked from home using a designated area exclusively or nearly exclusively for that purpose. In the case of earlier assessments it may be necessary to ask the Commissioner for extra time in which to lodge an objection.

We are here to help you

We should have a discussion about this issue if:

your employer requires you to regularly work from home;
no office space is available for you in which to perform your duties;
you work from home using a designated space such as a spare room which is used exclusively or nearly exclusively for that purpose; and
you rent your home or if you are a home owner and you have a substantial mortgage.

CGT: When is the contract of sale entered into?

Thu, 07 Aug 2025 23:36:36 GMT

The income year in which you enter into a contract to sell an asset is crucial for Capital Gains Tax (CGT) purposes.

This is because it will be in that income year that you make a capital gain or loss on the sale of the asset – and not the income year in which “settlement” of the contract takes place, if that occurs in a later income year.

And this may have certain important consequences. For example, you may realise a capital loss in that year which you can then use to offset or reduce any capital gains made in that year also. On the other hand, you may delay entering into a contract of sale so as to defer any capital gain to the next income year where it may be taxed more generously.

This illustrates that there are important tax planning opportunities around planning the time in which you enter a contract to sell an asset – albeit, it can also raise the issue of tax avoidance in certain cases.

For example, “wash sales” will attract the tax avoidance provisions. This occurs whereby you deliberately sell shares (or other such assets) before the end of the financial year to beneficially generate capital losses and then buy back the shares at roughly the same price in the next financial year. It can also apply where you transfer shares (or other such assets) to a related entity (eg, a family trust) for the same purpose.

Nevertheless, simply arranging the time at which you enter into a contract to sell an asset would generally not be considered to be tax avoidance – but merely valid “tax planning”.

(And in this regard, note also that in relation to the denial of a CGT main residence exemption for a foreign resident, the time at which you determine whether a person is a foreign resident is when they enter the contract – and, again, there are important practical consequences here. )

However, there will be no CGT consequences in respect of entering into a contract for the sale of the asset if the contract does not proceed to “settlement”. This is because there has been no “change in the ownership” of the asset for CGT purposes – albeit, there will be CGT consequences in respect of the forfeiture of any deposit and/or the payment of any damages.

But how does this timing rule work in the case where a contract is subject to conditions (such as “subject to obtaining finance – as is often the case in land sale contracts).

Well, in this case, the ATO draws a distinction between contracts where the “performance” of the contract is subject to meeting a condition (eg, a finance condition) and contracts where the “coming into existence” of the contract itself is subject to conditions.

In the former case, the contract is entered into from the start regardless of when the condition is satisfied; in the latter case, the contract is only entered into when the condition is satisfied and the contract comes into existence.

Usually, it is relatively easy to determine the distinction between these two types of contracts - but this is not always the case. In these circumstances, professional advice is a must.

On the other side of the coin, the time at which you enter into a contract to acquire an asset also has important CGT consequences – the first and foremost of these is that it is relevant to qualifying for the 12 month holding period for the purposes of accessing the 50% CGT discount.

However, it also, for example, relates to assets acquired on the exercise of an option. In this case, the ATO takes the view that the asset is acquired when the resulting contract of acquisition is entered into and not when the option is entered into (on the basis that the option itself is not the relevant contract of acquisition).

And, again, this is important for qualifying for the 12 month holding period for the purposes of accessing the 50% CGT discount.

Once again, these are important CGT matters which you need to speak to us about in relation to any contract for the sale or purchase of an asset you have entered into.

Can you leave your super to your grandchildren?

Thu, 07 Aug 2025 23:27:35 GMT

Many grandparents wonder if they can leave their superannuation to their grandchildren. Superannuation, or "super," is a key part of retirement savings in Australia, and its rules can be tricky. So, can a grandparent pass their super to a grandchild? The short answer is - rarely. But there is a solution. A binding super death benefit nomination in favour of your estate can allow you to bequeath your super to whomever you please. Just ensure your will clearly states who you want to inherit your super.

Who can receive super death benefits?

Super death benefits are the funds paid out from a person’s super account after they pass away. These benefits can only go to certain people, being dependents under superannuation law. Dependents include a spouse, children under 18, and anyone who was either in an interdependency relationship with the deceased or financially dependent on them. For a grandchild to directly receive their grandparent’s super upon their passing, they need to be in an interdependent relationship or financially dependent on the grandparent.

What is an interdependency relationship?

An interdependency relationship happens when two people have a close personal relationship and rely on each other in specific ways.

An interdependency relationship exists between two people if:

they have a close personal relationship
they live together
one or each of them provides the other with financial support, and
one or each of them provides the other with domestic support and personal care.

What does financial dependency mean?

If the grandchild doesn’t meet the interdependency rules, they could still qualify as a financial dependent. This means they relied on the grandparent for necessary financial support, especially for basics like food, housing, or clothing. It’s not just about getting money – it’s about needing that money to get by. A grandparent paying school fees won’t be enough to satisfy this requirement.

The third option: Super paid to your estate

Even if a grandchild doesn’t qualify as a dependent, there’s still a way for super benefits to be passed to them – through the estate. When you pass away, you can arrange for your super death benefit to be paid to your estate via a binding death benefit nomination. A binding nomination is like an instruction to your super fund to pay the death benefit to a particular dependent or your estate. You can use your will to ensure your grandchild inherits part of your estate, including your super funds. So always make sure that your will is up to date. This approach bypasses the strict rules for direct payments to super dependents.

Leaving super to grandchildren is tricky since they rarely qualify as dependents meaning a super fund may not be able to pay them directly. Instead you may use a binding nomination to direct super to your estate, then allocate it to your grandchild via your will. Professional advice is key so give us a call if you need help navigating super death benefits.

New super facts and figures from 1 July 2025

Thu, 31 Jul 2025 05:41:18 GMT

If you’ve been keeping an eye on your super, you might be wondering whether the contribution limits are increasing this year. The answer is – not yet.

Two key caps that determine how much you can put into super each year will stay the same from 1 July 2025.

Concessional contributions

These are contributions made before tax – like employer contributions, salary sacrifice, or personal contributions that you claim as a tax deduction. They’re taxed at 15% when they go into your super fund (unless you’re a high-income earner, in which case extra tax may apply).

And here’s a bonus – if you haven’t used your full concessional caps in recent years and your total super balance is under $500,000 as at 30 June 2025, you may be able to use the catch-up (carry-forward) rule to contribute more.

Non-concessional contributions

These are contributions made from your after-tax money. You don’t get a tax deduction for these contributions, but they’re a great way to boost your super savings over time.

Plus, if you’re under 75, you might be able to use the bring-forward rule to contribute up to $360,000 in one go by using three years’ worth of caps. Just remember – eligibility rules apply, like your total super balance and whether you’ve used this rule before.

For now, these caps are staying at $30,000 for concessional contributions and $120,000 for non-concessional contributions per financial year. If you were hoping to contribute even more, you’ll need to wait for a future increase.

So what is changing? The transfer balance cap

Starting 1 July 2025, the limit on how much super you can move into a tax-free retirement pension account will go up from $1.9 million to $2 million. This limit is called the transfer balance cap. This change means you can transfer more of your super into a tax-free pension when you retire.

The money you withdraw from your super pension (also called an account-based pension) is not taxed if you are 60 or over and the pension’s investment earnings are not taxed either. This can make a big difference to your savings in retirement.

If you haven’t started a pension before, the new cap of $2 million applies to you in full. However, if you’ve already started one, your personal cap may be somewhere between $1.6 million and $2 million, depending on your past pension history.

In the end, this increase is great news for anyone thinking about retirement, giving you more room to grow your super in a tax-free environment.

Why does this matter?

Even though the contribution caps aren’t going up, the increase to the transfer balance cap is a good reminder to check in on your super strategy, especially if retirement is on the horizon.

If you’re still working, now’s a great time to make sure you’re making the most of the current concessional and non-concessional contribution limits to build your super while you can.

And if you’re approaching retirement, consider how the higher transfer balance cap could open up more tax-free opportunities for your pension savings. It might be worth thinking about whether you should contribute more to your super now to make the most of it later.

Need help?

Super can be complex, but you don’t have to work it all out on your own. If you’d like help understanding these changes or planning your next steps, get in touch with us. We’re here to help.

The CGT exemption for land adjacent to a home

Thu, 31 Jul 2025 05:12:56 GMT

The rules surrounding the circumstances in which a home will be fully exempt from capital gains tax (CGT) are quite extensive – and complex.

One crucial one is that the exemption is only available for a home and “adjacent land to the extent that the land was used primarily for private or domestic purposes in association with the dwelling.”

There are some key things to know about this adjacent land requirement:

Firstly, it only applies where the adjacent land is no greater than two hectares – but excluding the land immediately under the home.

And two hectares is roughly the old five acre block – and it is pretty big, being 20,000 square metres ie, 200 metres by 100 metres. (Step it out around your neighbourhood and you will see how big.)

Of course, there would be few homes in major metropolitan cities that would approach this block size – albeit it may be an issue for homes on the rural outskirts of such cities.

In the case where adjacent land exceeds two hectares, a full CGT exemption on the sale of the home is not available and some sort of partial capital gain arises on a pro-rata or valuation method. And the ATO is quite generous on how this can be calculated.

Secondly, the adjacent land must be “used primarily for private or domestic purposes in association with the dwelling” . This would include where a granny flat is erected on the adjacent land and a child, a relative or other person lives in it rent-free (or only pays outgoings – and not arm’s length or commercial rent).

Likewise, it would include where adjacent land has other structures on the land such as a large shed, a pool and cabana, a tennis court – provided again that the land and these structures on it are “used primarily for private or domestic purposes in association with the dwelling”.

But what constitutes “primarily for private or domestic purposes...” ?

The ATO has a ruling on this issue which broadly provides that “primarily” requires a judgment as to time (and/or area) of land that the land was so used.

So, if for example a home that was owned for 30 years originally had a shed on a small part of it in which the owner carried on a small “shed” activity for a year, it should be possible to conclude that the land was used “primarily” for private or domestic purposes.

But otherwise, only a partial CGT main residence exemption is available to the extent that the adjacent land was not so “used primarily for private or domestic purposes in association with the dwelling”.

Thirdly, the adjacent land need not be immediately surrounding the home. It could for example, include vacant land on a separate title across the road or next door (or such land that has a dwelling or other building on it) – as long as it is “used primarily for private or domestic purposes in association with the dwelling.”

However, the further the distance between the relevant land and the land on which your home is situated the less likely it is that the relevant land is “adjacent” land.

Finally, and importantly, if you sell (or gift or transfer) any part of adjacent land separately from the whole of your home and adjacent land (eg, on its subdivision) then no CGT main residence exemption is available for any capital gain or loss you make on this transaction. And this is because the exemption applies to the home in totality – which includes all of the adjacent land.

This issue also arises in relation to dual occupancy arrangement where the new dual occupancy dwelling may be sold separately from the original home. However, the ATO has detailed guidelines on how the CGT rules apply in these circumstances.

So, if any of these scenarios apply to you come and get some advice from us – if only for peace of mind’s sake.

Market volatility: Super’s silver lining

Thu, 31 Jul 2025 05:11:17 GMT

If your super balance has suffered from recent market volatility there may be opportunities available now that weren’t before. Here are a few worth exploring.

Entitlement to an Age Pension

If you’re 67 or older, a lower super balance may mean you now qualify for the Age Pension or a higher payment if you are already getting an Age Pension.

Most assets, including super and super pensions, are assessed under the Centrelink asset test to determine eligibility.

The Age Pension is subject to both income and asset tests, and the one resulting in the lower payment applies.

If your assets fall below the cut-off threshold, you may qualify for a part Age Pension (subject to the income test). If they’re below the full pension asset test threshold, you may receive the maximum entitlement.

The table below shows the asset thresholds for receiving a full pension, as well as the cut-off point beyond which you’re no longer eligible:

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CGT concessions: Using an asset in a business for the required time

Thu, 31 Jul 2025 05:07:18 GMT

A recent decision of the tax tribunal has highlighted the requirement that in order to use the CGT small business concessions for a capital gain made on an asset used in a business, the asset must have been used, or held ready for use, in that business for the required time.

And this required time is for half the period that the asset was owned, or if you owned it for 15 years or more then it must have been so used for at least 7 ½ years.

And, importantly, this includes the period that it was held ready for use in that business.

In that tribunal case, the taxpayer inherited farmland which he never used for farming (but instead left it vacant and then later let his brothers use it in their own farming business). However, he claimed that it was for the relevant period it was held ready for use in his own farming business, but that a dispute with his brothers prevented him from using it as such.

In this case, it was clear that the farming land was never really held ready for use in his business – so the large capital gain he made on the asset was fully taxable and not entitled to any CGT small business concessions.

However, there are many cases where the period that an asset is held ready for use in a business will count towards the required time that an asset must have been used in a business (ie, half the period that the asset was owned, or 7 ½ years if you owned it for 15 years or more).

For instance, in relation to farmland, this would include where farmland is being prepared for grazing activity (eg, while fencing is being built or while waiting for the stock to be trucked in from other sources) or cropping activity (eg, while pastures are being sown).

In relation to other businesses, this could include the period that, say, a factory or a shop is being fitted out in preparation for the relevant business activity or where, say, relevant structures are being built on the land for that purpose (eg, greenhouses for a nursery).

And this period of being held ready for use may be important in meeting this holding period rule – where otherwise the actual business activity hasn’t been carried out for the requisite period.

But whether an asset is being held ready for use in a business can be a difficult question to determine – as can the other requirements of this rule. And this includes the crucial issue of whether an asset can qualify for the CGT small business concessions where it has also been used for rental purposes.

So, if you run a small business and have this type of issue come and have a talk to us and we can help you.

Small-scale subdivision and property development

Thu, 31 Jul 2025 05:03:17 GMT

So, you have decided to knock down your home and to build a couple of townhouses instead – and maybe live in one (but will just wait and see how things pan out).

Likewise, you may have decided to subdivide your large backyard to do a similar thing.

In another case, you may have bought yourself a large block of land down the coast or in the country on which to build a holiday home (or your dream retirement home), but have now decided to build some houses on it to sell as the market is now in that region. (And you know how to manage a project; you have been doing it all your working life.)

In all of these scenarios, the ATO may take the view that you are engaging in small scale property development and that, as a result, your profits from this activity should be taxed as ordinary business profit (and possibly at the top rate of tax), and not just merely as a concessionally taxed capital gain.

Furthermore, where you may have “ventured” land into a property development project, the capital gains tax (CGT) laws will apply to capture any capital gain (or loss) made on that land up until that time (but provided the land was not exempt from CGT, such as in the case of a home).

But there is one big advantage in being taxed as a property developer – you can generally claim your deductible costs each year as you incur them, and particularly interest on any money borrowed for the venture.

On the other hand, if you are merely subdividing part of your backyard and selling it you will only be subject to CGT in respect of any gain or loss you make – and, what’s more, you can’t claim the CGT exemption for a home in this case.

And in the case of a knockdown-rebuild of a home, where you move back into and make it your home in the required time periods, there will generally be no CGT consequences (albeit, one day the ATO may look more closely at this this rule if it considers it to be badly exploited).

In relation to GST, it generally doesn’t apply to small-scale property developments unless you’re operating a business and registered for GST – or to put it another way, for one-off projects, GST is unlikely to apply, but subdividing and selling multiple lots could push you into GST territory.

But the application of GST to small-scale property developments is a complicated area.

In short, the issue of how small-scale property development activities are taxed is complex – and will depend on the exact circumstances of the case.

So, it is vital to come and speak to us if you are considering undertaking such activity – or have already done so.

Proposed Division 296 tax - Key issues and implications

Thu, 31 Jul 2025 05:00:18 GMT

The proposed Division 296 tax, which is proposed to start on 1 July 2025, introduces an extra 15% tax on superannuation earnings above a $3 million super threshold. Everyone supports a fair and sustainable superannuation system, but the new tax is unpopular for many reasons.

Two big reasons people don’t like the new tax is that the:

Tax will apply on asset growth even if the asset hasn’t been sold
$3 million dollar threshold will not be adjusted with inflation

Let’s look at how the tax will apply on asset growth. The new 15% tax will apply on your super fund ‘earnings’ on the proportion of your super balance that exceeds $3 million. You might think that earnings are simply the profits you have made or locked in but that is not the case when it comes to this tax. Instead, earnings are based on how much your super balance has increased over the year. This includes ‘paper gains’ or increases in the value of assets not yet sold. This is a problem because your assets might be higher this year but may be lower when you sell them. In that case you have paid tax on ‘unrealised’ growth even though you didn’t make a profit. In fact you may subsequently sell the asset for a loss.

Another problem with taxing asset growth before the asset is sold is that you or your fund may not have the cash to pay the tax. In that case it is likely that you will be forced to sell an asset you were not planning to sell just to pay the new tax.

Only ‘earnings’ attributable to assets over $3 million are subject to the additional 15% tax. The threshold might sound high but with inflation the threshold in today’s dollar value will fall. A young person entering the workforce today can expect to pay Division 296 in the future unless this threshold is adjusted for inflation.

Keep in mind that this new tax has not yet been legislated and it may be premature to withdraw money from super to avoid the tax.

If you are concerned about how Division 296 tax may impact your retirement savings give us a call and we can help you understand its implications and explore strategies to optimise your superannuation.

Super guarantee is increasing to 12%

Thu, 31 Jul 2025 04:56:57 GMT

From 1 July 2025, your superannuation guarantee (SG) rate is increasing to 12%. That means more money going into your super from your employer, helping you build a better nest egg for retirement.

But what happens if you earn some of your wages before 30 June but get paid after 1 July? Will the higher super rate apply to that pay too? Let’s break it down.

It’s all about when you get paid

The key rule here is that the SG rate is based on when you’re paid, not when you earned the money.

So even if you did the work in June, if your pay day is on or after 1 July 2025, your employer has to pay 12% super on those wages.

If you get paid before 1 July 2025, then the old rate of 11.5% applies – if the work was done in July. It all comes down to the date the money hits your bank account.

A quick example

Let’s say George works for XYZ Pty Ltd.

If George works in June (or even across June and July), but gets paid in July, his employer must pay 12% super on the whole amount.
If George works in July, but for some reason gets paid in advance in June, only 11.5% super applies.

Your employer will then need to send that super contribution to your fund by the usual deadlines – generally within 28 days after the end of the quarter.

The final step in a long journey

The increase in the SG rate to 12% is the last step in a plan that’s been rolling out over the past few years. Here’s how the SG rate has been increasing:

This is great news for workers, because more super means more savings for retirement, and that can make a big difference later on.

Getting on the front foot for your 2024-25 Tax Return

Thu, 31 Jul 2025 04:52:03 GMT

Here are some more detailed tips relating to a couple of common claims that often attract ATO scrutiny.

Working from home

A lot of people are still regularly working from home for at least part of the week. If you do, you are entitled to a deduction for the additional costs you incur. To be eligible to make a claim it is not necessary to set aside an area exclusively for business or employment related use. A shared dining table is all you need. Except in very unusual cases, deductions are not available for occupancy costs such as mortgage interest, rent, rates and insurances.

Most people make their claim using the fixed rate method, which is 70 cents per hour for 2024-25. The fixed rate method covers home and mobile internet costs, mobile and home phone costs, power and gas charges and stationery and computer consumables. Under the fixed rate method, you can also claim depreciation and repairs for assets used such as desks, office chairs and laptops, where those items cost more than $300. This is on top of the 70 cents per hour.

Alternatively, you could use the actual cost method, but that requires more detailed records and receipts.

We can help you to legitimately maximise your claim, but before you can claim anything, you need to have:

A record of the hours worked from home. This has to be maintained for the entire 2024-25 financial year – you can’t just keep a detailed record for a representative period and apply it for the full year.
One current sample invoice for each of the costs the fixed rate method is intended to cover – internet costs, phone costs, energy bills. It’s important to take copies of those invoices now and file them with your tax records rather than scramble around looking for them when the ATO comes asking for them in a few years’ time.

Use of your own vehicle for business or employment related purposes

For starters, any reimbursement you receive from your employer, either on a cents per kilometre basis or a flat amount, is assessable in your hands and will be shown on your payment summary. Not everyone who uses their own car for work is reimbursed in this way, however, and you are still entitled to make a claim, in spite of not receiving any reimbursement.

There are two alternative ways of claiming a deduction for business or employment related car use – the cents per kilometre method or the logbook method. For those who use the cents per kilometre method (which only applies to claims of up to 5,000 kms) the process is pretty simple – just multiply the kilometre figure by 88 cents. So if your business or employment related use was 4,000 kms, your 2024-25 claim would be $3,520.

Under the cents per kilometre method, you don’t need to keep a full-blown logbook that tracks every journey. However, the ATO may ask you how you came up with the claimed distance, especially where you’re pushing up against the 5,000 km threshold. So you will need to have a diary of some sort that shows how you have estimated the kilometres being claimed – anything to prove you haven’t just plucked the figures out of thin air.

People sometimes get confused about what qualifies as business or employment related car use. You can make a claim where:

you travel to locations that are not your usual workplace;
you have no fixed workplace and travel from site to site;
you carry tools or equipment which are bulky and cannot be securely stored at your workplace;
you drive to see customers or suppliers;
you drive to seminars or to a second job.

Non-deductible travel includes situations where:

you drive to and from your regular workplace;
your employer pays your car expenses directly.

The logbook method is the alternative to the cents per km method. As the name implies, you need to keep a detailed logbook, but only for a representative period of twelve weeks to work out your business related use. Provided your pattern of car usage remains broadly the same, the resulting business use percentage is good for five years, after which you have to repeat the process. The logbook method might be more appropriate where your business or employment related car use is well over 5,000 kms.

For each journey, the logbook needs to show the date of the trip, the starting and finishing odometer reading, the distance travelled and the reasons for the journey. Where you are completing your logbook for the 2024-25 financial year, you need to complete the logbook entries during that year, after each trip. The logbook should come up with a business percentage, which can then be applied to all the costs associated with running the car, including depreciation. Receipts, invoices or other documentary evidence has to be maintained to verify the actual expenditure being claimed.

Car logbooks are available from Officeworks and most stationers, and can also be ordered online.

We can help you with the record keeping and logbook requirements.

Binding Death Benefit Nominations Explained

Thu, 31 Jul 2025 04:48:50 GMT

When it comes to superannuation, many people assume that their retirement savings will go to their loved ones when they pass away. Sadly, this isn’t always the case. Unlike other assets that are covered by your will, your superannuation is handled separately, and if you want to ensure it goes to who you want, you need a binding death benefit nomination (BDBN).

What is a binding death benefit nomination?

A BDBN is a formal instruction you give to your superannuation fund, telling them who should receive your super when you die. The fund must follow your instructions if your nomination is valid. This gives you certainty that your money will go to who you want.

If you don’t have a binding nomination, your super fund will decide who gets your money. This means your super could be distributed differently from what you intended. Without a valid nomination, your fund will usually follow set rules and laws about dependants.

The three-year expiry rule

A BDBN generally expires every three years. This means you need to renew it regularly to keep it valid. If your nomination expires and you haven’t updated it, your super fund will decide who gets your money when you pass away.

To avoid this, many people set reminders to review their nomination every few years. Major life events such as marriage, divorce, or having children are also opportune times to review your BDBN.

Non-lapsing binding nominations

Some super funds offer non-lapsing binding nominations, which do not expire. Once you make a valid non-lapsing nomination, it remains in place unless you choose to change or cancel it.

However, not all super funds offer this option, and each fund has its own rules about how non-lapsing nominations work. It’s important to check with your fund to see if you can make one and whether any conditions apply.

Binding nominations in SMSFs

If you have a self-managed super fund (SMSF), the rules around BDBNs can be different. Unlike large super funds, where trustee discretion is limited by the rules of the fund and superannuation laws, SMSFs can have more flexibility.

Some key differences include:

No automatic expiry: In many SMSFs, binding nominations do not expire unless the trust deed specifically states otherwise. This is different from retail and industry super funds, where nominations often expire after three years.
Customised rules: The rules about binding nominations in an SMSF depend on the trust deed, which is the legal document that governs the fund. Many SMSFs allow non-lapsing nominations, while others may require regular updates. Also, some SMSFs allow cascading nominations ie, instructing the fund to pay a death benefit to a secondary beneficiary if the primary beneficiary predeceases the member.
Trustee control: Since SMSF trustees are usually fund members themselves, there can be potential conflicts of interest when deciding how to distribute super benefits. A well-structured binding nomination can help prevent disputes among family members.

If you have an SMSF, it’s crucial to check your trust deed and ensure your nomination aligns with the fund’s rules.

Who can you nominate?

When making a binding nomination, you can’t just choose anyone – you must nominate one or more ‘eligible beneficiaries’. These include your:

Spouse (including de facto and same sex partners)
Children (including adopted or stepchildren)
Financial dependants (such as someone who relies on you financially)
Interdependents – someone you share an interdependent relationship with (such as a person you live with, have a close bond with, and where one or both of you provide financial assistance, domestic support, and personal care)
Legal personal representative (your estate, so your super is distributed according to your will)

If you nominate someone who isn’t eligible, your nomination will be considered invalid, and the super fund trustee will decide who receives your super.

How to make a valid binding nomination

To ensure your nomination is legally binding, follow these steps:

Check your fund’s rules: different funds have different requirements for binding nominations.
Complete the required form: your super fund will have a specific binding nomination form you need to fill out.
Nominate a dependant or legal personal representative
Ensure the proportions add up to 100%
Sign and date it in the presence of two independent witnesses (over 18 and not beneficiaries)
Submit the completed form to your super fund.

Final thoughts

A BDBN is an essential tool for ensuring your superannuation is distributed according to your wishes. If you don’t have one in place, or if yours has expired, your super fund may decide who gets your money – and it might not be who you intended.

Whether you choose a standard nomination with a three-year expiry, a non-lapsing nomination, or an SMSF-specific arrangement, keeping your nomination up to date is key. Take the time to review your super fund’s rules and ensure your hard-earned super goes to the ones you love.

Concessional Super Contributions vs Mortgage Paydown: What’s the smarter move?

Thu, 12 Jun 2025 05:13:30 GMT

If you have some extra cash, you might be deciding whether to make a concessional contribution to your super fund or use it to pay down your mortgage, whether on your home or holiday house. Both strategies have advantages, but the right choice depends on your personal situation. Let’s take a closer look at the options.

Option 1: Pay down your mortgage

Putting extra money towards your mortgage helps reduce non-deductible debt ie, debt carrying interest that isn’t tax-deductible. This strategy can be particularly appealing if you value certainty or plan to free up cash flow soon. Key advantages include:

Guaranteed savings : every extra dollar paid directly reduces your interest costs. For example, on a 5% loan, an additional $10,000 payment saves you $500 a year. This is essentially a risk-free 5% return.
Increased equity : reducing your loan balance builds equity in your property, which can improve your financial flexibility if you need to borrow against it or decide to sell.
Improved cash flow and peace of mind : with a smaller loan, your minimum repayments shrink, giving you more breathing room and financial security.

The downside is that unlike super contributions, there are no immediate tax benefits. Over the long term, investment returns from a well-diversified super portfolio often exceed typical mortgage interest rates.

Option 2: Concessional super contributions

Concessional super contributions, like salary sacrifice or personal deductible contributions, boost retirement savings and cut personal tax. They’re especially appealing for people near retirement. Super may be partly or fully accessible after 60 at which time withdrawals are generally tax-free and can be used to repay loans whilst also having enjoyed a tax break on contributions. Key advantages include:

Tax benefits : contributions are taxed at 15% in super (or 30% for some high-income earners), often below your marginal rate.
Long-term growth : super investments in growth assets, plus a concessional tax rate of 15% on asset income in super, can significantly grow your retirement savings.

The downside is that funds are locked away until age 60 and are generally unavailable for emergencies. Market fluctuations, such as those seen recently, may also impact your superannuation savings.

