Interest Deductions: Risks and Opportunities

Work vehicles and FBT: don’t let assumptions cost you

Tue, 07 Apr 2026 06:23:59 GMT

Ask your Aspen advisor:

"Are our work vehicles really exempt from FBT, or are we relying on assumptions that would fall apart in an audit?”

The ATO is sharpening its focus on work vehicles and Fringe Benefits Tax, and this is one of those areas where a lot of businesses think they are fine… right up until the review letter arrives.

The problem is usually not dramatic tax planning. It is everyday assumptions.

The biggest trap: “It’s a ute, so it must be exempt”

A popular myth in business is that dual-cab utes are automatically FBT-free.

They are not.

Whether a vehicle is exempt depends on:

the vehicle’s design
whether it is mainly designed to carry passengers or a load
and how it is actually used through the FBT year

Even if the vehicle has the right design features, private use can still trigger FBT. title styles, go to Site Theme.

Why record-keeping matters so much

The ATO is particularly focused on situations where businesses have claimed an exemption without the evidence to back it up.

Formal logbooks are not always legally required for every exemption test, but if you do not have records that look a lot like one, it becomes very hard to defend your position during a review.

That means good records on:

odometer readings
trip purpose
business versus private use
and the general pattern of vehicle use

can make a huge difference.

Private use needs to be dealt with properly

If a full exemption does not apply, private use needs to be apportioned properly. That means working out how much of the vehicle’s running costs relate to personal trips.

Ignoring this step because the private use feels “minor” is where a lot of small FBT issues turn into larger ones.

Do not forget the lodgement issue

Even if you think the FBT amount is small, there may still be an obligation to lodge an FBT return . The ATO’s systems are good at spotting non-lodgers, and penalties plus interest can pile up quickly.

What businesses should do now

This is a good time to:

review which vehicles are being treated as exempt
check whether the usage pattern actually supports that treatment
refresh logbooks or digital tracking
review private use policies
and make sure any FBT returns needed are being lodged on time

Final thought

Work vehicles are a very normal part of doing business. That is exactly why they can be risky. People stop questioning them.

If your business provides utes, vans or passenger vehicles to staff or owners, a quick check with your Aspen advisor now is far easier than trying to rebuild the records during an audit

Business sale valuations: what the Kilgour case teaches us

Tue, 07 Apr 2026 06:16:20 GMT

Ask your Aspen advisor:

“If we ever sell part or all of the business, how do we make sure the valuation stacks up for tax and concession purposes?”

When a business is sold, the tax outcome often turns on one deceptively simple question: what was it actually worth?

The recent Kilgour case is a timely reminder that for tax purposes, value is not just about a neat spreadsheet or theoretical discount model. It is about the real commercial deal .

What happened

Three family trusts sold 100% of the shares in an online wagering business to News Corp for around $31 million . Two of those trusts held 20% each and wanted to access the small business CGT concessions . To do that, they argued their minority interests should be heavily discounted, because a smaller parcel is often worth less on its own.

The ATO disagreed, and so did the Court.

The Court said that because this was a coordinated sale of the entire business , the minority parcels were effectively sold as part of a 100% transaction. That meant the real market value of each parcel was tied to the whole deal, not some hypothetical standalone minority sale.

What this means in practice

There are two big lessons here.

1. Real-world facts beat theoretical models

Even if tax law asks you to test value at a particular point in time, the Court made it clear you cannot ignore what was commercially obvious at that point. If negotiations were well advanced and the buyer was clearly willing to pay a premium, that reality matters.

2. Minority discounts are not automatic

A lot of people assume a 20% or 30% holding should always be discounted because it lacks control. Kilgour shows that is not always true. If all owners are selling together and the buyer wants the whole business, each parcel may carry more value than a textbook minority model suggests.

Why business owners should care

This matters well beyond one court case. It affects:

business sales
succession planning
restructures
and access to CGT concessions

If you are counting on a valuation to keep you under a threshold, you need to make sure that valuation reflects the real commercial setting, not just a convenient assumption.

What to do before a sale

If a business sale or restructure is even on the horizon, good steps include:

testing your eligibility for CGT concessions early
documenting buyer motivations and deal context
keeping records of negotiations and valuation evidence
speaking to your advisors before contracts or heads of agreement lock things in

Final thought

Kilgour is a strong reminder that tax valuations work best when they reflect commercial reality.

If you are thinking about a sale, a succession event or a restructure, your Aspen advisor can help you sense-check the valuation position early, when there is still room to plan.

A wake-up call for family businesses on FBT

Tue, 07 Apr 2026 04:24:03 GMT

Ask your Aspen advisor:

“We have family members working in the business and enjoying a few perks – are we sure those benefits are being treated properly for FBT?”

A recent court case involving a large family business, a trust structure and a fleet of luxury vehicles is a useful reminder that in family groups, informal does not always mean invisible .

The case looked at whether benefits provided to working family members were given because they were employees , or because they were beneficiaries and controllers of the trust.

That difference matters, because Fringe Benefits Tax only applies where the benefit is provided in respect of employment .

What happened

In the case, three brothers worked in a large family business run through a discretionary trust. They had access to a long list of luxury vehicles, including Bentleys and Ferraris, for both business and private use. The ATO argued the private use portion should be subject to FBT because the brothers were employees.

Aft er a long path through the courts, the Full Federal Court sided with the taxpayer . It found it was open to conclude that the brothers were not employees in the ordinary sense for FBT purposes, and that the benefits were more closely connected to their roles as beneficiaries, proprietors and controlling family members.

Why this matters

This does not mean all perks in a family trust are suddenly safe from FBT.

What it does mean is:

the facts matter
the documentation matters
and the reason the benefit is provided matters

If a phone, vehicle, travel or another perk is really being provided because someone works in the business, the ATO may still see it as an employment benefit. If it is genuinely linked to a beneficiary entitlement or ownership interest, that may point in a different direction.

Where family businesses get into trouble

The ATO is especially interested where:

family members wear multiple hats
there are no clear employment agreements
benefits are provided casually
and the paperwork does not clearly show how those benefits are meant to be treated

This is where “we’ve always done it this way” can become expensive

What to review now

If your business provides benefits to family members involved in operations, now is a good time to check:

how those benefits are documented
whether they are tied to trust resolutions or remuneration
whether there are Division 7A or deemed dividend risks sitting nearby
whether FBT has been considered properly, not just assumed away

Final thought

The SEPL decision is helpful for taxpayers, but it is also a warning shot. Courts will look at substance, not just labels.

If your family business has working owners, trust distributions and a few perks floating around, it is worth a proper review with your Aspen advisor before the ATO asks its own questions.

Division 296 tax: what it means for larger super balances

Tue, 07 Apr 2026 03:54:46 GMT

Ask your Aspen advisor:

"If my super balance is getting up there, what will the new Division 296 tax actually mean for me from 1 July 2026?”

The new Division 296 tax is now law and will apply from 1 July 2026 . It is designed to reduce the tax advantage of holding very large amounts inside super, without changing the rules for everyone else.

In plain English, the Government is saying: super is still a tax-effective structure, but once balances move beyond a certain size, the tax concessions start to taper off.

Who it affects

The new rules apply where an individual’s total super balance is above:

$3 million
$10 million for the higher band

Both thresholds are expected to be indexed over time. Under the new setup, earnings linked to balances above those thresholds will be taxed more heavily. For some people, that pushes the effective tax rate on part of their super earnings up to 30% , and for very large balances, up to 40% overall.

That is a major shift for people who have spent years building wealth inside super on the assumption that it would remain one of the lowest-tax environments available.

How it works in practice

For SMSFs especially, this is not just a “new tax” story. It is also an admin and planning story.

The fund will need to calculate its Division 296 earnings using taxable income, adjusted for things like:

contributions
exempt pension income
non-arm’s length income
certain pooled super interests
capital gains where relevant elections have been made

That amount is then attributed to members and the ATO issues the tax assessment to the individual , not the fund. The individual can pay it personally or choose to have it paid from a nominated super interest.

Why this matters beyond tax

This is not just about paying a bit more tax. It raises bigger questions around:

whether excess capital should still sit inside super
how future investment growth is best managed
whether estate planning still works the way you thought
and how cash flow will be handled when the tax starts being assessed

There are also special scenarios that need thought, including death during a financial year and how this interacts with estate planning

What to do now

If your balance is already close to the threshold, or well above it, now is the time to:

get tailored modelling done
review whether your current super structure still makes sense
consider the impact of the small-fund CGT election where relevant
talk through longer-term strategies with both your accountant and financial adviser

Final thought

Division 296 will not affect everyone, but for those it does affect, it is significant. The earlier you understand the numbers, the more choices you usually have.

If your super balance is near the line, speak with your Aspen advisor now so you can plan ahead, rather than react later.

Downsizer contributions: turning your home into super

Mon, 09 Mar 2026 03:02:00 GMT

Ask your Aspen advisor:

“If we sell our home and downsize, can we use the downsizer rules to boost our super – and what conditions do we need to meet?”

For many Australians, the family home is their biggest asset. At some point, the large house in the suburbs becomes more work than it is worth, and the idea of a smaller place starts to look attractive.

The downsizer contribution rules are designed to help in exactly that moment – letting some of the sale proceeds move into super, where they can work harder for retirement.

How downsizer contributions work in simple terms

In broad terms, if you sell an eligible home and meet the conditions, you may be able to:

Contribute up to $300,000 per person (so up to $600,000 for a couple) from the sale proceeds into super
Make this contribution on top of the usual annual contribution caps
Do it once in your lifetime, per person

The contribution does not count as a non-concessional contribution, but it is still subject to superannuation rules once inside the fund.

Key conditions people often miss

The detail matters, and there are a few common surprises:

Minimum ownership period – generally, the home must have been owned for at least 10 years .
Main residence status – the property needs to have been your main residence for at least part of that time (it does not need to be fully CGT-exempt, but the main residence exemption must apply to some part).
Timing – you normally have 90 days from settlement to make the downsizer contribution.
Age and timing changes – the minimum age has been lowered over time, so you need to check which threshold applies to you at the time of contribution.

On top of that, each person can only make a downsizer contribution once , so it is worth thinking ahead before you use it.

Things to think about before you commit

Before you rush to put a large chunk of house sale money into super, it is worth stepping back and looking at:

Cash flow – how much ready access to cash will you need over the next 5–10 years?
Centrelink – moving money from the home (which is exempt) into super and then into an income stream can affect age pension entitlements.
Estate planning – will moving more wealth into super change how your estate passes to adult children or other beneficiaries?
Investment mix – how will the extra super be invested, and does that line up with your risk comfort?

These are not reasons to avoid downsizer contributions, just reasons to plan properly.

Final thought

Downsizer contributions can be a powerful way to turn a home you no longer need into a more flexible retirement asset. Used well, they can boost your super balance without being blocked by normal contribution caps.

If you are even half-thinking about selling and downsizing, it is worth talking to your Aspen advisor before you sign a contract. A short conversation can help you line up the sale, the contribution and your retirement plans so everything works together, not against you.

AI tax tips: smart shortcut or expensive detour?

Mon, 09 Mar 2026 01:27:51 GMT

Ask your aspen advisor:

“Is it safe to use AI tools for tax answers, and how do I know when I absolutely need human advice?”

We have all felt the temptation. You type a tax question into an AI chatbot, get a long, confident answer in seconds and think: well, that sounds official enough.

The problem is that Australian tax and super rules are detailed, constantly changing and heavily dependent on your specific facts. AI systems are clever, but they are not registered tax agents, and they do not take responsibility if the ATO disagrees.

Where AI can help

AI tools are not useless. Used wisely, they can:

Explain general concepts in plain language (for example, what a capital gain is)
Help you think of better questions to ask your advisor
Summarise long public documents like media releases or explanatory memoranda
Draft first-pass checklists or to-do lists that you can refine

If you treat AI as an educational tool , it can actually make your conversations with real advisers more efficient.

Where AI can go badly wrong

The trouble starts when people treat AI outputs as personal advice .

AI can:

“Hallucinate” by inventing rulings, court cases or concessions that do not exist
Give answers based on outdated rules
Miss small fact differences that have big tax consequences
Encourage over-claiming work-from-home, car or rental property deductions
Completely misread tricky areas like trusts, SMSFs, crypto or company restructures

If you copy a suggested claim straight into your tax return and it is wrong, the ATO will not accept “the computer said so” as a defence. The responsibility rests with you (or your registered agent).

How to use AI safely in a tax context

If you are going to use AI around tax, a few simple rules will keep you safer:

Treat it as background reading , not a decision-maker
Avoid sharing detailed personal information, TFNs or sensitive financial data
Use it to clarify concepts, then test anything important with a real advisor
Be extra cautious in high-risk areas: property, trusts, SMSFs, business restructures, crypto

A good rule of thumb: if the decision involves large dollars, long-term commitments or ATO audit risk, you want a human in the loop.

Final thought

AI is a powerful tool, but it does not replace judgement, professional standards or experience. It is like having access to a very confident intern who has read a lot, but sometimes gets the details wrong.

If an AI answer has given you an idea, a concern or a “wait, can I really claim that?” moment, that is exactly the time to talk to your Aspen advisor. We can tell you what actually applies in your situation and keep good ideas from turning into expensive detours.

Electric cars: discount under review, opportunity now

Mon, 09 Mar 2026 01:18:27 GMT

Ask your Aspen Advisor:

“Is now the time to move on an EV for our business or salary packaging, or should we wait for the review to finish?”

Electric vehicles are no longer a novelty. They are parked in suburban driveways, business fleets and salary packages right across Australia.

A big part of that shift has been the Electric Car Discount , especially the FBT exemption for eligible EVs provided to employees. That concession is now under review, which has a lot of people wondering: have we missed the boat, or is there still time to use it?

Where things stand right now

For now, the key settings are still in place:

Certain zero or low-emission vehicles below a price threshold can be exempt from fringe benefits tax if provided as a car benefit to employees.
That has made novated leases and packaged EVs much more attractive than equivalent petrol cars in many cases.
On the business side, EVs may still benefit from higher luxury car tax thresholds for fuel-efficient vehicles and other concessions.

The Government’s review is mostly about cost and design for the future. Any major changes are expected to be forward-looking , not retrospective.

What this means for buisnesses and employees

If you are thinking about an EV, this is not a “panic and rush” situation, but it is also not a reason to sit frozen on the fence.

For employers and employees, the questions to ask include:

Do we have staff who already want an EV and are suitable for a novated lease?
Are there business vehicles coming up for replacement in the next 12–24 months?
How many kilometres do we realistically drive, and does an EV fit that pattern?
Do we have somewhere practical to charge – at home, at work, or both?

In many cases, the maths still favour EVs, especially where the FBT exemption and salary packaging structure are used properly.

Things to watch before you commit

Before you sign anything, it is worth:

Checking that the specific model meets the eligibility rules (including price)
Running a proper comparison between an EV and a similar petrol or hybrid on a like-for-like basis
Thinking about charging costs, installation of chargers and any impact on home electricity bills
Considering how the vehicle will be used if an employee leaves or circumstances change

This is where a simple spreadsheet and a short chat with your advisor can turn “seems like a good idea” into a clearer picture.

Final thought

The review of the Electric Car Discount does not mean EVs are suddenly a bad idea. It does mean that timing and structure matter .

If you are already planning to replace vehicles or you have staff keen on an EV, now is a smart time to look at the numbers rather than waiting for perfect clarity that may never come.

Your Aspen advisor can help you model different options and work out whether an EV makes sense for you financially, not just environmentally.

Holiday homes: deductions under the microscope

Mon, 09 Mar 2026 01:05:16 GMT

Ask your Aspen advisor:

“We have a holiday place we rent out sometimes – will the new ATO approach treat it as a holiday home or a genuine investment property?”

If you own a coastal shack, a farm stay or a city apartment you list on Airbnb, you are very much on the ATO’s radar this year.

The ATO has released new guidance that looks closely at how holiday homes are used and why they are owned. The big question is simple: is this a genuine income-producing asset, or a lifestyle property that just happens to bring in a bit of rent?

The answer will drive how much you can actually claim at tax time.

Holiday home or investment property - what is the difference?

On paper, two properties might look identical: both are in popular locations, both are listed on booking sites and both have some rental income each year.

In practice, the ATO will look at things like:

Is the property genuinely available for rent in peak periods, or blocked out for your own use?
Is the nightly rate set at a commercial level, or so high (or low) that no one realistic would book it?
Are photos, listings and responses to enquiries consistent with someone trying to maximise rental income?
How much private use is there by you, family or friends, especially at prime times?

If the pattern looks more like “family weekender that occasionally pays its way”, the ATO is more likely to treat it as a holiday home . That usually means fewer deductions and tighter apportionment.

What happens to your deductions?

For a property the ATO sees as a genuine rental investment, you can normally claim a share of costs like:

Interest on the loan
Rates, insurance and utilities
Repairs and maintenance
Depreciation on eligible assets

Those costs need to be apportioned if there is any private use or if the property is not genuinely available to rent all year.

For a property that is really a lifestyle asset, the ATO may restrict claims to expenses that directly relate to the periods it is truly available and rented. In some cases, they may even treat large, ongoing losses as private in nature rather than deductible.

What should owners do now?

If you own a holiday property, this is a good time to:

Look at your calendar – how many weeks each year are really available, and how many are blocked for private use?
Review your listing – price, photos, house rules and response times all send signals about how serious you are about renting.
Check whether the income and expense pattern makes sense for an investment, or looks more like a subsidised holiday.

Small changes – like opening up peak weeks, adjusting pricing or being more responsive to enquiries – can sometimes make a big difference to how the story looks on paper.

Final thought

Holiday homes are not off-limits. The ATO is simply asking: are you running this like a business or using it as a personal perk?

If you are not sure which side your property falls on, or you suspect past claims might not line up with the new guidance, talk to your Aspen advisor. We can review the numbers, the usage pattern and the listing, then help you decide what needs to change (if anything) before the next return.

Family Trusts On Notice: Why The ATO Wants You To Own Up Early

Mon, 19 Jan 2026 05:37:48 GMT

Ask your Aspen advisor:

“We’ve got family trusts – should we be doing a health check before the ATO’s ‘confess and we’ll go easier on you’ window closes?”

If your family uses trusts, you might have seen the headlines: “ATO warns family trusts to confess to past errors.” It sounds dramatic, but there’s a real opportunity behind the warning.

The ATO has launched what’s being described as a partial amnesty for family groups with historic Family Trust Distribution Tax (FTDT) problems. In short, if you come forward, fix mistakes and pay what’s owed by the end of 2026 , the ATO may remit up to 80% of the interest in suitable cases. Leave it, and you risk the full force of FTDT plus years of interest.

This is the ATO saying: “If you know something’s wrong, tell us now, not when we find it.”

Quick refresher: what is Family Trust Distribution Tax?

FTDT is a special 47% tax (plus Medicare levy) that can apply when distributions are made by a family trust outside the nominated “family group” under a family trust election.

It often comes up where:

Family trust elections (FTEs) or interposed entity elections weren’t done, or
Distributions over many years have gone to people or entities outside the intended group, or
There are messy structures, restructures or “admin shortcuts” that didn’t match the paperwork.

On top of the tax itself, general interest charges (GIC) can build up over time and become very painful.

Why the ATO is doing this now

Several things have pushed this onto the ATO’s radar:

Long-running audits have uncovered large FTDT exposures from simple administrative errors
There’s concern that current rules can punish honest mistakes as harshly as deliberate avoidance

The ATO’s Trusts Taskforce has FTDT as a priority area

Rather than hit everyone at once, the ATO has effectively said:

Review your trusts and come forward by 31 December 2026 , and
In appropriate cases, it will consider remitting up to 80% of interest on FTDT liabilities.