Case study

Brian has $10,000 (after tax) of surplus cashflow each year. He is considering using this surplus cashflow to pay down his mortgage on a holiday home or making a personal deductible contribution to super. He is 55, plans to fully retire at 60 and is on the 39% tax bracket (including Medicare Levy). His mortgage is incurring interest at 5.6%.

Option 1 – pay down mortgage

If Brian makes an additional $10,000 one-off mortgage repayment each year for the next five years, he will have about $56,000 less debt than he would otherwise have. This reduction includes the interest that would have been accrued but for the reduction in the loan over the five years.

Option 2 – make concessional contribution to super

If Brian can forgo $10,000 of after tax cashflow he can potentially make a personal deductible contribution of approximately $16,390 and be in the same after-tax cashflow position. As he is paying 39% tax, a $16,390 deductible super contribution will reduce his tax by $6,390 meaning his cashflow only reduces by $10,000 per annum.

Let’s assume a net super contribution of $13,930 ($16,390 less 15% contributions tax) is invested each year into super for the next five years. Let’s also assume his super grows at 5.6% net per annum. In this case Brian will have about $78,000 more in super than what he would otherwise have but for the deductible super contributions. After five years Brian is aged 60 and if he is also retired, he is free to withdraw any amount of super, tax-free, to pay down remaining debt.

The verdict

Chat with us to find out which option suits you best. There is no one-size-fits-all answer. Paying down your mortgage offers security and peace of mind. Making extra concessional super contributions can deliver powerful tax benefits and long-term growth in retirement savings.

Whether you're focused on financial flexibility now or building wealth for later, we're here to help you weigh the pros and cons and make the most of your money.

Writing a will in a tax-effective manner

Fri, 30 May 2025 04:14:23 GMT

When a person writes a will they usually leave their assets to their children – and usually in equal shares.

And when they first write their will their children may be young – and they may also be relatively young when they later update it.

However, there is a potential capital gains tax (CGT) issue lurking here.

In this increasingly globalized world, when the children do inherit the assets, they may be living overseas.

In this case, if they are considered a foreign resident for tax purposes at the time they become entitled to the assets of the estate (or their share of them), instead of the roll-over applying, it will trigger an immediate CGT liability for the deceased in their final tax return.

And this will usually be paid by the executor from estate assets – thereby diminishing the amount of the estate that would otherwise be available to the beneficiaries.

And in this case the amount of the capital gain (or loss) is determined by the asset’s market value at the time of the deceased’s death and the deceased’s cost for CGT purposes.

However, there is a very important carve out from this rule.

It does not apply if the bequeathed asset is Australian real estate (or other “taxable Australian property” as defined). This is because such assets always remain subject to CGT – regardless of the residency status of the taxpayer. Moreover, any dealings in them can usually be traced by the ATO (especially in the case of land).

However, the rule would, for example, apply to shares on the ASX and ordinary investment units in unit trusts.

Note that there are special rules that apply to shares in a company or units in unit trust where more than 10% of the shares or units are owned and more than 50% of the value of the assets of the company or unit trust is real property. (But these rules can be very complex.)

The upshot of all this is that when writing your will it is important to get good tax advice so that it can be structured and documented in a tax effective way – and, broadly speaking, this will entail giving your executor a high degree of flexibility in how estate assets will be distributed among your beneficiaries.

However, if you are already locked into a will and you find yourself in this situation, there are a few things you can do to ameliorate the effect of this rule.

And by the way, in writing a will it is probably not a bad idea to give your executor the power to grant someone a right to occupy your home after your death. This is because it is another potential way to access the CGT exemption for an inherited home.

So, if you are writing your will or looking at updating one, come and have a chat to us about it first so that we can take you through some of the ins-and-outs of writing it tax-effectively.

Concessional contributions - Can there be too much of a good thing?

Thu, 15 May 2025 04:24:36 GMT

A fantastic way to grow your retirement savings and shrink your tax bill is through concessional contributions (CCs) to super. But more is not always better and like Goldilocks and her porridge, it pays to get things just right.

The basics of concessional contributions

Extra CCs can be made through salary sacrifice or as personal deductible contributions (PDCs). These contributions reduce your taxable income and are taxed at 15% inside super rather than your personal tax rate. That’s a win—especially if you’re on a higher income !

When do concessional contributions lose their tax advantage?

CC’s typically save you tax but there’s a point where they stop working in your favour. This happens when your taxable income drops to the effective tax-free threshold—the level where you don’t pay any tax anyway.

For the 2024/25 financial year, the effective tax-free threshold for a single person (without the Senior Australian Pensioner Tax Offset or SAPTO) is $22,575. This includes the standard tax-free threshold of $18,200 plus the Low-Income Tax Offset (LITO). If your taxable income falls below this, making CCs won’t save you any tax—because you weren’t paying any in the first place!

What is YOUR effective tax-free threshold?

Knowing your effective tax-free threshold will help you decide how large or small your CC should be. This of course assumes you have your cashflow sorted!

This table illustrates the effective tax-free thresholds that may apply to you depending upon your circumstance.

* Figures rounded to the nearest $5

If your taxable income is already below your threshold, making CCs won’t reduce your tax further—but they will be taxed at 15% inside super. This means you’re losing 15% for nothing and you might be better off considering making after-tax “non-concessional contributions” which aren’t subject to this “contributions tax.”

Don’t forget your catch-up concessional cap!

Haven’t been maxing out your concessional cap in previous years? No worries! If your total super balance is under $500,000, you can make extra catch-up contributions using your unused cap amounts from the past five years. You might even be eligible for up to $162,500 in catch-up CCs! That can really get your taxable income down—but remember don’t go overboard!

Be careful not to exceed your concessional cap and other tips

Don’t forget your employer will make CCs via super guarantee and these will also count towards your concessional cap. Exceeding your concessional cap can mean extra tax and be an administrative headache. Also if you are on a higher income your CCs may be subject to an additional 15% tax in the form of “Division 293” tax. Play it smart and get advice!

Speak to your adviser

Super contributions are a balancing act—too little and you miss tax benefits, too much and you could face extra tax. Chat with your financial adviser to find the right number for you!

No CGT exemption for homes held on trust

Thu, 15 May 2025 04:23:49 GMT

It’s pretty well-known that a foreign resident (for tax purposes) cannot get a CGT exemption for a main residence (if they are a foreign resident at the time they entered the contract of sale).

Also, if the home was acquired after 8 May 2012 they won’t be entitled to any 50% CGT discount to reduce the amount of the assessable gain. And if they acquired the home before that date, then the amount of discount available will be reduced on a (disproportionate) sliding scale.

Of course, all this means that if a person is going to become a foreign resident and they want to get the CGT exemption on their home, they need to enter that contract of sale before they leave the country (even if the appropriate transaction takes place at the airport just before they leave!)

However, what is probably less well known is that you can’t get a CGT main residence if you own the home on trust for someone else.

And this means any form of trust, ranging from one that arises from a formally executed trust deed to one that arises “accidently” in the circumstances where a court of equity would rule it appropriate to find that one person own the home on trust for another in the interest of fairness.

It would also include the case where a home is held under a bare trust arrangement – which essentially means that the person for whom it is held essentially “owns” it and can call for its legal transfer to them at any time. And this is regardless of who lives in the home.

This bare trust arrangement is often used when the true owner of the home does not want his or her identity known as the real owner of the home – so it is held in trust under another name.

Which leads to the next point.

In the light of the Government’s recent announcement to place a temporary 2 year ban on foreign investors buying residential property in Australia, attempts may be made to circumvent this ban by arranging for a resident taxpayer to buy the property on behalf of a foreign resident.

In such a case, among other problems, no CGT main residence exemption would be available - regardless of who lives in it. And in any event, the broad rule that makes a foreign resident liable for CGT on any real estate they (beneficially) own in Australia would apply.

And presumably, the practice was fairly widespread even before the temporary ban – in every type of situation ranging from a defined strategy to buy the home on trust for a major overseas person or entity to the case where, say, a foreign student buys a property from parents’ money as an investment for the parents (and a place to live for the student) to “accidental” cases.

But, above all, be careful if you sign up for this – because if it is pursued by the ATO, then it will be you as the trustee who is liable for tax on any capital gain (or profit) made on the property to which the overseas owner is entitled. And you may no longer have the funds to pay it!

So, if you think you may this type of thing may apply to you, come and talk it us about it.

Employees vs. Contractors - What Sets Them Apart

Thu, 01 May 2025 01:21:59 GMT

The Australian Taxation Office (ATO) has recently revised its guidance on differentiating between employees and independent contractors. This change follows several court rulings that clarified the criteria for determining whether a worker is genuinely an employee or an independent contractor.

Whether you’re a worker or a business owner, understanding these differences is crucial, as they have an impact on tax, superannuation, and workplace entitlements.

Why does the difference matter?

How a worker is classified – either as an employee or a contractor – impacts who is responsible for paying taxes, providing benefits like superannuation and leave, and who carries legal responsibilities. Misclassifying a worker can lead to serious financial consequences, including unpaid entitlements and penalties from the ATO.

Key differences between employees and contractors

The primary difference lies in how the worker interacts with the business:

· Employees work in the business and are part of its operations.

· Contractors work for the business but maintain their own separate operation.

The contract between the business and the worker is crucial in determining a worker's classification. While day-to-day work practices play a role, the legal rights and responsibilities outlined in the contract hold the greatest significance.

Here are the ATO’s most important considerations:

Superannuation and contractors

Even if someone is considered a contractor, they might still be entitled to superannuation if:

· They’re paid mainly for their labour.

· They work as a sportsperson, artist, entertainer, or in a similar field.

· They provide services for performances or media production.

· They do domestic work for over 30 hours per week.

Workers who are always employees

Some workers are always considered employees, no matter what. This includes apprentices, trainees, labourers, and trades assistants.

Apprentices and trainees work while completing recognised training to earn a qualification, certificate, or diploma. They might be full-time, part-time, or even school-based and usually have a formal training agreement.

Most of these workers are paid under an award, meaning they have set pay rates and conditions. Businesses hiring them must follow the same tax and superannuation rules as they do for other employees.

Companies, trusts, and partnerships are always contractors

If a business hires a company, trust, or partnership (rather than a person) it’s always considered a contracting arrangement. However, people working for that entity could still be employees of that entity, rather than the business hiring the services.

Why this matters to you?

For workers, knowing your status helps ensure you receive the correct pay and benefits. For businesses, classifying workers correctly helps avoid fines and ensures compliance with tax and employment laws.

If you need more details or want to check your situation, reach out to us for more information. Proper classification today can prevent costly mistakes in the future.

Three great reasons to start a Transition to Retirement Pension

Thu, 01 May 2025 00:41:58 GMT

Thinking about easing into retirement but still need a steady income? Want to trim your tax bill while growing your super? Or maybe you'd love to knock down some debt before you stop working? If you are 60 or over, you can do just that.

Who can start a super pension?

Using your super to start a pension can help give you the cashflow needed to reach your financial goals. Not everyone is allowed to start a pension but if you are 60 or over, you can. Once you retire or turn age 65 you can unlock the flexibility an account-based pension has to offer. This includes no maximum limit on how much you can take out - so long as you draw a minimum pension.

If you're between 60 and 65 and still working, you may not qualify for a fully flexible account-based pension. However, you can start a Transition to Retirement (TTR) pension instead. While a TTR pension has some limits—like a maximum annual withdrawal of 10% of your starting balance —it can still be a powerful tool to help you achieve your financial goals. If you’re looking to supplement your income, reduce tax, or boost your super, a TTR pension could be the solution you need!

Let’s look at three typical goals.

1. Replace income while cutting back on work

Want to work less but keep the same income? A TTR pension can help!

As retirement approaches, many people start reducing their work hours—but that can mean a drop in income. By using a TTR pension, you can replace lost wages with tax-free withdrawals from your super.

Meet Theodore

Theodore (age 63) is a town planner. As Theodore nears retirement, he decides to cut back his work hours by one day a week. That means earning less—but thanks to a TTR pension, not taking home less. His taxable income drops by $25,000, but since his pension withdrawals are tax-free, he only needs to draw $17,000 to maintain the same after tax cashflow. Less work, lower tax, and the same income—sounds like a win, right?

2. Reduce tax and boost your super

Theodore works less and pays less tax. He is a winner but his super balance isn’t. Perhaps you would prefer more super and less tax. A TTR pension can free up extra cash so you can salary sacrifice more into super. This means swapping taxable salary (which could be taxed at up to 47%) for concessional super contributions, which are taxed at just 15%.

Meet Matilda

Matilda (age 62) is a marine biologist and earns $160,000 per year. She starts a TTR pension with $100,000 in super and withdraws $7,075 tax-free from her pension. To receive the same amount after tax Matilda would need to earn $11,600. The extra tax-free cash from her TTR allows her to salary sacrifice $11,600 into super. The result? She saves $4,525 in personal tax and her super grows by an extra $2,785 (after super tax). That’s a win-win!

3. Pay your debt off sooner

Have some unwanted debt? A TTR pension can help you clear that debt sooner—so you can enter retirement stress-free.

Meet Simon

Simon (age 60) is a self-employed shopfitter and has $300,000 in super and a $300,000 mortgage on a holiday home (6% interest). He makes monthly repayments of $3,330 and the loan will be extinguished in 10 years (age 70).

He wants to be debt-free at retirement (age 65) so commences a TTR pension and draws down $2,470 per month ($29,640 annually). He uses the extra cashflow to make additional monthly repayments of $5,800 ($69,600 annually).

The result? Simon pays off his loan in 5 years age 65 – saving him interest and giving him peace of mind in retirement.

Is a TTR Pension Right for You?

Commencing a TTR pension to reach your financial goals can be a great strategy, but it’s not for everyone. It’s important to weigh the benefits against the long-term impact on your super savings.

To make sure you’re making the right move, speak to your financial adviser. Your adviser can help you with your financial goals, be it to lower your tax, build your super, pay down debt or retire sooner!

Selling property? Buyers must withhold and pay the ATO!

Sun, 27 Apr 2025 23:31:59 GMT

If you're selling property in Australia and you're a foreign resident, there are important tax rules you need to know. Recent changes mean that buyers must withhold 15% of the property’s market value and pay it to the ATO, unless the seller provides a residency clearance certificate.

What’s changed?

From 1 January 2025, all property sellers must prove their residency status by obtaining a clearance certificate from the ATO. If they don’t, the buyer is legally required to withhold 15% of the sale price and remit it to the ATO.

This rule is designed to ensure foreign residents don’t avoid capital gains tax (CGT) withholding obligations. The government now assumes all property sellers are foreign residents unless they provide an ATO-issued clearance certificate proving otherwise.

How does the withholding rule work?

If you’re buying property from a foreign resident, you must:

· Withhold 15% of the purchase price (for contracts from 1 January 2025).

· Register as a withholder with the ATO before settlement.

· Pay the withheld amount to the ATO before the sale is finalised.

For contracts entered before 1 January 2025, the withholding rate is 12.5%, but only applies to properties worth over $750,000.

If you’re a foreign resident selling property in Australia, you’ll receive a tax credit for the withheld amount when you lodge your Australian tax return.

What if the property is your former home?

Even if the property was your main residence, foreign residents can’t claim the main residence CGT exemption when selling Australian real estate. This means that any capital gain from the sale is fully taxable in Australia.

In fact, foreign residents are always subject to CGT on property they own in Australia – whether or not they live here.

How do you know if the seller is a foreign resident?

As a buyer, you don’t have to investigate the seller’s residency status yourself. Under standard property contracts, the seller must declare whether they are a foreign resident and provide an ATO clearance certificate if required.

If the seller doesn’t obtain a clearance certificate, the buyer must withhold 15% of the purchase price and pay it to the ATO. Your solicitor or conveyancer will typically handle this process.

Are there any exceptions?

Yes. In some cases, the ATO may allow a reduced withholding amount – or even none at all. This happens when:

· The foreign resident seller obtains a variation certificate from the ATO.

· The seller is exempt from Australian tax (eg, a foreign charity).

· A CGT rollover applies, such as in a property transfer due to a marriage breakdown.

· The property is jointly owned by an Australian and a foreign resident - a situation becoming more common in today’s global world.

Other assets affected by these rules

It’s not just real estate – the foreign resident CGT withholding rules also apply to other assets that are closely connected to Australia such as “significant interests” in private unit trusts and companies.

Need help?

Whether you’re a buyer or seller, understanding these rules is crucial to avoid unexpected tax obligations. If you’re unsure how these changes affect you, get in touch with us for expert advice.

We may need to talk about your family trust

Fri, 11 Apr 2025 07:07:55 GMT

You may have read about a recent court decision affecting some family trusts. In a case called Bendel, published on 19 February 2025, the Full Federal Court unanimously held that the private company beneficiary of a discretionary trust has not made a “loan” or “financial accommodation” to the trust merely by not calling for the payment of its trust distribution.

This item only applies to clients with business structures involving trusts that have private corporate beneficiaries where the private company has not called for payment of a trust distribution, thereby creating an unpaid present entitlement (UPE).

It’s a fine distinction, but Full Court said that in order for there to be a loan there has to be an obligation to repay an amount, which does not apply to a UPE as there is no legal obligation to repay anything.

Since 2010 the ATO has been operating on the basis that a UPE owing by a trust to a corporate beneficiary is a loan for the purposes of the Division 7A rules. These rules catch disguised distributions made by private companies to their shareholders or associates.

If the “loan” remains unpaid at the time of lodgement of the company’s tax return, the UPE amount is treated as an unfranked dividend in the hands of the trust unless the company and the trust enter into a complying loan agreement involving both capital and interest payments. This avoids the deemed dividend outcome but usually involves some tax costs and can also create funding and compliance issues for the trust.

The ATO has responded to the Full Court’s decision by seeking special leave to appeal to the High Court. The outcome of the special leave application may not be known for some months, and if special leave is granted there is unlikely to be a decision much earlier than Christmas.

In the meantime, the ATO has revised its earlier Decision Impact Statement (DIS) by announcing that it will continue to apply its existing practice of treating UPEs as loans, in defiance of the Full Court’s decision. This is not the first time the ATO has felt entitled to ignore the law of the land, and it is not something taxpayers could hope to get away with.

Even if its High Court challenge is unsuccessful, the ATO could approach the government for a law change. The previous Coalition government announced in the 2018-19 Budget that it would legislate to make it clear that corporate UPEs are caught under Division 7A. To date, nothing has been done by either side of politics to follow through on that announcement but, depending on what happens in the High Court, a legislative response cannot be ruled out.

If the Full Court’s decision stands (a big if) there will be major implications for discretionary trusts with corporate beneficiaries. In the longer term, it would make the funding of discretionary trusts a lot easier, while also reducing compliance costs.

In view of all this uncertainty, there is the question of what to do about 2023-24 UPEs. While taxpayers would be within their rights to rely on the Full Court’s decision by not converting those UPEs into complying loan agreements, there are risks associated with that course of action which we need to discuss with you. A safer approach might be to follow the Commissioner’s approach for now and lodge objections to protect your rights.

A decision needs to be made one way or the other by the time the relevant company returns are due for lodgement, which isn’t far off.

Managing inherited investments: what you need to know

Fri, 11 Apr 2025 07:04:31 GMT

When it comes to inheritances, one key fact to understand is that Australia has no death duties – meaning there are no taxes on a deceased person’s estate based on the value of their assets at the time of death.

Rather, we have a form of “roll-over” whereby there is no taxation of the assets as they pass from the deceased person to their estate (executors) and then onto beneficiaries.

But like musical chairs, it will be the beneficiary who will be left holding the asset and will be subject to capital gains tax (CGT) on its later sale in their hands (unless the asset is exempt from CGT, such as a car or the home of the deceased sold within two years of their death).

But here’s the good news: even though the beneficiary does not pay anything for the inherited asset, in calculating any CGT on its later sale in their hands, they get a “cost base” for this purpose equal to either the cost of the asset to the deceased person or its market value at the date of their death.

Whether they get the deceased person’s cost or market value will depend on whether the deceased acquired the asset before or after 20 September 1985 (when the CGT regime was introduced into Australia).

If the deceased acquired the asset after 20 September 1985, they will get the cost base of the deceased. In other words, as well as inheriting the asset, they will inherit the deceased’s cost base, ie, they will “step into the shoes” of the deceased.

Otherwise, if the deceased acquired the asset before 20 September 1985, then they will get a cost base for the asset equal to its market value at the date of the deceased’s death (because the asset is being brought into the CGT system for the first time).

Either way, the outcome is good: despite the beneficiary paying nothing for the inherited asset, they get some sort of cost for it – which means less CGT will be paid on its sale.

Furthermore, if the asset has been owned for more than 12 months by the beneficiary (including the deceased’s ownership in the case of an asset acquired after 20 September 1985), then the beneficiary will get the benefit of the 50% CGT discount in calculating the assessable.

All this means is that in the case of inherited assets which the deceased acquired after 20 September 1985, it will be important for the deceased to have kept records of their cost (and their date of acquisition) – and in the case of inherited assets like a big parcel of shares it can be very messy if no records have been kept by the deceased or they are not readily available.

So, come and have a chat to us if you have inherited – or are going to inherit – assets such as shares and other investments. We can help make this easier for you - and maximise the tax outcomes.

Capital gains tax: How good records can save you money

Fri, 11 Apr 2025 01:46:36 GMT

Congratulations! Your investment has done well, and you’re cashing in. You’re happy, and so too is the ATO. That substantial capital gain has brought wealth and a hefty tax bill.

Sharing might be part of the deal but when it comes to your hard-earned profits, you might prefer to keep the ATO’s share to a minimum. Keeping good records will help do this. Here are some tips to help you hold onto more of your windfall and avoid that hefty tax bill.

How much did your investment really cost?

Good record-keeping is essential, it helps your accountant ensure that you pay no more tax than you must. You probably already know that what you get paid for your investment isn’t necessarily your gain. Basically your ‘gain’ on an investment is what you get less what it cost you, but do you really know what it cost you?

The most obvious cost to keep a record of is the asset purchase price or ‘acquisition cost’ but there are some lesser-known costs that are often forgotten. Keep records of anything falling under these four categories as well.

1. Incidental costs of acquisition

These are costs directly associated with acquiring the asset, including such things as:

· Fees paid to brokers, auctioneers, or accountants

· Stamp duty paid on the purchase

· Advertising costs incurred when acquiring the asset

· Conveyancing fees or conveyancing kit costs

· Brokerage fees if buying shares

2. Non-capital ownership costs

You can sometimes add certain ownership costs to your cost base if they weren’t previously claimed as tax deductions. These include:

· Interest on money borrowed to acquire the asset (but again only if it has not already been used as a deduction on income)

· Maintenance, repair, or insurance costs

· Rates or land tax (if the asset is land)

3. Capital expenditure on improvements

Your expenses covering things to increase or preserve the value of the asset are also relevant. Some examples include:

· Costs incurred for zoning changes, whether successful or not

· Capital improvements, such as renovations or structural changes

4. Costs of establishing, preserving, or defending ownership

Hopefully you don’t have too many legal expenses but if you do they too can be taken off the gain. If you have incurred costs related to defending your ownership in court or any legal fees incurred in a dispute over title keep a record of them as they will reduce the gain.

You’ve identified all the costs, but can we further reduce the gain?

That capital loss you made earlier in the year wasn’t nice but there is a silver lining, it can offset that gain. If that’s not enough to wipe out the gain, dig deeper into your records - was there any unused loss in a prior year? We can use that too!

Keep note of when you bought it

If you bought that asset prior to 20 September 1985, yippy no CGT! If you bought it over 12 months ago only half the net gain (after costs and losses) is assessable. So, if you’re thinking of selling an asset but haven’t held it for a year, consider hanging on to it just that little bit longer.

Final thoughts

By understanding what the costs are and keeping thorough records, you can legally minimise your CGT liability.

Speak to your accountant about what things you should keep records of to take full advantage of any applicable deductions and exemptions.

Do you own an asset that is used in your spouse’s business?

Fri, 04 Apr 2025 03:57:27 GMT

Did you know that if you own an asset (eg, land or a factory or even a trademark) that someone else uses in carrying on a small business then you might be entitled to the CGT small business concessions when you sell the asset?

And these concessions can either entirely or partially eliminate any capital gain you make on selling it (or at least defer it).

This can occur for example when your asset is used by, say, your spouse or a child under 18 in their own business (or one that you may be involved in also) – such as where that small commercial property you own (or own jointly with your spouse) is used by your spouse in, say, that art frame, photography or accounting business etc that he or she carries on.

Typically, this concession can also apply where an asset you own is used in say the business carried on by a family company or family trust in which you have a relevant interest – although the rules can get a bit complicated where you are only a beneficiary in that family trust.

These rules can also apply in “reverse” – so that an asset owned by family company or family trust that is used in the business carried on by a relevant shareholder or a relevant beneficiary can also qualify for the CGT small business concessions (eg, farmland).

Importantly, these rules apply whether or not you lease the asset to that other person (or entity) that carries on the business. Interestingly, the rules can also apply in appropriate circumstances where a testamentary trust continues to carry on the business that was carried on by the deceased – although in that case it may be easier to access the concessions by having the executor or beneficiary (or surviving spouse) sell the relevant business asset within two years of the deceased’s death.

These rules that allow an asset owned by one person to qualify for the CGT small business concessions where they are used by another person (or entity) in their business are only permissible where the parties are either “affiliates” or “connected entities” of each other (as defined under the tax law).

Suffice to say, whether or not persons or entities are “affiliates” or “connected entities” of each other for the purposes of the CGT small business concessions can be difficult to determine – and will depend on the exact circumstances of the relevant parties.

So, if you think you are in this situation – or propose to start a small business and intend to use assets owned by someone else in that business – speak to us first so that we can help you get the optimal CGT outcome.

Beware of Bitcoin gains!

Fri, 21 Mar 2025 03:12:44 GMT

If you own Bitcoin, or any other crypto currency, you may have been the beneficiary of Donald Trump’s election as President last November – which saw Bitcoin prices jump by almost 50% almost immediately after the election (and certainly in the following weeks).

And if you decided to take advantage of this and realise your gain by selling your Bitcoin you may have a capital gains tax (CGT) problem, and a nasty one at that (albeit, it is only a tax problem – it is not a “no-profit” problem!) .

So, if you have made a capital gain, you should consider a few things.

Firstly, the Tax Office’s data matching capabilities regarding the buying and selling of Bitcoin are very extensive (and very good) – so, any idea of just not declaring your gain would bring with it big risks.

Secondly, like anything to do with tax, keep good records of your dealings with Bitcoin: it is both a legal requirement and will help you manage your tax affairs.

Thirdly, if you also have capital losses from your dealings in Bitcoin (or any other CGT assets) in either this income year or previous ones, you can use those losses to reduce any assessable capital gains from Bitcoin – and this will result in less tax being payable.

And the same rules applies to using any current or prior-year “revenue” or trading losses you have from any other activities. They too can be used to reduce your capital gains from Bitcoin.

Fourthly, and importantly, like most capital gains from other assets, you are entitled to use the 50% discount to reduce the amount of assessable capital gain – provided you have owned the Bitcoin for more than 12 months.

Finally, don’t forget that if you become a foreign resident for tax purposes you will be deemed to have sold your Bitcoin for its market value at the time you left the country – or the CGT rules will subject you to Australian CGT if you sell it while you are overseas. (And don’t forget about the ATO’s extensive data matching capability in this regard!)

However, all this assumes you aren’t in the business of trading in Bitcoin. If this were the case you would generally be taxed on your profits as ordinary business or other income – without the benefit of the accompanying concessions.

The other thing to be wary of is that the ATO has specific guidelines about how it treats Bitcoin and these can be difficult to apply to a particular situation.

So, if you have a “Bitcoin problem”, come and speak to us about it – and we will help you get things right (and maybe even find a legitimate way to reduce the ultimate tax payable on it)

Salary Sacrifice vs Personal Deductible Contributions: And the winner is...

Fri, 14 Mar 2025 01:36:56 GMT

Super is a great way to save for retirement. It offers an opportunity to invest in long-term growth assets and enjoy generous tax concessions along the way.

For those wanting to make extra contributions and reduce their personal tax bill, there are two options:

Salary sacrifice, and
Personal deductible contributions (PDCs)

Both have their benefits, and choosing the right method depends on your cash flow, flexibility needs and personal preference. Let’s break them down.

What are salary sacrifice and personal deductible contributions?

Salary sacrifice – Your employer deducts a portion of your pre-tax salary and contributes it to your super fund.
Personal deductible contributions (PDCs) – You make voluntary contributions from after-tax money and later claim a tax deduction when you lodge your tax return.

Benefits of salary sacrifice

Timing – Salary sacrifice contributions reduce your taxable income immediately, meaning your employer will withhold less tax and you will immediately enjoy the tax saving. PDCs provide a tax deduction when you lodge your tax return meaning you do not get the tax benefit until later.
Discipline – Salary sacrifice is automatic and helps maintain savings discipline.
Simplicity – salary sacrifice can be much simpler and less administrative. PDCs require you to submit paperwork to the super fund known as a ‘notice of intent’ form. This paperwork must be submitted within strict timeframes. With salary sacrifice you do not need to worry about such paperwork.

When salary sacrifice is a winner

Salary sacrifice is a winner for employees who:

Prefer a “set-and-forget” approach to growing their super.
Have regular income and want a simple way to contribute.
Want to ensure their contributions are made gradually over the year to benefit from ‘dollar cost averaging’. This reduces the risk of ‘going all in’ at the peak of the market.

Benefits of personal deductible super contributions

Availability – Salary sacrifice is only available to employees. If you are not employed, you can’t salary sacrifice. Instead, you might able to make a PDC to super.
Flexibility – PDCs offer greater flexibility, allowing you to contribute lump sums at any time during the financial year.
Reversibility – After making the contribution and submitting paperwork to claim the deduction you might change your mind. Perhaps you have insufficient income to justify claiming a deduction and would prefer that contribution not be subject to the 15% ‘contributions tax’. It may be possible to ‘reverse’ the contributions tax and not claim the deduction, but unless you have retired or met a condition of release the contribution will remain ‘stuck’ in super.

When personal deductible contributions are a winner

PDCs are a winner for people who:

Want greater control over when and how much they contribute.
Have variable income or expect a large one-off payment (e.g., bonus, inheritance, asset sale).
Are self-employed or receive income from multiple sources.
Want to contribute additional amounts closer to the end of the financial year to maximise their tax deduction.

Enjoy the best of both worlds: Combining salary sacrifice and PDCs

Many people use both strategies to maximise their super contributions efficiently. For example:

Setting up salary sacrifice to contribute steadily throughout the year.
Making a PDC at the end of the financial year if additional concessional contribution (CC) cap space is available.
Adjusting contributions based on unexpected income or bonuses.

Conclusion

Salary sacrifice and PDCs each have their advantages, and the right choice depends on your employment, cash flow and personal preference. By speaking to your adviser as to how each method works, you can make informed decisions to optimise your retirement savings while reducing your tax bill.

Downsizer Super Contributions: Dispelling three myths

Fri, 07 Mar 2025 04:16:11 GMT

Billions of dollars in downsizer super contributions have been made since its introduction in 2018. Downsizer contributions are popular, but three common misconceptions keep them from being more so.

Introduction

Downsizer super rules allow people aged 55 and over who sell their home to contribute up to $300,000 into super. The rules say that you can be too young to make the contribution, but you can never be too old. This is why people who usually can’t make contributions due to their age love downsizer contributions.

People with large amounts to contribute also love downsizer contributions because they allow you to contribute over and above the ordinary contribution cap limits.

The “downsizer super contributions” has caused confusion about who is eligible and when. It is important to speak to an adviser to confirm your eligibility, but don’t be fooled by the following three myths which stop people from making a downsizer contribution.

You must “downsize” your home

A common misconception is that you must "downsize" by purchasing a cheaper home. While selling your home is required, there is no obligation to buy a less expensive property – or even to purchase a new home at all. In fact, some people choose to "upsize" and make a downsizer contribution using other savings. This is completely acceptable (see below).

Proceeds must come directly from the sale

The downsizer contribution does not need to come directly from the sale proceeds. If all the sale proceeds are used to purchase a new home, the individual can use savings elsewhere to fund the contribution. Individuals may also make a downsizer contribution in the form of an ”in-specie” contribution of another asset like listed shares so long as the value of the asset is within the allowable limits i.e. the lesser of sale proceeds or $300,000. Remember only self-managed-super funds generally accept in-specie contributions and these are limited to specific assets like listed shares, business real property and units in a widely held unit trust such as a managed fund.

You must live in the home at the time of selling

Another misunderstanding is that you must be living in the home when it’s sold. This is untrue but it is necessary to have lived in the home at some point. This requirement exists because eligibility for a downsizer contribution depends on qualifying for at least a partial main residence capital gains tax (CGT) exemption. While you must have previously lived in the home, it does not need to be your main residence when you sell it.

Conclusion and helpful checklist

Understanding the downsizer rules will help you to ignore the myths. It is important you speak to a qualified adviser to confirm your eligibility, but the following checklist may help you check off on your eligibility.

Essential reminder

Don’t forget to submit the “Downsizer contribution into super form” (NAT 75073) to your fund with or before the contribution is made.

Inheriting a home - and then living in it

Fri, 07 Mar 2025 04:16:07 GMT

Most people know that if you inherit a person’s home and you sell it within two years of their death, it can be exempt from capital gains tax (CGT).

However, there is another way you can get a full CGT exemption on an inherited home – and that is if a “relevant” person occupies it as their home from the time of the deceased’s death until its later sale (or other transfer or disposal, etc).

And these “eligible” persons are the deceased’s surviving spouse of the deceased, a person who is given a right to occupy it under the deceased’s will (eg, a niece or nephew or a friend) or a beneficiary who inherits the home (or an interest in it).

However, there are lots of things to bear in mind when using this rule – some good and some not so good. These include the following:

It is not necessary to occupy the home immediately from the deceased’s death – as soon as “practicable” will do (which will depend on the circumstances) – albeit in the case of a surviving spouse, presumably this would be no problem.
The requirement can be met if more than one of these relevant persons occupy the property as their home successively (eg, a surviving spouse, followed by a beneficiary who inherited the home).
The exemption applies on an “interest by interest basis” – which means that if more than one beneficiary inherits the home, then only the beneficiary who occupies the home gets an exemption – and only in respect of their interest (except in rare cases). But this problem can be readily overcome in a number of ways.
Where a person or persons are given a right to occupy the home under the will, they must be named or specified under the will; a general power given to the executor to grant such a right will not suffice – well at least that is the position the ATO takes.
For a surviving spouse to qualify for the exemption, they cannot be “living permanently and separately apart from the deceased”. They must, in effect, be living with the deceased at the time of their death.

Finally, it may be even possible to use another CGT concession – namely, the “building concession” - to preserve the CGT exempt status of the home where renovations are undertaken or intended to be undertaken on the home’s acquisition.

And this may mean it may not have to occupied by a relevant person (or sold within two years of the deceased’s death) to get the CGT exemption.

However, if this concession can be used in this case, it comes with one big drawback – no other home can be taken to be your CGT main residence for the period that this building concession is used.

As always, come and seek our advice if you inherit a home and wish to occupy the home – or even beforehand for some appropriate planning.

ATO confirms tax deductibility of financial advice fees

Fri, 28 Feb 2025 02:40:50 GMT

The Australian Tax Office (ATO) has released new guidance (TD 2024/7) on when financial advice fees can be claimed as a tax deduction. Overall, the ATO has not changed its view but it has given more clarity around the deductibility of upfront and ongoing fees.

Key points to know

Some of the key takeaways from this determination include:

· If you receive financial advice that includes tax-related advice, you may be able to claim a deduction, but only if the advice comes from a qualified tax professional.

· Upfront fees for initial advice (eg, setting up a financial plan) related to structuring investments are generally non-deductible, as they are considered capital expenses. However, if the advice relates to managing investments for income production or relates to managing tax obligations, it may be deductible.

· Ongoing advice fees can be deductible if they’re related to income-generating activities.

· To be deductible under tax law, the fees must relate to you gaining or producing assessable income. If only part of the advice is income-related, you can only claim a partial deduction.

In essence, advice fees must be linked directly to producing assessable income to qualify for deductions. For example, fees paid for advice that helps manage existing investments producing income can be deductible, but fees for advice on structuring investments or creating a financial plan won’t be. Understanding the distinction between capital and income-related advice fees is key for ensuring that tax deductions are properly applied.

Who isn’t covered

The rules in this determination do not apply to individuals running an investment business or address scenarios where financial advice fees are paid from a superannuation fund.

Why this matters

This update helps clarify what types of financial advice fees you can and can’t claim, making it easier to understand which expenses are deductible and which are not.

To make sure you are meeting all the ATO’s criteria for claiming these deductions, it’s important to work with your accountant or financial adviser to properly categorise your financial advice costs. This will help you make the most of the available deductions while staying compliant with the tax law.

Super and hardship ... A safety net in financial difficulty

Fri, 28 Feb 2025 02:40:08 GMT

Superannuation is often seen as untouchable savings for retirement, but did you know it can also be a lifeline during financial difficulty? While super is designed for retirement, there are rules to allow it to provide financial support in several situations. Let’s explore these rules and how super might offer relief in times of crisis.

Accessing super on compassionate grounds

If you're dealing with specific expenses that you simply can’t afford, you may be able to access your super on “compassionate grounds”. This option allows you to withdraw a lump sum to cover certain expenses, which may include:

Eligible medical treatment or associated transport costs
Modifications to your home or vehicle to accommodate a disability
Palliative care for yourself or a dependent with a terminal illness
Funeral expenses for a dependent
Preventing the foreclosure or forced sale of your home

There is no set limit on how much super you can access under compassionate grounds, except when it comes to mortgage relief which is restricted to the sum of 3 months repayments and 12 months of interest on the outstanding balance of the loan. Mortgage relief only applies to principal homes and not investment properties.

To apply, you’ll need to submit your application to the Australian Taxation Office (ATO). This can be done online through myGov or by requesting a paper form from the ATO. This process also applies to individuals with a self-managed super fund (SMSF). SMSF trustees also require the ATO’s approval before accessing their super early under compassionate grounds. Once approved, you’ll need to provide the approval letter to your super fund to facilitate the release of funds. Keep in mind that tax may apply to your withdrawal.

Severe financial hardship

If you do not qualify for an eligible expense under “compassionate grounds” but are struggling financially and receiving a Centrelink income support payment, you may qualify to access your super under severe financial hardship. The rules for this depend on your age:

If you’re under 60 and 39 weeks: You can make one withdrawal of up to $10,000 in a 12-month period if:

You’ve been receiving an income support payment (like JobSeeker Payment) for at least 26 continuous weeks, and
You can’t meet immediate and reasonable family living expenses, such as mortgage repayments.

If you’re older than 60 and 39 weeks: There are no limits on the amount you can withdraw if:

You’ve received an income support payment for at least 39 weeks since reaching 60 years of age, and
You’re not currently employed.

For those in this category, you may be able to access your full super balance.

To apply for early super release due to severe financial hardship, you’ll need to contact your super fund directly, as they are responsible for assessing your claim. The same rules apply to individuals with an SMSF, where trustees are legally required to evaluate member applications using the same severe financial hardship eligibility criteria.

Final thoughts

It can be reassuring to know that your super isn’t entirely locked away if you find yourself in financial difficulty. Whether it’s to cover urgent medical expenses, prevent losing your home, or simply make ends meet, these provisions can provide much-needed relief. Of course, accessing your super early means you’ll have less saved for retirement, so it’s important to weigh up your options carefully. Also keep in mind, tax may apply on your withdrawal.

If you are thinking of accessing your super due to financial difficulty, consider reaching out to your adviser who can help you navigate the process.

Yet more rental data matching by the ATO

Fri, 28 Feb 2025 02:40:05 GMT

Feeding its seemingly insatiable appetite for rental data, the ATO has recently announced it will soon be collecting rental bond details for some 2.2 million individuals.

The data, which will be collected twice a year from State and Territory bond regulators, is very comprehensive, and will include personal details such as names, addresses, dates of birth, telephone numbers, email addresses and bank account details for rental providers and tenants. The data obtained will also include business-related information for managing agents.

Also included will be the address of the leased property, the term of the lease, lease commencement and end dates, bond amounts, rent payable and payment intervals.

The ATO will also be seeking information about the characteristics of the leased property, including the type of dwelling, the number of bedrooms and a unique identifier for the rented property.

This latest quest for rental data comes after the ATO also acquired property management data records for 2.3 million rental providers from software companies last year.

The project is aimed at identifying those who may not have properly disclosed their rental income, or accounted for capital gains tax (CGT) due on the disposal of their rental property. Clearly, the ATO believes there is still significant under-reporting in this area and that the level of compliance needs to be improved. How much under-reporting of rental income there is remains to be seen.

Where people are letting their properties outside of the rental bond framework by using short stay platforms such as Airbnb, the ATO already knows about those arrangements, having obtained the information from the platform providers.

Rental income from short-term stays or even renting out a bedroom in your home has to be disclosed as assessable income in the same way as rental income from the long-term lease of a house or an apartment, although there can be some tricky issues around the apportionment of expenses when claiming deductions.

Many taxpayers with investment properties can expect to be subject to some sort of ATO attention in the coming years and it may be worth double checking that the way these transactions have been disclosed in your tax returns is 100% correct. If not, the best way to set things right would be by making a voluntary disclosure to the ATO before they start asking questions.

Issues that could be raised on audit include:

· The repairs vs improvement issue

There can be a fine line between work carried out that is a genuine repair (and tax deductible up front) and an improvement (generally deductible over time). Even where something is a genuine repair, it may not be deductible if the work is carried out immediately after acquiring the property and before any tenants are put in.

· Bond retentions

Where part of the bond is retained at the end of a tenancy because of damage caused by the tenants, the amount retained needs to be disclosed as assessable income. The cost of any associated repairs would generally be deductible.

· Interest deductibility

Where you have a mortgage over an investment property and the loan was used to acquire the property (or any other income-producing asset), interest will be deductible, provided the property is being let or is available to let. But where you already own an investment property free and clear and borrow against it to pay off the mortgage on your main residence or use the money to buy a car or fund a holiday, the interest is non-deductible. It’s the use of the borrowed funds that determines interest deductibility.

· Is that holiday house genuinely available for rent?

Unless your beach house is exclusively used for rental purposes, and is never used by family members or friends free of charge or below market value, there are always issues around the apportionment of expenses. Advertising the property at an unrealistic price is not regarded as making it genuinely available for rent, which will affect apportionment.

· Inherited property

There is a myriad of CGT issues around the sale of an inherited property, including where it has been used for rental purposes.

We’re happy to help you review any of these issues.

Seven changes impacting your super in 2025

Fri, 14 Feb 2025 04:02:19 GMT

Superannuation rules are always changing, and 2025 is set to bring some updates that could affect your retirement savings. Whether you’re just starting to build your super or already planning for retirement, keeping up with these changes can help you make informed decisions. Here’s what’s on the horizon.

The government is looking at increasing taxes on large super balances. The proposal would add an extra 15% tax on the earnings of super balances over $3 million, starting from 1 July 2025. This has been a hot topic, with debates about whether the tax system for super is fair.

The proposal made it through the House of Representatives in 2023 but ran into problems in the Senate in late 2024. To pass, the government needs support from minor parties and independent senators, but many are pushing back against key parts of the plan, such as taxing unrealised gains (profits on investments that haven’t been sold) and not adjusting the $3 million threshold over time.

With a federal election coming up, it’s unclear if this tax change will go ahead. If it doesn’t pass soon, it may be delayed or scrapped altogether. The Senate will revisit the issue in February 2025, so we’ll have to wait and see what happens next.

2. Increase in employer superannuation guarantee contributions

A key change in 2025 is the rise in the super guarantee (SG), which is the portion of your wage that your employer must contribute to your super fund. From 1 July 2025, the SG rate will increase from 11.5% to 12%. While this might seem like a small increase, it can make a significant difference over time, helping your retirement savings grow. If you’re an employee, this means more money going into your super, but it’s also worth checking if it affects your overall salary package.

3. Potential increase to transfer balance cap

Although contribution caps increased in July 2024 due to inflation adjustments, they are not expected to rise again in July 2025.

However, the transfer balance cap (TBC) – which limits how much super can be moved into a retirement pension – will increase from $1.9 million to $2 million on 1 July 2025.

This change mainly affects people who haven’t yet started drawing a retirement income from their super. If you already receive a pension from your super, you might still benefit from a partial increase, depending on your individual circumstances.

4. Impact on total superannuation balance

As the TBC rises on 1 July 2025, the total super balance (TSB) limit will increase as well. This limit affects how much you can contribute to your super using after-tax dollars, known as non-concessional contributions (NCCs).

The expected increase in TSB thresholds will determine how much extra you can contribute, including whether you can use the bring-forward rule, which allows you to make larger contributions over a shorter period. The table below shows a breakdown of the expected limits for 2025.

As can be seen, if your TSB is below $1.76 million, you can contribute up to $360,000 over three years. However, as your TSB increases beyond this amount, the limit on how much you can contribute gradually reduces. Once your TSB reaches $2 million or more, you will no longer be able to make additional NCCs.

These changes may create opportunities for some individuals to grow their super, but it’s important to understand how the new limits apply to your personal situation.

1. New rules for older legacy pensions

In December 2024, the government introduced new rules to give people more flexibility in managing older “legacy pensions.”

For years, some retirees with lifetime, life expectancy, and market-linked pensions in self-managed super funds (SMSFs) have faced strict rules that made it difficult to change or adjust these pensions. These products can no longer be started in SMSFs, and many people have been stuck in outdated pensions that no longer suit their needs.

Previously, the only way to change these pensions was to convert them into similar products, which came with limits on how reserves could be allocated that did not count towards the member’s contribution caps.

But with the new rules now in place, people with legacy pensions have five years to review their options and make changes if needed. Since these decisions can be complex, it’s a good idea to speak with a financial adviser, especially one who specialises in SMSFs, before making any changes.

2. Improved super fund performance and transparency

Large APRA-regulated super funds are under pressure to deliver better performance and be more transparent with their members. In 2025, expect to see:

· Continued focus on underperforming funds: funds that don’t deliver strong returns may face more scrutiny or even be forced to merge.

· Better reporting on fees and investment performance: members should receive clearer information about where their money is invested and what fees they’re paying.

Comparing super funds has become easier, helping you make more informed decisions about where to keep your retirement savings.

3. Technology and digital innovation and super

Technology is playing a bigger role in superannuation, and 2025 will likely see more innovation. Super funds are investing in better online tools, mobile apps, and artificial intelligence to help members track their savings and make smarter investment choices. If you haven’t already, it’s worth exploring your super fund’s digital tools to take control of your retirement planning.

Final thoughts

Superannuation is a long-term investment, and small changes can have a big impact over time. With the start of a new year, take the time to review your super, stay informed about potential changes, and consider speaking to a financial adviser if needed. With the right strategies, you can make sure your super is working hard for your future retirement.

Selling a property with mixed rental and residential use

Fri, 14 Feb 2025 04:02:18 GMT

Selling a property that may have been used for mixed rental and residence purposes has a lot of capital gain tax (CGT) issues – and some of these also involve exercising good judgment as to how to best use the relevant CGT concessions.

By way of example, if you retain your original home and rent it after you have purchased your new home, you will have to make a decision about whether you want to retain a full CGT exemption on the original home (or maximise it, at least) or whether you want the full exemption to apply to the new home.

(But there are also ways that you can, in effect, have your cake and eat it too!)

On the other hand, where you rent a property first and then afterwards live in it, then various concessions that may help reduce your CGT liability may not be available.

Further, there are important CGT rules and concessions that apply to a home that has been used for such mixed use where the owner dies and then it is later sold by beneficiaries. These can be complex, but if applied with good planning can have (very) good outcomes.

And then, of course, there is the issue of how you actually calculate any partial capital gain (or loss) in respect of a property that has been used for both rental and as a residence in circumstances where it is not possible to get a full exemption on it.

And these calculation issues can involve determining whether you can use a market value cost at any time in the process and how you can account for any non-deductible mortgage interest (and other non-deductible costs).

There is also the issue of whether you need to write-off any amounts for which you have claimed a deduction (such as building write-off deductions). In this regard, there is also the issue of whether you have actually claimed write-off amounts and therefore whether you need to write the amounts back in in any way (and the result may surprise you).

And crucially, there is also the issue of whether any partial capital gain can qualify for the very generous 50% CGT discount. (And in this regard, interestingly the tax concession that costs the government the most in foregone revenue in most financial years is the CGT discount applying to a partial exemption on a home!)

Of course, there are a lot of planning issues surrounding a property that you purchase with mixed intentions of both wanting to live in it and rent it.

For example, if you live in it first on a genuine (bona-fide) basis then you can access a concession that allows you to retain its full CGT exemption for up to six years.

Furthermore, if you rent it for more than six years and have to calculate a partial CGT exemption you can usually get the benefit of a market value cost at the time you first rent it to calculate this partial gain.

As can be seen, there are an array of CGT issues surrounding the selling of a property used for mixed rental and residence use – including the need to determine how to best use (and choose) various concessions to minimise any potential CGT liability.

So, if you are in this position – or even thinking of buying a property that may be used for this mixed purpose – come and have a chat to us.

Interest deductibility and investment properties

Fri, 14 Feb 2025 04:02:16 GMT

With interest rates remaining stubbornly high, and some property investors bailing out altogether, others are taking steps to refinance their debt in order to secure a lower rate and obtain better terms.

Before deciding to go down the refinancing route there are broader financial issues to weigh up and you may need to seek separate financial advice that takes into account your personal and financial circumstances. This article only examines the tax consequences of refinancing your investment property loan and some other issues around interest deductibility.

Basic rule for interest deductibility

The basic rule is that where you borrow money to acquire an income producing asset, the interest is deductible against your assessable income generally, including income from salary and wages. It’s about following the money and being able to demonstrate that a loan was used for income producing purposes. Any security given over a loan does not determine the deductibility of the interest.

Maximising tax deductible debt

There is nothing improper or untoward about maximising your tax deductible debt. We live in an after tax world and it’s perfectly legitimate to factor tax into your financial decision making.

Lower rate on refinancing

Where the refinancing involves no more than obtaining a reduced rate or better terms, there has been no additional borrowing and the interest on the new loan remains deductible in full, assuming the property is let or available to let.

Releasing equity

Where the refinancing releases equity in the investment property, interest deductibility depends on how the additional loan funds are applied. If they are used to maintain or renovate the investment property (or to buy other income producing assets), all the interest payable on the increased loan balance will be deductible.

However, where all or part of the equity released is applied for private purposes (like renovating the house you live in, to pay for a holiday or to buy a car), the interest would need to be apportioned between the amount originally used to acquire the investment property (deductible) and the amount used for private purposes (non-deductible).

Refinancing costs

Refinancing costs for the investment property such as exit fees, valuation fees, break costs and legal fees are deductible over five years or the term of the new loan if that is shorter.

Change in use

What if there is a change in use of the investment property? You might decide to move into the property yourself or to make it available to a family member free of charge. As soon as the investment property stops being used to generate rental income, the interest associated with the loan taken out to acquire the property stops being deductible.

By the same token, if you move out of your main residence to go and live somewhere else and you put tenants in, any interest on the mortgage over the property will become deductible.

Debt in the wrong place

Sometimes, through circumstances beyond your control, you can end up having debt in the wrong place. For example, you may have a mortgage over the house you live in and inherit the house of a relative which is unencumbered by debt. If you decide to keep the inherited property and put tenants in, you will have non-deductible home mortgage interest as well as an investment property that is debt-free.

While you could borrow using the inherited property as security and use the funds to pay off your home mortgage, that would not get you a tax deduction, as the borrowed funds would have been used to pay off private debt. Remember, it’s the use to which the funds are put that determine tax deductibility – not the nature of the security provided. The only way to make the interest tax deductible in this situation would be through a change in use. For example, you may decide to move into the inherited property and let out your main residence.

Forced sale

Real estate values can go down as well as up, and sometimes life’s events (rising interest rates, unemployment, illness, divorce) can leave the property owner with no other option but to sell the property, sometimes with part of the borrowing remaining unpaid. Any interest on the outstanding balance would generally be tax deductible, although the ATO would expect the investor to make a reasonable effort to pay down the remaining debt rather than acquire more assets.

Before deciding how to refinance an investment loan or taking any other steps that could impact on the tax deductibility of interest, come in and have a chat with us. We may be able to help you protect the interest deductibility you are legitimately entitled to.

What we know so far about payday super

Fri, 07 Feb 2025 04:25:57 GMT

The government has shared more details about its proposed new “payday super” plan, which will start on 1 July 2026.

What is payday super?

Starting in July 2026, employers must pay superannuation guarantee (SG) contributions to their employees at the same time they pay their salary and wages – weekly, fortnightly, or monthly. Currently, employers are legally required to pay their employees’ SG contributions on a quarterly basis.

What this means for employers

All employers, no matter the size, will have to make SG contributions when they pay their workers. This might affect cash flow, especially for small businesses, and could create an extra administrative burden if they don’t have the right systems in place (such as payroll software, etc).

What this means for employees

The goal of payday super is to make SG contributions more transparent and help boost retirement savings. For example, according to the Government, a 25-year-old earning the median income and receiving superannuation could have about $6,000 extra by retirement because of the proposed changes.

Further details announced

The government recently released further policy design details on the payday super measure.

Here’s what we know so far regarding the proposed payday super model:

Super must reach employees’ funds within 7 days of being paid, except for new employees or small, irregular payments.

For new employees, the timeframe will be 14 days after they commenced employment, and
SG contributions in relation to small and irregular payments can be made within seven days of the next regular ordinary time earnings (OTE) payment.

Super is still calculated based on an employee’s OTE which includes regular salary and wages but excludes overtime.

If employers don’t pay on time, they will continue to face penalties.

Small businesses will need to find alternative payroll software solutions to pay their employees’ super as the ATO’s small business clearing house will close from 1 July 2026.

Where to from here?

The government is still finalising its payday super plan and aims to introduce legislation soon. As always, we’ll keep you updated on this measure as more information comes to hand.

What tax receipts do I need to keep?

Fri, 07 Feb 2025 02:45:39 GMT

Only the ones you want to claim as a tax deduction, might be a common response.

Work-related expenses

But that isn’t quite right, as the tax rules in fact enable you to make legitimate claims for work-related expenses for up to $300 in a financial year without having receipts, provided:

you have spent the money;
the expense is directly related to earning your income;
you haven’t been reimbursed by your employer;
it is not of a private or capital nature; and
you have a record of the expense (other than a receipt).

Work-related expenses can include, among other things, tools and small items of equipment, office supplies, union or professional association fees, uniforms and protective clothing and associated cleaning costs, newspapers and periodicals and many more.

The cost of laundering work uniforms and protective clothing can be included without having receipts for an amount of up to $150. These costs form part of the $300 deductible limit without needing receipts. However, where total work-related expenses exceed $300, it is not necessary to have receipts in relation to costs for laundering work uniforms for these expenses if they do not exceed $150. The ATO will accept a rate of $1 per load where the laundry is done at home, or half that amount when accompanied by private items. Dry cleaning costs are not included in the receipt-free $150. Minor items costing up to $10 can be claimed without a receipt, up to $200 per financial year, and are also included in the $300 limit. But again, where total work-related expenses exceed $300, it is not necessary to have receipts for these costs.

The record of the expense can be in the form of a diary that records how much you have spent, what you spent it on, how you paid for it and how it relates to earning your income. You will need to retain those records for five years.

Of course, there is nothing wrong with keeping all your receipts as you go along, just in case you unexpectedly overshoot the $300 limit later in the financial year. Where that happens, you will need receipts and invoices to substantiate your entire work-related expense claim – not just for the excess over $300.