That doesn’t make the tax go away, but it can dramatically reduce the “pain on top of the pain”.

What kinds of issues are we talking about?

Common risks we see include:

Old trusts where no one is quite sure what elections were made (or if they were made at all)
Distributions to extended family, companies or entities that sit outside the original “family group”
Long-running patterns of distributions that don’t match the formal structure on paper
Restructures or refinancing steps where the flow of distributions wasn’t fully thought through

In many cases, these started as “seemed fine at the time” decisions rather than deliberate avoidance. Unfortunately, the FTDT rules don’t always distinguish cleanly between the two.

What should trustees and families do now?

This isn’t something to panic over – but it isn’t something to ignore either.

A sensible approach looks like:

Identify your trusts
Make a list of all family trusts in the group, including older or “inactive” ones.
Find the paperwork
Collect trust deeds, variations, family trust elections, interposed entity elections and distribution resolutions where possible.
Review past distribution patterns
Look at who has been receiving distributions and in what form (directly, through companies, through other trusts).
Do a risk triage
With your advisor, work out which trusts are likely fine, which are “grey”, and which might have clear exposure.
Consider engaging with the ATO early
Where issues are identified, there may be real value in approaching the ATO under this “confess early” approach rather than waiting for an audit.

How Aspen can help

We can assist you to:

Map out your trust structures and elections
Review historical distribution patterns for FTDT risk
Quantify potential exposures and the impact of possible interest remission
Help manage any voluntary disclosure to the ATO in a structured way

Final thought

This is paragraph text. Click it or hit the Manage Text button to change the font, color, size, format, and more. To set up site-wide paragraph and title styles, go to Site Theme.

Right To Disconnect: Where’s The Line Between Reasonable And Ridiculous?

Mon, 19 Jan 2026 05:18:22 GMT

Ask your Aspen advisor:

“Do the right to disconnect rules apply to my business now, and how do we set boundaries without breaking the business?”

Australia’s right to disconnect is here – not just as a headline, but in the Fair Work Act.

Employees of larger employers have had this right since 26 August 2024 . From 26 August 2025 , it extends to small businesses as well. That means every employer, regardless of size, now has to factor it into how they manage after-hours contact.

The law doesn’t ban calling or messaging staff outside hours. It gives employees the right to refuse to monitor, read or respond to work contact when saying no would be reasonable .

So the real question isn’t “can I ever call?” – it’s “what counts as reasonable for our business?”

What the right actually gives employees

Under the new right, employees can decline work contact outside their normal hours if it’s unreasonable in the circumstances. Things the Fair Work Commission will look at include:

The reason for the contact
How it’s made (quick text vs repeated calls)
How disruptive it is to the employee’s life
The employee’s role, pay level and level of responsibility
Any personal circumstances, such as caring responsibilities

Emergency safety issues and genuine time-critical problems are one thing. A non-urgent “quick favour” at 9.30 pm is another.

If disputes escalate, the Commission can make orders – and breaching those orders can lead to penalties.

What this means for small business owners

For small businesses, where everyone wears multiple hats and after-hours contact is often part of the reality, this feels uncomfortable at first.

Common concerns we hear:

“What if I need to reach my manager after hours?”
“We work across time zones – how does that work now?”
“We don’t have HR. How do we even write a policy?”

The good news: the law builds in the idea of reasonableness . It recognises that some roles genuinely involve flexibility, emergencies or on-call work.

The challenge is to move that understanding from your head onto paper and into conversations with your team.

Practical steps to get this right

You don’t need a 20-page policy. Start simple and keep it real.

Work out what’s actually needed after hours

Do you genuinely need someone on call?
Are there specific times of year that are more intense?
Are certain roles more likely to handle urgent issues?

Bake it into roles and rosters
If after-hours availability is genuinely part of a job, reflect that in the position description, roster patterns or allowance structure.

Set expectations in plain English
For example:

“We don’t expect replies to emails sent after 6 pm unless it’s clearly urgent.”
“If it’s an emergency about X, we’ll call. Otherwise it can wait until morning.”

Train your leaders
Much of this comes down to manager behaviour. A leader who constantly sends non-urgent messages at night will cause more issues than any formal policy.

Agree on escalation paths
Make it clear what “red-flag urgent” looks like and how those situations should be handled.

How Aspen can help

This isn’t just an HR question – it touches contracts, rostering, allowances and risk. We can help you:

Identify whether you’re a small business employer under the Fair Work Act
Review your current work patterns and highlight risk areas
Sense-check draft wording for policies or staff communications
Work out how your payroll, rosters and contracts line up with the new rules

Final thought

This is paragraph text. Click it or hit the Manage Text button to change the font, color, size, format, and more. To set up site-wide paragraph and title styles, go to Site Theme.

Super Is Moving In With Payroll – And The Free Clearing House Is Moving Out

Mon, 19 Jan 2026 04:03:13 GMT

Ask your Aspen advisor:

“Can you show me what Payday Super and the Small Business Super Clearing House closure mean for my payroll before 1 July 2026?”

If you pay staff, 1 July 2026 is a real line in the sand.

From that date, Payday Super becomes law. Employers will be required to pay super at the same time as salary and wages, instead of batching it up for a quarterly rush. The legislation has passed, received Royal Assent, and the ATO has confirmed the start date stays at 1 July 2026.

At the same time, the ATO is closing the Small Business Superannuation Clearing House (SBSCH) . You can keep using it for now, but you won’t be able to register as a new user after 1 October 2025, and access will end by 30 June 2026.

Put simply: super is moving in with payroll, and the free clearing house is moving out.

What Payday Super actually means

Under Payday Super, the big shift is timing.

Right now, most employers pay super quarterly. From 1 July 2026 , you’ll need to ensure superannuation guarantee (SG) contributions are paid at or around the same time as wages – in practice, that means near real-time or within a very short window after each pay run.

If super is late or missing, the Superannuation Guarantee Charge (SGC) still applies: catch-up super, plus interest and admin fees. The change doesn’t remove penalties – it just makes it harder for unpaid super to quietly build up.

The policy aims to:

Reduce unpaid super (billions each year at the moment)

Help casual and part-time workers see their super land when their wages do

Give employees more confidence that super is actually being paid, not just promised

Why the Clearing House is shutting

The Small Business Superannuation Clearing House has been a lifeline for many smaller employers – free, simple and run by the ATO.

But it wasn’t built for a world where super needs to move quickly with every pay run. The ATO has confirmed the SBSCH can’t meet the technology and operational requirements of Payday Super, so it will shut on 1 July 2026 , with new registrations blocked from 1 October 2025 .

That means:

If you already use the SBSCH, you have a deadline to move
If you don’t use it, you’ll need to make sure your current method can handle Payday Super anyway

What this will feel like inside your busines

Handled well, this is less “extra admin” and more a change in rhythm.

You’ll likely:

Process super as part of each pay cycle, not weeks later
Have a clearer view of staff costs in real time, because wages and super move together
Need tighter processes so no pay run slips through without the right super attached

If your business has:

Lots of casual or seasonal staff
Multiple pay cycles across different teams
Tight cash flow that’s used to quarterly super

…then this change is especially worth planning for now, not in June 2026.

How to prepare – practical steps

Here’s a sensible checklist to work through with your advisor:

Review your payroll software
Most modern systems (Xero, MYOB, QuickBooks etc.) are building Payday Super into their workflows. Check if super can be triggered automatically with each pay run.
Check your current clearing solution

If you use the SBSCH, pick a replacement early and test it.
If you use a commercial clearing house, make sure it’s Payday-Super ready.

Map your pay cycles
List your pay dates (weekly, fortnightly, monthly), and work out the likely contribution dates so you know the real deadlines.
Stress-test your cash flow
Talk to us about modelling the impact of more frequent super payments so there are no surprises.
Tidy up your data
Make sure employee details and super fund information are up to date – cleaner data means fewer rejected contributions.

Final thought

Payday Super and the closure of the SBSCH are big shifts, but not bad ones if you get ahead of them. You’ll have cleaner payroll, fewer “end of quarter” shocks, and fewer worries about unpaid super.

If you’d like a simple review of your payroll and super setup – or help choosing a new clearing house – speak with your Aspen advisor. A quick check now can save a scramble later.

General information only. Get advice for your specific situation before acting.

Cash Is Making A Comeback – Is Your Business Ready To Take It?

Wed, 17 Dec 2025 06:35:06 GMT

Ask Your Aspen Advisor:

“Will these new cash rules apply to my business, and should I start planning to handle notes and coins again before 1 January 2026?”

For years, the story has been that cash is disappearing. Tap and go, online payments and digital wallets have taken the lead.

Now, cash is quietly re-entering the conversation.

The Government has released draft regulations that would require some retailers to accept cash for everyday essentials. The aim is to make sure people can still buy groceries, fuel and similar basics when technology fails or when they simply prefer to use notes and coins.

Who Will Need to Accept Cash

The proposed rules focus on:

Fuel retailers
Grocery retailers , including big chains and independent supermarkets

They would only apply to:

In person transactions
Purchases under 500 dollars

So this is not about large, specialised jobs being paid fully in cash. It is about day to day items.

Smaller businesses are also being considered. If your business or franchise group has annual turnover below 10 million dollars , you are likely to be exempt from the requirement to accept cash.

The changes are expected to start from 1 January 2026 , with a review after three years.

Why is this happening

Two key reasons:

Inclusion and choice
While most Australians are happy using cards and phones, a noticeable group still relies on cash. This includes some older people and many in regional or remote communities.
Resilience when systems fail
During fires, floods, storms or simple outages, electronic payment systems can stop. In those moments, cash often becomes the only way for trade to continue.

The policy aim is to ensure basic goods stay accessible even when technology is not cooperating.

What This Means in Practice

If you are a larger retailer likely to be covered, you may need to:

Reintroduce or upgrade cash floats and tills
Train staff in handling and checking cash
Revisit how often you bank and reconcile cash takings
Put in place procedures for secure storage and transport of cash

If you are likely to be exempt, the focus will be on:

Keeping clear records that show your turnover and group structure
Being ready to demonstrate why the exemption applies if needed

There may also be a commercial opportunity. In some areas, especially regional ones, clearly welcoming cash can draw in customers who feel shut out by “card only” models..

How to Prepare

You do not have to make big changes yet, but it is wise to:

Check which side of the 10 million dollar threshold you are on
Review your payment policies and think about how cash would fit into them
Consider training and processes so staff know what is expected
 Talk with your Aspen advisor about banking, security and tax considerations

Final Thought

Cash is not replacing digital payments, but it is not disappearing either. For some businesses, these changes will simply formalise what they already do.

For others, it will be a return to skills and processes they have not used for a while.

If you would like help working out if the rules are likely to affect you, and what it would cost and mean in practice, speak with your Aspen advisor.

We can help you plan ahead rather than react at the last minute.

Know the Rules Before You Break Them: Why SMSF Education Matters

Wed, 17 Dec 2025 06:30:24 GMT

Ask Your Aspen Advisor:

“I have (or am thinking about starting) an SMSF – how do I know I am not accidentally breaking the rules, and what should I be learning now?”

Running your own self managed super fund can feel empowering. You decide where the money goes and how the investments are managed.

The catch is that SMSF trustees have serious legal responsibilities. The rules are detailed and, in some areas, unforgiving. If you do not know what those rules are,

it is very easy to make a mistake without realising it.

Why Understanding The Rules Matters

Common SMSF problems often come from simple misunderstandings, such as:

Using fund assets for personal use
Lending to or investing with related parties on non commercial terms
Going over in house asset limits
Making benefit payments when conditions are not met
Poor or incomplete record keeping

These issues do not always start as deliberate wrongdoing. Often, they start as “this seems harmless” decisions that slowly become reportable breaches.

Education is your first line of defence. You cannot comply with rules you have never heard of.

The ATO's Focus on Trustee Education

The ATO has signalled that it expects trustees to take learning seriously. It has outlined when it might issue an “education direction” that forces trustees to complete specific training if their behaviour suggests they do not understand their duties.

If you get to that point, something has already gone wrong.

Trustees who:

Make an effort to understand their obligations
Seek advice early when unsure
Fix issues properly and document their actions

are usually in a much healthier position than those who treat the fund casually.

Practical steps for SMSF trustees

Here are some sensible actions if you have, or are considering, an SMSF:

Use the ATO’s SMSF resources
The ATO has free online courses on setting up, running and winding up an SMSF. They are designed for trustees and are a good starting point.
Complete the knowledge checks honestly
Treat them as a health check, not a box to tick. If you do not understand a topic, that is a sign to dig deeper.
Ask for help when something feels unclear
Related party transactions, property use, loans and pensions are all areas where early advice can save a lot of pain later.
Keep clear records
Document training you have done, advice you have received and the reasons behind major fund decisions. Good records support your position if the fund is ever reviewed.

Final Thought

An SMSF can be a powerful tool, but it is not a set and forget structure. The best protection you have is knowledge and timely advice.

If you want a sense check on how your fund is tracking, or you are thinking about starting an SMSF and would like to know what is really involved, talk to your Aspen advisor.

We can help you understand both the opportunity and the responsibility in practical terms.

Unlocking Tax Savings: Can Your MBA Pay Off At Tax Time?

Wed, 17 Dec 2025 06:23:43 GMT

Ask Your Aspen Advisor:

“Can my MBA or other study actually reduce my tax bill, or am I dreaming?”

If you have invested in an MBA, leadership program or other postgraduate study, it is natural to ask: does any of this help at tax time, or is it just a career cost?

In Australia, some self education costs can be claimed. Others cannot. The trick is understanding a couple of key rules so you know which side of the line you sit on.ource.

Rule One: How You Paid for The Course

Not all course funding is treated equally.

HECS HELP
If your course is a Commonwealth supported place (which is how most undergraduate and some postgraduate uni courses are funded), those fees are generally not deductible , even if the study relates to your current job.
FEE HELP or private payment
If you are in a full fee course and either pay privately or use FEE HELP, your tuition fees may be deductible , if the other tests are met.

Repaying the loan later does not create a deduction. The potential deduction relates to the course fees at the time the expense is incurred.

Rule Two: What You Do For Work

The course must connect to the work you are doing now. The ATO generally allows a deduction where the study:

Maintains or improves the skills you use in your current role, or
Is likely to increase your income in that same role or field

If you are mainly studying to switch careers, the deduction usually fails.

Examples:

A finance manager doing an MBA that deepens their leadership, strategy and financial skills may have a strong case.
Someone in sales doing an MBA mainly to move into an unrelated field may not.

The detail of your role and the subjects you choose both matter.

What About Employer Support

If your employer pays a study allowance or reimburses part of your course, that amount is usually treated as taxable income.

However, that does not automatically cancel out a deduction. As long as the course itself meets the tests, and you have actually incurred the expense, there may still be a valid claim.

You will need good records, such as:

Invoices and enrolment details
Course outlines showing subject content
Your job description or contract
Any letters or policies from your employer about study support

Making This Practical

If you are considering further study, or you have just completed a big course, here is a sensible approach:

Confirm whether your course is HECS HELP, FEE HELP or privately funded
Write a short note linking the course content to your current role
Keep all course and payment documents in one place
Talk to your Aspen advisor before you include any large self education claim

A short conversation up front can prevent a lot of confusion later.

Final Thought

For some Aspen clients, further study provides both a career advantage and a real tax benefit. For others, it is purely an investment in changing direction.

The important thing is to know what applies in your situation before you rely on a deduction. If you are unsure, your Aspen advisor can walk you through your options in clear, simple language.

Super On Payday: Fundamental Changes For Employers

Wed, 17 Dec 2025 06:17:37 GMT

Ask Your Aspen Advisor:

“Can you explain Payday Super in plain English and tell me what I need to change before 1 July 2026?”

If you employ people, you already know payday can be a bit of a balancing act. Wages, tax, super and cash flow all collide at once.

From 1 July 2026 , that rhythm will change. A new system called Payday Super is now law, and it will bring superannuation much closer to payday.

The Change in Plain English

Right now, most employers pay super quarterly. Under Payday Super, from 1 July 2026 you will need to ensure super contributions reach your employees’ super funds within seven business days of each payday.

Super moves from “we sort that out later” to “we sort that out alongside wages”.

If super is not paid on time, the Superannuation Guarantee Charge (SGC) can apply. That is a catch up bill for the unpaid super, plus interest and administration costs, and it is almost always more expensive than paying on time.

The ATO will also retire the S mall Business Superannuation Clearing House from 1 July 2026, so some employers will need new systems or providers.

Why The Government is Doing This

Two main reasons:

To close an estimated 6.25 billion dollar unpaid super gap
To better protect casual and part time workers, who are most likely to miss out when super is delayed

By tying super more closely to payday, the Government wants to reduce unpaid super and help people see their balances grow steadily.

What This Means For Your Business

For many employers, this will change how you plan and view your cash flow.

You will likely:

Process super as part of your regular pay run
Track cash outflows more closely, because wages and super are closer together
Need clearer internal deadlines so nothing slips past the seven day window

If you rely on tight cash flow, have a high number of casuals or run different pay cycles across the business, this shift is especially important

Why this can be a Positive Change

Once you are set up, Payday Super can make life easier.

No more large quarterly super spikes
Easier to spot if something has gone wrong early
Stronger trust from staff who see super paid regularly, not in irregular bursts

It moves you towards a smoother, more predictable rhythm.

How to Get Reday Now

A few practical steps:

Check your payroll software – most modern systems can handle super aligned with pay runs, but you may need to review your settings
Map your pay cycles – work out your pay dates and count seven business days after each one
Stress test your cash flow – talk to us about how more frequent super will affect your cash position
Train whoever runs payroll – make sure they understand the new timing and what will be expected

Payday Super is not about catching you out. It is about building a fairer, more reliable system for employees and a cleaner rhythm for businesses.

If you would like help understanding the impact on your business, or want a simple plan to move towards payday aligned super, reach out to your Aspen advisor.

AML Is Coming: Why Your Accountant Will Ask More Questions

Wed, 17 Dec 2025 05:57:51 GMT

Ask your Aspen Advisor

“Are my current companies and trusts ready for the new AML rules, or could they hold up banks and transactions after 1 July 2026?”

If you feel like banks already ask for your whole life story just to open an account, you are not wrong. For years, they have had to follow strict anti money laundering and counter terrorism financing rules.

From 1 July 2026 , a lot of that world will extend to accountants, law firms and other professional service businesses. That includes Aspen and many of the advisers you and your clients rely on.

This is not about making life harder. It is about Australia tightening the net on fraud, tax crime and terrorism funding. The practical impact for you is simple. You will see more ID checks, more questions and more focus on getting the paperwork right.

The Two Dates that Matter

31 March 2026
Firms that set up or manage companies and trusts, or act in key roles such as trustee or nominee, must be registered with AUSTRAC as “reporting entities”.

1 July 2026
From this date, when you ask us to set up or restructure a company or trust, we will be required to:

Check and verify the identity of the relevant people
Identify who really owns or benefits from the structure
Ask more questions where needed about the source of funds and wealth
Keep stronger records and monitor for suspicious activity

In other words, we will need to behave more like a bank when it comes to risk and documentation.

What this will feel like for you

In practice, you can expect:

Tighter ID checks
Names, dates of birth and ID documents will need to match exactly. Missing middle names, name changes or minor spelling issues can cause delays.
Closer review of documents
Trust deeds, company constitutions and related documents will be reviewed more carefully. If details are wrong or missing, they may need to be corrected before a bank or regulator is comfortable.
More questions about ownership and money flow
We may ask who ultimately benefits from a structure, or how a large contribution is being funded. This is not suspicion, it is compliance.
Some additional cost
We will be using secure systems for verification and monitoring. There will be reasonable fees associated with that work.