Car expenses

Instead of keeping receipts and invoices for the actual running costs of the employment-related use of your own car, you can elect to claim on a cents per kilometre basis for up to 5,000 business kilometres. The rate you can claim is 88 cents per kilometre for the 2024-25 financial year (the maximum claim is $4,400).

The claimable use of a private car covers situations where, for example:

you visit a client’s premises after arriving at your usual place of work;
you’re working at another location that is not your usual place of work; or
you drive to a work-related conference.

The cost of driving between home and work is generally regarded as a private expense.

You won’t need any receipts to claim on a cents per kilometre basis, but you do have to be using your own car and you will need to maintain a logbook or a diary that records your employment-related car use. Where two taxpayers use the same car for their respective work-related purposes they can each claim for up to 5,000 kilometres.

It also needs to be a requirement of the employer that you provide your own transport for work-related purposes. There was a recent AAT case where the applicant’s cents per kilometre claim failed spectacularly when it emerged in evidence that the employer provided a company car for traveling between different work sites.

Note this is not a standard deduction anyone can just claim. The ATO has previously made noises about how it has noticed there are many claims right on the cusp of the 5,000 kilometre limit and has been actively challenging some claims.

Working from home

With many employees still working from home in the wake of the COVID-19 pandemic, at least on a part-time basis, the ATO has developed an administrative method for claiming associated expenses. Working from home for the purpose of making a claim has to involve something substantive – minimal tasks such as occasionally checking emails or answering phone calls while at home are not regarded as enough.

While the option is always there to make a claim using the actual cost method (which would require receipts), taxpayers can also opt for the fixed rate method, which has been set at 67 cents per hour since 2023. The 67 cents per hour rate covers:

energy costs;
internet expenses;
mobile and landline expenses; and
stationery and computer consumables.

Depreciation on office furniture, computers and printers is available on top of the fixed rate deduction, as are repairs to those items. Since those claims fall outside the fixed rate method they will need to be supported by receipts or invoices.

A crucial requirement to qualify for the fixed rate method is to keep a diary or a timesheet of the hours worked from home during the financial year. This record needs to be maintained throughout the year – making an estimate at tax time will not be sufficient.

While you won’t need comprehensive receipts for the various items covered by the fixed rate method, the ATO will expect you to retain a sample copy of an invoice, bill or bank statement verifying you have incurred each of the expenses covered by the fixed rate method. All the information has to be retained for five years.

The Commissioner doesn’t like work-related expenses much, but Australian taxpayers love them which is why governments have been wary of getting rid of them.

While there are a number of specific exceptions to the need to have receipts to substantiate particular claims, all these “concessions” come with conditions attached, mainly to ensure that the expenses were actually incurred in earning assessable income. It’s important to be aware of all the legal and administrative requirements so that your work-related expense claim can survive an ATO audit.

Super on Parental Leave Pay is now law

Fri, 07 Feb 2025 02:40:17 GMT

Starting 1 July 2025, new parents will receive superannuation payments on top of their paid parental leave (PPL).

The change

Eligible parents with babies born or adopted from 1 July 2025 will get an extra 12% of their government-funded PPL as a superannuation contribution to their nominated superannuation fund.

The lump sum superannuation payment will be paid annually by the ATO after the end of each financial year. The contribution will also include an additional interest component to account for the delay.

Eligible parents can continue to apply for PPL through Services Australia who are responsible for assessing eligibility for the payment and superannuation contribution.

Who is eligible?

Currently, parents can get up to 22 weeks of government-funded PPL at the minimum wage, which will increase to 24 weeks from 1 July 2025 and to 26 weeks by 1 July 2026.

To be eligible, parents must meet the following requirements:

Have a newborn or have recently adopted a child
Have met an income test
Won’t be working during their PPL period, except for allowable reasons
Have met the work test
Have met the residency rules
Have registered or applied to register their child’s birth with their state or territory birth registry if they’re a newborn.

For further information regarding the government-funded PPL scheme see the Services Australia website.

What about employer-funded PPL?

PPL falls into two categories: government-funded PPL, or employer-funded PPL. If eligible, employees could receive both types.

Although it is not compulsory for employers to do so, many choose to support their employees with PPL. Generally, employers will set out a minimum service period that employees need to meet before they are eligible for employer-funded PPL, and the amount they receive (usually measured in weeks) varies from employer to employer. Employers will have their own policies when it comes to parental leave and the available benefits will depend on the employee’s agreement/contract. So while some employers offer PPL and pay superannuation on top of that, the new laws ensure parents using government-funded PPL will be able to have the same benefit.

Impact on families

As super isn’t currently paid on government-funded PPL, this change will enable employees to receive super contributions for the period they are on PPL. This change helps close the gap in superannuation savings, especially for women, by ensuring parents receive superannuation while on parental leave, improving financial security in retirement.

What is the right business structure?

Thu, 06 Feb 2025 06:52:07 GMT

If you carry on a business – small or large – the question of which business structure to use always arises – and not just from when you start that business, but also during its operation when it may be beneficial to change from one structure to another.

Essentially, there are four major ways in which you can carry on a business: as a sole trader, in partnership, or through a company or trust – or even a combination of these (eg, in a partnership of companies and/or trusts).

Moreover, each has their own particular advantages and disadvantages – particularly when it comes to taxation consequences (and the benefits thereof).

By way of a simple example, if you operate a business in partnership you have the legal problem of being “jointly and severally” liable for any debts of the partnership (ie, you can be personally liable for all the debts of partnership even if they were “incurred” by the other partner).

On the other hand, there are not a lot of legal formalities to comply with (unlike a company) and, moreover, from a tax point of view you can generally split the income from the business with the other partner/s in the most tax advantaged manner.

Furthermore, and something that is often forgotten, any tax losses made by the partnership can be attributed to the partners – and can be used to reduce tax on their other income. This may be particularly useful in the early stage of a business when losses are more likely to be made.

This is unlike companies and trusts where the losses remain “locked” in the company or trust until such time that there is income against which they can be offset. And even then there are complex rules that prevent such losses being used in this way if, for example, there has not been underlying “continuity in ownership” of the company or trust.

On the other hand, family trusts at least do in effect allow flexible “splitting” of the income or profits made by the trust in a tax-effective way. And companies and unit trusts also allow the same – but in a somewhat more rigid manner.

However, the key point we seek to make is that you can change the structure of your business at any time in its operation – and in regards tax, you can do so usually without any adverse tax consequences because of the various concessions and roll-overs that allow you to do so.

For example, if you have been running your business as a sole practitioner or in partnership you can roll-over your business (ie, the assets that comprise it) into a company or trust without there being any adverse tax consequences.

Of course, this is subject to meeting certain eligibility requirements – the main one of which is that you remain the beneficial owner of the business in that you remain the controller of the business in the same way you were before the “roll-over”.

And this is just at the simple end of this type of roll-over. In fact, the roll-over provisions now allow you to even roll-over a small business from whatever structure into a discretionary trust structure (with all its tax benefits). But again this is in effect subject to the same “continuity of beneficial ownership” existing both before and after the roll-over.

Finally, and crucially, even in the event you trigger a capital gain on restructuring a small business, the CGT small business concessions should apply to allow you to eliminate or greatly reduce the assessable gain – and to roll-over the gain into buying assets for a new business.

If you are running a small business, and think it is time to do things a bit differently (at least from a tax perspective!) come and see us to discuss all the options and all the advantages and disadvantages of a particular structure.

Likewise, if you are thinking of starting a business for the first time, come and speak to us to work out what type of structure would best suit you at the start of your entrepreneurial adventure.

Setting up an SMSF: Who can join the fund?

Thu, 06 Feb 2025 06:52:02 GMT

A question that often gets asked is who can set up an SMSF together.

The rules

The answer is practically anyone can set up a SMSF together. You can have up to six people in an SMSF, and they’re often family members. The most common setup is you and your partner running the fund together, or just you if you’re single. But it doesn’t stop there. It is also common for business partners to set up an SMSF together, and in other cases, children may also join their parents’ SMSF. As can be seen, other setups are possible.

Business partners

As mentioned above, it is possible for business partners to set up an SMSF together. However there is a catch – that is, no fund member can be employed by another member unless they’re related. To be clear, the rules allow two people who are directors of a company which owns the business to set up a fund together, however it is not possible if one person is not a director – in this case, it’s only allowed if you are relatives.

Your children

It is also possible for your children, regardless of their age, to join your fund. However, if your child is under 18, they can’t be a trustee, so you as their parent would be the trustee on their behalf and handle that role for them. Once they’re over 18, they must be a trustee unless they give someone else the power to act on their behalf by granting them an enduring power of attorney.

The number one thing to keep in mind when sharing an SMSF

Shared responsibility! As a rule, all members are usually trustees, meaning you’ll share the obligations of managing the SMSF and making decisions. This means you generally won’t be able to act entirely on your own and will require everyone’s agreement when it comes to making decisions impacting your fund.

Change of mind and exit plan

If down the track you want to separate off into different funds, someone will have to exit the fund. This could involve selling assets or transferring them to a new fund, which might trigger capital gains tax or stamp duty issues.

When setting up your SMSF, it is important to also consider your exit plan as there will come a time when your benefit eventually needs to be paid out of the fund – this will usually happen when specific life events occur which may trigger an exit. As such, its best to plan well ahead and deal with this consideration upfront to avoid future disputes and tax implications later on.

Separation and divorce: CGT consequences and relief

Wed, 29 Jan 2025 05:41:41 GMT

With apparently at least one in three marriages ending in divorce – and with countless more defacto relationships breaking down – the capital gains tax (CGT) roll-over provisions for “marriage and relationship breakdowns” has assumed increasing relevance.

These rules provide for the “roll-over” of any capital gain on the transfer of assets between the separating parties so that there is not any immediate CGT liability in the circumstances.

However, they (like all CGT concessions) are subject to important conditions to be met and special rules that apply to certain categories of assets.

The first and foremost of these conditions is that the transfer of the asset must take place in accordance with one of the specific ways set out in the provisions – and these are essentially by way of a relevant court order or a defined financial or maintenance agreement.

And here’s the first big planning opportunity: if one of the parties wants to realise a capital loss on an asset that they propose to transfer to the other spouse, then don’t transfer it under any of the ways specified in the CGT rollover provisions – do it by way of a private agreement with the other party.

The second key rule is that the roll-over does not apply unless the asset is transferred to the other spouse. It cannot be transferred to the other spouse’s discretionary trust or private company. It cannot even be transferred to the estate of the other spouse if that spouse dies during the separation proceedings.

The only possible exception to this rule is if the asset is transferred to a “child maintenance trust” – and even then strict conditions would apply.

In addition, not all assets can get roll-over under these rules. For example, trading stock is excluded and would be subject to the normal rules that apply to the disposal of trading stock outside the ordinary course of business.

Of course, if the rollover applies it does not mean CGT is avoided; it just means that it is deferred until the spouse to whom the asset is transferred later sells the asset or it is subject to a CGT event in their hands.

However, in this case they would generally acquire the other party’s “cost base” for the purposes of calculating any capital gain or loss. And they would also generally be entitled to the CGT 50% discount if it was held for the required time.

Nevertheless, there is an important and tricky rule that applies where the asset that is transferred is a dwelling (eg, a rental property) which is used for another purpose in the hands of the other spouse (eg, their home).

In this case, the spouse who acquires the asset will be liable for CGT for the gain that accrued while it was a rental property – even though it became their home from the time they acquired it from the other spouse until they later sold it.

Suffice to say, this type of scenario requires some careful negotiations between the parties before such a transaction is undertaken to make sure everything is “fair” for all the parties.

There are also special rules that apply when, say, an asset that is held by a family company or trust is transferred out of that company or trust to the other party as part of a settlement agreement.

Again, these rules can be complex and require good advice to ensure that all the issues are managed effectively.

So, all in all, if you are facing any spousal separation issues come and speak to us first about the ins-and-outs of the rules that apply on any transfer of assets.

And perhaps some of the impact of divorce or separation can be alleviated by making sure that the CGT rollover is used most effectively – because like death, divorce affords certain tax planning opportunities.

Comparing SMSFs with other super funds

Fri, 24 Jan 2025 06:43:54 GMT

While all superannuation funds have a shared goal to provide retirement benefits to their members, there are many differences between SMSFs and other superannuation funds

If you’re thinking about setting up an SMSF, it’s worthwhile comparing SMSFs with other funds before making your decision. Here, we highlight the main differences between SMSFs and other funds.

How taxable is that side hustle?

Mon, 20 Jan 2025 02:01:43 GMT

With Australia going through a major cost of living crisis and interest rates not coming down as quickly as hoped, more and more people are looking at ways of creating additional cash flow to help make ends meet.

What is a side hustle?

Earning extra income on top of your primary job is sometimes known as a side hustle. While the extra money is no doubt welcome, it’s important to stay on top of the tax issues this sort of activity can throw up.

Side hustles can take many forms and may include:

posting content to platforms such as TikTok and attracting viewing hours;
being an influencer on a social media platform and attracting followers;
picking up casual work through platforms such as Airtasker;
garden maintenance;
providing tech support;
creating content for OnlyFans;
cleaning business premises or private homes;
coaching or tuition;
dog walking or pet sitting;
freelance writing;
creating and selling art;
gold fossicking.

Business or a hobby?

Whether or not the net income from these kinds of activities is subject to tax depends on whether they amount to a business, and this is where the sometimes fuzzy boundary between a business and a hobby comes into play.

In determining on what side of the line your activities fall, the following questions have to be answered:

does the activity have a commercial purpose?
do you have the intention of making a profit?
is the activity conducted in a business-like manner?
do you advertise or employ people?

In many cases the answer will be obvious – the whole point of a side hustle is to earn extra money so you can afford to keep paying the mortgage or cover the rent. Getting gigs through Airtasker to provide services, or picking up garden maintenance jobs would generally be something done with the intention of making a profit.

Gold fossicking, on the other hand, tends to be something people take up as a hobby. They enjoy seeing the countryside and any gold nuggets they may find are a bonus. But while occasional finds involving valuable nuggets might get a run on the evening TV news, they are rare. Most fossickers would run at a net loss, although whether the activity is actually profitable is not necessarily determinative.

And what if you own the most adorable cat who enjoys being dressed up and posed for photos? After putting a few shots up on social media you might be shocked to find you have many thousands of likes and your cat has more followers than Taylor Swift.

That sort of online attention can be monetised, sometimes for astonishing amounts. It does happen occasionally, even where there were no expectations of generating any revenue. If all you do is put up fresh shots on a regular basis and just collect the advertising revenue, you might fall outside the tax net. It all depends on the facts, but something that throws off a lot of money isn’t always taxable.

We can help you sort out where on the taxable spectrum your side hustle sits.

Tax compliance issues

If the activity falls on the business side of the dividing line, the income from your side hustle is just as taxable as the income from your primary job. You will need to keep track of all your income and deductions and pay tax on the net profit.

You will also need to register for GST (and charge GST) if your annual turnover exceeds $75,000. Registering for GST comes with an Australian Business Number (ABN), although you can apply for an ABN before reaching the $75,000 threshold. Once you have an ABN you need to keep the details up to date and cancel the ABN on closing your business.

The net profit from any side hustle that is conducted as a business gets added to taxable income from your primary job, which can leave you with a tax bill come tax time. To avoid any nasty surprises you could put aside some of your net profit as you go along to cover the tax bill when it arrives. How much to put away depends on what tax bracket the combined income from your primary job and your side hustle puts you in. You can also ask your employer for your primary job to take out more by way of PAYG deductions by completing a withholding declaration. We can help you work out the best course of action.

If you make a net loss from your side hustle, but the activity qualifies as a business, you may not be able to offset the loss against the income from your primary job if the non-commercial loss rules apply to quarantine the loss until the business grows.

Deductions

What sort of deductions you can claim very much depends on the nature of your side hustle. Bear in mind that any amounts you may want to claim have to be incurred in carrying on your business and you cannot claim private expenses against business income. Some things, like car expenses, may need to be apportioned (and it would be helpful to maintain a logbook or diary that keeps track of business and private use of your car).

Occupancy costs for your home (mortgage interest, rates and taxes, house insurance) are only deductible where part of your home is used exclusively as business premises. Using the dining table in the evenings to prepare invoices doesn’t cut it.

We can help you sort out what is what on the deductions front and prevent your side hustle becoming a tax hassle.

How does your super compare with others your age?

Fri, 17 Jan 2025 00:10:51 GMT

Have you ever wondered how your super balance compares to others in your age group? Or maybe you’re curious about how much you should have saved by now to ensure a comfortable retirement? It’s not always easy to figure out if your super is on track, but understanding how it stacks up can help you make smarter decisions now that will benefit you later. This article looks into the average super balances for people of different ages and explores how much you may need in retirement.

Average balances of Australians

The Australian Taxation Office (ATO) has released data showing average super balances for different age groups. The data gives a helpful overview of where Australians are at in terms of their retirement savings. Here’s how the averages break down:

*Source: ATO Statistics 2021–22: Median super balance, by age and sex, 2021–22 financial year

You might be looking at your super balance right now, feeling either satisfied or a little worried about how it measures up to these averages. Remember, averages don’t tell the whole story. Your balance can be impacted by various factors like career breaks, part-time work, salary levels, or investment decisions. If you’ve made additional contributions or opted for higher-growth investment options, your balance may be above average. If it’s not quite where you’d like it to be, don’t worry – there’s still plenty of opportunity to take steps and get back on track.

How much super do you need in retirement?

Understanding what you’ll need in retirement can help you gauge whether your super balance is on track. The Association of Superannuation Funds of Australia (ASFA) provides clear benchmarks to define what a “comfortable” or “modest” retirement might look like.

A modest retirement covers basic living expenses, with most of the income coming from the age pension. On the other hand, a comfortable retirement allows for a higher standard of living, including private health insurance, a reliable car, household upgrades, and leisure activities like holidays.

Here’s what ASFA estimates you’ll need if you retire at 65, own your home outright, and are in good health:

Source: ASFA retirement standard budget for retirees aged 65 to 84 (June quarter 2024)

Knowing these benchmarks can help you assess your progress and plan for the future you want.

Are you on track?

Now that you know what the average super balance look like, and you have a better idea of how much you may need, it’s time to check where your super stands. If your balance is lower than the targets set by ASFA, don’t panic – it’s never too late to take action. You can still take steps to boost your super and make it work harder for your retirement.

Consider making extra contributions, whether through salary sacrificing or personal after-tax payments. Reviewing your investment strategy to ensure it aligns with your goals and risk tolerance is also important. If you’re unsure about what changes to make, it could be helpful to speak to a financial adviser who can offer tailored advice for your situation.

Super is an essential part of your retirement planning, and understanding where you stand can help you make smarter choices today. Whether you’re feeling confident about your balance or realising there’s more work to be done, it’s always worth taking the time to review and plan ahead. The sooner you act, the more time your super will have to grow – putting you in a better position to enjoy your golden years.

Division 293 tax – will you be caught?

Thu, 25 Jul 2024 04:01:21 GMT

If you’re a high income earner, you may soon be asked to pay an extra 15% tax on the amount of concessional contributions that exceed the $250,000 threshold.

What is Division 293 tax?

Division 293 tax is an additional 15% tax that is payable when your income and concessional contributions exceed $250,000 in 2023/24.

To recap, concessional contributions are before-tax contributions and are generally taxed at 15% within your fund. This is the most common type of contribution individuals receive as it includes superannuation guarantee payments your employer makes into your fund on your behalf. Other types of concessional contributions include salary sacrifice contributions and tax-deductible personal contributions.

It’s worth noting that the extra 15% Division 293 tax is payable in addition to the standard 15% tax that is paid on concessional contributions.

How does Division 293 tax work?

You will be liable for Division 293 tax on either your concessional contributions, or the amount of income that is over the $250,000 threshold – whichever amount is lower.

Income for the purposes of Division 293 includes taxable income from a range of sources, such as:

Employment and business income
Reportable fringe benefits
Investment income
Net financial investment losses, such as negative gearing losses where deductions attributable to an investment property exceed rental income
Income you may receive due to a one-off event, such as making a capital gain, receiving a work bonus, or a redundancy or termination payment.

Purpose of Division 293 tax

The purpose of this extra tax is reduce the tax benefits that high income earners receive from the superannuation system and to level the tax playing field for average income earners.

Even though high income earners may pay tax on their concessional contributions at 30%, this is still less than the top marginal tax rate of 47% (including Medicare levy) that generally applies to high income earners who are liable for Division 293 tax. As such, making and receiving concessional contributions are still tax effective.

Liability to pay Division 293 tax

The ATO will determine if you need to pay Division 293 tax based on information in your tax return and data they receive from your superannuation fund(s). As a result, there is usually a delay between when the contribution is made and when Division 293 tax is payable.The ATO will issue you with a notice of assessment stating the amount of tax payable and provide an authority to enable your superannuation fund to release the money. You also have the choice to pay the tax personally. Note that the tax is due within 21 days of the assessment being issued to you, and certain timeframes also apply if you elect to pay the amount from your superannuation fund.

Need more information?

The secret life of TFNs

Thu, 18 Jul 2024 03:50:44 GMT

Tax file numbers (TFNs) are so much an everyday element when dealing with tax and the ATO that many taxpayers won’t give it a second thought when tax return software responds with an “invalid” message when a TFN is entered.

The common thought will be that it’s human error, so naturally one’s first reaction will be to check the numbers you entered, followed by carefully re-entering them.

Most of the time the problem will be fixed and its business as usual, but here’s a passing thought — how does the tax return software know what is, and what is not, a valid TFN? Especially when you consider that its validity or otherwise is not dependant on matching those numbers with someone’s name and/or birthday and/or address and so on. These identifiers are used to cross-check a person’s identity of course, but the initial validity of a TFN is known via another factor — the “TFN algorithm”.

This verification algorithm, also known as a check digit algorithm, is embedded in each unique TFN. As with a lot of these things, this is best explained using an example. However, you need to keep a number in mind, which in this case is the number 11.

To make the algorithm work, a fixed weighting is applied to each number of the TFN.

In order from the left, these weightings are 1, 4, 3, 7, 5, 8, 6, 9, 10.

Example: 123 456 782

Validation: 1 + 8 + 9 + 28 + 25 + 48 + 42 + 72 + 20 = 253

As 253 is a multiple of 11 the TFN is valid.

To check for yourself, try the above with your own TFN.

Using the building concession for major renovations

Thu, 11 Jul 2024 03:32:59 GMT

There is no better way to take advantage of the CGT main residence provisions to increase the value of your home than by using the “building concession” to renovate your home.

At the far end, this concession allows you to move out of your home, knock it down and rebuild a more valuable one without losing any of your CGT main residence exemption.

However, it does require a number of conditions to be met.

Conditions to be met

Firstly, from the time you move out (or start renovation) you have four years to complete the construction.

Moreover, if you can’t complete the construction because of circumstances outside your control or other such serious matters within this four-year period, the Commissioner has the discretion to extend this period as appropriate. This may be invaluable at a time of building supply shortages – or just a shortage of builders.

Secondly, you must reoccupy the renovated home or the newly constructed one as your home as soon as it is practicable after the construction has been completed. This is usually measured by when the building completion /occupation certificate (or the like) is signed-off. This rule would also presumably take into account any personal circumstances (such as illness, etc) to determine when it is “soon as practicable” to move in.

Thirdly (and here’s the real concessional part of the concession to exploit) – you only have to re-occupy and live in it as your home for three months at a minimum.

However, re-occupation must be on a bona-fide basis – and note that there have been instances where the taxman has followed this up by looking at, for example, gas and electricity usage and comparing it to average usage in the area. And these days this can be readily done by a computer data match.

Nevertheless, only three months’ occupation as your main residence is an extraordinarily generous part of the concession.

But apart from moving out and renovating your home, there are a range of other circumstances in which the building concession can be used – but again noting the above conditions must be met in each case.

And these circumstances range from merely buying a vacant block of land on which to build your home, to the case of doing a knock-down re-build in respect of your existing home.

The concession can also apply where someone who buys land and/or enters into a contract to build a new home dies before completion of the new home and/or before its occupation. In this case the concession extends to the executor of that person’s estate.

So if you are thinking of doing some renovating or a knock-down rebuild, it is important to come and see us about proper planning to use this concession most effectively.

Don’t lose your super to scammers

Wed, 12 Jun 2024 01:45:53 GMT

Don’t be another victim – be on the lookout for scammers who call you about your superannuation!

ASIC on the lookout

The number of cold callers is on the rise. The Australian Securities and Investments Commission (ASIC) are urging people to hang up on cold callers and scroll past social media click bait that may be offering to help you compare and switch superannuation funds.

How cold callers operate

In many cases, cold callers will convince you to buy a product or sign up to a service. This could relate to any financial investment, product or service, but there has been a focus on scammers approaching people about their superannuation.

A typical superannuation cold calling experience includes:

A call from someone you don't know to see if you 'qualify' for a free review of your superannuation.
Contact from a cold caller who convinces you your existing superannuation fund is not performing.
A statement of advice (SOA) prepared by a financial advice firm the cold caller has an existing arrangement with.
'Cookie cutter' advice that is expensive, often unnecessary, doesn't consider your individual needs, and may leave you in a worse position.

The cold caller may benefit by getting a cut of the financial advice fees, which are deducted from your superannuation balance. In the end, you could end up paying for advice that may not even be right for you.

What to do

If you receive a call from a number you don’t know, ignore it. Otherwise, if you are contacted by a cold caller and answer the call, just hang up. Similarly if you receive a SMS message from a number you don’t know, ignore it and do not click on any links.

If you have given personal information about your superannuation or banking details to a cold caller, contact your existing superannuation fund or bank immediately and ask them to not allow any withdrawals.

You can also block a cold caller’s number and limit the calls you receive by joining the Do Not Call register .

Avoid social media click bait

You may have also come across some posts on your social media feed which question whether your superannuation is performing or encouraging you to compare your superannuation fund. If so, take care as some businesses try to grab your attention on social media before they try to sell you their services.

Beware of other sophisticated scammers

There are also reports that many Australians have fallen victim to sophisticated scammers who use technologies that use your bank’s legitimate phone number and texts on the same thread as genuine messages. Often, people are losing their money through no fault of their own as scammers either hack or manipulate a bank or other institution’s systems which will often see victims inadvertently providing information, such as a passcode, to the scammer. Be vigilant and never provide personal information, passwords or pass codes to anyone over the phone.

Beware of scammers

As the saying goes, if it sounds too good to be true it probably is. Avoid pushy sales tactics such as cold calling or social media click bait that rushes your decision-making. If you're thinking about making changes to your superannuation, you can always start by doing your own research, contact your existing superannuation fund, and consider using a licenced financial adviser to obtain quality financial advice about your superannuation.

What’s not considered “income” by the ATO?

Fri, 07 Jun 2024 01:34:42 GMT

It is possible to receive amounts that are not expected by the ATO to be included as income in your tax return. However some of these amounts may be used in other calculations and may therefore need to be included elsewhere in your tax return.

The ATO classifies the amounts that it doesn’t count as assessable into three different categories: exempt income; non-assessable non-exempt income; and other amounts that are not taxable.

Exempt income

As the name may suggest, exempt income doesn’t have tax levied on it. The thing to remember here however is that certain exempt income may be taken into account for other adjustments or calculations — for example, when calculating the tax losses of earlier income years that you can deduct, and perhaps “adjusted taxable income” of your dependants.

Exempt income includes:

certain government pensions, including the disability support pension paid by Centrelink to a person who is younger than age-pension age
certain government allowances and payments, including the carer allowance and the child care subsidy
certain overseas pay and allowances for Australian Defence Force and Federal Police personnel
government education payments, such as allowances for students under 16 years old
some scholarships, bursaries, grants and awards
a lump sum payment you received on surrender of an insurance policy where you are the original beneficial owner of the policy – generally these payments are not earned, expected, relied upon or occur regularly (examples include payments for mortgage protection, terminal illness, and permanent injury occurring at work).

Non-assessable, non-exempt income

Non-assessable, non-exempt income is income you don't pay tax on and that also does not count towards other tax adjustments or calculations such as tax losses.

Non-assessable, non-exempt income includes:

the tax-free component of an employment termination payment (ETP)
genuine redundancy payments and early retirement scheme payments
super co-contributions
various disaster recovery assistance packages (although these need to assessed on a case-by-case basis).

Other amounts that are not taxable

Generally, you don't have to declare:

rewards or gifts received on special occasions, such as cash birthday presents and gifts from relatives given out of love (however, gifts may be taxable if you receive them as part of a business-like activity or in relation to your income-earning activities as an employee or contractor)
prizes you won in ordinary lotteries, such as lotto draws and raffles
prizes you won in game shows, unless you regularly receive appearance fees or game-show winnings
child support and spouse maintenance payments you receive.

Six super strategies to consider before 30 June

Sat, 01 Jun 2024 01:17:57 GMT

With the end of financial year fast approaching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2024.

Tip 1 – Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation, you may be able to use the carry forward concessional contribution (CC) rules (otherwise known as “catch-up concessional” rules) to make large CCs this year without exceeding your CC cap.

This strategy can allow you to carry forward any unused CC cap amounts that have accrued since 2018/19 for up to five financial years and use them to make CCs in excess of the general annual CC cap (currently $27,500 in 2023/24).

You can then make a CC using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) at 30 June 2023 was below $500,000.

Tip 2 – Make a personal deductible contribution

Carry-forward contributions may also provide you with an opportunity to make higher amounts of personal deductible contributions in financial years where you may have a higher level of taxable income, for example, due to assessable capital gains.

But if you’re not eligible to use the carry forward rules to make a larger contribution, you can still boost your superannuation by making a personal deductible contribution up to the general CC cap.

It’s important to note that personal deductible contributions are only deductible if you meet all of the following conditions:

You make the contribution to a complying superannuation fund
You are at least age 18 when the contribution is made (unless you derived income from carrying on a business or from employment-related activities)
You make the contribution within 28 days after the month in which you turn 75
You notify your superannuation fund trustee in writing of your intention to claim the deduction
The notice must be given by the earlier of:
when you lodge your income tax return for the year the contributions were made, or
the end of the financial year following the year the contributions were made
The trustee of your superannuation fund must acknowledge receipt of the notice, and you cannot deduct more than the amount stated in the notice.

Tip 3 – Spouse contribution splitting

You can split up to 85% of your 2022/23 CCs before 30 June 2024 to your spouse’s superannuation if your spouse is:

Under preservation age, or
Aged between their preservation age and 65 years, and not retired at the time of the split request.

This is an effective way of building superannuation for your spouse and can manage your TSB which can have several advantages, such as:

Equalising your balances to maximise the amount you both have invested in tax-free retirement phase income streams, or
Optimising both of your TSBs to access a higher NCC cap, etc.

Tip 4 – Superannuation spouse tax offset

If your spouse is not working or earns a low income, you may want to consider making a NCC into their superannuation account. This strategy could benefit you both by boosting your spouse’s superannuation account and allowing you to qualify for a tax offset of up to $540.

You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer superannuation contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.

Tip 5 – Maximise non-concessional contributions

Another way to boost your superannuation is to make a NCC with some of your after-tax income or savings. The general NCC cap for 2023/24 is $110,000 and eligibility to utilise the cap depends on your TSB.

Although NCCs don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that is paid on superannuation on investment earnings. This tax rate may be lower than what you might pay if you held the money in other investments outside superannuation.

Tip 6 – Receive the government co-contribution

If you're a low or middle-income earner earning less than $58,445 in 2023/24 and at least 10% is from your job or a business, you may want to consider making a NCC to superannuation before 1 July 2024. If you do, the Government may make a ‘co-contribution’ of up to $500 into your superannuation account.

The maximum co-contribution is available if you contribute $1,000 and earn $43,445 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $43,445 and $58,445 pa.

Like the superannuation spouse tax offset, the definition of total income for the purposes of the co-contribution includes assessable income, reportable fringe benefits and reportable employer superannuation contributions.

Need help?

You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. Contact us before 30 June if you’re thinking about investing more in superannuation so we can help you decide which strategies are most appropriate to your circumstances.

Compensation from your bank or financial institution – is it taxable?

Fri, 23 Feb 2024 00:29:44 GMT

Unfortunately our financial institutions have not always acted as ethically as we consumers would like.

Whether you’ve received bad advice or paid for advice you didn’t receive at all, our supervisory and regulatory bodies have sought not only to improve the system so it won’t happen again, but also to ensure that if you are on the receiving end of such bad behaviour, you could be entitled to receive financial restitution.

If you’ve recently received a compensation payment, you might be wondering whether you need to pay tax on it.

The answer is - it depends!

It depends on how your investment was held and the type of compensation you received.

For example, if you’ve disposed of the investment and previously reported a capital gain in your income tax return, your compensation payment increases the capital gain (you may be able to claim the 50% discount too if you held the investment for more than 12 months). You may need to amend your income tax return to include this additional capital gain.

If you haven’t yet disposed of the investment, and you hold it as a capital investment ¹ , then the compensation payment reduces its cost for when you do dispose of it in the future (make sure keep details of the compensation payment with your tax records to provide to us later).

Where your compensation payment includes an amount that is a refund or reimbursement of adviser fees, and these fees were previously claimed a tax deduction by you, then the amount you received as a refund or reimbursement will generally be taxable to you in the income year you receive it. Similarly, any part of the payment that represents interest should also be included in your tax return in the year you receive it.

If you’ve received an amount of compensation and not sure whether it is taxable, or if you need to amend a prior year tax return for a payment you received, please reach out to us.

Returning to work after retirement

Fri, 23 Feb 2024 00:29:38 GMT

Most people look forward to retirement as it is a chance to finally take time to relax, enjoy life and do things they never had time for when they were working. But sometimes things change and some people feel the urge to return to work. If a return to work is inevitable, it is important to understand the superannuation retirement rules when it comes to working and accessing your superannuation.

Many new retirees find that after a few months the novelty of being on ‘permanent vacation’ starts to wear off. Some people may miss their sense of identity, meaning, and purpose that came with their job, the daily structure it brought to their days, or the social aspect of having co-workers.

In fact, figures from the Australian Bureau of Statistics (ABS) have revealed financial necessity and boredom are the most common factors prompting retirees back into full or part-time employment.

As such, it is not uncommon to want to return to work after retirement, even if only on a part-time or casual basis. Whatever your reasons or motivations might be, there are a range of factors to consider if you wish to return to work depending on your age.

There are three ways in which you can retire, access your superannuation and then return to work, which are summarised below.

1. Retire on or after reaching preservation age

Individuals can retire after reaching their preservation age, ending gainful employment and declaring that they intend never to return to any ‘gainful employment’ for 10 hours or more each week.

It is illegal to access your superannuation with a false declaration of intention so your intention to retire must be genuine at the time. This is why your superannuation fund may require you to sign a declaration stating your intent.

That said, you can return to work while still accessing your superannuation as long as your intention to retire at the specific time was genuine and that you didn’t plan to return to work all along. Your intentions are allowed to change even though you may have retired and have already accessed your superannuation or are receiving age pension payments.

2. Ceasing an employment arrangement after age 60

From age 60, you can stop an employment arrangement (ie, resign from a job) and obtain full access to your superannuation without having to make any declaration about your retirement or future employment intentions.

If you are in this situation, you can return to work without any issues because there was no requirement for you to declare your retirement permanently. For example, you could resign from a job with one employer and start work with a different employer and access your superannuation.

3. Retire after age 65 or older

Once you turn age 65, you can access your superannuation regardless of your work status and do not need to make any declaration about your retirement status. You only need to be retired if you want to access your superannuation before you turn age 65.

Whether you are accessing your superannuation or not, you can return to work at any time.

Your super after returning to work

Regardless of what age category you fall into, you may have taken your superannuation as a lump sum, income stream or a combination of both. If your circumstances change and you return to work, any amounts in your superannuation fund, including any pension payments you may be receiving will remain accessible and can continue to be paid.

However upon recommencing any future employment, any future superannuation contributions and earnings from subsequent employment and any voluntary contributions will remain preserved until a further condition of release is met, such as retirement or reaching age 65.

Impact on age pension

If you are receiving the age pension and decide to return to work, your employment income will count towards Centrelink’s income test which may impact your age pension entitlements.

Having said that, Centrelink has a ‘Work Bonus’ scheme which reduces the amount of your employment income, or eligible self-employment income, which Centrelink applies to your rate of age pension entitlement under the income test. Fortunately, you don’t need to apply for the Work Bonus, rather Centrelink will apply the Work Bonus to your eligible income if you meet all the eligibility requirements. All you need to do is declare your income.

If your intentions or circumstances have changed and you have decided that you would like to return to work, contact us if for a chat about your options.

Gifting and the age pension

Fri, 23 Feb 2024 00:24:58 GMT

Many people gift assets to their family or friends to give them a helping hand. However care must be taken to ensure any gifting does not impact your current or future social security entitlements, such as the age pension.

What are the gifting rules?

For Centrelink purposes, gifting refers to selling or transferring income or assets for less than it’s worth or without receiving anything in return. If you receive adequate compensation, such as payment for an asset to the same value, it is not considered a gift.

Gifting limits

Although you can gift as much income or assets as you like, Centrelink imposes gifting limits to discourage retirees from giving away their wealth to qualify for more age pension income.

The gifting rules allow you to gift up to $10,000 each financial year or a maximum $30,000 over five financial years without this impacting your entitlement to government benefits.

When applying the gifting rules, they are first measured against the $10,000 per financial year rule (with the same limit applying to both singles and couples), then against the $30,000 limit over a rolling five financial year period.

If you exceed these limits, the excess amount will be treated as a ‘deprived asset’ and will count as an asset under Centrelink’s asset and income tests. When applying for a pension, the asset and income tests are both applied and the test that pays the lower rate of pension will apply.

Example

Kylie is 68 and receives the age pension. She decides to gift $50,000 to her son to help him buy his first property. Assuming Kylie has not gifted any amounts previously, the first $10,000 falls under the gifting free threshold. The remaining $40,000 will be treated as Kylie’s asset under the asset and income tests for the next five financial years, after which it won’t be counted.

If on the other hand Kylie decides to gift a lower amount of $20,000 to her son in the one go instead, she would still be impacted by the gifting rules. Even though she hasn’t used the entire $30,000 gifting limit over five financial years, $10,000 would be deemed a deprived asset (ie, $20,000 - $10,000) and count towards the asset and income test for five financial years because she gifted more than $10,000 in one financial year.

Timing is key

Centrelink looks retrospectively at any gifting amounts over the last five years. For example, if you gift your holiday house which is worth $1 million at the age of 61 to your kids, when you turn 67 and claim the age pension, that gift will not be assessed. This is because once the five year time period is up, any deprived assets are removed from the assessable assets used to calculate your entitlements.

As can be seen, this highlights a gifting strategy where you can gift large amounts that exceed the allowable gifting limits five years before you qualify for the age pension without the gifting rules applying against any age pension payments in the future. But remember, there are other financial implications of your gift that you should consider, such as missing out on investment income that your asset would have generated and any potential capital gains tax that may be payable if there is a change of ownership in the asset.

Obtain advice

If you are approaching age pension age and are considering gifting to help your family or friends, you should seek advice to assist with your specific situation as the gifting rules can be complex.

Damage or destruction of a rental property

Fri, 23 Feb 2024 00:24:54 GMT

What happens if your property is damaged from the results of a natural disaster, or by tenants? Such a situation can affect the types of expenses you claim and the income you need to declare for your rental property.

Declaring income

If you receive a payout for damage to your rental property as a result of a disaster, you may need to include this amount as income on your tax return. This includes:

insurance payout for loss of rental income
insurance payout for repairs
insurance payout for replacements (even if they are capital assets
money received from a relief fund.

Note however that money provided for immediate or urgent repairs may be exempt. If you receive a one-off payment as assistance from a charity or community group or even from a government arm, these are generally tax-free, as well as gifts from friends and/or family.

If your rental property is damaged or destroyed by a natural disaster, you may still be able to claim deductions for holding costs of the vacant land. Where you rented it out, or it was available for rent prior to the natural disaster, taxpayers can generally claim a deduction under the “exceptional circumstances” exemption. If the exemption applies to your circumstances, you can continue to claim deductions for three years from when the disaster occurred. This period can be extended if required by applying to the ATO.

Claiming deductions for repairs

Generally, repairs must relate directly to wear and tear or other damage that occurred as a result of you renting out the property. Examples of repairs include but are not limited to:

replacing broken windows
replacing part of a fence damaged by a bushfire
replacing the plaster board in a wall damaged by flood inundation
repairing electrical appliances or machinery.

Substantial changes, including improvement, modernisation, making additions or the replacement of an entire structure is not considered to be a repair.

Deduction for unoccupied property repairs

The ATO has used an example before of a rental property that was tenanted when it was severely damaged by a cyclone. Due to the damage, the tenants had to move out. The owner carried out repairs and then advertised the property for rent. Even though the property was not available for rent while being repaired, the owner was able to claim his repairs.

Capital expenditure which may be claimable over time

Capital allowances:

For each asset where you may claim a deduction for decline in value (depreciation) you can choose to use either the effective life the ATO has determined for such assets or your own reasonable estimate of its effective life (although where you estimate an asset’s effective life, you must keep records to show how you worked it out).

Depreciating assets:

Depreciable assets are those items that can be described as “plant”, which do not form part of the premises. They are usually not part of the main structure, and not likely to be permanent and expected to be replaced within a relatively short period.

Examples of depreciable assets include carpets, curtains, appliances (such as a dishwasher or fridge), and furniture. If you replace a depreciating asset costing up to $300 you can generally claim an immediate deduction. Note that a deduction is only available for new assets, and not for second-hand assets.

Capital works:

Capital works is used to describe certain kinds of construction expenditure used to produce income. Examples include but are not limited to:

building construction costs
cost of altering a building
major renovations to a room
adding a fence.

The rate of deduction for these expenses is 2.5% per year for 40 years following the completion of the construction.

Capital gains tax implications

If an insurance payout is made on a dwelling that is not your main residence (eg a holiday home or rental property), it may need to be taken into account for capital gains tax purposes.

If you rebuild or replace your property, you may be entitled to roll over any capital gain you make. For the rollover to apply you must have incurred some of the expenditure to acquire another property within one year after the end of the income year in which the property was damaged or destroyed.

Where your property is destroyed and you do not rebuild, you will need to calculate your capital gain or loss. Any insurance payout received will be counted as capital proceeds when calculating your gain or loss. However, where you don’t receive any payouts the market value substitution rule does not apply and generally you can claim a capital loss.

Otherwise, a capital gain will arise if the insurance payout is more that the asset’s cost base. A capital loss will arise if the insurance payout is less that the asset’s reduced cost base. Note that calculating the cost base of a destroyed building on land can be complex. Where you have this situation, please call us to discuss.

Taken goods for private use? Here’s the latest values

Thu, 07 Dec 2023 06:18:57 GMT

The ATO knows that many business owners naturally help themselves to their trading stock and use it for their own purposes. This common practice can occur in businesses such as butchers, bakers, corner stores, cafes and more.

The ATO regularly issues guidance for business owners on the value it expects will be allocated to goods taken from trading stock for private use. The table below shows these values for the 2023-24 income year.

The basis for determining values is the latest Household Expenditure Survey results issued by the Australian Bureau of Statistics, adjusted for CPI movements for each category.

Note that the ATO recognises that greater or lesser values may be appropriate in particular cases, and where you are able to provide evidence of a lower value, this should be used.

If you have any questions regarding this issue, please reach out to us for guidance.

Give yourself a super gift this Christmas

Thu, 07 Dec 2023 06:18:55 GMT

Give yourself the ultimate gift that doesn’t cost a thing – a super to-do list which is a gift that will benefit you now and in the future.

1. Consolidate your super

With over 10 million unintended multiple superannuation accounts, these multiple accounts are costing Australians an extra $690 million in duplicated administration fees and $1.9 billion in insurance premiums per year, which is eroding many Australians’ hard earned superannuation benefits. If you are one of these individuals with multiple superannuation accounts, there may be benefits to rolling your accounts onto one superannuation fund.

Consolidating your superannuation is now easier than ever, using ATO online services or your myGov account. If you’re not sure whether you might have other superannuation accounts, you can search for lost or unclaimed super via the ATO or by logging into your myGov account linked to the ATO and clicking on Manage my super.

However before you consolidate your funds, there are a few things you should do, such as:

-consider whether you have any insurance cover which may be lost when transferring benefits to a new fund, and

-check on other details such as fees, insurance premiums, variety of investment options available, performance data, and tax implications from consolidating your superannuation to ensure the transfer provides you with better value and meets your needs.

2. Review your investment strategy

Your superannuation fund trustee invests your money for you. Most funds allow you choose from a range of investment options, from conservative to growth. Take the time to check your investment options and decide what’s right for you. The options you choose can make a big difference to how your super grows between now and your retirement.

If you manage your own self-managed superannuation fund (SMSF), the super laws require you to prepare and implement an investment strategy for your SMSF and review the strategy regularly (ie, at least annually). Your investment strategy is effectively your plan for making, holding and realising assets consistent with your investment objectives and retirement goals. It also needs to set out why and how you’ve chosen to invest your retirement savings to meet the goals outlined in the strategy. Review your investment strategy to ensure it meets each member’s investment and retirement objectives.

3. Make extra contributions

Making small financial sacrifices and contributing to super over the years is key to long-term wealth. This long-term growth is due to the power of compounding interest. Superannuation uses compounding interest to grow your balance which will help you in retirement. If you’re an employee, your employer will pay 11% of your salary/wages into superannuation in 2023/24 that will benefit from compounding interest and grow until you reach retirement.

To boost the amount you’ll have saved at retirement, you may want to consider making additional contributions through salary sacrificing or making personal after-tax contributions to superannuation. However contribution caps must be considered to avoid exceeding the caps and paying extra tax.

4. Check your insurance

Insurance is another key aspect of your superannuation that you should review. Superannuation funds generally offer three types of insurance for their members, including life insurance, total and permanent disablement (TPD) insurance and income protection insurance, so it’s important to check whether you have any cover within your fund.

Some funds provide a default level of insurance as a standard inclusion when you open your account, but it’s worthwhile seeking advice to determine whether your current level of cover will adequately protect you and your family in the event of injury, illness or death.

5. Check your beneficiary nominations

Despite what many people may think, superannuation is not an estate asset which means on death it does not automatically flow to your estate. This means that your Will does not typically deal with your superannuation benefits.

To make sure your superannuation is distributed to the right people, you should nominate a valid beneficiary. If you don’t nominate a beneficiary or you have an invalid nomination (i.e., because your nominated beneficiary does not meet the definition of a superannuation law dependant at the time of your death), your superannuation fund may decide who receives your superannuation money, regardless of what you have in your Will. For this reason, it is important to regularly review your superannuation death benefit nominations* when your circumstances change to ensure it remains up to date and ends up in the hands of the right person(s).

Sleigh the super way

Superannuation is your money so it pays to take an active interest in your superannuation during your working years. Reviewing your current superannuation and making these simple changes can help boost the amount you have available for retirement over the long term.

Personal Property Securities Register

Thu, 07 Dec 2023 04:20:22 GMT

Are you aware of the personal property securities register?

What is it?

The personal property securities register (more commonly known as the PPSR) is an official government register. It’s effectively a public noticeboard of *security interests in **personal property that is managed by the Registrar of Personal Property Securities.

*security interests are most commonly created when a secured party (such as a lender) takes an interest in personal property of a grantor (such as a borrower) as security for a loan or other obligation. The security interest means the secured party can take the personal property (known as the collateral) if the secured obligation is not met, such as defaulting on a loan.

**personal property to which the PPSR applies is property other than land, buildings and fixtures to the land. It includes goods, motor vehicles, planes, boats, intellectual property such as copyright/patents/designs, shares, bank accounts and debts.

The debts or other obligations that are secured by personal property are shown on the register (if registered). The PPSR is accessible by the public 24/7. The PPSR came into existence on 30 January 2012 replacing many state-based registers, such as REVS and other vehicle registers and the ASIC Register of Company Charges, to form one national register.

Put simply, the register assists both those with a security interest over property, and also consumers/businesses purchasing property as follows:

Registering

When someone registers a security interest on the PPSR, they are letting the world at large know that they claim to have a security interest over certain personal property. Registering on the PPSR is a way to notify others if personal property such as cars, goods or company assets have security interests over them. Registering your security interest correctly on the PPSR can protect you and give you extra rights in the property it's registered over. This is especially important if the person who gave you the interest goes insolvent. A registration also offers other protections such as ranking you as a higher priority over other security interests.

Searching

Consumers including businesses can search the PPSR to see if someone has registered a security interest over personal property (which they may want to do before buying property or lending money to someone). When you search you will receive a certificate that you can retain as proof of whether or not a security interest was registered at the time of your search. If you don’t do a search and then proceed to purchase property that has an existing security interest registered over it, you place yourself at risk of the goods being repossessed even though you have paid for them. Millions of searches and registrations take place on the PPSR every year.

To access the PPSR, visit www.ppsr.gov.au

Gifting to employees

Thu, 07 Dec 2023 04:20:08 GMT

Some employers, especially at Christmas time or for birthdays, give small gifts to their employees or the employee’s associates (i.e. spouses). These gifts typically take the form of bottles of wine, movie tickets, gift vouchers etc. The tax treatment of these gifts from an employer standpoint, depends upon a range of factors including:

To whom the gifts are provided (e.g. employees or clients?)
Whether the gifts constitute entertainment
The dollar value of the gifts, and
The frequency with which they are provided.

Use the following steps as a guide:

1. Does the gift constitute entertainment?

If yes, go to 2
If no, go to 3

(gifts that constitute entertainment include: tickets to the movies/plays/theatre, restaurant meals, holiday airline tickets, admission tickets to amusement parks etc.)

(gifts that do not constitute entertainment include: Christmas hampers, bottles of alcohol, gift vouchers, perfume, flowers, pen sets)

2. Does it cost less than $300 (GST-inclusive) and is provided infrequently?

If yes…no FBT, no deduction, no GST credit
If no…FBT applies, is deductible and can claim any GST

3. Does it cost less than $300 (GST-inclusive) and is provided infrequently?

If yes…no FBT, deduction can be claimed as can any GST credits
If no…FBT applies, deduction can be claimed as can any GST credits

All told, from a tax standpoint it’s best to buy employees and their associates non-entertainment gifts that cost less than $300. That way, no FBT is payable yet a deduction and GST credits can be claimed. Alternatively, you can put the tax burden back on the employee and pay them a cash bonus, in which case the amount will be assessable to the employee, and deductible to the employer.

Touch base with us if you require further clarification.

SMSFs and property development projects

Mon, 27 Nov 2023 04:59:01 GMT

The ATO continues to see instances in which closely held groups seek to inappropriately divert profits to a related SMSF to access concessional tax rates.

Taxpayer Alert TA 2023/2 outlines the ATO’s concerns with arrangements that it has recently identified in which the profits of a property development enterprise are diverted to a related SMSF through the use of a special purpose vehicle owned by the SMSF.

The Alert provides an overview of the arrangements the ATO is reviewing and outlines what you should do if you have entered or are considering entering such arrangements. The Alert also reinforces the messages already contained on the ATO website about the significant tax and SISA regulatory implications of schemes which encourage taxpayers to channel money inappropriately through their SMSF.

The arrangements under review involve closely held groups (which include an SMSF) and non-arm’s length dealings between group members. Some taxpayers and advisers may be under the misapprehension that, because the SMSF itself is not directly involved in the non-arm’s length dealings, the arrangement is effective in obtaining concessional tax treatment. However, the Alert makes it clear any non-arm’s length transaction between entities within the same closely held group can give rise to non-arm's length income for an SMSF in that same group.

If you're the trustee of an SMSF that is looking to participate in a property development, you should ensure the arrangement will meet your income tax and regulatory obligations.

For more information, read SMSF Regulator’s Bulletin SMSFRB 2021/1 Self-managed superannuation funds and property development .

Remember, if something seems too good to be true, then it probably is. You should always speak to your SMSF professional before entering any arrangement. Super Scheme Smart has more information on other arrangements and schemes that catch the ATO’s attention.

Costs of a caravan/motor home for work-related travel

Fri, 17 Nov 2023 04:54:37 GMT

SCENARIO:

I run a small business that requires me to travel quite a lot, particularly to country areas where I will often stay overnight. To save on accommodation costs, I have purchased a caravan. I have a business logo on the side of the caravan that is on display when I attend town shows and events. Will the costs of purchasing and maintaining my caravan be deductible in my individual income tax return?

GUIDANCE:

In these challenging and changing times, many have jumped on the modern version of the proverbial band wagon and purchased a caravan or motor home to use for work or business-related travel.

It is a common misconception that there are specific rules governing whether you can claim a tax deduction for the costs of purchasing and maintaining a caravan or motor home. A caravan or motor home is no different to any other work or business asset you own, and the extent the expenses are deductible will depend upon the extent you use the caravan or motor home for income-producing purposes. The complexity does not arise because the expenses relate to a caravan or motor home, but that the expenses (in our scenario above) are essentially travel and accommodation expenses, and this is an area of tax law that can be difficult to apply in practice.

Travel and accommodation expenses are deductible under the tax legislation where you incur these expenses gaining or producing assessable income, or they are necessarily incurred in carrying on your business.

Travel between two unrelated work locations is also deductible where neither of the two work locations is your home (although in this case, the costs may still be deductible under the general deduction provision).

Travel costs will not be deductible if they are a prerequisite to earning income, if you are living away home (rather than travelling on work) nor if they are as a result of your own personal choice or circumstances, eg, the costs are not deductible just because you decide it is more convenient to stay overnight. It would seem that if it is reasonable that you would stay overnight rather than travelling to and from a location within a day, and the reason cannot be attributed to a personal choice, then it is more likely the travel would be viewed as work-related. Keeping a diary would help support your deduction (and is necessary as a sole trader travelling for six or more consecutive nights).

Generally, the depreciation and GST claim on a caravan or motorhome will not be limited by the car limit (currently $68,108). This is because, a caravan or motorhome (designed to carry a load of more than one tonne) is not a ‘car’ as defined in the tax legislation.

What if my business logo is on the side of the caravan?

The good news is while the cost of the business logo will ordinarily be tax deductible as advertising, the bad news is the ATO is firmly of the view that placing a business logo on the side of a caravan (or any type of motor vehicle) will not turn private travel into business travel, even if the signage is affixed permanently. This means if the travel expenses are not tax deductible without a logo, the travel expenses will not be deductible with a logo.

Financing motor vehicles

Fri, 10 Nov 2023 02:00:15 GMT

One of the most common decisions facing business is how to finance and account for the acquisition of a motor vehicle. There are numerous ways of doing so, with each resulting in differing accounting, taxation and GST treatment.

Options

How should you go about purchasing a vehicle? While it may seem a relatively straightforward question, there are numerous ways of doing so. Some of the more common methods are:

Outright Purchase
Lease
Hire Purchase, or
Chattel Mortgage.

Outright purchase

The advantage of purchasing a vehicle outright, as opposed to financing the acquisition of the vehicle, is that there will be no ongoing costs of finance. This is a real benefit now that interest rates are on the rise. On the downside, the outright purchase of a vehicle can impact greatly on the cash resources of an entity when those funds may be better utilised elsewhere. It is far easier to obtain finance for the acquisition of a vehicle than it is for the acquisition of trading stock. Care should therefore be taken not to cripple your business’s cashflow if considering an outright purchase.