Why this can actually help you

While this might sound like extra hassle, done properly it can strengthen your position.

Banks are less likely to reject documents at the last minute
Your structures are better prepared if they are ever reviewed
Old paperwork issues are more likely to be fixed rather than ignored

You end up with cleaner structures and fewer surprises.

What you can do now

You do not need to wait until the deadline.

Make sure your ID matches your ASIC and legal records
Pull out key documents such as trust deeds and constitutions and check they are complete
Let us know early if you are planning restructures, new entities or major changes
Talk to us if you suspect any old documentation might not be quite right

A short review now is much easier than a rushed fix when a bank is holding up a settlement.me.

Final Thought

AML is a serious change, but it does not need to be scary. If you are unsure how ready your structures are, speak with your Aspen advisor.

We can help you work out what is fine, what needs a tidy up and how to move into the new regime with confidence.

Cyber In Accounting: Safeguarding Financial Data in a Digital Age

Thu, 06 Nov 2025 03:21:29 GMT

Cyber In Accounting: Safeguarding Financial Data in a Digital Age

Cybersecurity is fast becoming a critical business strategy – and if it’s not, it should be. Many businesses hold critical data that poses significant risk to both businesses and their customers if the data they hold is not safeguarded from cybersecurity threats.

The largest threats to businesses come from external entry points exposed by staff, through phishing links, malware being downloaded and payment fraud. The valuable information held by some businesses (such as professional firms) make them prime for cyber attacks, which can have devastating impacts on businesses and their customers.

Outside of Government organisations, the financial services sector was the most targeted industry in Australia in FY 2024/25, with the cost of these cybercrimes increasing up to 55% for small and medium businesses.

People: The Biggest Cyber Risk

But where does your cyber strategy start, and how do you know what the risks are? The biggest risk to Australian businesses is its people. More than 85% of all cybersecurity incidents are caused by human error. The top three incident types all rely on staff and business decisions to gain access into systems, meaning it is more important than ever to conduct regular staff training.

Staff training should focus on identifying phishing attempts, understanding what to look for in malicious emails and content and how to maintain healthy password practices.

Technology and Updates: Don’t Let Legacy Systems Create Weaknesses

Another considerable business risk is legacy hardware and software being used in your environment. It might seem like a small frustration, turning your computer off for updates regularly, and using the latest versions of software, replacing hardware to align with required standards, but it works to close the gaps of security vulnerabilities.

Recommendations aligned with the Australian Signals Directorate’s Essential 8 Framework are that all critical vendor patches are applied within 48 hours of release, and any non-critical patches are applied within two weeks. This method applies to networking equipment, third party vendor software and device operating systems.

Recently, Microsoft have made the Windows 10 Operating System End of Life (EOL) which means that devices still running on this operating system can no longer receive security updates, a vulnerability that malicious actors will no doubt use to their advantage.

Visibility and Monitoring: Detecting Threats Early

Realistically, you cannot defend what you cannot see. An important safeguard is event logging, reporting and alerting being setup in your environment.

Just by way of example, the average breach for financial services businesses in Australia takes 288 days to detect. 288 days of unmitigated breaches, access to customer and staff data,

contact lists, patterns of behaviour and possibly already setting up rules and routing inside the environment that the business is entirely unaware of.

Setting up appropriate logging and alerts to ensure that you are notified when something risky, like logging in from Australia at 10am and Japan at 11am, is happening inside your environment. Understanding when unauthorised access to systems has occurred is critical in being able to then assess the potential scope of an incident, so it can then be managed.

The Importance of a Cyber Incident Response Plan

A Cyber Incident Response Plan (CIRP) might seem like another piece of paper, but it is critical in defining the steps that your organisation needs to take to act, mitigate and respond to a cyber event. An adequate CIRP will include several critical components, but the incident management team, detection methods, incident categorisation, evidence process and resolution plans form the baseline of what will help an organisation act swiftly, and appropriately for the event type.

A CIRP that has been tested regularly ensures that in the event of a cybersecurity incident, your organisation has a prioritised and effective response that deals with the technical concerns, the potential data breaches and any ongoing communications required either internally or externally with customers and stakeholders.

Protecting Your Business, Clients, and Reputation

In today’s digital world, it is never more important for businesses to ensure their data, systems, staff and clients are protected from threats. Cybersecurity and risk strategies are critical in this landscape and should consider different components, including staff training, technology strategies, data and information handling policies, and incident response plans.

Considering cybersecurity as a business strategy is how organisations will survive, and thrive, and ensure that their reputation, financial security and customers are protected.

Proposed Extension of the Instant Asset Write-Off and Other Tax Measures

Thu, 06 Nov 2025 03:16:03 GMT

Proposed Extension of the Instant Asset Write-Off and Other Tax Measures

A new Bill before Parliament – the Treasury Laws Amendment (Strengthening Financial Systems

and Other Measures) Bill 2025 – proposes several key changes that could affect small businesses, listed companies, and the not-for-profit sector. The headline measure is the proposed extension of the $20,000 instant asset write-off for another year, to 30 June 2026.

Small Business Boost: $20,000 Instant Asset Write-Off Extended

If the Bill passes, small businesses with an aggregated annual turnover of less than $10 million will continue to be able to immediately deduct the full cost of eligible assets costing under $20,000 (excluding GST) through to 30 June 2026.

The threshold applies per asset, meaning multiple purchases can qualify if each individual item is under the limit. To claim the deduction, the asset must be first used or installed ready for use by the new deadline.

This measure remains one of the simplest and most practical tax incentives available to small businesses. It provides a direct cash-flow benefit by allowing the full deduction in the year of purchase instead of spreading depreciation over several years, as long as the taxpayer would actually have a tax bill for that year. For example, a tradesperson upgrading tools, or a café purchasing a new fridge or coffee machine, can immediately claim the full deduction – freeing up cash for reinvestment elsewhere in the business.

While the proposal still needs to pass Parliament, now is the time to plan. If you are considering new equipment or technology upgrades, budgeting early ensures assets can be delivered and installed before the cut-off date once the law is enacted.

Strengthened Corporate Disclosure

The Bill also proposes tighter disclosure rules for listed companies. Changes to the Corporations Act 2001 would require the disclosure of equity derivative interests – such as options, swaps, and short positions – under the substantial holding regime. These reforms are designed to improve market transparency and make it harder for significant shareholdings or control interests to remain hidden.

For listed entities, this will increase compliance obligations and may require updates to internal monitoring and reporting systems. Investors with substantial positions in listed companies should also review their current arrangements to ensure future compliance.

Greater Transparency for Charities

For the not-for-profit sector, the ACNC Commissioner would gain the power to publicly disclose “protected information” such as details of investigations, provided it meets a public harm test. This aims to strengthen public confidence in the charity sector by showing that the regulator is taking action where misconduct occurs.

For well-run charities, stronger transparency can enhance community trust – but it also highlights the need for robust governance, record-keeping, and compliance processes.

Financial Regulator Reviews Simplified

Finally, the Bill would reduce the frequency of reviews of ASIC and APRA by the Financial Regulator Assessment Authority from every two years to every five. While largely administrative, this signals a shift toward streamlined oversight to allow regulators to focus on core functions.

What You Should Do Now

Although these measures are still before Parliament, it’s wise to start planning. For small businesses, consider your 2025–26 capital expenditure needs and make sure any planned purchases can be installed and ready for use by 30 June 2026 if you are hoping to rely on the upfront deduction. For charities and listed entities, review governance and reporting frameworks to prepare for greater transparency requirements.

We’ll keep you updated as the Bill progresses. In the meantime, contact us if you’d like to discuss how these proposed changes might fit into your business or investment strategy.

When Medical Bills Meet Tax Rules – Lessons from a Heartbreaking Case

Tue, 04 Nov 2025 06:53:50 GMT

When Medical Bills Meet Tax Rules – Lessons from a Heart-breaking Case

Imagine this: after years of hardship and illness, you’re forced to retire early on a Total and Permanent Disability (TPD) pension from your super fund. It’s your only income stream. Then come the medical bills – tens of thousands of dollars in treatments to manage the very conditions that ended your career. You might assume those costs are tax deductible as the TPD pension was payable because of this disability.

Unfortunately, a recent tribunal case shows it’s not that simple. In Wannberg v Commissioner of Taxation [2025] ARTA 1561, the Administrative Review Tribunal (ART) upheld the ATO’s decision to deny nearly $100,000 in medical deductions. The case is a stark reminder that the tax system draws a sharp line between earning income and dealing with your health.

The Story Behind the Case

The taxpayer, Mr Wannberg, had left the workforce due to severe mental and physical health issues caused by years of abuse. His TPD pension from his super fund was his only income. In 2024, he applied to the ATO for a private ruling, asking whether about $98,000 in medical expenses – including psychotherapy, residential treatment, and dental work – could be claimed as deductions.

His argument was heartfelt and logical: these treatments were essential to manage his disabilities and sustain his eligibility for the pension. He compared his situation to a 2010 High Court case (Anstis), where a student was allowed to deduct self-education costs linked to her Youth Allowance.

But the ATO said no – and the tribunal agreed.

Why the Deductions Failed

The key issue came down to a single piece of tax legislation: section 8-1 of the Income Tax Assessment Act 1997. To be deductible, an expense must be incurred “in gaining or producing your assessable income” and must not be of a private or domestic nature.

The tribunal found no direct link – or “nexus” – between the medical treatments and the pension income. The TPD pension was payable because of his disability, not because of any ongoing effort to maintain it. As the tribunal put it, the medical costs helped him live with his condition, but didn’t produce the pension.

In other words, while staying healthy might be personally essential, it doesn’t make those expenses tax-deductible. The costs were considered private in nature – similar to most therapy, medical, or dental bills.

What This Means for You

This decision offers a few key takeaways for anyone receiving disability pensions, super income streams, or other support payments:

Understand the “nexus” test: An expense must directly help you earn your income. Medical costs for managing a condition usually don’t meet that test.
Recognise the private line: Even if a treatment relates to your ability to work, it’s likely still “private” unless it directly relates to producing income
Treatment vs assessment: Some taxpayers are required to obtain certificates from medical practitioners to maintain a licence so that they can continue with their current income producing activities. These costs are often deductible, unless the individual receives medical treatment.
Plan for non-deductible costs: If you rely on disability or super pensions, factor medical expenses into your financial plan. Consider insurance options, offsets, or rebates (like private health or Medicare levy exemptions) to ease the load.
Seek advice early: Before spending large sums, get an ATO private ruling or professional advice.

The Wannberg case is a tough reminder that the tax law cares more about how income is produced than how life is lived. The system draws a firm line between personal wellbeing and income generation – and unfortunately, even genuine medical needs often fall on the wrong side of that line.

If you’re unsure whether an expense might be deductible, don’t guess. Talk to us first. We can help you plan ahead, stay compliant, and make the most of the rules that do work in your favour.

Super Tax Shake-Up: Big Balances Beware

Mon, 03 Nov 2025 07:32:43 GMT

Super Tax Shake-Up: Big Balances Beware

If your super balance is comfortably below $3 million, you can probably relax — the proposed changes to the super rules shouldn’t adversely affect you (yet). But if your super is nudging that level, or if you’re clearly over, the Treasurer’s latest announcement could change how you think about super’s generous tax breaks.

For some time now the Government has been planning to introduce targeted measures to reduce tax concessions for those with superannuation balances over $3 million. This has commonly been referred to as the Division 296 tax.

However, the Government has reworked the proposed new tax — part of the Better Targeted Superannuation Concessions (BTSC) policy — attempting to make it simpler, fairer, and more practical. After a wave of industry criticism, the revised version keeps the broad policy intent (reducing tax concessions for very large balances) but removes some of the more problematic features.

Let’s break down what’s changed and what it means for you.

What’s Changing — and Why It’s Simpler

The original 2023 proposal aimed to apply an extra 15% tax on “earnings” from super balances above $3 million. The big flaw? “Earnings” included unrealised gains — paper profits on assets like property or shares that hadn’t been sold. This meant some people could have owed tax on increases in value they hadn’t actually received in cash.

The reworked model drops unrealised gains from the equation entirely, taxing only realised earnings — actual income and capital gains when assets are sold. This makes the system far more practical and aligned with everyday tax rules. No more worrying about funding a tax bill on assets you haven’t sold.

A Fairer, Tiered Approach

The new rules introduce a two-tier system for high balances:

Tier 1 ($3m–$10m): Extra 15% tax on earnings from this portion (making a total rate of 30%).
Tier 2 (over $10m): Extra 25% tax on earnings above $10m (for a total rate of 40%).

Both thresholds will be indexed annually to inflation ($150,000 steps for the $3m tier and $500,000 for the $10m tier), which should prevent “bracket creep” over time. Importantly, the start date has been pushed back to 1 July 2026, with the first assessments expected in 2027–28. The Government estimates less than 0.5% of Australians will be affected at the $3m level, and fewer than 0.1% at the $10m mark.

What This Means in Practice

Here are a couple of examples from Treasury to help you get your head around this.

Consider Megan, who has a $4.5 million super balance split between an SMSF and an APRA fund. She earns $300,000 in realised income for the year within the super system. The super balance above $3m represents is one-third of the total balance, so she’ll pay $15,000 in additional Division 296 tax (15% × 33.33% × $300,000).

Emma, on the other hand, has $12.9 million in her SMSF and $840,000 in earnings. She pays 15% on the Tier 1 portion and an extra 10% on the Tier 2 portion—a total of around $115,000 in extra tax.

These examples show how the tax scales up progressively. The ATO will calculate each individual’s total super balance across all funds (SMSFs and APRA funds) and determine the proportionate amount of earnings to be taxed.

Why It’s Still Good News (for Most)

For many SMSF members, this update is a relief. By removing unrealised gains, it eliminates valuation headaches and liquidity pressures — particularly for those holding property or unlisted assets.

That said, individuals with super balances above $10m will face a higher overall rate (up to 40%), which may prompt a rethink of long-term strategies.

However, remember that updated legislation relating to this measure hasn’t been introduced to Parliament and things could change before the proposed rules become reality.

Low Income Superannuation Tax Offset

In addition to introducing the revamped Division 296 tax, the Government has announced that it will increase the Low Income Superannuation Tax Offset (LISTO) from $37,000 to $45,000 from 1 July 2027.

The maximum payment will also increase to $810.

Treasury estimates that the average increase in the LISTO payment will be $410 for affected workers.

What to Do Now

Check your total super balance (TSB) now and project where it may be by 2026.
Seek advice early — strategies like managing liquidity, reviewing asset allocations, and timing asset sales could make a real difference.
Stay informed — draft legislation is expected in 2026. We’ll keep you updated through our newsletters.

Overall, the Government’s revised approach strikes a more balanced tone: fewer administrative headaches for most, but less generosity for the ultra-wealthy. If your balance is near or above $3 million, now’s the time to plan ahead — not panic.

Your future self (and your accountant) will thank you.

Accessing superannuation funds for medical treatment or financial hardship

Thu, 02 Oct 2025 03:25:51 GMT

Accessing superannuation funds for medical treatment or financial hardship

Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible.

Early access is generally available in two situations:

Financial hardship – where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses.
Compassionate grounds – Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain.

Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information. If approved the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below.

When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account. It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance). The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early.

Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations.

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

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

Thu, 02 Oct 2025 03:21:44 GMT

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

The Federal Government recently wrapped up a consultation process on supermarket unit pricing. While the topic might sound like a purely consumer issue, it could have very real commercial impacts for businesses supplying into the grocery sector.

On 1 September 2025, Treasury opened consultation on strengthening the Retail Grocery Industry (Unit Pricing) Code of Conduct. Submissions closed just a few weeks later on 19 September 2025, marking the end of a very short opportunity for stakeholders to have their say.

A Quick Recap

Unit pricing is what allows shoppers to compare costs per standard measure (e.g. $/100g or $/litre) across different pack sizes and brands. Since 2009, large supermarkets have been required to display this information to help customers spot value. While compliance has been relatively low-cost and penalties limited, the Government’s review signals that much tighter rules could be on the way.

Why Now?

The ACCC’s recent supermarket inquiry highlighted that while unit pricing helps, there are still gaps. The big concern is shrinkflation—when pack sizes quietly reduce while prices remain the same or higher. With cost-of-living pressures dominating headlines, the Government is looking at clearer, fairer pricing to rebuild consumer trust.

What Might Change?

Proposals considered in the consultation paper include:

Shrinkflation alerts – supermarkets may need to flag when a product becomes smaller without a matching price cut.
Clearer displays – larger, more prominent unit prices both in-store and online.
Wider coverage – expanding the rules beyond major supermarkets to smaller retailers and online sellers.
Standardised measures – eliminating confusing “per roll” vs “per sheet” comparisons.
Civil penalties – introducing fines for non-compliance.

The Commercial Impact

For suppliers, packaging decisions could come under closer scrutiny. For retailers, costs might arise from updating shelf labels, software, or e-commerce systems. But there are also opportunities: businesses that embrace transparency could build loyalty and stand out in a competitive market.

What You Should Do

Now that the consultation period has closed, Treasury will consider submissions and the Government is expected to announce its response later this year. Businesses in food, grocery, and household goods should stay alert—the final shape of the rules could affect pricing, packaging, and compliance obligations across the sector.

At Aspen Corporate, we can help you model potential compliance costs, assess financial impacts, and prepare for upcoming regulatory change. Reach out to discuss how this review might affect your business.

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

Thu, 02 Oct 2025 03:14:25 GMT

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

Leaving debts outstanding with the ATO is now more expensive for many taxpayers.

As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years.

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy.

Refinancing ATO debt

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities.

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as:

GST
PAYG instalments
PAYG withholding for employees
FBT

However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not.

Individuals

If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity:

Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible.
Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible.

However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible.

Companies and trusts

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business.

However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them.

Partnerships

The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts.

However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity.

Practical takeaway

Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible.

Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates.

The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction.

If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Trust Resolutions – Why Timing and Evidence Matter

Thu, 02 Oct 2025 03:08:57 GMT

Trust Resolutions – Why Timing and Evidence Matter

A recent decision of the Administrative Review Tribunal (Goldenville Family Trust v Commissioner of Taxation [2025]) highlights the importance of documentation and evidence when it comes to tax planning and the consequences of not getting this right.

The case involved a family trust which generated significant amounts of income. For the 2015, 2016 and 2017 income years, the trustee attempted to distribute most of the income to a non-resident beneficiary. As the trustee believed the income was classified as interest (this was challenged successfully by the ATO), the trustee assumed that the income would be subject to a final Australian tax at 10%, under the non-resident withholding rules. This was clearly more favourable than having the income taxed in the hands of Australian resident beneficiaries at higher marginal rates.

However, the ATO argued that the distribution resolutions were invalid and the Tribunal agreed. Why? The main reason was a lack of evidence to prove that the distribution decisions were made before the end of the relevant financial years.

While there were some documents that were purportedly dated and signed “30 June”, the Tribunal wasn’t convinced that the decisions were actually made before year-end and it was more likely that these documents were prepared on a retrospective basis. The evidence suggested the decisions were probably made many months after year-end, once the accountant had finalised the financial statements.

The outcome was that default beneficiaries (all Australian residents) were taxed on the income at higher rates.

Timing of trust resolution decisions is critical

For a trust distribution to be effective for tax purposes, trustees must reach a decision on how income will be allocated by 30 June each year (or sometimes earlier, depending on the trust deed). It might be OK to prepare the formal paperwork later, but those documents must reflect a genuine decision made before year-end.

For example, let’s say a trust has a corporate trustee with multiple directors. The directors meet at a particular location on 29 June and make formal decisions about how the income of the trust will be appointed to beneficiaries for that year. Someone keeps handwritten notes of the meeting and the decisions that are made. On 5 July the minutes are typed up and signed. The ATO indicates that this will normally be acceptable, but subject to any specific requirements in the trust deed.

If the ATO believes the decision was made after 30 June (or documents were backdated), the resolution can be declared invalid. In that case, you might find that one or more default beneficiaries are taxed on the taxable income of the trust or the trustee is taxed at penalty rates. This could be an unexpected and costly tax outcome and could also lead to other problems in terms of who is really entitled to the cash.

Broader lessons – it’s not just about trust distributions

The timing issue is not confined just to trust distribution situations. Other areas of the tax system also turn on when a decision or agreement is actually made, not just when it is eventually recorded.

For example, if a private company makes a loan to a shareholder in a given year, that loan must be repaid in full or placed under a complying Division 7A loan agreement by the earlier of the due date or lodgement date of the company’s tax return for the year of the loan. If not, a deemed unfranked dividend can be triggered for tax purposes.

If a complying loan agreement is put in place then minimum annual repayments normally need to be made to avoid deemed dividends being recognised for tax purposes

A common way to deal with loan repayments is by using a set-off arrangement involving dividends that have been declared by the company. However, in order for the set-off arrangement to be valid there are a number of steps that need to be followed before the relevant deadline. The ATO will typically want to see evidence which proves:

When the dividend was declared; and
When the parties agreed to set-off the dividend against the loan balance.

If there isn’t sufficient evidence to prove that these steps were taken by the relevant deadline then you might find that there is a taxable unfranked deemed dividend that needs to be recognised by the borrower in their tax return.

Documenting decisions before year-end

The key lesson from cases like Goldenville is that documentation shouldn’t be an afterthought — lack of contemporaneous documentation can fundamentally change the tax outcome. What normally matters most is when the relevant decision is actually made, not when the paperwork is drafted.

In practice, this often means:

Check relevant deadlines and what needs to occur before that deadline.
If a decision needs to be made before the deadline, ensure that a formal process is followed to do this. For example, determine whether certain individuals need to hold a meeting or whether a circular resolution could be used.
Produce contemporaneous evidence of the fact that the decision has been made. You might consider sending a brief email to your accountant or lawyer explaining the decision that has been made before the relevant deadline , basically providing a time-stamped record of the decision.
Finalise paperwork: formal minutes of meetings can sometimes be prepared after year-end, but they must accurately reflect the earlier decision.

Thinking carefully about timing — and building a habit of producing clear evidence of decisions as they are made — is often the difference between a tax planning strategy working as intended and an expensive dispute with the ATO.

RBA cuts rates to 3.60%: what this means for you

Wed, 03 Sep 2025 05:55:36 GMT

RBA cuts rates to 3.60%: what this means for you

In a widely anticipated move on 12 August 2025, the Reserve Bank of Australia (RBA) delivered a 25 basis point rate cut, lowering the cash rate from 3.85% to 3.60%, the third reduction this year. This rate is now at its lowest level since March 2023 signalling renewed monetary easing amid persistent economic fragility.

Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did however leave the door open for further action if conditions warrant it. The unanimous decision was made because:

Headline inflation has eased to 2.1% year on year and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target.
There’s still soft economic growth, quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%.

This is a welcome move for many with flow-on impacts across a wide section of the community.

Borrowing and mortgages:

A borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually.

Refinancing:

The latest cut has triggered a wave of refinancing, Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses.

Housing and lending:

The cut may revive home buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief.

Currency and markets:

The Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, particularly the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins.

While there are always winners and losers with a decision like this, for many Australians this is a positive change. Either way, please do reach out if we can help you understand how to best manage your debt, exploring refinance options, adjust pricing models or evaluating investment readiness.

Superannuation guarantee: due dates and considerations for employees and employers

Wed, 03 Sep 2025 05:52:44 GMT

Superannuation guarantee: Due dates and considerations for employees and employers

On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make

superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday.

To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH).

The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers.

Employers

To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date.

Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions.

If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO link: The super guarantee charge | Australian Taxation Office

Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this.

Employees

It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips.

Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO.

There is some helpful discussion on this process at the following link.

Non-compete clauses: The next stage

Wed, 03 Sep 2025 05:48:54 GMT

Non-compete clauses: The next stage

Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers.

Treasury has since issued a consultation paper, seeking feedback in the following key areas:

How the proposed ban on non-compete clauses should be implemented;
Whether additional reforms are required to the use of post-employment restraints, including for high-income employees;
Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and
Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act.

Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment.

If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.

Creating a more dynamic and resilient economy

Wed, 03 Sep 2025 02:32:24 GMT

Creating a more dynamic and resilient economy

The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations.

The PC has now released its interim report which presents some draft recommendations that are focused on two key areas:

Corporate tax reform to spur business investment
Where efficiencies could be made in the regulatory space (ie, cutting down on red tape)

The interim report makes some interesting observations and key features of the draft recommendations are summarised below.

Corporate tax reform

The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes.

The first stage of this process would involve two linked components:

Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate.
New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion.

Cutting down on red tape

The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps.

The proposed fixes include:

The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism.
Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered.
Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation.

These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia.

The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.

A win for those carrying student debt

Wed, 03 Sep 2025 02:30:04 GMT

A win for those carrying student debt

In support of young Australians and in response to the rising cost of living, the Australian Government has passed legislation to reduce student loan debt by 20% and change the way that loan repayments are determined. This should help students significantly more than the advice from outside of Parliament - cut down on the smashed avo.

20% reduction in student debt

The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:

HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
VET Student loans
Australian Apprenticeship Support Loans
Student Start-up Loans
Student Financial Supplement Scheme

The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied.

If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.

The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility.

Changes to repayments

The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments. The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.

Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000.

Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO. For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

RBA Holds Rates at 3.85%: What this means for your business strategy

Thu, 07 Aug 2025 08:22:58 GMT

RBA Holds Rates at 3.85%: What this means for your business strategy

In a move that surprised many commentators, the Reserve Bank of Australia (RBA) held the cash rate steady at 3.85% in July. A show of caution over action, amid mixed economic signals. Despite headline inflation easing within the RBA’s target band, concerns over economic fragility and employment softness prompted the central bank to delay a widely expected cut.

Why the RBA waited

The Board is awaiting June quarter CPI data to assess whether inflation stability is sustainable
Australia’s labour market is showing early signs of softening, and business confidence has dropped slightly
Consumer spending remains muted, especially among mortgage holding households, which has led some economists to call for a rate reduction to spur activity.

Potential impacts

The interest rate hold means ongoing pressure on loan repayments and cash flow, particularly for those with variable debt or finance leases. Businesses relying on consumer discretionary spending may continue to feel the squeeze. The hold does however give business owners time to prepare. Analysts expect a possible cut in late Q3 or early Q4 if data trends continue potentially providing breathing room ahead of the holiday period. Given where things are at it’s a good time to review your debt exposure, optimise cash flow and consider refinancing options.

There’s a lot to take in. If we can help you with any of the content that’s been covered, please reach out.

Superannuation Rates and Thresholds Updates

Thu, 07 Aug 2025 08:22:28 GMT

Superannuation rates and thresholds updates

Super guarantee rate now 12%: what it means for employers

From 1 July 2025, the superannuation guarantee (SG) rate officially rose to 12% of ordinary time earnings (OTE). This is the final step in the gradual increase legislated under previous reforms.

What’s changed?

Old rate: 11.5% (up to 30 June 2025)

New rate: 12% (from 1 July 2025)

This increase affects cash flow, payroll accruals and employment contracts, especially where total remuneration includes superannuation.

Employer checklist

Update payroll software : ensure systems are calculating 12% SG correctly from 1 July 2025 pay runs.

Review employment agreements : if contracts are set to inclusive of super, the take-home pay of employees may reduce unless renegotiated or the employer decides to bear the cost of the increased SG rate.

Budget for higher super contributions : consider possible cash flow impacts.

Remember that significant penalties can be imposed for late or incorrect SG payments, including loss of deductions, interest and other administration charges.

Personal superannuation contributions

The annual concessional contribution cap will remain at $30,000 for the 2025/2026 financial year. The annual non-concessional contribution (NCC) cap is set at four times the concessional contribution cap meaning it will also remain at $120,000.

Although the annual NCC cap has not changed, NCCs can now be made by individuals with a total super balance (TSB) of less than $2,000,000 on 30 June 2025 (assuming they have not reached the age 75 deadline and any prior bring forward periods are considered). This is due to the fact that the upper TSB limit links to the general transfer balance cap (TBC) which has increased to $2,000,000.

The relevant TSB amounts for NCCs in the 2025/2026 financial year are summarised in the table below:

Personal deductible contributions

A superannuation fund member may be able to claim a deduction for personal contributions made to their super fund with personal after-tax funds. A member will normally be eligible to claim a deduction if:

The member makes an after-tax contribution to their superannuation fund in the relevant financial year
They are aged under 67 or 67 to 74 and meet a work test or work test exemption
They have provided the superannuation fund with a valid notice of intent to claim
The super fund has provided the member with acknowledgement of the notice of intent to claim

Notice of intent to claim

If the member is eligible and would like to claim a deduction, then they must notify their super fund that they intend to claim a deduction. The notice must be valid and in the approved form – Notice of Intent to Claim or vary a deduction for personal super contributions (NAT 71121).

The tax legislation provides a notice of intent to claim will be valid if:

The individual is still a member of the fund
The fund still holds the contribution
It does not include all or part of an amount covered by a previous notice
The fund has not started paying a super income stream using any of the contribution
The contributions in the notice of intent have not been released from the fund that the individual has given notice to under the FHSS scheme
The contributions in the notice of intent don't include FHSSS amounts that have been recontributed to the fund.

What you need to consider

The member must provide the notice of intent to claim to the fund by the earlier of:

The day the individual lodges their income tax return for the relevant financial year; or
30 June of the following financial year in which the individual made the contribution.

However, if a super fund member provides a notice of intent after they have rolled over their entire super interest to another fund, withdrawn the entire super interest (paid it out of super as a lump sum), or commenced a pension with any part of the contribution, the notice will not be valid.

This means the individual will not be able to claim a deduction for the personal contributions made before the rollover or withdrawal.

Updated Superannuation and Tax Thresholds: 2025/2026

Remaining unchanged

The following thresholds will remain unchanged for the 2025/2026 financial year.

Luxury Cars: The Impact of the Modified Tax Rules

Thu, 07 Aug 2025 03:16:39 GMT

Luxury cars: The Impact of the Modified Tax Rules

With the purchasing of luxury vehicles on the rise it’s important to be aware of some specific features of the tax system that can impact on the real cost of purchase. Often the tax rules provide taxpayers with a worse tax outcome if the car will be used for business or other income producing purposes compared with a non-luxury car, but this depends on the situation.

Let’s take a look at the key features of the tax system dealing with luxury cars and the practical impact they can have on your tax position.

Depreciation deductions and GST credits

Normally when someone purchases a motor vehicle which will be used in their business or other income producing activities there will be an opportunity to claim depreciation deductions over the effective life of the vehicle. Rather than claiming an immediate deduction for the cost of the vehicle, you will typically be claiming a deduction for the cost of the vehicle gradually over a number of years.

Likewise, a taxpayer who is registered for GST might be able to claim back GST credits on the cost of purchasing a motor vehicle that will be used in their business activities.

However, when you are dealing with a luxury car the tax rules will sometimes limit your ability to claim depreciation deductions and GST credits, impacting on the after-tax cost of acquiring the car.

How does it work?

Each year the ATO publishes a luxury car limit which is $69,674 for the 2025-26 income year. If the total cost of the car exceeds this limit, then this can impact the GST credits or depreciation deductions that can be claimed.

Let’s assume that Alice buys a new car for $88,000 (including GST) in July 2025. To keep things simple, let’s say Alice uses the car solely in her business activities and is registered for GST.

The first issue for Alice is that rather than claiming GST credits of $8,000, her GST credit claim will be limited to $6,334 (ie, 11th x $69,674).

We then subtract the GST credits that can be claimed from the total cost, leaving $81,666. As this still exceeds the luxury car limit, Alice’s depreciation deductions will be capped as well.

While she actually spent $89,000 on the car, she can only claim depreciation deductions based on a deemed cost of $69,674. The end result is that Alice has missed out on some GST credits and depreciation deductions because she bought a luxury car.

Exceptions to the rules

There are some important exceptions to these rules.

The rules only apply to vehicles which are classified as ‘cars’ under the tax system. That is, the car limit doesn’t apply if the vehicle is designed to carry a load of at least one tonne or it is designed to carry at least 9 passengers.

The rules only apply if the vehicle was designed mainly for carrying passengers. The way we determine this depends on the nature of the vehicle and whether we are dealing with a dual cab Ute or not.

For example, let’s assume Steve buys a Ute which is designed to carry a load of at least one tonne. This isn’t classified as a car for tax purposes so Steve won’t miss out on GST credits or depreciation deductions.

However, let’s assume Jenny has bought a dual cab Ute which is designed to carry a load of less than one tonne and fewer than 9 passengers. This is classified as a car and the luxury car limit will apply unless we can show that it wasn’t designed mainly to carry passengers. As we are dealing with a dual cab Ute, we multiply the vehicle’s designed seating capacity (including the driver's) by 68kg. If the total passenger weight determined using this formula doesn’t exceed the remaining 'load' capacity, we should be able to argue that the Ute wasn’t designed mainly for the principal purpose of carrying passengers, which means that Jenny should be able to claim depreciation deductions based on the full cost of the vehicle.

The approach would be different if we were dealing with something other than a dual cab Ute, such as a four-wheel drive vehicle.

Luxury car lease arrangements

Normally when someone enters into a lease arrangement for a car and they use the car in their business or employment duties there’s an opportunity to claim deductions for the lease payments, adjusted for any private usage.

However, if the value of the car exceeds the luxury car limit then the tax rules apply differently. Basically, what happens is that the taxpayer is deemed to have purchased the car using borrowed money. Rather than claiming a deduction for the actual lease payments, instead we will be claiming deductions for notional interest charges and depreciation, subject to the luxury car limit referred to above.

Luxury car tax

Cars with a luxury car tax (LCT) value which is over the LCT threshold for that year are subject to LCT, which is calculated as 33% of the amount above the LCT threshold.

The LCT thresholds for the 2025-26 income year are:

$91,387 for fuel-efficient vehicles
$80,567 for all other vehicles that fall within the scope of the LCT rules

From 1 July 2025 the definition of a fuel-efficient vehicle has changed, meaning that a car will only qualify for the higher LCT threshold if it has a fuel consumption that does not exceed 3.5 litres per 100km (this was 7 litres per 100km before 1 July 2025).

Buying a car or other motor vehicle can be a complex process and there will be a range of factors to consider. If you need assistance with the tax side of things please let us know before you jump in and sign any agreements.

Interest Deductions: Risks and Opportunities

Wed, 06 Aug 2025 07:09:12 GMT

Interest Deductions: Risks and Opportunities

This tax season, we’ve seen a surge in questions about whether interest on a loan can be claimed as a tax deduction. It’s a great question as the way interest expenses are treated can significantly affect your overall tax position. However, the rules aren’t always straightforward. Here’s what you need to know.

The purpose of the loan

The most important thing when looking at the tax treatment of interest expenses is to identify what the borrowed money has been used for. That is, why did you borrow the money?

For interest expenses to be deductible you generally need to show that the borrowed funds have been used for business or other income producing purposes. The security used for the loan isn’t relevant in determining the tax treatment.

Let’s take a very simple scenario where Harry borrows money to buy a new private residence. The loan is secured against an existing rental property. As the borrowed money is used to acquire a private asset the interest won’t be deductible, even though the loan is secured against an income producing asset.

Redraw v offset accounts

While the economic impact of these arrangements might seem somewhat similar, they are treated very differently under the tax system. This is an area to be especially careful with.

If you have an existing loan account arrangement, you’ve paid off some of the loan balance and you then use a redraw facility to access those funds again, this is treated as a new borrowing. We then follow the golden rule to determine the tax treatment. That is, what have the redrawn funds been used for?

An offset account is different because money sitting in an offset account is basically treated much like your personal savings. If you withdraw money from an offset account you aren’t borrowing money, even if this leads to a higher interest charge on a linked loan account. As a result, you need to look back at what the original loan was used for.

Let’s compare two scenarios that might seem similar from an economic perspective:

Example 1: Lara’s redraw facility

Lara borrowed some money five years ago to acquire her main residence. She has made some additional repayments against the loan balance.

Lara redraws some of the funds and uses them to acquire some listed shares. Lara now has a mixed purpose loan. Part of the loan balance relates to the main residence and the interest accruing on this portion of the loan isn’t deductible. However, interest accruing on the redrawn amount should typically be deductible where the funds have been used to acquire income producing investments.

Example 2: Peter’s offset account

Peter also borrowed money to acquire a main residence. Rather than making additional repayments against the loan balance, Peter has deposited the funds into an offset account, which reduces the interest accruing on the home loan. Peter subsequently withdraws some of the money from the offset account to acquire listed shares. This increases the amount of interest accruing on the home loan. However, Peter can’t claim any of the interest as a deduction because the loan was used solely to acquire a private residence. Peter simply used his own savings to acquire the shares.

Parking borrowed money in an offset account

We have seen an increase in clients establishing a loan facility with the intention of using the funds for business or investment purposes in the near future. Sometimes clients will withdraw funds from the facility and then leave them sitting in an existing offset account while waiting to acquire an income producing asset. This can cause problems when it comes to claiming interest deductions.

First, even if the offset account is linked to a loan account that has been used for income producing purposes, this won’t normally be sufficient to enable interest expenses incurred on the new loan from being deductible while the funds are sitting in the offset account.

For example, let’s say Duncan has an existing rental property loan which has an offset account attached to it. Duncan takes out a new loan, expecting to use the funds to acquire some shares. While waiting to purchase the shares, he deposits the funds into the offset account, which reduces the interest accruing on the rental property loan. It is unlikely that Duncan will be able to claim a deduction for interest accruing on the new loan because the borrowed funds are not being used to produce income, they are simply being applied to reduce some interest expenses on a different loan.

To make things worse, there is also a risk that parking the funds in an offset account for a period of time might taint the interest on the new loan account into the future, even if money is subsequently withdrawn from the offset account and used to acquire an income producing asset.

For example, even if Duncan subsequently withdraws the funds from the offset account to acquire some listed shares, there is a risk that the ATO won’t allow interest accruing on the second loan from being deductible. The risk would be higher if there were already funds in the offset account when the borrowed funds were deposited into that account or if Duncan had deposited any other funds into the account before the withdrawal was made. This is because we now can’t really trace through and determine the ultimate source of the funds that have been used to acquire the shares.

To do

It’s worth reaching out to us before entering into any new loan arrangements. In this area, mistakes are often difficult to fix after the fact, which can lead to poor tax outcomes. That’s why getting advice from a tax professional before committing to a loan is essential. We can work alongside you and your financial adviser to ensure your loan is structured in a way that makes financial sense and protects your tax position.

Important tax update: deductions for ATO interest charges scrapped

Wed, 02 Jul 2025 02:56:08 GMT

Important tax update: deductions for ATO interest charges scrapped

If you're carrying an Australian Taxation Office (ATO) debt there is a good chance that it will cost you even more from 1 July 2025 onwards. This is because from 1 July 2025 two types of interest charges imposed by the ATO are no longer deductible.