Lease

Rather than choosing to acquire a vehicle outright, your business may elect to finance the acquisition. The central issue that surrounds any form of financing, and how it is to be accounted for, is whether the person providing the asset under the finance arrangement is the legal owner of that asset. This issue goes to the heart of how the finance transaction is to be treated and is often the subject of ATO scrutiny. The ATO has warned taxpayers about the trap of claiming deductions for what appear to be lease payments when in fact the finance arrangement is a Hire Purchase or similar type of transaction. The only way to identify the difference is to read the terms and conditions of the finance agreement.

The ATO will consider a finance arrangement to be a lease when:

· There is no option to purchase the vehicle written into the agreement, and

· The residual value reflects a bona fide estimate of the vehicle’s market value at termination.

If these two conditions are not met, the ATO considers the finance agreement to be a Hire Purchase or other instalment type agreement.

Under a leasing arrangement, the lease payments are a deductible amount to the extent the vehicle is used for income producing purposes, and the financed sum is not typically booked on the balance sheet of the entity.

Hire purchase

This is simply another form of finance. Its tax and GST treatment however is vastly different from both that of leasing and acquisition by chattel mortgage. As a result, this form of finance needs to be considered on its own merits.

In essence, a hire purchase arrangement is an agreement to purchase goods by instalments. The term hire purchase is defined as:

“ a contract for the hire of goods where:

i) the hirer has the right or obligation to buy the goods; and

ii) the charge that is or may be made for the hire, together with any other amount payable under the contract (including an amount to buy the goods or to exercise an option to do so), exceeds the price of the goods; and

iii) title in the goods does not pass to the hirer until the option to purchase is exercised; or iv) where title in the goods does not pass until the final instalment is paid”.

Unlike a lease, where there is no obligation to acquire the goods at the end of the instalment period, a hire purchase arrangement provides for this obligation and as such the goods will be eventually owned by the purchaser.

Chattel Mortgage

A chattel mortgage from the perspective of recording the asset purchase and recognising the liability is identical to that of a hire purchase arrangement. The difference between a chattel mortgage and other forms of finance such as hire purchase and lease comes when dealing with the GST consequences.

Please contact us if you would like to discuss your options and the tax consequences.

GST refresher for your business

Fri, 10 Nov 2023 01:33:09 GMT

Most businesses are familiar with how GST works. But here’s 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 business 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, for GST registered enterprises, the 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.

Coffee or cars anyone?

You may be thinking of rewarding the office with an impressive new coffee machine for the staff room, or perhaps you are thinking a bit bigger, say a new vehicle. Either way you may want to keep some of these GST issues in mind:

1. Second-hand goods*

Buying second-hand can often be cheaper. However, if you purchase from a non-registered seller (eg, a friend, or privately via Gumtree, eBay etc) unless the seller is a re-seller of second-hand goods registered for GST, in most cases you will not be able to claim GST on the purchase. (And if you are registered for GST, don’t forget to charge GST when you sell your business assets regardless of whether the purchaser is registered for GST or not).

(*excludes goods containing valuable metals)

2. Deposits

The purchase of a significant asset often requires a deposit to be paid. If you report GST on a cash basis, you will not be entitled to claim a GST input tax credit on the deposit at the time of paying (you may be entitled to claim it if you have paid an amount in addition to the deposit, or if you report GST using the non-cash accounting method and hold a tax invoice). If you haven’t claimed GST at the time of paying the deposit, make sure to claim GST on the full purchase price, including the deposit, when the deposit is later applied towards the cost of the asset (which may occur in a later BAS reporting period).

3. Purchasing a car for more than the car limit

Your GST input tax credit will be limited if you purchase a car with a cost that exceeds the tax car cost limit for depreciation. The car cost depreciation limit is the maximum you can claim as depreciation deductions for income tax purposes ($68,108 in 2023-24). Where the cost of your car exceeds this value, your GST claim is limited to 1/11 ^th of the car limit ie, $6,191 (1/11 ^th x $68,108). Importantly, there are some exceptions to this rule where your GST entitlement will not be limited, including on the purchase of a commercial vehicle (those not designed to carry passengers) or motor homes and campervans.

Be aware, however, that on the disposal of the car there is no corresponding reduction or adjustment to the GST on the sale proceeds ie, you must pay the ATO 1/11 ^th of the full sale proceeds. This is the case, even if your GST and depreciation claims were limited on the purchase under these rules.

4. Cancelling your GST registration

A cost that is often overlooked when considering winding up a business is the potential need to repay GST previously claimed in respect of assets you still hold. In most cases (there are a few exceptions), you must cancel your GST registration within 21 days of selling or closing your business. You can also choose to cancel your GST registration if your GST turnover is below the turnover threshold ($75,000). If, when you cancel your GST registration, you still hold business assets on which you previously claimed GST, you may need to repay some of those credits, depending on how long you have owned the asset and its original cost. The adjustment will generally be 1/11 ^th of the GST inclusive value of the asset at the time of cancelling your registration (where this value is lower than its original cost).

Small but not insignificant

It’s not just on these larger transactions where we can uncover GST issues. Although the dollars involved are usually more significant when buying and selling business assets, it is extremely easy to over or under claim GST on our day-to-day transactions and over time, these too can add up to a sizeable GST adjustment. For example:

Bank fees – ordinary monthly bank account charges won’t include GST, but merchant fees do so check your accounting system is set up to capture the GST on those merchant fees.
Insurance policies – insurance policies often include a small stamp duty component which does not attract GST. If your accounting software is set up to claim a full 10% GST (or 1/11 ^th of the premium cost) you may be overclaiming GST.
Recharge or top-up cards – eg, for tolls, telephone (and vouchers given as Christmas or other gifts) – GST should only be accounted for when the recharge is used or redeemed for purchases used in your business, not when the cards or vouchers are purchased.
Private apportionment – eligible small businesses can make an annual apportionment of GST where purchases are partly for business and partly for private purposes rather than each time you pay an expense. You can make this adjustment in the activity statement that covers the period your income tax return is due, making sure not to reduce your GST claim twice (once when you paid the expense, and once as part of the annual adjustment).
Software subscriptions – you may not be claiming GST on software subscriptions on the basis that the supplier is an overseas supplier.

However, from 1 July 2017 the rules changed in this area so you may be paying GST when you do not have to, or not claiming GST when you could be – you will need to check your tax invoices and let your bookkeeper or accountant know if the software subscriptions you are paying include GST (or provide the software supplier your ABN so you are not charged in the first instance).

Remember the best way to maximise your GST claims is by checking your tax invoices for GST paid (you have four years to claim the GST), and then keeping those and other GST records for 5 years.

If you have any questions around GST, reach out to us.

Time for a restructure?

Fri, 10 Nov 2023 01:29:01 GMT

The new financial year can be a time where business owners look at their operating structure and consider whether it still meets their needs.

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Choosing a structure is not simply about minimising tax, rather a range of factors should be considered as such as asset protection, establishment and ongoing compliance costs, succession planning, and your understanding of each structure etc.

Most small businesses operate as a sole trader, company, trust, or partnership. The following table is a comparative snapshot of each of the four structures:

*subject to the Personal Services Income (PSI) rules

You may find that, as your business grows or as your priorities change, your chosen structure no longer serves your needs. For example, a number of people commence businesses as sole traders (often for reasons of simplicity as well as keeping start-up costs to a minimum) but later find that this structure is no longer appropriate. From an income tax perspective, a drawback with sole traders is that income from the business is assessed personally to you at your marginal tax rates. As your business grows and the revenue generated increases, your tax rate also increases.

The take-home message is that you should periodically review your structure to ensure it continues to serve your needs. Be mindful however that changing structures can have CGT and stamp duty consequences – these one-off costs need to be taken into account when making the decision whether to change. Also note that under the small business rollover provisions, it may be possible for you to change your structure without incurring CGT.

Talk to us if you are contemplating changing your business operating structure.

Discounting your capital gain

Wed, 01 Nov 2023 01:13:14 GMT

The capital gains tax (CGT) discount can reduce by 50% a capital gain that you make when you dispose of (sell) a CGT asset that you have owned for 12 months or more. However, the discount is only available to:

individuals (but not foreign or temporary residents)
complying superannuation funds (33% discount applies, not 50%)
trusts, and
life insurance companies in respect of a discount capital gain from a CGT event in respect of a CGT asset that is a complying superannuation asset.

The most notable omission from this list is companies. They are not eligible for the general discount. This should be factored in when assessing which entity is chosen to acquire a CGT asset.

12-month requirement

The tax legislation requires that to qualify for the general discount, the asset must have been acquired at least 12-months before the time of the CGT event (sale).

The 12-month period requires that 365 days (or 366 in a leap year) must pass between the day the CGT asset was acquired and the day on which the CGT event happens…effectively 12-months and two days! If a taxpayer is nearing the 12-month mark, they should consider delaying the sale where possible until this timeframe is satisfied and therefore become eligible for the discount.

For the purposes of satisfying the 12-month holding period, beneficiaries can treat an inherited asset as though they have owned it since:

the deceased acquired the asset, if they acquired it on or after 20 September 1985
the deceased died, if they acquired the asset before 20 September 1985.

Note more generally that for CGT assets acquired before 20 September 1985, no CGT is payable anyway.

Foreign residents

The CGT discount no longer applies to discount capital gains of foreign or temporary residents or Australian residents who have a period of foreign residency after the below date. However, the CGT discount will still apply to the portion of the discount capital gain of a foreign resident individual that accrued up until 8 May 2012 (the date of announcement).

This measure applies where:

an individual has a discount capital gain, including a discount capital gain as a result of being a beneficiary of a trust, from a CGT event that occurred after 8 May 2012, and
the individual was a foreign resident or a temporary resident at any time on or after 8 May 2012.

The effect of the measure is to:

retain the full CGT discount for discount capital gains of foreign resident individuals to the extent the increase in value of the CGT asset occurred prior to 9 May 2012
remove the CGT discount for discount capital gains of foreign and temporary resident individuals accrued after 8 May 2012, and
apportion the CGT discount for discount capital gains where an individual has been an Australian resident, and a foreign or temporary resident, during the period after 8 May 2012. The discount percentage is apportioned to ensure the full 50% discount percentage is applied to periods where the individual was an Australian resident.

If you have any questions about the 50% discount, contact us.

Super withdrawal options

Wed, 01 Nov 2023 01:03:38 GMT

For individuals who have retired and met a condition of release, or who have turned 65 and are still working, you can receive your superannuation as a super income stream, as a lump sum, or a combination of both. This third option is quite popular for those who have yet to pay out their house, for example – a lump sum is withdrawn to pay off the remainder of the mortgage, and the balance used to commence a super income stream.

1. Lump sum

If your super fund allows it, you may be able to withdraw some or all of your super in a single payment. This payment is called a lump sum.

You may be able to withdraw your super in several lump sums. However, if you ask your provider to make regular payments from your super it may be classed as an income stream.

The downside to lump sums from a tax perspective is that once you take a lump sum out of your super, it is no longer considered to be super, and thus no longer enjoys the superannuation tax concessions (15% on earnings and capital gains, and tax-free if you convert your super into an income stream). That is, if you invest the lump sum outside of super, earnings on those investments are not taxed as super and may need to be declared in your tax return.

Further, if you’re over age 60, super money you access from super will generally be tax free, but if you’re under 60, you might have to pay tax on your lump sum.

2. Super income stream

You receive a super income stream as a series of regular payments from your super provider (paid at least annually). The payments must be made over an identifiable period of time and meet the minimum annual payments for super income streams. To find out what will happen if the income stream doesn't meet the minimum annual payment, see Minimum annual payment not made .

The payments don't need to be at the same interval, and the amount paid may also vary.

Super income streams are a popular investment choice for retirees because they help you manage your income and spending. Super income streams are sometimes called pensions or annuities.

One of the most common income streams is an account-based income stream. This is an account made up of money you've accumulated in super, which allows you to draw a regular income once you retire. An account-based income stream includes market-linked pensions that started on or after 1 July 2017.

Your provider or SMSF normally continues to invest the money in your super account and adds returns from investments to your account. Your account balance fluctuates with market performance.

Each year you can withdraw as much as you like through your account-based super income stream (unless you're receiving a transition to retirement income stream).

You must withdraw a minimum amount each year – based on your age and account balance. There may be income tax implications if your provider does not pay you the minimum amount each year.

You can continue to receive your super income stream until there is no money in your account. How long your super income stream lasts depends on how much you take out each year and what investment returns you receive. There is a limit on the amount you can transfer into retirement phase; this is known as the transfer balance cap.

The chief advantage of this type of withdrawal is that earnings on the remainder of your account inside of superannuation are taxed concessionally.

Take-home message

Check with your super provider and adviser to find out what options are available to you, and which are best for your circumstances.

SMSFs and property development

Mon, 23 Oct 2023 05:26:42 GMT

The ATO has issued a new Taxpayer Alert around SMSFs engaging in property developments. Developments can be very lucrative given how much property prices have appreciated in Australia over the past decade or two.

For background, while it is permissible for SMSFs to engage in property development, it is subject to a number of stringent conditions.

The first hurdle is the “sole purpose test”. Section 62 of the SIS Act is unambiguous: superannuation funds, including an SMSF, must be run for the sole purpose of providing retirement income, with limited permissible “ancillary purposes” such as death and permanent disability. When you are undertaking property development you are also undertaking a commercial activity and effectively carrying on a business (if you are doing it all yourself).

If you are outsourcing the project development and merely funding it through the SMSF, then many of the problems disappear, you are not running a business, and if the property developers are unrelated, then you do not have any of the related party payment issues. In this case, it is usually safe to continue.

While carrying on a business need not be a breach of the sole purpose test (though it may be if not done properly) such a venture is likely to come under ATO scrutiny and scrutiny from your SMSF auditor.

The problem with carrying on a business are several. First, it is generally to generate income today, not for retirement. If all of that income is going to the fund, this is not a problem. However, if some of that income is going to a related party then there is a problem!

There is also the issue that the trust deed and investment strategy must specifically permit this type of investment.

Your fund’s investment strategy must also need to be updated to allow for this type of investment. When reviewing the investment strategy, it requires more than just allowing for a property investment. The risk profile will also need to be reviewed. Also, it must be in the interest of all members, and all members must agree to it. This must all be addressed in the investment strategy.

With that in mind, the ATO has just issued Taxpayer Alert TA 2023/2: Diverting profits of a property development project to a self-managed superannuation fund, through use of a special purpose vehicle, involving non-arm's length arrangements.

The Alert states that the ATO is reviewing arrangements under which:

one or more self-managed super funds (SMSFs) have, or acquire, direct or indirect ownership of a special purpose vehicle (SPV) that undertakes a property development project, and
because of the non-arm's length arrangements between the SPV and other entities, the SPV derives a profit that ultimately benefits the SMSFs which is more than what it would have been if all the parties had dealt with each other at arm's length.

The ATO will consider whether such dividends and other income received by the SMSFs are non-arm's length income (NALI) and the application of the regulatory requirements in the Superannuation Industry (Supervision) Act 1993 (SISA) and other relevant law in respect of these arrangements.

Members of or advisers to an SMSF that is looking to participate in a property development are urged to refer to the SMSF Regulator's Bulletin Self-managed superannuation funds and property development on how SMSF trustees can ensure they meet their income tax and regulatory obligations when participating in property development activities.

Trusts – are they still worth it?

Mon, 23 Oct 2023 05:18:53 GMT

The recent ATO crackdown on trusts will no doubt have some business owners (and even some advisors) asking themselves the question: Is this structure for business purposes still worth it?

To recap, trust distributions have been under the ATO microscope in recent years. The latest ATO crackdown was in February 2022 when it updated its guidance around trust distributions especially those made to adult children, corporate beneficiaries and entities that are carrying losses.

Depending on the structure of these arrangements, the ATO may potentially take an unfavourable view on what were previously understood to be legitimate distribution arrangements. The ATO is chiefly targeting arrangements under section 100A of the Tax Act; specifically, where trust distributions are made to a low-rate tax beneficiary, but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s Taxpayer Alert (TA 2022/1) illustrates how section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children.

Despite this new ATO interpretation and the wider crackdown on trusts in recent years, the choice of a trust as a business structure still has a range of benefits including:

Asset protection – limited liability is possible if a corporate trustee is appointed. Usually, when a person owes money and cannot meet the repayment requirements, the creditor can access the person’s personal assets to recoup the debt payable. However, if a trust is in place, there is no access to beneficiary assets.
50% CGT discount – A family trust receives a 50% discount on capital gains tax for profits made from selling any assets the trust has held for more than 12 months. This contrasts with a company structure. Companies cannot access the 50% CGT discount.
Tax planning – Income that sits in the family trust that is not distributed by year-end is taxed at the highest income tax rate. However, any trust income distributed to the beneficiaries is taxed at the income tax rate of the beneficiary who receives the distribution. The way to definitely get around the ATO’s aforementioned section 100A crackdown is to ensure the distributed money actually goes to the nominated beneficiary and is enjoyed by the beneficiary rather than another taxpayer.
Carry-forward losses – A trust does not distribute losses to beneficiaries. This means the beneficiaries will not be called upon to contribute money to the trust to meet any loss. Instead, losses from each year can be carried forward to the following year, subject to certain conditions being met.

If you have questions around your trust structure, or your business structure more generally, touch base with us.

Do you have a side-hustle?

Mon, 16 Oct 2023 06:47:57 GMT

With new and emerging ways to make money, the ATO is reminding taxpayers to consider if they are ‘in business’ and to declare to their tax agent if they are engaged in a sidehustle.

With the cost-of-living skyrocketing, have you taken up a side-hustle?

Record numbers of taxpayers are now working multiple jobs or supplementing their income with ‘side-hustles’ or ‘gig’ economy activities.

ATO Assistant Commissioner Tim Loh said if you earn money through continuous and repeated activities for the purpose of making a profit, then it’s likely you’re running a business.

While there are always new and different ways to make money, the tax obligations remain the same. Don’t fall into the trap of forgetting to include all your income thinking the ATO won’t notice.

You also need to declare any additional income earned through that side-hustle.

Businesses have a range of obligations depending on their structure and turnover, including registering for an Australian business number (ABN), keeping the right records and lodging the right type of tax return. They may also have to register for GST.

The ATO is running an advertising campaign to remind taxpayers about their obligations if their side-hustle is generating income.

Mr. Loh said:

With tax time just around the corner, if you are bolstering your income with new activities, make sure all your records are up-to-scratch. This could be anything from animal breeding to earning income through digital platforms, such as ride share or food delivery, or even online content creation, like social media influencers.

If your home has become more like a warehouse and is stocked to the hilt with goods to sell, then you may in fact be running a business.

If you’re running bootcamp sessions, in addition to your 9–5 job, well this is a side hustle and you need to declare this income to the ATO.

If you’re an online content creator earning money or receiving gifts, you’re also likely to be running a business and there are tax obligations you need to comply with.

Mr. Loh acknowledged ‘sometimes it’s hard to tell if you’re ‘in business’ and we recognise not everything you do to make money is considered a business. The ATO won’t consider activities as ‘in business’ when they are a one-off transaction (unless it is the first step in carrying on a business or intended to be repeated) or an activity from which you don't seek to make a profit.’

The ATO has sophisticated data-matching and analytical tools to identify taxpayers that under-report their income. From 1 July 2023, the Sharing Economy Reporting Regime will commence and the ATO will receive data from more electronic distribution platforms. The ATO will match this information with the information taxpayers provide on their tax return or activity statement to identify income that has not been included. Mr. Loh said:

It doesn’t matter whether you are carrying on a business or simply earning additional income through a digital platform, such as a website or even an app, you must keep accurate records of your income and include it in your tax return.

If you are finding your feet in business, we are here to support you.

Case study: Hayley heads off-track for fun, but on the right track for business

Hayley works in hospitality at night and spends most days fishing or four-wheel driving. She decides to start developing ‘how-to’ YouTube videos when fishing and four-wheel driving. Hayley’s online following is rapidly increasing, and she’s now earning money from her videos.

With the growing online interest, Hayley cuts back her hospitality work and starts to invest more effort into her videos. Hayley sets up a production schedule that sets out the type of content she will produce on a weekly basis, buys equipment to improve her production quality, completes an online video editing course to improve her editing skills and records all expenses from her content creation activity.

Hayley wants to know if her side hustle activities are a business. She looks at all her activities together and determines she is running a business because she:

intends to make a profit to supplement her salary and wage income
set up a regular schedule for these activities

operates in a business-like way (she has a plan and system for making a profit).

Be sure to inform us of any side-hustle you may be carrying on.

Director penalty notices

Mon, 16 Oct 2023 06:45:35 GMT

If your company is falling behind with payment of certain taxes, directors may be held personally liable.

To recap, there are a number of advantages in operating a business through a company structure. Chief among them is asset protection. Because a company is a separate legal entity, it is liable for any debts incurred while trading. Directors, it is widely believed, are protected – they have no personal liability for the debts or actions of the company they run, and therefore their personal assets are not at risk from creditors in the event that their business folds or is sued. While this is largely true, Director Penalty Notices (DPNs) stand as an exception to this general rule, and can see directors held personally liable for certain ATO-related debts owed by their company.

Which liabilities?

Originally, the DPN regime applied only to pay-as-you-go withholding (PAYGW) liabilities. This includes PAYGW amounts withheld (or that should have been withheld) from payments made to:

Employees (from salary, allowances etc.)
Other workers that you have a PAYGW voluntary agreement with such as contractors, and
Businesses that fail to quote their ABN but were required to do so.

In 2012, the DPN regime was extended to Superannuation Guarantee (SG) amounts SG amounts can be payable to not only employees, but also certain contractors.

The DPN regime also now applies to outstanding GST, Luxury Car Tax, and Wine Equalisation Tax (WET) liabilities as part of Activity Statements.

Who?

DPNs can be issued to directors in relation to liabilities/debts that arose prior to their appointment as well as after their appointment. New directors have 30 days (commencing on the day of their appointment) before they become liable for the above types of debts. Given this strict liability in respect of amounts that predate your appointment, prospective directors need to do due diligence of a company before accepting appointment. Does the company have DPN amounts or lodgements outstanding?

The DPN regime also applies former directors. If you are no longer a director, you remain liable for director penalties equal to the unpaid DPN liabilities of the company that were due before the date of your resignation.

The DPN will typically be posted to either a director’s home or business address held by ASIC. Even if it is not actually received (for example, the directors may not have updated their address) liability applies from 21-days after the DPN is posted. It’s important therefore that director addresses with ASIC remain up-to-date.

Defenses

Directors will not be liable for amounts contained in a DPN if they successfully invoke any of the following three defenses:

1. You did not take part (and it would in the circumstances been unreasonable to take part) in the management of the company during the relevant period because of illness or another good reason

2. Corrective action is taken by taking all reasonable steps to ensure one of the following three things happened:

The company paid the outstanding liability
An administrator was appointed to the company, or
The directors began winding up the company (within the meaning of the Corporations Act).

3. In the case of unpaid SG, the company interpreted the law as applying in a way that could be reasonably argued was in accordance with the law.

For example, if a company has not paid an employee SG because it reasonably believed that the worker was a contractor, then a defense may be available.

Take-home message

Company directors are not immune from liability for certain ATO-related debts owing by their business
Ensure SG, PAYGW, GST/LCT/WET payments and lodgements are up-to-date
Before becoming a company director, do due diligence and ensure payments and lodgements are up-to-date
Keep address details up-to-date with ASIC
Explore the option of reimbursement from the company or other directors if you have paid a DPN personally
The ATO is cracking down on outstanding liabilities.

If you have outstanding debts of this type or you receive a DPN, touch base with us.

Work-related car expenses updated

Fri, 06 Oct 2023 00:44:54 GMT

The ATO has just announced that the cents per kilometre rate has increased to 85 cents per kilometre for 2023/24.

To recap, there are two methods to claim work-related car expenses as follows:

1. Cents per kilometre method

This method is easier for record keeping, involves a more simple calculation, and is generally suited to those with less vehicle use.

You simply keep a record of the number of kilometres you’re traveling for work or for business over the duration of the year and you claim these the set rate.

The drawback of this method is that you are limited to a maximum of 5000 work related or business kilometres per year. That gives you a total maximum claim of $4,250. Thus, if you’re using your car a lot for work, you may find that this is method quite limiting.

2. Logbook method

This method can allow for greater claims depending on how much you’re using your car for work or business.

However, there are more recordkeeping requirements – the main one being that you must keep a 12-week logbook that records all of your trips, both business and private for those 12 weeks.

At the end of the 12 weeks, you calculate your work related or business percentage use, and you can claim that percentage of all deductions for your car.

You also need to keep all receipts for fuel, insurance, registration, interest, and servicing throughout the year.

As mentioned, despite the additional effort, it can often lead to a greater claim if you are using your car a lot for work and business.

As you can see, both methods have their downsides and can have their benefits too depending on your situation. Consider which is best for you, taking into account:

If you have the time or the ability to save all of your car-related records
The level of your business-related vehicle use.

Small Business Lodgement Amnesty

Fri, 06 Oct 2023 00:41:20 GMT

Since Budget night, the ATO has released more information around the small business lodgement amnesty…which can now be taken advantage of from 1 June 2023!

The amnesty was announced in the recent Budget. It applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022 and runs from 1 June 2023 to 31 December 2023.

To be eligible for the amnesty, the small business must be an entity with an aggregated turnover of less than $10 million at the time the original lodgement was due.

During this time, eligible small businesses can lodge their eligible overdue forms and the ATO will then proactively remit any associated failure to lodge (FTL) penalties.

ATO Assistant Commissioner Emma Tobias urged small businesses to take advantage of the amnesty to get back on track with their tax obligations if they have fallen behind.

“The past few years have been tough for many small businesses, with the pandemic and natural disasters having a significant impact. We understand that things like lodging ATO forms may have slipped down the list of priorities. But it is important to get back on track with tax obligations. Lodging these forms are not optional, so we hope our amnesty will make it easier for impacted small businesses to get back on track.

When forms are lodged with the ATO under the amnesty, businesses or their tax professionals will not need to separately request a remission of FTL penalties.

All you need to do is lodge your outstanding tax returns or activity statements and we’ll take care of the FTL penalty remission from our end. You might see an FTL penalty on your account for a short period of time, but don’t worry, we will remit it".

Ms Tobias also noted that outstanding lodgements can be an early indicator that a small business is not actively engaged with the tax system, which can be a red flag:

“We encourage all businesses to lodge any overdue forms even if they are outside the eligibility period. Whilst forms outside the amnesty eligibility criteria will attract FTL penalties, the ATO will consider your circumstances and may remit such penalties on a case-by-case basis.

We understand that some small businesses may be worried about paying an amount owing on their overdue lodgment. If you are unable to make full payment of your debt, remember we can work together with you or your registered tax or BAS agent to figure out the right solution for you.

We want to make this process easy and encourage small businesses to do the right thing. If you have a registered tax or BAS agent, now is a good time to reach out to them to make sure you are up to date with your tax affairs.

Taxpayers still have an obligation to lodge overdue forms during the amnesty period and we will continue to work with them to help ensure they meet their obligations,' Ms Tobias said.

The ATO offers a range of support options, including payment plans. Many small businesses are also able to set up their own payment plan online.

Ms Tobias also explained that if a business has ceased trading, they need to advise their registered tax professional, or the ATO directly.

The amnesty applies to income tax returns, business activity statements, and fringe benefits tax returns. It does not apply to superannuation obligations and excludes other administrative penalties such as penalties associated with the Taxable Payments Reporting System.

If you are ready to come forward and get your overdue lodgements up to date, we can help you, and hopefully secure the amnesty for you.

Small Business Energy Incentive now open

Tue, 03 Oct 2023 05:51:28 GMT

The recently announced Small Business Energy Incentive is now open for business!

The Energy Incentive will help up to 3.8 million small‑ and medium‑sized businesses save energy and save on their energy bills.

The incentive is delivered by way of a bonus tax deduction which will provide businesses with annual turnover of less than $50 million an additional 20% deduction on spending that supports electrification and more efficient use of energy.

It will help small businesses make investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Tradies, manufacturers, restaurants, hairdressers, real estate agents and other small businesses may find it particularly attractive. This incentive helps ensure these businesses share in the benefits and opportunities of the energy transition that’s now underway.