What are the interest charges?

There are two main types of interest that are charged by the ATO. These are:

General Interest Charge (GIC): This applies when you pay your tax liability late. The ATO applies GIC to encourage tax liabilities to be paid on time and ensure taxpayers who pay late don’t have an unfair advantage over taxpayers who pay on time. GIC is calculated on a daily compounding basis on the overdue amount. The GIC annual rate for the July – September 2025 quarter is 10.78%.
Shortfall Interest Charge (SIC): This is applied when there is a shortfall in tax paid because of an amendment or correction to your tax assessment. SIC is also calculated on a daily compounding basis. The SIC annual rate for the July – September 2025 quarter is 6.78%. The ATO applies SIC to the tax shortfall amount for the period between when it would have been due and when the assessment is corrected.

What’s changing?

Historically, both GIC and SIC amounts could be claimed as a deduction. This has meant that the net after-tax cost of the interest charges has been reduced for taxpayers who have a positive income tax liability for the relevant income year.

However, the Government has passed legislation to ensure that GIC and SIC amounts incurred on or after 1 July 2025 are no longer deductible, even if the interest relates to a tax debt that arose before this date.

As these interest charges are no longer deductible, this means that the after-tax impact of the charges is higher for many taxpayers. The impact becomes greater as your tax rate increases.

For example, let’s take a look at two individuals who have the same level of tax debt owed to the ATO and the same GIC liability of $1,000 for a particular income year:

Sally is a high income earner and subject to a 45% marginal tax rate (ignoring the Medicare levy). Under the old rules the net cost of the interest charge was only $550 because she could claim a deduction for the GIC amount and this reduced her income tax liability by $450. Under the new rules no deduction is available and the full cost to Sally will be $1,000.
Adam is subject to a 30% marginal tax rate (again, ignoring the Medicare levy). Under the old rules the net cost of the interest charge was $700 because he could reduce his income tax liability by $300 by claiming a deduction for the GIC amount. As with Sally, under the new rules no deduction is available for the GIC and the full cost to Adam is $1,000.

What can I do to minimise the impact of this change?

The simple answer is to pay down ATO debt as quickly as possible. As you can see, the GIC rate is relatively high and continues to accrue on a daily basis until the debt is paid off. The faster you can pay off that debt, the lower the interest charges that will accrue.

If you can’t afford to pay off your ATO debt in the short term then you might want to explore other options, including whether you would be better off borrowing money from another source at a lower interest rate to pay off the ATO debt. In some cases it is possible to claim a deduction for interest accruing on a loan that is used to pay tax debts, although this is normally only possible if the debt arose from business activities. It isn’t normally possible to claim a deduction for interest accruing on a loan that is used to pay a tax debt that arose from investment or employment activities.

While the ATO will sometimes allow taxpayers to enter into a payment plan so that tax debts can be paid through instalments, tax debts that are subject to a payment plan still accrue GIC.

On a more proactive basis, a better option is to plan ahead to ensure that upcoming tax payments can be made on time. This will sometimes mean setting aside funds regularly for tax instalments, GST,

PAYG withholding and other amounts that need to be paid to the ATO. Keeping these amounts separate will help to ensure you’re ready when the ATO bill arrives.

If you're currently carrying tax debt or need help staying ahead of your obligations, we're here to help. Let’s work together on a strategy that keeps you compliant and protects your bottom line.

Div 296 super tax and practical things to consider

Wed, 02 Jul 2025 02:35:01 GMT

Div 296 super tax and practical things to consider

Division 296 super tax is a controversial Federal Government proposal to impose an extra 15% tax on some superannuation earnings for individuals if their total superannuation balance (TSB) is over $3 million as at 30 June of the relevant income year.

This measure is not yet law and must still pass both Houses of Parliament. At the time of publication, the start date had not been confirmed, although the Government was originally hoping that the measure would apply from 1 July 2025, with the first tax bills to be sent out sometime after 30 June 2026.

How does it work?

While we are waiting to see whether the measure will become law, let’s assume for the moment that the Government passes legislation which is consistent with the Government’s announcements to date. If so:

If your TSB is over $3 million at 30 June, a portion of your annual superannuation earnings above that threshold will be taxed at an additional 15%.
The tax is assessed to you personally and can be paid from your super or your own funds.
Superannuation earnings for this purpose reflect the increase in your net super balance for the year, adjusted for certain contributions (eg, inheritance via death benefit pension) and withdrawals.
Some exclusions apply: children on super pensions, structured settlements (personal injury), and the deceased.

It is important to remember that your TSB is the aggregate of all Australian superannuation interests (including balances with APRA funds, SMSFs and defined benefit schemes) held at the end of the income year.

If the start date is 1 July 2025, then the first test date will be 30 June 2026. An individual’s TSB at this date, and each following 30 June, will determine whether they will have a Division 296 tax liability for that income year. Only where the individual has a TSB on 30 June in excess of $3 million will they have a Division 296 tax liability for that income year.

Examples

Sam’s account

30 June super balance: $4 million.
Annual growth: $120,000.
Portion above $3m: ($4m–$3m)/$4m = 25%
Taxable earnings: $120,000 × 25% = $30,000
Extra tax: $30,000 × 15% = $4,500

Chris withdraws

Chris withdraws $200,000 before 30 June so his TSB is below $3 million at year end.
Chris will not pay Division 296 tax for that year.

Lisa’s inheritance

Lisa’s balance rises from $2m to $4.5m after receiving a death benefit pension.
Only new investment growth (not the transferred amount) is taxed as earnings, but a total balance over $3m means she may still have a liability.

What can you do?

Review your super fund liquidity and cashflow planning for future tax payments
Ensure your asset valuations are up to date
Estimate your combined super balances and plan for any large transactions
Document asset values, especially for SMSF members
Seek tailored professional advice before making any changes

While we are waiting to see whether the legislation passes through Parliament and whether any significant amendments or adjustments are made to the proposed measures, if you have any questions or concerns around this in the meantime, reach out – we’re here to help.

Finfluencers: bad tax advice could cost you thousands

Wed, 02 Jul 2025 02:22:48 GMT

Finfluencers: bad tax advice could cost you thousands

They’re advising from your insta and TikTok feeds, they’ve got huge followings, they speak with conviction - financial influencers or ‘finfluencers’. Please heed our caution, taking advice from unqualified sources can have serious consequences. We’re seeing examples of misleading claims, exaggerated deductions and outright misinformation. Relying on this advice could not only leave you out of pocket but also expose you to ATO penalties, fines or in the worst case scenario - prosecution.

What’s the problem?

Many finfluencers make money by promoting financial products on behalf of companies, which means that they don’t necessarily have your best interests in mind when sharing information or insights. Finfluencers aren’t always qualified to provide advice on tax or financial products. You just can’t expect to receive solid, reliable or tailored guidance. Unfortunately, we’re seeing some influences share tax hacks that are either completely false or apply only in extremely limited situations.

The ATO and some of the accounting professional bodies have sounded the alarm on some recent false claims, including:

Claiming your pet as a work related guard dog
Writing off luxury handbags as laptop bags
Deducting fuel costs without any documentation
Trying to claim swimwear as a work uniform

These kinds of suggestions might sound plausible but following them could get you into serious trouble. The ATO uses sophisticated data matching tools to detect suspicious or inflated claims. If your deductions don’t meet the legal criteria, this could trigger an audit and if mistakes are found, the consequences can include:

An increased tax liability
Interest charges
Fines
A criminal record and in the most serious cases, imprisonment

Here’s how to stay safe and tax smart:

If it sounds too good to be true, it probably is. Dodgy deduction tips on social media are best ignored, at least until they can be verified.
Stick to trusted sources. For official tax guidance, visit ato.gov.au .
Don’t risk your business or personal reputation for a quick deduction.

If you aren’t sure, please reach out to us and we can help you stay compliant, no filters or hashtags!

Trust funds: are they still worth the effort?

Wed, 02 Jul 2025 02:16:27 GMT

Trust funds: are they still worth the effort?

For decades, trust structures have been a cornerstone of the Australian tax and financial system, prized for their asset protection and flexibility when it comes to income distributions. However, with regulatory changes and mounting administrative complexity the shine has been wearing off lately, prompting some businesses and investors to rethink their use.

Is there a shift away from trusts?

In recent years, we have noticed a slight trend of businesses transitioning from trust structures to corporate entities. This shift is largely due to increasing scrutiny on how trusts are used and the growing complexities involved in managing trusts, particularly when it comes to documentation and compliance requirements. Trustees and directors of trustee companies are realising that they need to devote more time and resources to ensure compliance with evolving and complex regulations.

One of the primary challenges in utilising trusts for business purposes is the need for timely and accurate decision making. Trustees are normally required to make decisions about distributions by the end of the financial year to prevent the profits of the trust from being taxed at penalty rates. This timing can be problematic as it might not align with the availability of complete financial information, especially for businesses that are actively trading. This can lead to difficulties in making informed decisions regarding the distribution of trust income and to achieve optimal tax outcomes.

The ATO has also intensified its focus on trust arrangements, especially when it comes to the use of integrity rules which have formed part of the tax system for many years, but haven’t tended to be applied all that often. The risk of making mistakes and being detected is probably higher than ever before.

All’s not lost (we’re here to help)

While the landscape around trusts is evolving and the scrutiny is high, this doesn’t mean that trust structures don’t still have their place. With the right support (support that we can provide in conjunction with other experts) trusts can still offer advantages that other structures can’t. They can still be a useful platform for passive investment activities, estate planning and as part of a business structure.

This isn’t the time to give up on trusts. But it is important to seek advice before setting up a trust to make sure it is the most appropriate option and to fully understand the advantages, disadvantages and practical issues that will need to be managed when using a trust structure.

The one big, beautiful bill that may not be so beautiful for Aussies

Wed, 02 Jul 2025 02:10:19 GMT

The one big, beautiful bill that may not be so beautiful for Aussies

You may have seen the viral headline about a new U.S. tax bill called the One Big Beautiful Bill, but what does it mean for Australian investors, especially super funds and small businesses with US exposure? Turns out, it could mean a hit to investment returns.

Where are things at?

Australian superannuation funds currently have about $400 billion invested in the US and tax concessions are currently available under existing tax treaties. This could change.

A new bill, backed by the Trump administration and recently passed through the House of Representatives proposes higher taxes on countries seen to be discriminating against US businesses, including Australia.

If the bill becomes law, Australian super funds could face higher taxes on US investments, directly affecting the long-term returns of super funds.

The implications

Even if you don’t have direct investments in the US, this matters. If your business is tied to superannuation funds or if you rely on consistent super returns for your retirement planning, changes like these can add pressure. It also adds a layer of uncertainty for Aussie businesses operating globally. As trade tensions rise and tax rules shift, doing business internationally becomes more complex and potentially more costly. Tax experts say these changes could override existing treaties between the US and Australia. And they’re not just aimed at big corporates, any individual or entity with US exposure could potentially be affected in some way.

What’s being done?

Industry groups including the Financial Services Council are calling on the Australian Government to step in and protect Australian investors through diplomatic and trade channels. Major super funds have already met with US lawmakers, reminding them that Australia is a significant source of capital for US markets and that strong partnerships go both ways.

That said, this legislation is still working its way through Congress and faces pushback even from some Republicans. But as one US political expert said, ‘Bills that looked doomed have passed before.’ We live in hope but it’s not over yet.

What can you do?

Using John Howard’s barometer, for now we’re at the be alert but not alarmed stage. If you’re managing a business, planning your retirement, or investing overseas, this is a reminder of how global politics can impact your bottom line.

Here’s what we recommend:

Stay informed. Tax rules can change quickly
Ensure your retirement planning is flexible enough to adjust if needed or talk to us to help you
Talk to us if you’ve got exposure to US investments, but you might need some input from a US tax specialist.

There’s undoubtedly a bit to consider in the world of tax / finance at the moment, the environment’s changing at pace. You’re not alone in this though, as always please reach out if you have any questions and concerns. We’re here to help.

ATO's New Requirements for NFPs

Tue, 17 Jun 2025 02:05:48 GMT

ATO's New Requirements for NFPs

If you are involved with running a not for profit (NFP) organisation it is important to be aware of key obligations and requirements. In particular, if the NFP qualifies as a tax exempt entity there are some specific conditions that need to be satisfied and a relatively new ATO reporting obligation which needs to be undertaken to maintain that income tax exempt status.

Annual NFP self-review return

From the 2023–24 income year, non-charitable NFPs with an active Australian Business Number (ABN) are required to lodge an annual NFP self-review return with the ATO. This return notifies the ATO of the organisation's eligibility to self-assess as income tax exempt.

The return has three sections:

Organisation details: standard information on the NFP.
Income tax self-assessment: confirmation of the organisation's income tax exempt status.
Summary and declaration: acknowledgement of the information provided.

When the return is being completed the NFP must answer ‘yes’ or ‘no’ to the question: ‘Does the organisation have and follow clauses in its governing documents that prohibit the distribution of income or assets to members while it is operating and winding up?’ This requirement needs to be satisfied in order for the NFP to self-assess its position as a tax exempt entity.

If a NFPs governing documents don’t have these clauses then it can still self-assess as income tax exempt for the 2024 income year as long as no income or assets have been

distributed to members. As a transitional arrangement, the ATO is allowing NFPs until 30 June 2025 to update their governing documents. Failing to do this will mean that the organisation cannot self-assess as income tax exempt from 1 July 2024 for the 2025 income year, which would lead to the organisation being treated as a taxable entity that might then need to lodge a tax return.

Mandatory clauses in governing documents

Governing documents are the formal documents which set out the purpose of the organisation, its character and the rules and requirements for how decisions are made, how it operates and how long it operates for.

As noted above, NFPs must include specific clauses in their governing documents to self-assess as income tax exempt. These clauses must:

Prohibit the distribution of income or assets to members during the organisation's operation and on winding up.
Ensure that any surplus assets are transferred to another NFP with similar purposes upon dissolution.

NFPs should also ensure that there are sufficient controls in place to ensure that members don’t receive income, property or assets which belong to the organisation, except where they are receiving remuneration for work performed for the entity or a reimbursement of expenses incurred on behalf of the organisation.

The advises that NFP governing documents should be reviewed at least annually or whenever there is a major change to the structure or activities of the organisation. An annual general meeting is a good time to review governing documents.

Taking a proactive approach helps identify any issues and reinforces your organisation's commitment to good governance.

Economic Crossroads: US Shrinks, China Stimulates, Australia Holds Steady

Wed, 11 Jun 2025 02:32:48 GMT

Economic Crossroads: US Shrinks, China Stimulates, Australia Holds Steady

The US economy experienced a notable slowdown in the first quarter of 2025. The latest GDP data showed the economy contracted at an annual rate of -0.3%. Businesses stockpiling goods (which increased import volumes) ahead of the implementation of President Trump's shemozzle of a tariff policy was one of the reasons for the contraction in GDP. The other was a decline in Government spending. Mr Trump’s tariffs are deflationary for the world and inflationary for the US. The sharp weakening in soft economic data points to rising recession risks, although markets still only seem priced for a mild slowdown which now seems right given the backdown.

It is no surprise that China announced a new stimulus package including interest rate cuts and a significant liquidity injection, as the Government looks to boost an economy that has been hit by the collapse in the property market and now the trade war with the US. China’s factory activity contracted at its fastest pace in 16 months in April following the frontloading of orders to beat the tariffs. Trade talks between the US and China have driven market optimism over the past few weeks and sentiment has turned positive. The US-China deal has 30% import taxes on Chinese goods, which could still stem trade flow. The trade announcement with the UK has disappointed many in the market as it kept the 10% tariff on imports into the US up from 3.4%. The EU hasn’t even begun negotiations with the US.

In Australia, the election has come and gone fairly uneventfully for financial markets. We are waiting on GDP data to be released in the next few weeks which should confirm a sluggish economy given consumer spending remains weak. The RBA has cut interest rates and this should underpin mild growth.

The outlook for financial markets remains one of uncertainty reflected by the increase in volatility. Tight policy, lingering inflation risks and tariff-related drag still weighs on markets. What seems to have been achieved so far is a whole lot of volatility and the realisation the US needs China as much as China needs the US. Within the Australian share market there was a notable softening in outlook statements by company management in the recent reporting season. With full-year forecasts being revised lower, it is reasonable to suggest that market-wide earnings growth is slowing, with expectations moderating for the rest of this year and potentially into the next.

From Air Fryers to Swimwear: Tax Deductions to Avoid

Wed, 11 Jun 2025 02:22:08 GMT

From Air Fryers to Swimwear: Tax Deductions to Avoid

With the 2025 tax season fast approaching the Australian Taxation Office (ATO) is reminding taxpayers to be careful when claiming work related expenses. This is in reaction to a spate of claims that didn’t quite pass the ‘pub test’. To give you a few examples of what didn’t get through…

A mechanic attempting to claim an air fryer, microwave, two vacuum cleaners, TV, gaming console and gaming accessories as work related expenses
A truck driver seeking to deduct swimwear purchased during transit due to hot weather
A fashion industry manager attempting to claim over $10 000 in luxury branded clothing and accessories for work related events

These claims were deemed personal in nature and lacked a sufficient connection to income earning activities. The advice here would be - if in doubt leave it out or run it by us.

2025 priorities

The ATO is focusing on areas where frequent errors occur including:

Work related expenses: as above, claims must have a clear connection to income earning activities and be substantiated with records including receipts or invoices. Even if an expense seems to relate to income earning activities, it can’t normally be claimed if it is a private expense. There are a wide range of common expenses that normally don’t qualify for a deduction.
Working from home deductions: taxpayers must prove they incurred additional expenses due to working from home. The ATO offers two methods for calculating these deductions: the fixed rate method and the actual cost method (more detail below).
Multiple income sources: all sources of income, including side hustles or gig economy work must be declared. Each source may have different deductions available.

Working from home deductions

For those working from home there are two methods to calculate deductions:

Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate isn’t enough.
Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous.

It's important to note that double dipping is not allowed. For instance, if you claim deductions using the fixed rate method you can’t separately claim a deduction for your mobile phone costs.

Labour's Victory: Unpacking the Promises and Priorities

Tue, 10 Jun 2025 06:22:20 GMT

Labour's Victory: Unpacking the Promises and Priorities

As the Labour party settle back into their seats having secured a majority in the House of Representatives, we look at the campaign promises and the unfinished business from the last term.

Individuals

Personal income tax cuts: the 2025-26 federal budget introduced a modest income tax cut for all taxpayers from 1 July 2026 and again from 1 July 2027.
The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.
Legislation enabling the tax cut passed Parliament on 26 March 2025.

$1,000 instant work related expenses tax deduction

The Government has committed to providing taxpayers who earn labour income with a $1,000 shortcut work related deduction claim on their tax return.
Taxpayers who are likely to have claims higher than $1000 can claim in the usual way.
The simplified tax deduction is only available to those earning labour income. Those earning business or investment income only will not be able to claim this shortcut deduction.
Taxpayers will be able to claim other non-work related deductions in addition to the instant work related deduction.

Energy rebate extended

The 2025-26 federal budget extended energy rebates. From 1 July 2025, households and small business will be eligible for a further $150 energy rebate until the end of the 2025 calendar year. The rebates will automatically apply to electricity bills in quarterly instalments.

Cheaper home batteries

The Government has committed to reducing the cost of home batteries from 1 July 2025. Through the scheme, households will be able to purchase a typical battery with a 30% discount on installed costs – saving around $4,000 on a typical battery. The initiative extends the existing Small-scale Renewable Energy Scheme.