It will support investments that deliver ongoing power bill savings for businesses, while at the same time helping Australia lower emissions.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

Feel free to reach out to us for more information.

Employee contractor case law

Tue, 03 Oct 2023 05:50:41 GMT

Another significant Federal Court case may have a bearing on whether you owe certain workers you engage superannuation guarantee or not.

For background, early last year the High Court made a game-changing decision in determining whether a worker is an employee or contractor at common law. It ruled that this is determined by the employment contract / agreement and whether it contains the usual indicators that tend toward a finding that a worker is an employee at common law including:

Does the business have control over the worker (e.g. what hours they work and how they do they do the work)?
Must the worker perform the work personally (rather than having the ability to delegate or subcontract the work to an outside party)?
Is the worker paid like an employee (e.g. hourly rate)?
Does the business supply the tools and equipment for the worker?
Does the business bear the risk and liability to outside parties for any defects in the work?

Where the answer to most of those questions is yes, then the worker is an employee at common law.

Up until the High Court’s decision, lower courts were looking at how individual work arrangements were playing out in practice when answering the above questions. The High Court however ruled that you should instead look at the rights and obligations set out in the respective contract between the parties rather than how the situation plays out after the contract is signed. This is provided that the contract was not a sham.

With this new approach in mind, in early June 2023 a case came before the Full Federal Court where it was asked to determine whether a worker was an employee or contractor. Adopting the High Court’s new approach, the Full Federal Court examined the contract and found that the answers to some of the above questions were yes, while the answers to others were no. However, ultimately it found that because the worker had the ability to delegate/subcontract the work (although a limited ability subject to the approval of the business) the worker was not an employee for superannuation purposes at common law:

… if a person engaged to perform work has a contractual right to have someone else perform that work, that is a matter which at the very least tends against a conclusion that the person is an employee. The existence of the right is inherently inconsistent with an employee relationship. In the absence of significant countervailing considerations, how can you be an employee if, within the scope of the contract, you can lawfully get someone else to perform the entirety of your contractual obligations, whether for a short period, or for a longer period?

Because the worker had the ability to delegate, he was also not entitled to superannuation under the wider definition of ‘’employee “in the superannuation legislation either which provides that 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 ability to delegate meant that this test was not met.

The take home message for employers is that the terms of the written agreement will determine whether a worker is owed superannuation at common law (but that contract cannot be a sham). However, where there is the ability of the worker to delegate, this will generally be decisive – no superannuation will be owed at common law or under the superannuation legislation.

All told, this is a complex area. Reach out to us if you are unsure of whether a superannuation obligation is owed to a worker.

Tax Time: Unexpected first-time debts

Fri, 29 Sep 2023 06:23:36 GMT

For the first time, many Australians are finding themselves in a position where they are being told they owe the ATO money after completing their tax return this year.

A significant number of taxpayers in this position are those that are still paying off their HECS/HELP debts – many of them young Australians. Following are some myths and facts around why this may be the case.

We also tackle the LMITO myth.

When PAYGW is deducted from salaries and wages to take account of HELP liabilities, the withheld amount is not applied against the HELP debt until after the end of the income year, when the tax return is lodged. This means that indexation is applied to the debt without taking into account any PAYGW withheld during the year.

Fact or myth?

This is a myth.

Indexation only affects the loan balance, it doesn’t affect the amount of the year-end tax liability.

Where an employee has salary sacrificed, the lower salary will reduce the PAYGW withheld, but the reportable fringe benefit is included in the repayment income that is used to determine liability to HELP repayments.

This is not likely to be understood or expected by affected taxpayers.

Fact or myth?

This is a fact.

HELP repayment income is the total sum of the following amounts from a person’s income tax return for the income year:

taxable income
total net investment loss
reportable fringe benefits (as reported on their payment summary)
total net investment loss (which includes net rental losses)
reportable super contributions (including salary sacrificed contributions); and

any exempt foreign employment income amounts

Negative gearing amounts are added back and included in HELP repayment income. The rapid rise in interest rates will flow through to negative gearing amounts which increase the repayment income.

This is not likely to be understood by affected taxpayers and will have caught them off-guard.

Fact or myth?

This is a fact.

However, this will only affect those engaged in negative gearing which may not be many young Australians with a HELP debt.

The high indexation applied to HELP debts this year of 7.1% compared to prior years (3.9% in 2022 and 0.6% in 2021) has caught taxpayers off-guard. Prior to 2022, over the last 10 years, the rate had not exceeded 2.6% and was often around 2%.

Fact or myth?

This is a myth.

Again, indexation only affects the loan balance, it doesn’t affect the amount of the year-end tax liability.

The end of LMITO after 2021/22 is only just being realised by taxpayers now, despite two years of talking about this. The message did not get through, or the impact was not fully understood.

Fact or myth?

This is a myth.

For employees, the PAYGW rates were increased to take the LMITO abolition into account, so yes no refund, but there shouldn’t be tax payable as a result of just the LMITO ending.

If you have any questions as to why you received a tax bill this year or would like assistance in entering into a payment plan with the ATO, please contact us.

Employee or contractor? – the Federal Court weighs in

Tue, 26 Sep 2023 06:22:49 GMT

A recent Federal Court case has highlighted important superannuation guarantee (SG) implications for businesses that engage certain types of contractors.

Background facts

The case of Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48 (24 March 2023) concerned two truck drivers who previously drove delivery trucks for a company, ZG Lighting, and its related and predecessor companies for just under 30 years. The drivers provided their services via a partnership with their spouses.

The drivers commenced proceedings against ZG Lighting claiming they were employees for the purposes of section 12(3) the Superannuation Guarantee (Administration) Act (1992).

In the first appeal decision more than two years ago, the Federal Court held that Mr. Jamsek and his colleague Mr. Whitby were employees of ZG Lighting within the ordinary, common law, meaning of that term.

The court, in the first appeal decision, did not consider whether the ‘expanded meaning’ of employee in section 12(3) applied.

The expanded meaning provides that “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” .

On appeal, the High Court held that the workers were not employees within the ordinary, common law meaning of that term and remitted the matter back to the Federal Court to determine whether Mr. Jamsek and Mr. Whitby were ZG Lighting’s employees within the expanded meaning in s 12(3). That is, were the two workers engaged under contracts that were wholly or principally for their labour? If yes, then an SG obligation arose. That was the question that the Federal Court turned its mind to in March 2023.

Federal Court decision

The Federal Court ruled that section 12(3) was not satisfied and therefore the workers were not entitled to SG for a number of reasons, including:

The expanded meaning of employee only applies where the worker is an identified natural person who is a party to the contracts for services in their individual capacity (here, the partnership was the party to the contract).
The expanded meaning of employee is not satisfied where a contract is characterised as being for the provision of a result (as opposed to being wholly or principally for the labour of the worker).
A contract that allows the worker to do the work themselves or to engage other persons to carry it out is not wholly or principally for the labour of the worker.
The expanded meaning of employee only applies in relation to contracts for the personal performance of work by the worker who is a party to the contract.

Takeaways for businesses who engage contractors

This case is a timely reminder for businesses dealing with contractors to consider the following key takeaways from this case:

The principle that the worker, as a natural person, must be a party to the contract in their individual capacity. That is, the worker must be engaged personally.
SG will not be payable where the contract is for the provision of labour, nor will SG be payable where the individual can delegate the work.
Although many arrangements are clear-cut on the question of an entitlement to SG, arrangements where workers or entities are engaged under a contract may need to be reviewed in light of this decision, which carries the force of the Federal Court, no less.
Given that SG entitlements and accompanying penalties can date back years, perhaps a private ruling from the ATO should be considered in line-ball cases.

Top cyber security tips for business

Wed, 09 Aug 2023 04:27:33 GMT

It is important you keep all your business, staff and client information secure. If your data is lost or compromised, it can be very difficult, time consuming, and costly to recover.

The federal government have created a list of top security tips to help keep your and your clients’ information safe.

Use strong and secure passwords

Regularly change passwords and do not share them.

Use multi-factor authentication where possible. This requires users to provide multiple pieces of information to authenticate themselves – for example, a text message to your phone when logging in to a website.

As a business owner, remember:

multi-factor authentication puts an additional layer of security on your accounts, making it harder for others to access your account
consider using a password that includes numbers and symbols which is easy for you to remember but difficult for someone to guess (for example, P!ne@pp1eP!zz@).

Remove system access from people who no longer need it

Immediately remove access for people who:

no longer work for your business
have changed positions and no longer require access.

Unauthorised access to systems by past employees is a common cause of identity security or fraud issues for businesses.

Make sure all devices have the latest available security updates

Run weekly anti-virus and malware scans and have up-to-date security software.

Instances of malicious software (malware) are increasing. It can be easy to accidentally click on an email or website link which can infect your device.

In some instances, your device may be impacted by ransomware which can:

lock your computer until you pay a fee to the hacker
install software which provides access to your bank accounts, allowing criminals to steal your business’s money.

Do not use USBs or external hard drives from an unfamiliar source

USBs and external hard drives may contain malware, which can infect your business computers without you noticing.

It can cost your business a lot of money to repair the damage.

Stolen information could be used to commit crimes, often in your business's name.

Be vigilant about what you share on social media

Keep your personal information private and be aware of who you are interacting with.

Before sharing, ask yourself if it is information you want strangers to have access to.

Scammers can take information you publicly display and impersonate you or your business. Impersonators may send emails to trick your staff into providing valuable information or releasing funds.

Monitor your accounts for unusual activity or transactions

Check your accounts (including bank accounts and digital portals) for transactions or interactions you did not make, or content you did not post.

If an organisation you deal with sends you an email alerting you to unexpected changes on your account:

don't click on included hyperlinks
don't log on to the organisation's website by using links or attachments included in the email.

You should immediately:

check those accounts
contact the organisation by phone.

Ensure your mail is secure

Consider using a secure PO Box.

Mail theft is a leading cause of information security breaches.

Fending off GST audits

Thu, 27 Apr 2023 02:02:37 GMT

The Government has welcomed the actions of an ATO-led taskforce in relation to what is termed "the biggest GST fraud in Australia's history".

The ATO states that the fraud was first detected in early 2022 and involved offenders inventing fake businesses and ABN applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund. In response, the ATO's Serious Financial Crimes Taskforce set up "Operation Protego" in partnership with the Australian Federal Police. Warrants were executed in three States against 10 individuals suspected of promoting the fraud (which included the use of social media).

Some of the numbers involved are simply staggering in terms of the perpetrators' audacity:

The ATO has taken compliance action on more than 53,000 "clients".
It has stopped approximately $2.5 billion in fraudulent GST refunds from being paid (as at 31 December 2022).
Two individuals have been sentenced to jail following their arrest in 2022.
There have been some 87 arrests across the country, "with many more to come".
The ATO has commenced writing to more than 20,000 individuals involved in the fraud.

The purpose of our informing clients of this operation goes to GST audits conducted by the ATO and what they will be looking for should you or your business be selected. As a starting point, generally, the ATO will apply at least some level of scrutiny to Activity Statements where there is a refund of $5,000 or more or where the refund is uncharacteristically large for the taxpayer involved.

The key to staving off a GST audit is the obtaining and retaining of tax invoices. As your tax agent, there is no requirement for us to view each and every tax invoice you hold before we make a claim for GST credits on your behalf on your Activity Statement. However, no claim can be made without you being in possession of a tax invoice.

If you have any questions around tax invoices, or if you are having problems obtaining them, reach out to us.

Reimbursement versus Allowances

Mon, 17 Apr 2023 05:30:09 GMT

Many employers assist workers with work-related expenses by reimbursing them or paying them an allowance. Failure to do so, can sometimes result in resentment from the employee who is otherwise forced to incur the cost themselves. While they may be able to claim a deduction, this would still leave them out of pocket as a deduction merely reduces your taxable income.

According to the ATO, the treatment of allowances is one of the most misunderstood areas of payroll. Whether it be misclassifying an amount as an allowance (when it’s actually a reimbursement) or applying the incorrect PAYG withholding, superannuation or payroll tax treatment, mistakes in this area are easy to make.

The distinction

It’s important to define an allowance, and in particular distinguish it from a reimbursement as the PAYG withholding, superannuation and payroll tax treatment can differ significantly. On the one hand, allowances:

are generally assessable income to the employee
may be included on an employee’s payment summary
may attract superannuation, and
the employee may be able to claim a deduction against the allowance for a work-related expense incurred.

On the other hand, reimbursements:

are generally not taxable to the employee
will be fringe benefit taxable to the employer where they constitute an expense payment fringe benefit or a Living away from home allowance (LAFHA)
may be liable for payroll tax where they constitute a fringe benefit
will not attract superannuation, and
the employee will not be able to claim a tax deduction for the original expense incurred.

According to Taxation Ruling TR 92/15, an “allowance” is “a definite sum of money allotted or granted to meet expenses or requirements”. An allowance usually consists of the payment of a definite or predetermined amount to cover an estimated expense, and is paid regardless of whether the recipient incurs the anticipated expense. An amount is not an allowance if it’s just folded in to normal salary and wages. Rather an allowance must be a separately identifiable payment made to an employee for:

working conditions – e.g. a danger allowance, on-call allowance
qualifications or special duties – e.g. first aid officer allowance
expenses that cannot be claimed as a tax deduction by the employee – e.g. travel between home and work, or
work related expenses that may be able to be claimed as a tax deduction by the employee – e.g. travel between work sites or a uniform allowance for a compulsory uniform.

On the other hand, a payment is a reimbursement when the employee is compensated exactly (i.e. precisely, not approximately), for an expense they have already incurred. In the case of a reimbursement, the employer considers the expense to be their own, with the employee effectively incurring the expenditure on behalf of the employer. With a reimbursement, the employee will almost always be required to produce evidence to the employer of the exact amount and nature of the expense (e.g. receipt), before the amount is reimbursed to them.

Be aware that reimbursements may constitute an expense payment fringe benefit. The main exception is where the expense would otherwise be deductible to the employee had they paid the expense themselves. In that case, it would generally be FBT exempt.

If you have any questions around allowance or reimbursement-style payments to workers, don’t hesitate to contact us for advice.

Reducing the risk of crypto scams

Fri, 14 Apr 2023 03:37:02 GMT

ASIC has released fresh and timely information around crypto scams.

Scammers use cryptocurrencies, like bitcoin or ether, because they are not easily recovered. Crypto can be sent overseas quickly with limited oversight. If you lose your money to a crypto scam, your money is likely gone. If you buy crypto, only invest what you can afford to lose as it’s a somewhat volatile investment.

How to spot a crypto scam

If you're investing in crypto, watch out for these potential red flags:

1. Unexpected contact

Someone you don’t know contacts you with investment advice or offers:

through phone, email, social media or text message
claiming to be an investment manager or broker
through an online forum discussing crypto.

2. Recommendations from someone familia r

You may hear about it through:

an advertisement or fake celebrity endorsement on social media
an online influencer promoting a token and claiming to have made huge, quick profits
family and friends who have unknowingly been scammed themselves
an online romantic partner who asks for money paid in crypto or suggests an investment opportunity.

3. Pressure to take action

You are being pushed to:

transfer crypto off your current exchange and invest through their site
use crypto to pay an individual or for a financial service
download an investment app not listed on Google Play Store or Apple Store
deposit money to invest into different bank accounts
pay tax or invest more in order to access your funds.

4. Something just doesn’t feel right

You’re not sure about:

the crypto investment offers 'guaranteed' high returns or 'free' money
crypto service providers that withhold investment earnings for 'tax purposes'
strange tokens appear in your digital wallet that you did not trade yourself
there is little paper trail for crypto investments you make
the document describing the crypto investment (sometimes called a ‘whitepaper’) is poorly written or non-existent
online searches indicate that an entity may be a scam or has bad reviews
a work from home job offer that requires you to purchase cryptocurrency.

How crypto scams work

There are three main types of crypto scams:

1. Investing in a fake crypto exchange, website or app

Scammers create fake crypto trading apps to steal your money. The giveaway is usually that they ask you to download the app from their website. They may appear on legitimate platforms like Google Play and Apple, but are usually promptly removed. If you find one on an app store, check for overly positive reviews and be cautious.

2. Fake crypto tokens, investments or jobs trading crypto

Scam tokens in crypto wallets – A mystery token appears in your crypto wallet, seemingly worth thousands. If you sell it, a 'smart contract' is activated. This transfers your legitimate crypto tokens and private keys to the scammer.
Crypto ponzi scheme – You are promised large ‘returns’ by investing in crypto. But the promoter uses money from other investors to pay your ‘earnings’. For more on how these scams work.
Jobs 'trading crypto' – You apply for a job ad for 'crypto traders', for a fake or impersonated financial services firm. You are told to set up multiple bank and crypto accounts, and are paid well for a few hours of work a week. You think you're trading crypto for the entity’s ‘investors’ or ‘clients’, but you're actually money laundering for the scammers. You could be charged by state or federal police.

3. Using crypto to pay scammers

Requests for payment in crypto – An online romantic partner, job recruiters, work from home job, or fake financial services firm asks for payment in crypto only.
Giveaway scams – Fraudulent posts on social media offer to match or multiply crypto invested with them in a crypto giveaway scam. Often, this uses fake celebrity endorsement.
Blackmail/extortion – You're told by a scammer they have your internet browsing history, compromising photos or videos. They demand payment in crypto.

Take-home message

If you’re uncertain whether you’re being scammed by an unsolicited contact, keep your powder dry and abstain from acting. Contact your advisors before acting.

FBT exemption for electric vehicles

Tue, 11 Apr 2023 03:20:59 GMT

With car fringe benefits one of the most common benefits provided by employers to employees, a

new ATO fact sheet shines more light on the FBT exemption for electric vehicles.

To recap, in the October 2022 Federal Budget, the government announced that it would exempt from FBT the private use, or availability for use, of cars to current employees that are zero or low emissions vehicles with a value at first retail sale below the luxury car tax threshold for fuel efficient

vehicles. This is aimed at making electric cars more affordable, to encourage a greater take-up of electric cars by Australian road users to reduce Australia’s carbon emissions from the transport sector.

The new law applies to fringe benefits provided on or after 1 July 2022 for cars that are eligible zero or low emissions vehicles that are first held and used on or after 1 July 2022 (see examples 1 and 2 in the fact sheet ).

To be clear, the new rules apply to cars that are collectively referred to as zero or low emissions vehicles, namely:

battery electric vehicles
hydrogen fuel cell electric vehicles, and
plug-in hybrid electric vehicles.

For such vehicles, an FBT exemption should normally apply where both: the value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for the 2022/23 financial year), and the car is both first held and used on or after 1 July 2022. From 1 April 2025, private use of a plug-in hybrid EV is no longer eligible for the exemption unless: (i) use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and (ii) the employer has a financially-binding commitment to continue providing private use of that vehicle on and after 1 April 2025.

Other key points in the facts sheet are:

An FBT exemption may apply to a car benefit arising if either:

you allow your current employees, or their associates, to use a zero or low emissions vehicle (electric vehicle) for their private use, or
the electric vehicle is considered available for your current employees’, or their associates’, private use under FBT law.
If an employer or lessor provides an employee with the use of a car by means of a lease arrangement, the benefit provided is only a car benefit if the car lease arrangement is a bona fide car leasing arrangement.
Associated benefits arising from the provision of certain car expenses provided with the electric vehicle are also exempt from FBT. These are not included when working out if an employee has a reportable fringe benefits amount. These benefits may be provided as an expense payment, property or residual benefit, and include: registration and road user charges, insurance, repairs and maintenance and fuel (including electricity to charge and run electric vehicles).
Providing your employee with a home charging station is a fringe benefit – the benefit is not an exempt associated benefit.
If the use of the car and the associated car expenses are provided under a salary sacrifice arrangement, the exemption can still apply.
Even if an exemption applies for the electric vehicle car benefit, you still need to work out the taxable value of the car benefit provided. This is because the car benefit’s value is used in working out if the employee has a reportable fringe benefits amount. This does not include the value of any associated car expense benefits.
An employee’s reportable fringe benefits amount is reported on their income statement or payment summary. Employees do not pay income tax on this amount, but it does impact their income tests and thresholds for family assistance, child support assessments and some other government benefits and obligations.
The government will complete a review of this exemption by mid-2027 to consider electric vehicle take-up.

Touch base with us, for more information about this new FBT exemption.

Super teething issues

Fri, 31 Mar 2023 03:51:06 GMT

Last year 9,700 individuals applied for compassionate release of super for dental treatment expenses, and 82% were approved. Out of those approved, 9% were for a dependent child’s dental treatment, which could include braces. What is the pathway for access?

While normally superannuation must be preserved for retirement, there are limited exceptions. One of these is compassionate grounds. An individual must apply to the ATO for a determination that an amount of the person’s preserved benefits or restricted non-preserved benefits in their fund be released on compassionate grounds due to the individual lacking the financial capacity:

(a) to pay for medical treatment (defined as life-threatening illnesses or to alleviate acute or chronic pain or mental disturbance or medical transport for the person or a dependant)

(b) to enable payments to prevent foreclosure by a mortgagee or the exercise of an express or statutory power of sale over the family home

(c) to pay for home and vehicle modifications to accommodate the special needs of a severely disabled person or dependant

(d) to pay for expenses associated with the person’s palliative care, death, funeral or burial, or

(e) to meet expenses in other cases where the release is consistent with items (a) to (d).

Where one of these conditions is met, the benefit must be released as a single lump sum not exceeding the amount that is determined by the ATO to be reasonably required, based on the nature of the hardship and the person’s financial capacity. The ATO must provide a copy of its written determination to both the individual applicant and the trustee of their superannuation fund.

Turning back to dental treatment, point (a) is the relevant release condition. The applicant will need to demonstrate that they are suffering acute or chronic pain such that they require dental treatment to alleviate that pain, and that they are lacking the financial capacity to pay for that treatment. From an evidentiary perspective, an applicant would almost certainly need to furnish the ATO with correspondence from a dentist that speaks to the above, and also evidence of their financial position.

The ‘acute or chronic pain’ requirement means that cosmetic procedures such as teeth whitening, dental veneers, dental bonding, dental implants, dental bridges, dental crowns/tooth caps, orthodontics, and white tooth fillings are all unlikely to qualify.

There is no lifetime limit on the number of applications that you can make. For example, if you had three children who all required braces, then potentially you could tap into your super for each child’s procedure. Before making an application, individuals should consider:

alternative funding sources, such as loans
the impact on your retirement savings, noting the compounding nature of superannuation investments. Each time you dip into your super, you’re killing off the power of compound interest. Instead of braces costing $7000 or more, compounding interest means that it may be several multiples of this by the time you retire.

Crystalising capital losses

Tue, 28 Mar 2023 03:27:26 GMT

It’s been a particularly difficult 12 months for investors.

On the superannuation front, we now have two major reports assessing how super accounts fared in the 2022 calendar year. SuperRatings issued its average balanced return recently and found it was minus 4.8%. Late last year, ChantWest undertook a similar exercise – reporting a figure of minus 4.6%. There have been four negative years since 2000. In 2002, there was an identical return of minus 4.8%, and in the horror 2008 GFC year, the average super fund fell 20%.

Regarding property, CoreLogic’s capital city index declined 8.8% from its May 2022 peak to December, down 7.1% in calendar year terms, being the worst calendar year result in 42 years.

It’s important however to be mindful that these losses are merely paper losses. That is, these losses are only realised, and locked in, if:

in the case of property or shares, you sell the asset, or
in the case of superannuation, by selling assets or withdrawing super when investment balances are down.

If you retain the asset, you may be able to ride things out and hopefully the market bounces back. For example, the average return for the average balanced fund since 2000 is 6.1% (a period that takes into account the aforementioned 20% downturn during the GFC) – that’s $30,500 a year for

every $500,000 you can get into super. Things should improve!

If you determine that an asset has little potential for future growth and decide to sell and happen to make a capital loss…there is a silver lining from a tax standpoint! You can deduct capital losses from your capital gains to reduce CGT liability. Capital losses must be used at the first opportunity. If you have any capital losses in the current year, or unused capital losses from previous years, you must use these losses to reduce any capital gains in the current year, and use the earliest losses first.

Of course, tax is not the only consideration when weighing up whether to retain or dispose of a CGT asset. Talk to your advisors before selling.

New work from home record keeping requirements

Thu, 23 Mar 2023 23:27:05 GMT

Are you one of the five million Australians who claim work from home deductions? If so, stricter record-keeping rules may now apply.

For this financial year and moving forward, there are now only two methods to calculate your work from home claim:

Revised fixed rate method (with new rules applying)
Actual costs method (unchanged).

The actual costs method has never been all that popular because you need to keep records of every expense incurred and depreciating asset purchased, as well as evidence to show the work-related use of the expenses and depreciating assets. By way of example, to claim electricity expenses, the ATO suggests that you need to find out the cost per unit of power used, the average amount of units used per hour (power consumption per kilowatt hour for each appliance) and the number of hours the appliance was used for work-related purposes.

For this reason, the fixed rate method has been preferred (or in recent years the COVID shortcut method where you could simply claim 80 cents for each hour worked from home. Note, however, that the COVID-method is no longer available).

The fixed rate method has now been revised. The revised fixed-rate method increases your claim from 52 cents to 67 cents per-hour. However, this rate now includes internet, phone, stationery and computer consumables. Therefore, you can’t claim these expenses separately in addition to your home office fixed-rate deduction. Cleaning expenses and depreciation on office furniture are no longer included in the fixed rate. Therefore, you can now claim these expenses separately.

The record-keeping requirements under the revised fix rate method are now more onerous, also. You now need to keep a record of actual hours worked from home. The ATO will accept a record in any form, but it suggests either: timesheets, rosters, logs of time spent accessing systems, time-tracking apps, or a diary. The ATO will no longer accept estimates, or a four-week representative diary.

This new, strict record-keeping requirement applies from 1 March 2023. For the period before it (1 July 2022 to 28 February 2023) the ATO will accept a four-week representative diary.

Further, under the revised fixed rate method, you will now also need to provide at least one document for each type of expense to demonstrate that you actually incurred that expense. For example, if you receive electricity bills quarterly, you will need to keep one of those quarterly bills as a record to represent that year’s electricity expenses.

If you have any questions around these stricter rules, and how they may impact you, reach out to us.

Accommodation Sharing and Tax

Fri, 17 Mar 2023 00:20:12 GMT

The ATO has reminded taxpayers around their sharing economy tax obligations when providing accommodation.

The sharing economy provides a great opportunity for individuals with spare rooms or spare entire properties to rent out space and earn rental income using facilitators such as Airbnb. Indeed, approximately 2.1 million individuals reported rental income of $42 billion in the past financial year.

This comes as the ATO announces 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 indeed just privately – there are many tax issues to be aware of:

Rental Income

This will need to be declared in your tax return, irrespective of whether you rent out a room or an entire property, and irrespective of whether this is your main source of income.

Rental Expenses

Expenses associated with renting out your property can be claimed as a tax deduction. However, there can be a number of complexities. Expenses directly associated with the rented area are deductible in full, while expenses that relate to shared areas (i.e. areas that you as the host may share with renters), must be apportioned. Expenses that relate to the host’s private area only are not deductible.

Expenses include claims for depreciation and also capital works deductions (i.e. depreciation on the building structure). Expert advice should be sought as this is a complex area, with significant deductions potentially in play.

Capital Gains Tax

Broadly, the sale of your main residence is free from Capital Gains Tax (CGT) when you sell it, where it was the main residence for the entire time you owned it, and it was not used to produce income. However, if you are renting out a portion of your home, you will only be eligible for a partial main residence exemption. If you are renting out the entire home, then none of the property will enjoy the main residence exemption for that period. Exceptions however apply, including the ability to rent out your home for six-years, and yet still enjoy the full CGT main residence exemption. This exemption however is subject to a number of conditions, and advice should be sought on your specific circumstances.

It is important to note that properties purchased prior to 20 September 1985 are totally exempt from CGT, irrespective of whether they are rented out.