5% deposit scheme for first home buyers

The Government has committed to a 5% deposit scheme for all Australian first home buyers. Under the scheme the Government will underwrite eligible first home buyers, enabling them to purchase a property with a 5% deposit without the need for Lenders Mortgage Insurance.

Expanding the existing first home buyer scheme, the media release says, “there will be higher property price limits and no caps on places or income, in a major expansion of the existing scheme.”

The existing Home Guarantee Scheme is limited in places and subject to income tests. The scheme is open to Australian citizens or permanent residents who have never owned property or land in Australia, or have not owned property or land in Australia in the last 10 years, and available to owner occupiers only.

Superannuation

Legislation enabling the proposed Division 296 tax on superannuation balances above $3m lapsed when Parliament dissolved. The question now is whether the Government will seek to push this reform through the Senate with the support of The Greens.

Greens Senator Nick McKim has previously advocated for the Division 296 threshold to be lowered to $2m and indexed to inflation. In addition, the Senator tied his support for the tax to a “prohibition for super funds to borrow to finance investments.”

Originally intended to apply from 1 July 2025, if enacted, Division 296 will increase the headline tax rate to 30% for earnings on total superannuation balances (TSB) above $3m. The proposed calculation captures growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.

Small business

Extending the instant asset write-off for small business: An increase to the $1,000 instant asset write-off threshold has been a consistent feature of federal budgets by various governments as an incentive for small business investment.

The extension of the increased instant asset write-off threshold to $20,000 for the 2024-25 financial was passed by Parliament on 26 March 2025. The Government has committed to extending the $20,000 instant asset write-off threshold to 30 June 2026.

National small business strategy

The Government has released its National small business strategy for consultation. The strategy primarily addresses how different government jurisdictions work with small business and how to relieve some of the friction when dealing across government systems and requirements.

Energy

Green Aluminium Production Credit:

The Government has $2bn set aside for a new Green Aluminium Production Credit to support Australian aluminium smelters switching to renewable electricity before 2036 (there are four of them).

If you are wondering why the aluminium industry has been singled out, the reason is two-fold; aluminium is the second most used metal in the world and according to the Institute of Energy Economics and Financial Analysis, represents about 10% of Australia’s electricity demand - Tomago Aluminium just north of Newcastle in NSW, is the largest single user of electricity in the country with electricity making up about 40% of its costs. Transition from brown to green energy is not just a consumption issue for the industry, it’s a recreation of the value chain.

Under the initiative, smelters will be able to negotiate an emissions linked credit contract payable per tonne of green aluminium produced for up to 10 years. The final credit rates will be based on individual facility circumstances and be dependent on reducing Scope 2 emissions. Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling. They account for around 85% of emissions from aluminium smelting.

Year-end tax planning opportunities & risks

Wed, 07 May 2025 00:00:00 GMT

Year-end tax planning opportunities & risks

With the end of the financial year fast approaching we outline some opportunities to maximise your deductions and give you the low down on areas at risk of increased ATO scrutiny.

Opportunities

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $30,000 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super and any amounts you have contributed personally that will be claimed as a tax deduction.

If your total superannuation balance on 30 June 2024 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2024-25 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at your personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and receive an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 74, you can only claim a deduction on a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

If your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.

If you are likely to face a tax bill this year and you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe.

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts of $2 and above as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy).

To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR.

Philanthropic giving can be undertaken in a number of different ways. Rather than providing gifts to a specific charity, it might be worth exploring the option of giving to a public ancillary fund or setting up a private ancillary fund. Donations made to these funds can often qualify for an immediate deduction, with the fund then investing and managing the money over time. The fund generally needs to distribute a certain portion of its net assets to DGRs each year.

Investment property owners

If you do not have one already, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help to maximise your deductions.

Risks

Work from home expenses

Working from home is a normal part of life for many workers, and while you can’t claim the cost of your morning coffee, biscuits or toilet paper (seriously, people have tried), you can claim certain additional expenses you incur. But, work from home expenses are an area of ATO scrutiny.

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

The short-cut method allows you to claim a fixed rate of 70c for every hour you work from home for the year ending 30 June 2025. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates.

The alternative is to claim the actual expenses you have incurred on top of your normal running costs for working from home. You will need copies of your expenses, and your diary for at least 4 continuous weeks that represents your typical work pattern.

Landlords beware

If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property normally needs to be rented or genuinely available for rent to claim the expenses.

Sounds obvious but taxpayers claiming investment property expenses when the property was being used by family or friends, taken off the market for some reason or listed for an unreasonable rental rate, is a major focus for the ATO, particularly if your property is in a holiday hotspot.

There are a series of issues the ATO is actively pursuing this tax season. These include:

Refinancing and redrawing loans – you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses.
The difference between repairs and maintenance and capital improvements – while repairs and maintenance costs can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets).
Co-owned property – rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses.

Gig economy income

It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, YouTube, etc., is declared in your tax return.

The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. If you are a content creator for example, this is when your account is credited, not when you direct the money to be paid to your personal or business account. Squirrelling it away from the ATO in your platform account won’t protect you from paying tax on it.

Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime so expect the ATO to utilise data matching activities to identify unreported income.

Other sharing economy platforms have been required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest.

For your business

Opportunities

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June to claim a deduction this year. Ensure you document the fact that you have written off the bad debt on your debtor’s ledger or with a minute.

Obsolete plant & equipment

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June if you don’t use it anymore.

For companies

If it makes sense to do so, bring forward tax deductions by committing to pay directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Risks

Tax debt and not meeting reporting obligations

Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf.

Professional firm profits

For professional services firms - architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risk.

The ATO’s updated small business benchmarking tool

Tue, 06 May 2025 03:30:00 GMT

The ATO’s updated small business benchmarking tool

The ATO has updated its small business benchmarks with the latest data taken from the 2022–23 financial year. These benchmarks cover 100 industries and allow small businesses to compare their performance, including turnover and expenses, against others in their industry.

While the ATO doesn’t use the benchmarks in isolation, small businesses who fall outside the ATO’s benchmarks are more likely to trigger a closer examination from the ATO. The ATO uses information reported in business tax return with key performance benchmarks for the relevant industry to identify potential tax risks.

Aside from determining the risk of unwanted attention from the ATO, the benchmarks can also be used to compare your business performance against other businesses in the same industry. The benchmarks could help you spot areas where you might be able to reduce costs or improve efficiency.

The small business benchmarks can be accessed here .

Aside from the small business benchmarks, the ATO also has a business viability assessment tool which can help business owners identify whether there are any obvious financial risks. The ATO consider a business to be viable if it is generating sufficient profits to meet commitments to creditors and provide a return to the business owners. If a business isn’t generating profits, the ATO looks at whether the business has sufficient cash reserves to sustain itself.

The business viability assessment tool can be found here .

Please let us know if you would like us to review your business performance and make recommendations on ways that performance could be improved.

Note : The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Instant asset write-off threshold finally confirmed

Mon, 05 May 2025 03:36:01 GMT

Instant asset write-off threshold finally confirmed

It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30 June 2025 to $20,000. This was announced back in the 2024-25 Federal Budget but the Government faced a number of hurdles in terms of passing the legislation.

This basically means that individuals and entities who carry on a business with turnover of less than $10m can often claim an immediate deduction for the cost of depreciating assets (eg, plant and equipment) that are acquired during the 2025 financial year as long as the cost of the asset, ignoring GST credits that can be claimed, is less than $20,000.

If you are thinking about purchasing an asset before 30 June 2025 with the hope of claiming an immediate deduction, then please reach out to us to confirm the position. The rules contain a number of tricks and traps which we can help you to navigate.

The threshold is due to drop back to $1,000 from 1 July 2025 unless further legislation is passed to provide another temporary increase to the threshold or a permanent modification.

Property subdivision projects: the tax implications

Mon, 05 May 2025 03:32:09 GMT

Property subdivision projects: the tax implications

As the urban sprawl continues in most major Australian cities, we are often asked to advise on the tax treatment of subdivision projects. Before jumping in and committing to anything, it is important to understand the tax liabilities that might arise from these projects.

Unfortunately, many people make incorrect assumptions about the way that subdivision projects will be taxed, often believing that any tax exposure will be minimal. However, the reality is that there are a number of important issues that need to be considered and that could have a significant impact on the overall profitability of the project.

For example, when someone buys a property with the intention of subdividing it into smaller lots and selling them at a profit in the short term this will normally mean that any profit is taxed as ordinary income, rather than being taxed under the CGT rules. This means that the general CGT discount would not be available to reduce the tax liability, even if the property has been held for more than 12 months and it would not be possible to apply capital losses to reduce the taxable amount.

Also, in situations like this the sale of the subdivided lots will often trigger a GST liability, further reducing any after-tax profits generated from the project.

Many people fail to properly estimate the income tax and GST liabilities that will arise from property projects and can end up with a nasty shock when they realise the impact this has on the economic viability of the project.

The ATO has recently updated its guidance in this area, adding a number of new and practical examples to demonstrate how the tax rules will typically apply. The ATO’s examples cover the income tax and GST consequences of common property transactions such as property flipping, subdivision projects and property development activities.

For example, in one of the examples the ATO looks at a scenario where the taxpayer repeatedly buys, renovates, and sells properties. They engage in market research, seeking professional advice, taking out business loans, and then carrying out renovations in a business-like manner. The ATO takes the view that the taxpayer is running a business, since the taxpayer’s primary intention is to make a profit from the renovations and reselling of the property.

The profits are treated as ordinary income and taxed on revenue account. The CGT provisions don’t apply here since the property is held as trading stock. However, GST doesn’t apply on this particular situation as long as the properties have not undergone “substantial renovations”, which needs to be considered carefully.

On the other hand, in another example the ATO deals with a taxpayer who subdivides the vacant land from their main residence because of ill health and growing debt levels. Since they didn’t initially intend to profit from the subdivision and sale of the vacant land, the sale is viewed as the mere realisation of a capital asset rather than a business venture. The activities related to the subdivision are limited to necessary actions for council approval, reflecting a low level of complexity and small scale. The sale of the subdivided lot is taxed on capital account under the CGT rules, qualifying for the general CGT discount if the land has been held for more than 12 months. However, the main residence exemption cannot apply because the land is not being sold together with the dwelling that has been used as the taxpayer’s main residence.

You can find the ATO’s guide and examples here

Super guarantee rules catch up with venues and gyms

Tue, 08 Apr 2025 03:02:44 GMT

Super guarantee rules catch up with venues and gyms

The superannuation guarantee rules are broad and, in some circumstances, extend beyond the definition of common law employees to some directors, contractors, entertainers, sports persons and other workers.

Employers need to pay compulsory superannuation guarantee (SG) to those considered employees under the definition in the SG rules. But, the SG definition of an employee is broad and just how far this definition extends has sparked debate of late about the rights of performers, gym instructors and others not typically considered employees.

For employers and business owners, it is crucially important that if there is any uncertainty about the rights of workers to SG, your position is confirmed. This might be an initial assessment of the position by us, confirmed by an employment lawyer, or clarified by applying for a ATO private ruling covering your specific workplace arrangements. One of the things that employers find most alarming is that there is no tangible time limit on the recovery of outstanding SG obligations. In theory, the ATO can go back as far as it determines necessary to recover unpaid superannuation contributions for workers who are classified as employees for SG purposes. One of the key features of the SG system is to ensure that appropriate contributions are being made for employees and deemed employees, to adequately support them in their retirement. The SG laws, and complimentary director penalty regime, ensure that every cent owing to an employee for SG is paid.

Who is not paid super guarantee?

Super guarantee does not need to be paid to:

Under 18s who do not work more than 30 hours a week.
Private and domestic workers who do not work more than 30 hours a week.
Non-resident employees who perform work outside of Australia.
Employees temporarily working in Australia covered by an agreement.
Some foreign executives who hold certain visas or entry permits.

Generally, SG is not payable if you have entered into a contract with a company, trust or partnership.

If you have Australian employees temporarily working outside of Australia in a country with a bilateral social security agreement , for example, the United States, you should continue paying SG and apply for a certificate of coverage to avoid paying super (or the equivalent) in the country where the employee is temporarily located.

SG’s broader definition of an employee

There is a section of the SG rules, section 12 , that specifies who is deemed to be an employee for SG purposes. This section extends the definition of an employee beyond common law to cover:

Company directors who are remunerated for performing duties;
Contractors working under a contract wholly or principally for their labour;
Certain state and Commonwealth government contracted workers; and
Those paid to perform or present any music, play, dance, entertainment, sport or other similar promotional activity. This includes people who provide services in connection with these activities or people paid in relation to film, tape, disc or television.

Are contractors entitled to SG?

If your contractor holds an Australian Business Number (ABN), this of itself will not prevent SG from applying. Where the arrangement looks like it is a contract for the provision of an individual’s labour and skills, it is likely they will meet the definition of an employee and SG will be payable.

The SG rules state if, “a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.”

This definition is alarming to many employers as the rate paid to contractors, and often the terms of the agreement, factor in an uplift for super guarantee and other entitlements that would normally be paid if the person was an employee. But for SG purposes, it does not matter what the contract says, if the person is deemed to be an employee under the rules, they are entitled to SG and the employer is obligated to pay it.

The Australian Taxation Office (ATO) states that SG needs to be paid to contractors if you pay them:

under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
for their personal labour and skills (payment isn't dependent on achieving a specified result)
to perform the contract work (work cannot be delegated to someone else).

In a recent ruling , the ATO says that where the worker is required to use a substantial capital asset (such as a truck) this will help in arguing that the contract is not mainly for the labour of the worker, but this will always depend on the facts.

Are directors paid SG?

Yes. Directors (members of executive bodies of bodies corporate) should be paid SG if they are remunerated for performing duties for the company.

Entertainers, performers and sportspeople

Generally, if a performer operates through a company, trust, or partnership then there is not an employment relationship and SG is not payable.

However, individual artists, performers and sportspeople are captured as employees under the SG rules ( section 12(8 )) where they are paid to:

perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills;
provide services in connection with an activity referred to above;
perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast.

Whoever is paying the individual for their labour, is generally responsible for the payment of that individual’s SG. For example, a music festival operator that contracts a sole trader to perform at a festival might be liable for SG for that performer. Likewise, if the sole trader contracts band members to perform with them at the festival, then the sole trader is responsible for the SG of the band members. If however, the music festival worked with an agency to supply the performers (the music festival pays the agency, the agency pays the performers), then the agency is likely to be responsible for the SG of the artists if there is a liability. If the agency only charges a booking fee and the festival pays the performers directly, then the festival is likely to be responsible for the performer’s SG.

You can see from this how important it is to determine who meets the definition of an employee for SG purposes, and if so, to understand the parties to the deemed employment relationship.

What’s a service “in connection to”

The definition of an employee for SG purposes captures workers who work with performers, for example individuals that are producers, videographers, editors, etc. If the person meets the definition of an employee under the SG rules, then it is likely SG is payable.

Is a gym instructor a sportsperson?

A gym instructor may be captured under the definition of a deemed employee under the SG rules. Whether the gym is liable to pay the instructor SG really depends on the facts of the individual arrangement.

Let’s look at the example of a gym instructor operating as a sole trader under an ABN.

There is a contract between the instructor and the gym stating that the instructor is an independent contractor and is responsible for their own SG payments and other employment obligations.
The instructor is paid per class, and per training session with clients, covering their time and labour.
The instructor utilises the equipment of the gym and its scheduling system.
The instructor wears the uniform of the gym.
The instructor is trained by the gym in how to deliver the services of the gym.

Employee? Most likely because the ATO places a heavy significance on whether an individual is working to build their own business or someone else’s. If the instructor “..works under a contract that is wholly or principally for the labour of the person” then this also brings them into the SG net.

If the employer, the gym, had not been paying SG, is it exposed to SG payments for the instructor since the employment relationship began.

Concerned about your workplace SG liability? Please contact us for an initial review.

Threshold for tax-free retirement super increases

Mon, 07 Apr 2025 04:42:30 GMT

Threshold for tax-free retirement super increases

The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.

Each year, advisers await the December inflation statistics to the be released. The reason is simple, the transfer balance cap – the amount that can be transferred to a tax-free retirement account – is indexed to the Consumer Price Index (CPI) released each December. If inflation goes up, the general transfer balance cap is indexed in increments of $100,000 at the start of the financial year.

In December 2024, the inflation rate triggered an increase in the cap from $1.9m to $2m.

The complexity with the transfer balance cap is that each person has an individual transfer balance cap. If you have started a retirement income stream, when indexation occurs, any increase only applies to your unused transfer balance cap.

Considering retiring in 2025?

If you are considering retiring, either fully or partially, indexation of the transfer balance cap provides a one-off opportunity to increase the amount of money you can transfer to your tax-free retirement account. That is, if you start taking a retirement income stream for the first time in June 2025, your transfer balance cap will be $1.9m but if you wait until July 2025 your transfer balance cap will be $2m, an extra tax-free $100,000.

Already taking a pension?

If you are already taking a retirement income stream, indexation applies to your unused transfer balance cap - so you might not benefit from the full $100,000 increase on 1 July 2025.

Where can I see what my cap is?

Your superannuation fund reports the value of your superannuation interests to the ATO. You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov .

If you have a self-managed superannuation fund (SMSF), it is very important that your reporting obligations are up to date.

The proposed ban on non-compete clauses

Mon, 07 Apr 2025 03:38:58 GMT

The proposed ban on non-compete clauses

In the 2025-26 Federal Budget the Government announced a ban on non-compete clauses and “no poach” agreements.

In the 2025-26 Federal Budget, the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on high incomes (under the Fair Work Act the high income threshold is currently $175,000).

The reason? A recent Australian Bureau of Statistics (ABS) report found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

From an economic perspective, declining job mobility impacts wage growth and innovation as restraints prevent access to skilled workers within the economy. Productivity is a key concern as Australia’s productivity has declined in the last 20 years.

Treasury’s consultation paper Non-compete clauses and other restraints states that, “the direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

A Productivity Commission report estimates the effect of limiting the use of unreasonable restraint of trade clauses will be increased wages for workers - by up to up to 2.4% in industries with high use of non-compete clauses and up to 1.4% in others.

Non-competes: the state of play

Non-compete clauses in Australia are generally enforced under common law. For all regions except New South Wales, restraints are generally presumed to be against the public interest and therefore void and unenforceable except where they are deemed to be reasonably necessary to protect the legitimate interest of the employer [1] .

In NSW, a restraint of trade is valid to the extent to which it is not against public policy.

When non-competes are contested, the courts consider the nature and extent of the business interest to be protected (e.g., confidential client information) and whether the scope of restriction the business wants imposed is reasonable including its geographic area, time period and activities which the restraint seeks to control.

Interests considered ‘legitimate’ by courts include the protection of trade secrets or other confidential information; protection against solicitation of clients with whom the former worker had a personal connection; and protection against key staff being recruited by a former colleague. An employer is not entitled to protect themselves against mere competition by a former worker .

What now

The ban on non-compete clauses was announced in the 2025-26 Federal Budget. The Government has stated that it intends to consult on policy details, including exemptions, penalties, and transition arrangements. Following consultation and the passage of legislation, the reforms are anticipated to take effect from 2027, operating prospectively.

There is a lot of uncertainty at this stage about this measure, despite the enthusiasm of the Treasury economists, not least of which is the impending election.

We’ll bring you more as further information is available.

[1] Treasury Competition Review. Non-competes and other restraints: understanding the impacts on jobs, business and productivity Issues Paper

Personal tax cuts

Mon, 07 Apr 2025 02:51:07 GMT

Personal tax cuts

From 1 July 2026, personal income tax rates will change.

On the last sitting day of Parliament, the personal income tax rate reduction announced in the 2025-26 Federal Budget was confirmed. The modest reduction of 1% applies to the $18,201-$45,000 tax bracket, reducing from its current rate of 16% to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.

With a 1 July 2026 start date, the outcome of the Federal election on 3 May 2025 and subsequent budgets will determine whether this change comes to fruition.

Medicare levy threshold change for low-income earners

Low-income earners do not pay the compulsory 2% Medicare levy until their assessable income reaches the threshold. The threshold is different depending on whether you are a single taxpayer, pensioner, and the number of children you have that are dependent on you.

Parliament has confirmed the increase to the Medicare levy threshold announced in the Federal Budget. The threshold change is backdated to 1 July 2024, which means that taxpayers will benefit when they lodge their 2024-25 tax return.

See our Budget 2025-26 summary for details.

Budget 2025-26: Show Me The Money

Wed, 26 Mar 2025 02:28:24 GMT

Budget 2025-26: Show Me The Money

The Government’s big moment in the 2025-26 Federal Budget was the personal income tax cuts. Income tax cuts are a dazzling headline but in reality they deliver a tax saving of up to $268 in the 2026-27 year, with a tax saving of up to $536 from the 2027-28 year.

At the same time, the Australian Taxation Office has been allocated almost $1bn in funding to extend and enhance its compliance programs.

Two previously announced measures of note that have not passed Parliament but remain in the Budget are:

Tax on super accounts above $3m (a 30% tax on future earnings for superannuation balances above $3 million); and
The $20,000 instant asset write-off for small business for 2024-25.

Both of these measures have stalled in Parliament and, assuming they are not approved in the final days of Parliament, will lapse when an election is called.

Budget 2025-26 is a budget for voter appeal with over $7bn in additional spending measures in 2025-26 and over $20bn across five years. Most measures extend previously announced and Budgeted items for another year. Key initiatives include:

Energy

$180bn to deliver a $150 energy bill rebate extension until the end of 2025.

Healthcare

$8.5bn on Medicare for increases to Medicare payments, 50 new urgent care clinics, and a bulk billed GP service.
$1.8bn over 5 years for cheaper medicines on the Pharmaceutical Benefits Scheme.
$240m for women’s health - reproductive health and menopause

Education

$500m to provide a 20% cut to HECS-HELP debt for students, and a realignment of the repayment schedule to reduce the amount required to be paid (from 1 July 2025).

Housing

$800m to expand the ‘Help to Buy’ scheme reducing the size of the deposit required to buy a home by co-buying with the Government.

Families

Three days of subsidised childcare for families with young children (income tested) from 1 January 2026 replacing the Child Care Subsidy activity test.

Lifestyle

From August, the excise on beer will be frozen for 2 years.

Economically, trade tensions have magnified global uncertainty. Global growth is already subdued. The indirect effect of tariffs is estimated to be nearly four times as large as the direct effect on Australia, reflecting the relative importance of affected trade flows between Australia, China, and the United States.

Australia’s economy is expected to grow, albeit slowly at 2.25% in 2025-26 and 2.5% in 2026-27.

The Budget will be in deficit at -$42.1bn in 2025-26, before improving marginally but remaining in the red.

The Aspen Corp team are available to assist you to capitalise on any of the Budget measures or minimise your risk.

As always, the detail is important so please let us know if we can assist.

Trade wars and tariffs

Wed, 19 Mar 2025 02:14:34 GMT

Trade wars and tariffs

Global Google searches for the word “tariffs” spiked dramatically between 30 January and 2 February 2025, a +900% increase to the previous 12 months. We look at what tariffs really mean.

Who pays for tariffs?

Tariffs increase the price of imported goods and reduce trade flows of that good or service.

Traditionally used to protect specific domestic industries by reducing competition, tariffs increase the price of foreign competitors and reduce demand. In his first term, President Trump imposed a 25% global tariff on steel and a 10% tariff on aluminium (which Australia managed to reduce to zero with supply limits imposed instead). The impact was reportedly a 2.4% increase in the price of aluminium and 1.6% increase in the price of steel in the domestic US market. The cost of tariffs is not borne by overseas suppliers but indirectly through a reduction in trade and domestically through higher prices, particularly where those goods and services are common.

For the US however, the negative impact of tariffs will be felt less abruptly than many of its trading partners as trade only represents around 24% of US gross domestic product (GDP) – whereas trade accounts for 67% of Canda’s GDP.

Where we are at with US trade tariffs

While talking to shock jock Joe Rogan during his election campaign, Donald Trump stated, “this country can become rich with the proper use of tariffs.”

In his second week of office, President Trump used emergency powers to curb the “extraordinary threat” of illegal aliens, drugs and fentanyl into the US, by imposing the following tariffs :

Canada - 25% additional tariff on imports from Canada (except energy resources that have a reduced 10% additional tariff). Canada responded by imposing its own 25% tariffs on a range of predominantly agricultural products and household goods. Canada is a trading nation and exports represent two-thirds of its GDP. In 2023, the US represented 77% of Canada’s total goods export .
Mexico - 25% additional tariff on imports from Mexico . Mexico has responded with its own 25% tariff on US goods.
China - 20% additional tariff on imports from China. The US trade deficit was over $900bn in 2024 of which China accounts for around $270bn. The additional tariff on postal shipments from China to the US has since been temporarily suspended for items with a value under $800 until the US postal service is able to collect the tariff. China’s response has been to impose additional tariffs on certain US imports including a targeted 15% tariff on agricultural products including chicken, wheat, corn and cotton, and a 10% tariff on fruit, vegetables, dairy products, pork, beef and sorghum. Export controls have been placed on some critical minerals. In addition, China has filed a complaint to the World Trade Organization.

Industry specific tariffs and investigations

Steel imports – from 12 March 2025, the original 25% steel tariff is set to resume without the bi-lateral agreements reached over time with many nations including Australia watering down the tariff.
Copper imports – while no actions on tariffs, the President has ordered an investigation into the threat to security of copper imports .
Imports of timber, lumber products – while no action or impositions as yet, the President has ordered an investigation into the threat to security of imports of timber, lumber and derivative products such as paper.
US tech giants – it seems that the President is concerned by digital services taxes (DST) imposed on US technology companies and has vowed to respond with tariffs and other measures. Australia does not impose a DST and instead is aligned to the OECD reforms of digital taxing rights.

Will Australia face US tariffs?

Australia has a large trade surplus with the US which would normally make the imposition of tariffs less likely. However, specific industries may be impacted by product or industry based tariffs, such as steel and aluminium.

The largest American imports into Australia are financial services, travel services, telecoms/ computer/ information services, royalties and trucks. Australia’s largest exports to the US are financial services, gold, sheep/goat meat, transportations services and vaccines.

Impacts of trade wars on Australia

Australia is impacted indirectly by demand. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade in 2023. If Chinese demand slows as a result of a trade war, Australia’s economy will slow. But there is a pattern in President Trump’s approach to international and trade relations that suggests that an all-out trade war might not occur: a bold line or policy is stated - a statement that tells a story to the US public consistent with his election sentiments; then, wound back either partially or fully after concessions have been secured or concessions stated. For Australia, there is a risk in these policy machinations that China again agrees to reduce the US trade deficit by purchasing more from the US, potentially to the detriment of Australian suppliers.

For Australian business, uncertainty and volatility is the problem. Uncertainty slows the economy and impacts business revenue while at the same time, costs may increase.

For those in the business of selling product manufactured and distributed from China or through other trading partners directly impacted by tariffs, watch for more supply chain issues and potential cost increases.

If the US export markets retracts, there is also a risk other trading nations look to dump their products to help offset losses.

ATO Cracks Down on Record-Keeping: What Next 5,000 Groups Need to Know

Wed, 19 Mar 2025 02:03:11 GMT

ATO Cracks Down on Record-Keeping: What Next 5,000 Groups Need to Know

Ensuring your business records are accurate and up to date is essential to avoiding costly audits and compliance issues.

The Australian Taxation Office (ATO) has reinforced its focus on proper record-keeping practices for Next 5,000 privately owned and wealthy groups , emphasizing the need for transparency and accuracy in tax reporting.

The Importance of Accurate Record-Keeping

The ATO expects Next 5,000 groups to maintain thorough and well-documented tax records, including tax returns and business activity statements (BAS). Failure to do so can lead to serious consequences, such as:

Lengthy and expensive audits
Denial of deductions and input tax credits
Increased scrutiny on financial transactions

Recent findings from the ATO’s 2024 Next 5,000 report highlight that deductions were frequently denied due to inadequate record-keeping. In many cases, businesses failed to substantiate expenses or provide sufficient evidence linking expenses to income. especially in related-party transactions. Discrepancies, such as one party reporting income lower than the deduction claimed by an associated party, have drawn particular attention from the ATO.

Key Observations from the 2024 Next 5,000 Findings Report

Over the course of the Next 5,000 program’s inception, the ATO identified several key insights, which they outlined in the 2024 Next 5,000 Findings Report .

Many businesses have governance processes and procedures in place, but most are not formally documented.
Clearly documented roles and responsibilities contribute to effective tax governance.
Proper documentation of tax return preparation, review processes, and material transactions helps businesses identify and mitigate tax risks, reducing errors.
Private groups that seek tax advice on material risks and issues are more likely to make accurate disclosures and adopt correct tax treatments.

Take Action to Strengthen Your Tax Compliance

With the ATO’s increasing focus on compliance, now is the time to review and enhance your record-keeping practices. Ensuring proper documentation, seeking professional tax advice, and maintaining clear governance processes can help safeguard your business from unnecessary audits and financial penalties.

If you need assistance in strengthening your tax governance and compliance, Aspen Corp is here to help. Contact us today to ensure your records are audit-ready and fully compliant with ATO requirements.

FBT 2025: What you need to know

Tue, 11 Mar 2025 02:39:23 GMT

FBT 2025: What you need to know

The Fringe Benefits Tax (FBT) year ends on 31 March. We’ve outlined the hot spots for employers and employees.

FBT exemption for electric cars

Employers that provide employees with the use of eligible electric vehicles (EVs) can potentially qualify for an FBT exemption. This should normally be the case where:

The car is a zero or low emission vehicle (battery electric, hydrogen fuel cell or plug-in hybrid electric);
The car is both first held and used on or after 1 July 2022; and
The value of the car is below the luxury car tax threshold for fuel efficient vehicles (which is $89,332 for 2024-25 financial year).

Plug-in hybrid vehicles no longer FBT exempt

From 1 April 2025, plug-in hybrid electric vehicles will no longer qualify for the FBT exemption unless:

The use of the vehicle was exempt before 1 April 2025, and
There is a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025.

If there is a break or change to that commitment on or after 1 April 2025 then the exemption normally won’t be available any more.

Working with the exemption

Even if the FBT exemption applies, your business will still need to work out the taxable value of the benefit as if the FBT exemption didn’t apply. This is because the value of the exempt benefit is still taken into account when calculating the reportable fringe benefits amount of the employee. While income tax is not paid on this amount, it can impact the employee in a range of areas (such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments).

This means the employee’s own home electricity costs incurred on charging the electric vehicle will often need to be worked out. This figure can generally be treated as an employee contribution to reduce the value of the benefit.

While this can be practically difficult to determine, the ATO has issued some guidelines that provide a 4.20 cent per km shortcut rate that can potentially help with the calculation. These guidelines do not apply to plug-in hybrid vehicles.

Many electric vehicles are also packaged together with electric charging stations. Just be aware that the FBT exemption for electric cars does not extend to charging stations provided at the employee’s home.

Providing equipment to work from home

Many businesses continue to offer flexible work from home arrangements. employees are often provided with work-related items to assist them to work from home. In general, where work related items are provided to employees and used primarily for work, FBT shouldn’t apply.

For example, portable electric devices such as laptops and mobile phones provided to employees shouldn’t trigger an FBT liability as long they are primarily used by your employees for work. Multiple similar items can also be provided during the FBT year where required – for example multiple laptops have been provided to the employee – but only if the business has an aggregated turnover of less than $50m (previously, this threshold was less than $10m).

If the employee is using equipment provided by the business for their own private use, normally FBT would apply to the private use. However, the FBT liability can be reduced based on the business use percentage.

Does FBT apply to your contractors?

The FBT rules tend to apply when benefits are provided to employees and certain office holders, such as directors. FBT should not apply when benefits are provided to genuine independent contractors but, you need to be sure that your contractors are in fact contractors.

Are your contractors really contractors?

Following two landmark decisions handed down by the High Court, the ATO has now finalised a ruling
TR 2023/4 that helps determine whether a worker is an employee or an independent contractor.

If the parties have entered into a written contract, then you need to focus on the terms of that contract to establish the nature of the relationship (rather than looking at the conduct of the parties). However, merely labelling a worker as an independent contractor doesn’t necessarily mean that they won’t be treated as an employee if the terms of the contract suggest that the parties have entered into an employment relationship.

The ATO has also issued PCG 2023/2  that sets out four risk categories. Arrangements will tend to be viewed in a more favourable light where:

There is evidence to show that you and the worker have agreed on the classification;
There is a comprehensive written agreement that governs the relationship;
There is evidence that you and the worker understand the consequences of the classification;
The performance of the arrangement hasn’t deviated significantly from the terms of the contract;
Specific advice has been sought confirming that the classification is correct; and
Tax, superannuation, and reporting obligations have been met when the worker is classified as an employee or independent contractor (whichever relevant).

If your business employs contractors, you should have a process in place to ensure the correct classification of the arrangements and to determine the ATO’s risk rating. These arrangements should also be reviewed over time.

Even when a worker is a genuine independent contractor, just remember that this doesn’t necessarily mean that the business won’t have at least some employment-like obligations to meet. For example, some contractors are deemed to be employees for superannuation guarantee and payroll tax purposes.

Reducing the FBT record keeping burden

Record keeping for FBT purposes can be onerous. From 1 July 2024 however, your business will have a choice to keep using the existing FBT record keeping methods, use existing business records where those records meet the requirements set out by the legislative instrument, or a combination of both methods:

Travel diaries – see LI 2024/11
Living-away-from-home-allowance – FIFO/DIDO declarations – see LI 2024/4
Living-away-from-home – maintaining an Australian home declaration – See LI 2024/5
Otherwise deductible rule – expense payment, property or residual benefit declaration – See LI 2024/6
Otherwise deductible rule – private use of a vehicle other than a car declaration – See LI 2024/7
Car travel to an employment interview or selection test declaration – See LI 2024/14
Remote area holiday transport declaration – See LI 2024/10
Overseas employment holiday transport declaration – See LI 2024/13
Car travel to certain work-related activities declaration – See LI 2024/9
Relocation transport declaration – See LI 2024/12
Temporary accommodation relating to relocation declaration – See LI 2024/8

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

The top FBT risk areas

Mismatched claims for entertainment – claimed as a deduction but no FBT

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are often keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees. Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Let’s say you taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for FBT purposes, then there should not be any FBT implications. This is because benefits provided to client are not subject to FBT and minor benefits (i.e., value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.

If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the business would be able to claim 50% of the GST credits.

Employee contributions by journal entry in the accounts

Many businesses use after-tax employee contributions to reduce the value of fringe benefits. It is also reasonably common for these contributions to be made by journal entry through the accounting system only (rather than being paid in cash).

While this can be acceptable if managed correctly, the ATO has flagged numerous concerns including whether journal entries made after the end of the FBT year are valid employee contributions.

For an employee contribution made by way of journal entry to be effective in reducing the taxable value of a benefit, all of the following conditions must be met:

The employee must have an obligation to make a contribution to the employer towards a fringe benefit (i.e., under the employee’s remuneration agreement);
The employer has an obligation to make a payment to the employee. For example, the parties may agree that the employer will lend an amount to the employee or the employee might be entitled to a bonus that hasn’t been paid yet. If a loan is made by the employer then this could trigger further tax issues that need to be managed;
The employee and employer agree to set-off the employee’s obligation to the employer against the employer’s obligation to the employee; and
The journal entries are made no later than the time the financial accounts are prepared for the current year (i.e., for income tax purposes).

Failing to ensure that arrangements involving fringe benefits and employee contributions are clearly documented can lead to problems. For example, the ATO may ask to see evidence of the fact that the employer is actually under an obligation to make contributions towards a fringe benefit. If there is no evidence, then significant FBT liabilities could arise.

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns when required to.

If your business employs staff (even closely held staff such as family members), and is not registered for FBT, it’s essential to ensure that the position is reviewed to check whether the business could potentially have an FBT liability.

If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing at least some fringe benefits.

There is a list of benefits that are considered exempt from FBT, such as portable electronic devices like laptops, protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you are unlikely to have to worry about FBT.

Make sure you have reviewed the FBT client questionnaire we sent you!

Need assistance?

Please contact us on 08 9228 0700 or by email .

Ban on foreign property purchases

Tue, 11 Mar 2025 01:58:54 GMT

Ban on foreign property purchases

The Government has announced a temporary ban on investors buying established homes between 1 April 2025 to 31 March 2027.

The measure aims to curb foreign “land banking.”

From 1 April 2025, foreign investors (including temporary residents and foreign-owned companies) will be prohibited from acquiring established dwellings unless they qualify for specific exemptions. While exemptions exist, they are limited.

In addition, foreign investors purchasing vacant land will be required to meet development conditions that require the land to be used productively within a reasonable timeframe.

Will credit card surcharges be banned?

Thu, 13 Feb 2025 02:46:21 GMT

Will credit card surcharges be banned?

If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point.

In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems?

The push for change

The Reserve Bank of Australia (RBA) launched a review in October 2024 of Merchant Card Payment Costs and Surcharging . The review explores whether existing regulatory frameworks are still fit for purpose given the rate of technological change and complexity, and if there is a need for greater transparency – surcharges, transaction fees, and the way in which payments are regulated, are all up for review. Ultimately, the review is about reducing costs to merchants and consumers.

In general, customers dislike surcharges and would be happy to see them go – they represent a personal loss of value in much the same way a discount is seen as a personal gain. And, they have support for a ban from the large credit card providers and financial institutions with the Australian Banking Association’s (ABA) submission to the RBA review saying, “The current surcharging framework is clearly not working and requires targeted reform. Consumers should never be surcharged for bundled costs like POS systems, business software products or other business incentives.” The reference to “business incentives” is where a higher fee is charged by the payment service provider to provide the merchant with reward points and other incentives.

The push for a ban accelerated when the government announced that it would ban debit card surcharges from 1 January 2026, subject to the outcome of the RBA review later this year.

If surcharges are banned for some or all payment methods, businesses currently charging surcharges will need to either absorb the cost of merchant fees or increase prices. The issue for many businesses is not whether to charge a fee, but the costs of accepting what is now the most common payment method – cash is free to transact, cards are a facility to transact legal tender, not legal tender in and of themselves.

Small business pays 3 times more

While the average card payment fee in Australia is lower than the United States (which is close to double Australia’s rates), we pay a higher rate than in some other jurisdictions such as Europe. The RBA have flagged there might be room to improve this by capping interchange fees and/or introducing competition into how debit card payments are routed (allowing systems to default to the ‘least cost’ option available).

In Australia, it is not a level playing field when it comes to card transaction fees with a large disparity between fees paid by small and large merchants – small merchants pay around three times the average per transaction fee than larger merchants (large merchants are able to secure wholesale fees or utilise ‘strategic’ interchange rates). But even within the small business sector, fees vary dramatically with the cost of accepting card payments ranging from less than 1% to well over 2% of the transaction value.