Goods and Services Tax

Income from renting out part or all of a residential property is typically “input-taxed”. This means that you should not charge GST on the rent that you earn from guests. Conversely, you cannot claim GST credits credits for any rental expenses that you incur, but you are entitled to claim the GST-inclusive amount of any rental expenses as a tax deduction. All told, there is no requirement to register for GST on account of your rental property alone.

Take-Home Message

The number of people renting out their house or part of their house has exploded in recent times, due in large part to facilitators such as Airbnb. While this is a great avenue for earning essentially passive income, there are a number of tax issues that landlords need to be across.

If you would like to discuss any aspect of tax around accommodation-sharing or rental properties more generally, contact us.

The importance of cashflow forecasts

Fri, 10 Mar 2023 06:04:00 GMT

As we move through the year, with many economists predicting a slowing of the economy, planning your business’s cashflow is more important than ever.

Studies suggest that the failure to plan cash flow is one of the leading causes of small business failure. To this end, a cash flow forecast is a crucial cash management tool for operating your business effectively.

Specifically, a cash flow forecast tracks the sources and amounts of cash coming into and out of your business over a given period. It enables you to foresee peaks and troughs of cash amounts held by your business, and therefore whether you have sufficient cash on hand to fund your debts at a particular time.

Moreover, it alerts you to when you may need to take action – by discounting stock or getting an overdraft, for example – to ensure your business has sufficient cash to meets its needs. On the other hand, it also allows you to see when you have large cash surpluses, which may indicate that you have borrowed too much, or you have money that ought to be invested.

In practical terms, a cash flow forecast can also:

make your business less vulnerable to external events in the economy, such as interest rate rises
reduce your reliance on external funding
improve your credit rating
assist in the planning and re-allocation of resources, and
help you to recognise the factors that have a major impact on your profitability.

At this point, a distinction should be drawn between budgets and cash flow forecasts. While budgets are designed to predict how viable a business will be over a given period, unlike cash flow forecasts, they include non-cash items, such as depreciation and outstanding creditors. By contrast, cash flow forecast focus on the cash position of a business at a given period. Non-cash items do not feature. In short, while budgets will give you the profit position, cash flow forecasts will give you the cash position.

Cash flow forecasting can be used by, and be of great assistance to, the following entities:

business owners
start-up business
financiers
creditors.

A cash flow forecast is usually prepared for either the coming quarter or the coming year. Whether you choose to divide the forecast up into weekly or monthly segments will generally depend on when most of your fixed costs arise (such as salaries, for example). When you are making forecasts, it is important to use realistic estimates. This will usually involve looking at last year’s results and combining them with economic growth, and other factors unique to your line of business. When forecasting overheads, usually a forecast will list:

receipts
payments
excess receipts over payments (with negative figures displayed in brackets)
opening balance
closing bank balance.

Reach out to us if you would like to know more.

Reduction in downsizer eligibility age

Fri, 03 Mar 2023 05:16:32 GMT

The eligibility age for downsizer contributions reduced from 60 to 55 years from 1 January 2023. This means if you are age 55 or older, you could invest the proceeds of the sale of your family home to your superannuation outside of your standard contribution caps.

Downsizer contributions

From 1 January 2023, if you’re aged 55 years or older you may be eligible to make a downsizer contribution of up to $300,000 (or $600,000 for a couple) to your superannuation fund from the proceeds of the sale of your home where specific requirements are met.

Downsizer contributions can be a great way of boosting your superannuation after retirement. As well as the extra capital they introduce, the contributions can also earn investment income that is either tax-free if you commence an income stream with the funds or be taxed at a concessional tax rate of as low as15% whilst in accumulation phase.

Eligibility requirements

To be eligible to make a downsizer contribution, you must answer yes to all of the following conditions:

You must be aged 55 or over from 1 January 2023 (or age 60 or over for any downsizer contributions made between 1 July 2022 and 31 December 2022. Note, prior to 1 July 2022, the eligibility age was 65 years and over).
The amount of the contribution is an amount equal to all or part of the sale proceeds (capped at $300,000 per person) of a qualifying main residence, where the contract of sale of the main residence was exchanged on or after 1 July 2018.
The home was owned by you or your spouse for 10 years or more prior to the sale. Further, your home must be in Australia and must not be a caravan, houseboat or other mobile home.
The proceeds of selling your home are either fully exempt or partially exempt from capital gains tax under the main residence exemption or, if the home was acquired before 20 September 1985, would have been exempt.
You make the downsizer contribution within 90 days of receiving the proceeds of sale (i.e., usually settlement date).
You complete and provide the ‘Downsizer contribution into super form’ (NAT 75073) which is available on the ATO website and provide it to your superannuation fund either before or at the time of making the downsizer contribution.
You have previously not made a downsizer contribution from the sale of another home.

Provided that the above conditions are met:

There is no obligation to purchase a new home or to move to a smaller or cheaper home…you can even move into another home you own! You simply need to sell your home and meet the above criteria to make a downsizer contribution.
There is no maximum age limit to make a downsizer contribution.
The downsizer contribution does not count towards your non-concessional or concessional contributions caps. The contribution is in addition to these caps.
There is no requirement to meet a work test or work test exemption to make a downsizer contribution, and
Downsizer contributions can be made regardless of the size of your total superannuation balance (TSB). This means a downsizer contribution can still be made even if you have more than $1.7 million in superannuation.

Downsizer contributions count towards your super balance

While downsizer contributions can be made regardless of what your TSB is, once the downsizer contribution is made to superannuation it forms part of your TSB.

At this point, the downsizer contribution will increase your TSB which may impact your eligibility to:

Make carry forward concessional contributions
Make non-concessional contributions
Receive government co-contributions, and
Receive a tax offset for spouse contributions.

Similarly, a downsizer contribution will also count towards your transfer balance cap (TBC), which applies when you move your superannuation into retirement phase to commence an income stream.

So if you intend to use your sale proceeds to commence a superannuation income stream in retirement, it’s important to note that you have a personal TBC of up to $1.7 million on the total amount that can be transferred from a superannuation account into a tax-free superannuation income stream. You can find out your personal TBC by contacting the ATO or logging myGov.

Preservation considerations

Although the age to make a downsizer contribution has reduced to age 55, you should be aware that the contribution will be preserved until you satisfy a condition of release, such as retirement after reaching your preservation age (currently age 59) or ceasing a gainful employment arrangement after reaching age 60.

However, if you have retired or met another condition of release that frees up your superannuation, the downsizer contribution could still be accessed to provide an income stream but it will have to be by way of a transition to retirement income stream, which is slightly more restrictive than a regular income stream, such as an account-based pension.

Need advice?

Although making a downsizer contribution may seem to be a straightforward strategy, there are a number of eligibility requirements and nuances that you must be aware of when utilising these rules. If you’re thinking about downsizing and contributing to superannuation but want more information, we can help explain the rules in further detail and discuss how you may benefit from this scheme, based on your particular circumstances.

ATO New-Year Resolutions

Thu, 02 Mar 2023 05:39:32 GMT

The ATO has released its new year resolutions…and there is not a gym in sight! According to the ATO the five new year’s resolutions to keep if you want to stay on top of your tax and super in 2023 are:

1. Know if you’re in business or not

Are you earning an increasing income from a side-hustle?

If you answer yes to a few of the following questions, the more likely it is your activities are a business:

Do you intend to be in business?
Do you intend and have a prospect of making a profit from your activities?
Is the size or scale of your activity sufficient to make a profit?
Are your activities repeated and continuous?
Are your activities planned, organized, and carried out in a business-like manner? For example, do you:
keep business records and have a separate business bank account?
advertise and sell your goods and services to the public, rather than just to family or friends?
operate from business premises?
maintain required licences or qualifications?
have a formal business plan or budget?
have a business name or an ABN?

We can help you make this call as to whether your side-hustle may be a business.

2. Keep business details and registrations up to date

It’s important to keep your ABN details up to date as emergency services and government agencies use this information to support businesses during disasters. Also, if you’re going to earn over $75,000 this financial year, you’ll need to register for GST . Even if your turnover is below this threshold, it may be advantageous to register.

3. Keep good records

Good record keeping helps you manage your business and its cash flow. It also is your defense should the ATO make an enquiry about your affairs, or select your business for an audit. Feel free to approach us if you need assistance with your record keeping practices.

4. Work out if the PSI rules apply to you

The Personal Services Income (PSI) rules are a suite of ATO provisions designed to prevent persons who derive income from their personal services from “splitting” or “alienating” that income with other persons, and therefore minimising the overall tax payable.

If you cannot pass one of the tests within the PSI Rules and do not have a personal services business determination (PSBD) from the Commissioner, then regardless of the trading structure you choose, your PSI income derived will be classified as PSI, which means:

you will be unable to claim certain deductions against your PSI (basically, your deductions will be limited to those of a normal employee)
your PSI, less allowable deductions, will be attributed to you, and therefore included in your individual tax return, and taxed at your individual marginal tax rate as though you were an employee.

We can assist you in determining whether these rules apply to you and answer any questions you may have.

5. Look after yourself

The last few years have thrown some curve balls at small business, so it's good to be prepared. If you're struggling, the NewAccess program can help. It’s free, confidential, and designed for small businesses doing it tough.

Chat with us if you want to know more about these hot-button, new year issues.

Super Guarantee - Rate Increase from 1 July 2022

Fri, 03 Jun 2022 01:29:43 GMT

Super Guarantee is increasing from 10% to 10.5% from 1 July 2022

From 1 July 2022 the Superannuation Guarantee (SG) rate for employers will increase from 10% to 10.5%. Employers should ensure to update their payroll software and accounting system prior to their first pay event in July 2022 so that employees are paid super at the correct rate.

As well as the Super Guarantee rate changing the Australian Government has also announced that from 1 July 2022 the $450 threshold for employees will be removed, this means:

All eligible workers aged 18 years or older are now entitled to receive Super Guarantee Contributions regardless of how much they earn or how many hours they work.
Workers aged under 18 will generally receive Super Guarantee Contributions if they work more than 30 hours per week. Please contact us for further advice if you have any employees who are under 18.

Employers should also check that their employees will satisfy super guarantee eligibility requirements prior to their first payroll in July 2022 and ensure any employees who will be receiving their first Super Guarantee Contribution have nominated a Super Fund to receive the contributions. Details can be requested via an employees Stapled Super Fund or by filling out a Standard Choice Form.

If you would like further information, please contact us.

Director IDs

Mon, 15 Nov 2021 06:17:21 GMT

Director IDs

From 1 November 2021

The Australian Government has introduced a new identification process for Company Directors. As of 1 November 2021, Directors are required by law to verify their identity with the Australian Business Registry Service (ABRS) and obtain a Director ID. This is a unique 15 digit identifier that will remain with a Director for life, similar to a Tax File Number.

When do Directors need to obtain their ID?

The Australian Business Registry Services has outlined key dates in which a Director must apply for their ID number. Penalties will apply if a director does not meet their obligations.

How do I apply for my Director ID?

A Director must verify their own identity when applying - we can assist you if required but we are unable to lodge the application.

There are three ways in which a Director can obtain their ID.

1.Online

Step 1 - Set up a MyGovID account (note this is separate from a MyGov account)
Step 2 - Apply for a Director ID via ABRS

2. Apply with a paper form including certified documents

3. By phone

What documents do I need to apply for my Director ID?

The method in which you apply for your Director ID will dictate the level of documentation required. The documents required can be found here . We recommend you have these on hand prior to starting the process:

your Tax File Number (TFN)
your residential address as held by the ATO

and information from two documents to verify your identity which may include:

bank account details
an ATO notice of assessment
super account details
a dividend statement
a Centrelink payment summary
PAYG payment summary.

Via MyGovID

The quickest way to obtain your ID number is through MyGovID. You will need to have some information the ATO knows about you when you set up your MyGovID, to make the process quicker it is best to have these on hand.

Via paper

Applications can be processed via paper and will take 28 days to process. Certified documents meeting the 100 point ID check will be required. If you would prefer to apply via paper please contact us and we can assist you.

Via Phone

You can call the ABRS on 13 62 50

If you would like further information, please contact us.

Changes to Super Choice Rules 1 November 2021

Thu, 21 Oct 2021 23:46:02 GMT

Changes to Super Choice Rules

From 1 November 2021 the Australian Taxation Office will introduce stapled super funds in an aim to reduce unnecessary account fees by stopping new super accounts being acquired each time an employee starts a new job. These stapled super funds will be linked to an individual employee and follow them throughout their working life.

What does this mean for employers?

Until 31 October 2021, when an employer onboards a new employee, the employer is required to offer new employees a choice of super fund with a superannuation choice form. If your employee nominates a chosen super fund, the employer pays super guarantee contributions to that fund. If the employee doesn't choose a super fund then their super guarantee contributions will go to a default fund which is chosen by the employer.

From 1 November 2021, when an employer onboards a new employee, the employer is still required to offer eligible new employees a choice of super fund by requesting they complete a superannuation choice form. If the new employee chooses not to complete the superannuation choice form, then the employer may need to request their stapled super fund details from the ATO.

How can I get an employee’s stapled super details?

You’ll be able to request these details once you have submitted a TFN Declaration or have filed a Single Touch Payroll (STP) pay event which links that new employee to your business.

To request details of your employees stapled super fund you or your authorized representative should log into the ATO Online Services. You will need to have on hand your employees TFN, full name, date of birth and/or an address. Once a request has been submitted for a stapled super fund you will receive details of the fund within minutes.

If you do not have access to ATO Online Services you will need to contact your authorized representative for the details.

Are existing employees affected?

No, you can continue to pay your Super Guarantee obligations to the current employees chosen super fund. The process of requesting a stapled super fund will only affect new employees who have not provided their chosen fund. If an employee has multiple super accounts the Tax Office will determine which account is the stapled account. Generally, this will be determined by the last account that has received contributions.

Further information

For more information on stapled super funds please find below some helpful links:

If you need assistance with any of the above, please contact our office.

Important Changes - Eligibility of Employees for JobKeeper Payments

Tue, 18 Aug 2020 23:00:00 GMT

IMPORTANT CHANGES

Eligibility of Employees for JobKeeper Payments - as at 19 August 2020

Below are some important changes to the criteria for employees that were not previously eligible for JobKeeper Payments but may now be eligible.

1. Employees Who Were Employed Between 1 March to 1 July 2020

Previously, any new employees that a business hired after 1 March 2020 were not eligible for JobKeeper Payments. This condition has now changed.

If an employee was hired on or before 1 July 2020, and after 1 March 2020, and they ceased working at their previous employer, they will now be eligible for JobKeeper Payments from 3 August 2020 as long as the other JobKeeper criteria is met. If you have employees who meet this criteria, you must notify them by Friday 21 August 2020 that the business will be claiming JobKeeper on their behalf by completing a Nomination Notice and giving to the employee.

Note, if the employee has not received $1,500 in gross wages per fortnight from 3 August 2020, the business has until 31 August 2020 to ensure any shortfall is paid to the employee. If they do not receive this, the business will not be eligible to receive the JobKeeper Payment relating to that employee.

2. Employees Who Were Employed On Or Before 1 March 2020

By and large there are no changes to the eligibility for this category of employee. One minor change is that a casual who was previously not eligible as they had not been with the business for more than 12 months may now meet this criteria on or before 1 July 2020.

Payment and Notification Notice requirements apply per above if an employee is now eligible.

If you require assistance with assessing the eligibility of new employees for JobKeeper Payments, or if you need assistance with updating your Single Touch Payroll settings to include these employees for JobKeeper Payments, please contact us for further information.

If you have any other questions or concerns, please don't hesitate to contact one of the team or myself.

Jobkeeper Declaration - May 2020

Wed, 17 Jun 2020 23:00:00 GMT

The Tax Office has released the monthly JobKeeper Declaration form for May 2020.To continue to receive the subsidy, the May declaration must be lodged by 14 June 2020 (a Sunday) – so 12 June .There are no extensions to this date – if the Declaration is not lodged by this date, you will likely miss out for that month.

Single Touch Payroll - Closely Held Payees

Wed, 17 Jun 2020 23:00:00 GMT

The Tax Office has deferred the commencement date of Single Touch Payroll (STP) for small employers with closely held (related) employees until 1 July 2021 as a result of the current COVID-19 crisis. As previously advised, this was due to commence 1 July 2020.

JobKeeper Registration Open and Updates as at 20 April 2020

Wed, 22 Apr 2020 23:00:00 GMT

The Tax Office has released their much anticipated registration for Employers to receive the JobKeeper payments. We have set out some of the requirements below.

JobKeeper Payments as at 7 April 2020

Mon, 06 Apr 2020 23:00:00 GMT

Below is some important information about the JobKeeper Payments. To receive the full benefit of the JobKeeper Payments, you will need to ensure eligible employees are paid at least $1,500 prior to 12 April 2020.

COVID-19 Support Package - Jobkeeper Payments as at 31 March 2020

Sun, 29 Mar 2020 22:00:00 GMT

The Federal Government has released its third stimulus package for Australia in response to COVID-19. Below is a summary of the new JobKeeper Payments. To avoid confusion, the terminology used is as follows...

COVID-19 Stimulus Packages as at 23 March 2020

Sun, 22 Mar 2020 22:00:00 GMT

The Federal Government has released its second stimulus package for Australia in response to COVID-19. Below is a summary of what has been released to date, including the first package, the second package and the Qld State Government's general response. Various industries will have some specific targeted stimulus so we recommend that you keep up to date with your various industry associations.

Australian Government's Stimulus Package

Mon, 09 Mar 2020 22:00:00 GMT

The government has released today it's much anticipated stimulus package for Australia in response to COVID-19 and the slowdown in the economy. Here is a summary of the announced measures...

FBT & The Work Christmas Party

Mon, 25 Nov 2019 22:00:00 GMT

FBT & The Work Christmas Party

Well it is the festive time of year again already, please see the below link to our circular which outlines the tax and FBT implications relating to work Christmas parties.

Christmas Circular - 2019 - FBT on parties and gifts

If you would like further information please contact us.

Single Touch Payroll for Small Employers

Tue, 12 Mar 2019 22:00:00 GMT

Single Touch Payroll for Small Employers

The Tax Office has announced that Parliament has passed legislation to extend Single Touch Payroll (STP) reporting to include all small employers (less than 20 employees) from 1 July 2019. STP is the electronic reporting of wages information to the Tax Office at the time payments are made to employees. It does not change the timing of PAYGW and Superannuation payments.

Below are links to the Commissioner's statement as well as further information on the ATO website.

We will be sending out information about the options available to our clients in the near future.

Commissioner's Statement

Single Touch Payroll - ATO

If you would like further information, or to check if you are ready for the 1 July 2019 start date, please contact us.

Software Development & the R&D Tax Incentive

Tue, 26 Feb 2019 22:00:00 GMT

The Department of Industry, Innovation and Science has released new guidelines for tech firms that develop software and claim the R&D Tax Incentive. Below are the new guidelines that have been issued, together with an article from the Australian Financial Review.

Business.gov.au - Software Development

Australian Financial Review - Article

R&D Guidance - Software.pdf

R&D Guidance - Common Errors.pdf

Instant Asset Write-off - Proposed Extension

Wed, 06 Feb 2019 22:00:00 GMT

On 29 January 2019, the Prime Minister announced that the government will introduce legislation to increase the Small Business $20,000 instant asset write-off threshold to $25,000 from 29 January 2019 until 30 June 2020. This proposal is not yet law and will be introduced into Parliament shortly.

Maximise Your Savings Today!

Rudd Mantell Accountants, your reliable Brisbane business accountants , want to keep you informed about the proposed increase to the instant asset write-off threshold. This change could provide substantial benefits to your business. Contact us for more details about our SME accounting services via our online form , by calling 07 3371 7855 or emailing us at admin@ruddmantell.com.au

Further details from the Tax Office can be found here Instant asset write-off - ATO.pdf

Scammers Targeting Taxpayers

Mon, 04 Feb 2019 22:00:00 GMT

We have recently had a few cases of new scams emerging where these scammers are directly contacting our clients reporting to be from the Australian Taxation Office (ATO).

If you are unsure about a call, text message or email, do not reply or give any personal information and contact us so we may confirm the validity of anything you may have received.

Protect Your Business from ATO Scams

Rudd Mantell Accountants, your trusted Brisbane business accountants , urges you to stay alert. Scammers are impersonating the ATO, targeting taxpayers with fraudulent calls, texts, and emails. Contact us for more details about our business tax accountant services via our online form , by calling 07 3371 7855 or emailing us at admin@ruddmantell.com.au

ATO Media Centre

Rudd Mantell Accountants Blog, Darra, QLD, Australia

Reducing your tax bill while topping up your super

Let’s say you’ve just sold the house you inherited from your parents 12 years ago for $1.3 million. You’ve been renting it out for most of that time, but the property market has been hotting up and you were told by several real estate agents that they could get you a good price.

Surviving (and maybe avoiding) an ATO audit

This piece is aimed at self-employed clients, so if you’re a salary earner or a retiree you can safely move on to the next item.

Forgiveness of a debt - What are the tax consequences?

If you are owed money and you forgive that debt, potentially there are some important CGT consequences.

Permanent incapacity and super - what it means if you're totally and permanently disabled

Most people think of superannuation as money they can’t touch until retirement, but there are important exceptions. One significant exception is the permanent incapacity condition of release, which can allow people who are totally and permanently disabled to access their super earlier.

CGT - Buying a new home before selling the old

If you find yourself in the position of having bought yourself a new home before you sold your existing home, there are important CGT issues to consider – and these centre on the fact that under the CGT rules, you cannot have two or more CGT exempt homes at the same time.

Six changes impacting your super in 2026

Superannuation rules are always evolving, and 2026 is shaping up to be another year of important changes. Some of these updates may only affect a small group of people, while others could impact almost everyone with super.

Age Pension and CGT implications of caravanning around Australia for 12 months

Many retirees dream of taking a “lap of Australia” in a caravan. A common question is what happens to the Age Pension and the family home if you leave it for a year.

Change to the tax treatment of holiday homes

Protecting your super from scams

Changes to deductibility of interest on ATO debts

An important reminder: Interest incurred in income years starting on or after 1 July will no longer be deductible, regardless of whether the debt relates to an earlier income year.

Age Pension means test changes - What they mean for you

Working from home and occupancy costs

CGT: When is the contract of sale entered into?

The income year in which you enter into a contract to sell an asset is crucial for Capital Gains Tax (CGT) purposes.

Can you leave your super to your grandchildren?

New super facts and figures from 1 July 2025

If you’ve been keeping an eye on your super, you might be wondering whether the contribution limits are increasing this year. The answer is – not yet.

The CGT exemption for land adjacent to a home

The rules surrounding the circumstances in which a home will be fully exempt from capital gains tax (CGT) are quite extensive – and complex.

Market volatility: Super’s silver lining

If your super balance has suffered from recent market volatility there may be opportunities available now that weren’t before. Here are a few worth exploring.

CGT concessions: Using an asset in a business for the required time

A recent decision of the tax tribunal has highlighted the requirement that in order to use the CGT small business concessions for a capital gain made on an asset used in a business, the asset must have been used, or held ready for use, in that business for the required time.

Small-scale subdivision and property development

So, you have decided to knock down your home and to build a couple of townhouses instead – and maybe live in one (but will just wait and see how things pan out).

Proposed Division 296 tax - Key issues and implications

The proposed Division 296 tax, which is proposed to start on 1 July 2025, introduces an extra 15% tax on superannuation earnings above a $3 million super threshold. Everyone supports a fair and sustainable superannuation system, but the new tax is unpopular for many reasons.

Super guarantee is increasing to 12%

From 1 July 2025, your superannuation guarantee (SG) rate is increasing to 12%. That means more money going into your super from your employer, helping you build a better nest egg for retirement.

Getting on the front foot for your 2024-25 Tax Return

Here are some more detailed tips relating to a couple of common claims that often attract ATO scrutiny.

Binding Death Benefit Nominations Explained

Concessional Super Contributions vs Mortgage Paydown: What’s the smarter move?

Writing a will in a tax-effective manner

When a person writes a will they usually leave their assets to their children – and usually in equal shares.

And when they first write their will their children may be young – and they may also be relatively young when they later update it.

Concessional contributions - Can there be too much of a good thing?

A fantastic way to grow your retirement savings and shrink your tax bill is through concessional contributions (CCs) to super. But more is not always better and like Goldilocks and her porridge, it pays to get things just right.

No CGT exemption for homes held on trust

It’s pretty well-known that a foreign resident (for tax purposes) cannot get a CGT exemption for a main residence (if they are a foreign resident at the time they entered the contract of sale).

Employees vs. Contractors - What Sets Them Apart

The Australian Taxation Office (ATO) has recently revised its guidance on differentiating between employees and independent contractors. This change follows several court rulings that clarified the criteria for determining whether a worker is genuinely an employee or an independent contractor.

Three great reasons to start a Transition to Retirement Pension

Thinking about easing into retirement but still need a steady income? Want to trim your tax bill while growing your super? Or maybe you'd love to knock down some debt before you stop working? If you are 60 or over, you can do just that.

Selling property? Buyers must withhold and pay the ATO!

If you're selling property in Australia and you're a foreign resident, there are important tax rules you need to know. Recent changes mean that buyers must withhold 15% of the property’s market value and pay it to the ATO, unless the seller provides a residency clearance certificate.

We may need to talk about your family trust

Managing inherited investments: what you need to know

When it comes to inheritances, one key fact to understand is that Australia has no death duties – meaning there are no taxes on a deceased person’s estate based on the value of their assets at the time of death.

Capital gains tax: How good records can save you money

Congratulations! Your investment has done well, and you’re cashing in. You’re happy, and so too is the ATO. That substantial capital gain has brought wealth and a hefty tax bill.

Do you own an asset that is used in your spouse’s business?

Did you know that if you own an asset (eg, land or a factory or even a trademark) that someone else uses in carrying on a small business then you might be entitled to the CGT small business concessions when you sell the asset?

And these concessions can either entirely or partially eliminate any capital gain you make on selling it (or at least defer it).

Beware of Bitcoin gains!

If you own Bitcoin, or any other crypto currency, you may have been the beneficiary of Donald Trump’s election as President last November – which saw Bitcoin prices jump by almost 50% almost immediately after the election (and certainly in the following weeks). ﻿

Salary Sacrifice vs Personal Deductible Contributions: And the winner is...

Super is a great way to save for retirement. It offers an opportunity to invest in long-term growth assets and enjoy generous tax concessions along the way.

Downsizer Super Contributions: Dispelling three myths

Billions of dollars in downsizer super contributions have been made since its introduction in 2018. Downsizer contributions are popular, but three common misconceptions keep them from being more so.

Inheriting a home - and then living in it

Most people know that if you inherit a person’s home and you sell it within two years of their death, it can be exempt from capital gains tax (CGT).

ATO confirms tax deductibility of financial advice fees

The Australian Tax Office (ATO) has released new guidance (TD 2024/7) on when financial advice fees can be claimed as a tax deduction. Overall, the ATO has not changed its view but it has given more clarity around the deductibility of upfront and ongoing fees.

Super and hardship ... A safety net in financial difficulty

Yet more rental data matching by the ATO

Feeding its seemingly insatiable appetite for rental data, the ATO has recently announced it will soon be collecting rental bond details for some 2.2 million individuals.

Seven changes impacting your super in 2025

Selling a property with mixed rental and residential use

Selling a property that may have been used for mixed rental and residence purposes has a lot of capital gain tax (CGT) issues – and some of these also involve exercising good judgment as to how to best use the relevant CGT concessions.

Interest deductibility and investment properties

An important reminder: Interest incurred in income years starting on or after 1 July will no longer be deductible, regardless of whether the debt relates to an earlier income year.

If you own Bitcoin, or any other crypto currency, you may have been the beneficiary of Donald Trump’s election as President last November – which saw Bitcoin prices jump by almost 50% almost immediately after the election (and certainly in the following weeks).