How we use cards and digital transactions

The RBA are generally in favour of allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers. And, this might be true for large purchases, but do we really notice when we’re tapping our phones or watches to grab that morning coffee?

Cards (including debit, prepaid, credit and charge cards) are the most frequently used payment method in Australia, accounting for three-quarters of all consumer payments in 2022.

According to the Australian Banking Association:

Contactless payments now account for 95% of in-person card transactions, compared to less than 8% in 2010.
Online payments, as a share of retail payments, have grown from 7% in 2010 to 18% in 2022.
Mobile wallet (Apple Pay, Google Pay, etc.,) usage has grown from 1% of point-of-sale payments in 2016 to 44% in October 2024.
Buy Now, Pay Later (BNPL) services, virtually unknown 8 years ago, are now used by nearly a third of Australians.

When are surcharges allowed

In the days before the RBA’s surcharge standard , it was not uncommon for businesses to apply a flat 3% surcharge.

The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”.

This means:

A business can only charge a surcharge for paying by card/digital wallet, but the surcharge must not be more than what it costs the business to use that payment type .
These costs, measured over a 12 month period, can include gateway costs, terminal costs paid to a provider, and fraud prevention etc., if they relate directly to the card type being surcharged.
Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type.
If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated.
If the surcharge applies to all payment types regardless of type, it must not be more than the lowest surcharge set for a single payment type.
If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. That is, if your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge.

The RBA estimates that, on average, card fees cost:

Source: RBA

Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit. The Australian Competition and Consumer Commission (ACCC) reportedly stated that excessive surcharge complaints increased to close to 2,500 in the 18 months from the start of 2023.

Tax on surcharges

If your business charges goods and services tax (GST) on goods or services, then GST should also apply to any surcharge payments made.

Is there a problem paying out your super when you die?

Thu, 13 Feb 2025 02:46:15 GMT

Is there a problem with your super being paid out when you die?

The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?

The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made.

Complaints to the Australian Financial Complaints Authority (AFCA) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year. The super laws do not specify a time period only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member.

How to make sure your super goes to the right place

Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. If you don’t make a decision, or let your nomination lapse, then the fund has the discretion to pay your super to any of your dependants or your estate.

There are four types of death nominations:

Binding death benefit nomination
Directs your super to your nominated eligible beneficiary, the trustee is bound by law to pay your super to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.
Non-lapsing binding death benefit nomination
If permitted by your trust deed, a non-lapsing binding death benefit nomination will remain in place unless you cancel or replace it. When you die, your super is directed to the person you nominate.
Non-binding death nomination
A guide for trustees as to who should receive your super when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay your super to someone else or to your estate.
Reversionary beneficiary
If you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years.

Who is eligible to receive your super?

Your super can be paid to a dependant, your legal representative (for example, the executor of your will), or someone who has an interdependency relationship with you. A dependant for superannuation purposes is “the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship”. An interdependency relationship is where someone depends on you for financial support or care.

What happens if I don’t make a nomination?

If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will be a superannuation dependant or the legal representative of your estate to then be distributed according to your Will.

Where it can go wrong

There have been a number of court cases over the years that have successfully contested the validity of death nominations. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name. If your super is to be directed to your estate, ensure the wording uses the correct legal terminology.

One of the reasons for delays in paying death benefit nominations cited by the funds is where there is no nomination (or it is expired or invalid), there are multiple potential claimants, and the trustee needs to work through sometimes complex family scenarios.

The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place, and it is valid and correct. While there still might be a delay in getting your super where it needs to go if you die, the process will be a lot quicker and less onerous for your loved ones.

Threshold for tax-free retirement super increases

Wed, 12 Feb 2025 04:46:00 GMT

Threshold for tax-free retirement super increases

The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.

The transfer balance cap - the amount that can be transferred to a tax-free retirement account – is indexed to the Consumer Price Index (CPI) released each December. If inflation goes up, the general transfer balance cap (TBC) is indexed in increments of $100,000 at the start of the financial year.

In December 2024, the inflation rate triggered an increase in the cap from $1.9m to $2m.

Everyone has an individual transfer balance cap. If you have started a retirement income stream, when indexation occurs, any increase only applies to your unused transfer balance cap.

If you are already taking a retirement income stream, indexation applies to your unused TBC - so, you might not benefit from the full $100,000 increase on 1 July 2025.

Where can I see what my cap is?

Your superannuation fund reports the value of your superannuation interests to the Australian Taxation Office (ATO). You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov .

Why the ATO is targeting babyboomer wealth

Wed, 12 Feb 2025 02:53:07 GMT

Why the ATO is targeting babyboomer wealth

“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.”
ATO Private Wealth Deputy Commissioner Louise Clarke

The Australian Taxation Office (ATO) thinks that wealthy babyboomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations.

If you are within the ATO’s Top 500 (Australia's largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control.

A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets. Generally, under tax law, you can legitimately structure assets if there is a good reason to do so - like for asset protection, but if you tip across the line and the only viable reason for a structure is to reduce tax, then you risk the ATO taking a very close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules in Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities.

“We’re seeing that succession planning behaviour is primarily done by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update.

Key areas of concern include:

Division 7A loans being settled. That is, a company has been paying money to a shareholder or an associate under a loan account. The ‘loan’ is quickly settled, often via a distribution, to remove it from the accounts.
Assets moving around the group (often the true value of an asset is not recognised raising the question, why the change if not to avoid capital gains tax on disposal or for some other benefit).
Family member interests being restructured .
Trust deeds being amended.
A restructure is cited as a reason for late lodgment.

Use of trusts

Trusts are also a key area of concern in 2025. Where a trust which has made a family trust election (FTE) or interposed entity election (IEE) makes a distribution outside of the family group, a 47% Family Trust Distribution Tax applies (tax at the top marginal tax rate plus Medicare).

In addition, the ATO has recently tightened its approach to trust tax returns for closely held trusts to ensure that trustee beneficiary (TB) statements are being completed. These are required when a trust makes a distribution of income or assets to the trustee of another trust, unless an exclusion applies.

For example, a trust which has made an FTE or IEE doesn’t need to make a TB statement. The TB statement will then be used to cross reference against what the beneficiary has declared in its tax return. Where a valid TB statement is not made on time this can trigger a hefty 47% Trustee Beneficiary Non-Disclosure Tax.

Reducing risk

Where you or your family have control over multiple entities, particularly where the value of these entities is significant, it is important that the connections between these - be it in Australia or overseas - are looked at closely to avoid any nasty surprises or lost opportunities.

Transferring control of your business may involve restructuring your business operations – changes to share structures, changes to the trustee and appointor of a trust, changes to partnership structures – or transferring assets to family members via the creation of trusts or other entities. All these events have legal and tax implications that need to be carefully considered.

Contact us to assist you with your succession and tax planning.

Planning for 2025 key changes and challenges

Wed, 11 Dec 2024 05:56:50 GMT

What’s ahead in 2025?

The last few years have been a rollercoaster ride of instability. 2025 holds hope, but not a guarantee, of greater stability and certainty. We explore some of the key changes and challenges.

An election

Welcome to political advertising slipping into your social media, voicemail, and television viewing - most likely with messages from the opposition asking if you are better off, and from the incumbents telling you all the reasons why you are.

The 2025-26 Federal Budget has been brought forward to 25 March 2025. This suggests an election will be held in either March or May 2025 but no later than 17 May 2025.

Legislation in limbo

The Senate pushed through 32 Bills on the final sitting day of parliament for 2024 including seven of direct relevance to business and to the financial interests of some Australians. However, two key announcements remain in limbo:

$3m tax on earnings in a superannuation fund

The proposed Division 296 tax, which imposes a 30% tax rate on future earnings for superannuation balances above $3 million, is proposed to commence from 1 July 2025. The Bill enabling the new tax is stalled in the Senate. It’s unlikely that this tax will pass parliament prior to the election; at which point, the Bill lapses. It then becomes a question of whether the elected Government chooses to rectify the concept or let it fade into oblivion as a bad idea.

$20,000 instant asset write-off for small business

In the 2024-25 Federal Budget, the government announced the extension of the $20,000 instant asset write-off threshold for small business for a further year to 2024-25. The concession enables businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Without this measure, the threshold returns to $1,000. This concession was removed by amendment from the enabling legislation at the last minute in the final sitting of Parliament of 2024. The removal of this measure is unfortunate, as once again, SMEs now have no confidence about the tax treatment of investments in assets that they might be looking to make, or have made, in the current financial year.

Tax & super changes

Foreign resident capital gains withholding changes on sale of property

One of the Bills pushed through Parliament at the end of 2024 changes how capital gains withholding applies to foreign residents from 1 January 2025.

Currently, residents selling taxable Australian property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more. If applicable, the withholding is then made available as a credit against any tax liability. The vendor only receives any refund due after their next income tax return is processed at tax time.

From 1 January 2025 however, the threshold will be removed and the withholding rate increased so that:

The withholding is increased from 12.5% to 15%; and
The withholding applies to the sale of all Australian land and buildings by foreign residents, regardless of the value of the assets.

The reforms apply to acquisitions made on or after 1 January 2025.

Superannuation rate increases to 12%

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025 - the final legislated increase.

Super on Paid Parental Leave

From 1 July 2025, superannuation will be paid on Paid Parental Leave payments. Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments), as a contribution to their superannuation fund.

Interest rates

At the last Reserve Bank Board (RBA) meeting, RBA governor Michele Bullock recognised the easing of headline inflation from 5.4% to 2.8% over the year to September 2024 but suggested that the economy still has some way to go before inflation is sustainably within the 2% to 3% target range. The RBA appears wary of volatility and wants to see inflation sustainably trending down before making any move. Commbank is predicting a February 2025 rate cut, ANZ and Westpac May 2025, and NAB June 2025.

Cost of living pressures

The National Accounts released in early December took economists by surprise with living standards growing by a mere 0.2% in the September quarter – the expectation was much higher. Discretionary spending only increased by 0.1%.

The personal income tax cuts that came into effect from 1 July 2024 helped households, as did energy subsidies, but the impact is still working its way through the system. At the same time, mortgage costs continue to rise as past increases continue to impact.

Through the year, Australia’s economy grew 0.8%, the lowest rate since the COVID-19 affected December quarter 2020. Economic activity in the Australian economy right now is heavily dependent on Government spending.

Slow and steady is the expectation for 2025.

The ‘Trump effect’

President-elect Trump will recite his oath of office on 20 January 2025. The Trump administration will hold the presidency, Senate and the House.

For Australia, the question is the likely impact of some of President-elect Trump’s stated policy objectives including the imposition of tariffs. On social media, Trump has said:

“ …as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. ”
“ …we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America. ” This in response to claims that China is responsible for massive amounts of drugs, in particular Fentanyl being sent into the US.

The issue for Australia is the secondary impact of a trade war. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade with the world in 2023. A slowdown in the Chinese economy impacts Australia and the region generally.

An immediate impact of the idea of a trade war has been the decline of the AUD/USD, currently sitting at around 64c.

Fuel efficient cars

New standards for vehicle manufacturers come into effect from 1 January 2025. Vehicle manufacturers will have a set average CO ₂ target for all new cars they produce, which they must meet or beat. The target will be reduced over time and car companies must provide more choices of fuel-efficient, low or zero emissions vehicles.

Suppliers can still sell any type of vehicle they choose but with more fuel-efficient models offsetting any less efficient models. If suppliers meet or beat their target, they'll receive credits. If they don’t, they will have two years to either trade credits with a different supplier, or generate credits themselves, before a penalty becomes payable.

Wage theft criminalised

As of 1 January 2025, the intentional underpayment of workers will be criminalised.

Employers will commit an offence if:

they’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument; and
they intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid.

Employers convicted of wage theft face fines of up to 3 times the amount of the underpayment and $7.825 million.

Tax deduction denied for signature basketball shoe R&D

Wed, 11 Dec 2024 05:26:36 GMT

Tax deduction denied for signature basketball shoe R&D

The Federal Court has denied a sports company’s appeal to claim research & development incentives for the creation of an Australian signature basketball shoe.

The Movie Air highlighted the importance of the signature Air Jordan shoe to Nike. While expected to sell around $3 million worth of shoes by its fourth year, the signature shoe eclipsed expectations raking in $126 million in its first year. Nike sold 1.5 million in the first six weeks following clever marketing suggesting that the colourful shoes were in breach of the NBA regulations.

Nike’s recent fourth quarter results to 31 May 2024 show the Jordan brand worth $7 billion, and the bright spot in the company’s results with a 6% sales gain.

In Australia, Peak Australia created the Delly1. Peak worked with Australian Olympian and NBA Champion, Matthew Dellavedova, on the final shoe design. Dellavedova has stated in interviews that he had, “...a whole lot of involvement with the shoe… I wanted a low-cut shoe that was light and close to the ground because I need to guard all these quick guards that are tough to defend over here [in the NBA]. They [Peak] did a great job with that, and as we went through the process of me testing it we just made minor adjustment.”

But did the process undertaken to create the Delly1 meet the requirements to access research and development (R&D) concessions?

Accessing R&D concessions

The R&D tax incentive program encourages research and development that companies might not otherwise undertake. The incentive offers a tax offset which is calculated with reference to qualifying R&D expenditure. The rate of the tax offset and whether it is refundable or non-refundable depends on the company’s situation.

To access the incentive, R&D activities have to be “core” or “supporting.”

Active Sports Management Pty Ltd lodged applications with Industry Innovation and Science Australia (IISA), to register activities relating to the development of a customised basketball shoe (Delly1) as “core R&D activities.” A core activity is one that can’t be determined in advance, can only be determined by systematic progression through scientific principles and experimentation, and is conducted for the purpose of generating new knowledge.

Unfortunately for Active Sports Management, the ATO, Administrative Appeals Tribunal, and now the Federal Court did not see the development of Delly1 as core R&D.

The claim was denied on the basis that the outcome did not appear to have technical or scientific uncertainty, just subjective views.

Phasing out cheques

Tue, 10 Dec 2024 05:16:21 GMT

Phasing out cheques

The Government has announced a transition plan to phase out the use of cheques. Under the plan, cheques will stop being issued by 30 June 2028 and stop being accepted on 30 September 2029.

The use of cheques has declined dramatically over the last 10 years, declining by around 90%. In response, banks have stopped issuing chequebooks to new customers. However, financial institutions have a legislated requirement to accept cheques until the Government no longer requires them to do so.

Danish banks stopped accepting cheques in 2017 and New Zealand's banks in 2021.

Cheques out but cash remains king

While Australians have moved to digital payment methods, the Government has been careful to maintain cash as a payment method.

Around 1.5 million Australians use cash to make more than 80% of their in‑person payments. Cash also provides an easily accessible back‑up to digital payments in times of natural disaster or digital outage.

According to the most recent data, up to 94% of businesses continue to accept cash.

The Government has stated that they will mandate that businesses must accept cash when selling essential items, with appropriate exemptions for small businesses.

Currently, businesses don’t have to accept cash – business can specify the terms and conditions that they will supply goods and services.

The issue of card surcharges often comes up when a business adds a surcharge rather than recognising this cost of doing business in their pricing. A business can charge a surcharge for paying by card, but the surcharge must not be more than what it costs the business to use that payment type.

Tax and tinsel Q&As

Tue, 10 Dec 2024 04:13:19 GMT

Tax and tinsel Q&As

Can you avoid giving the Australian Tax Office a gift this Christmas?

The top Christmas party questions

What can I do to make the staff Christmas party tax deductible or tax-free?

Not have one? Ok, seriously, it’s likely that you will pay tax one way or another; it’s just a question of how. If you structure your celebrations to avoid fringe benefits tax (FBT), then you normally can’t claim a tax deduction for the expense or goods and services tax (GST) credits.

No FBT

If you host your Christmas party in the office on a working day, then FBT is unlikely to apply to the food and drink. Taxi travel that starts or finishes at an employee’s place of work is also exempt from FBT - helpful if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer.

If you host your Christmas party outside of the office and keep the cost per head under $300 (the FBT minor benefit limit) then FBT often won’t apply to the cost of entertaining your employees.

But, if you do not incur FBT, you cannot claim GST credits or a tax deduction for the Christmas party expense.

Tax deductible

If your business hosts slightly more extravagant parties away from the business premises and the cost goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Are the costs of client gifts deductible?

It depends on the gift and why you’re giving it. If you send a client a gift, the gift is tax deductible if you have an expectation that the business will benefit; it’s marketing. While this seems like a mercenary way to look at Christmas giving, it is the business giving the gift, not you personally. This assumes that the gift is not a gift of entertainment like golf, or restaurants, which would not be deductible.

What about gifts for staff? Are they tax deductible?

The key to Christmas presents for your team is to keep the gift spontaneous, ad hoc, and from a tax perspective, below the $300 FBT minor benefit limit. So, no ongoing gym memberships or giving the same person several of the same gift that adds up to $300 or more unless you want to give a gift to the ATO at the same time. But, you can give gifts at different times throughout the year without triggering FBT as these are counted separately for the minor benefit limit.

A cash bonus will be treated as income in much the same way as salary and wages.

I like to catch up with clients for lunch or a drink (or two) at Christmas. These expenses are deductible, right?

Regardless of whether it’s for Christmas or at any other time of the year, the cost of entertaining your clients – food, drink or other entertainment – is not deductible. The ATO is keen to ensure that taxpayers are not picking up part of the cost of your long lunches or special events while you’re bonding with clients.

If you have any questions about business christmas gifts or entertainment, contact our office.

You may also be interested in these past articles about Christmas planning:

https://www.aspencorp.com.au/bah-humbug-the-christmas-tax-dilemma

https://www.aspencorp.com.au/avoiding-the-fbt-christmas-grinch

https://www.aspencorp.com.au/what-makes-or-breaks-christmas

What makes or breaks Christmas?

Mon, 25 Nov 2024 22:20:07 GMT

What makes or breaks Christmas?

The cost of living has eased over the past year but consumers are still under pressure. For business, planning is the key to managing Christmas volatility.

The countdown to Christmas is on and we’re in the midst of a headlong rush to maximise any remaining opportunities before the Christmas lull. Busy period or not, Christmas causes a period of dislocation and volatility for most businesses. The result is that it is not ‘business as usual’ and for many, volatility can create problems.

Added to this dislocation are cost of living pressures impacting consumers. Employee households are the hardest hit experiencing mortgage cost fuelled increases – spiked by the rollover of fixed rate loans to higher variable rate loans. While there has been some relief from energy subsidies and a reduction in fuel prices, underlying inflation remains persistently above the RBA’s target rate. Services inflation - the cost of your rent, insurance, your hairdresser, etc. – is sitting at around 5%. With the Reserve Bank of Australia (RBA) Board keeping rates on hold for now and hinting that it will be some time yet before they are comfortable reducing rates, consumers want a reason to spend based on value for money. The irony is that if we all spend up big, which a recent Roy Morgan poll suggests we are, there is a risk this elevated spending will further delay rate cuts. But, while we might spend more, some of this increase is simply to compensate for inflation - we need to spend more to buy at the same level as previous years.

The discounting trend

Consumers expect a bargain and can generally find one. If you choose to discount stock (or the market forces you to), it’s essential to know your profit margins to determine what you can afford to give away. A business with a 20% gross profit margin that offers a 15% discount, needs a 300% increase in sales volume simply to maintain the same position. Worst case scenario is that a business trades below its breakeven point and generates losses.

Increased sales from discounting can be great if you know your numbers, have excess or older stock that needs to be moved, generates demand, or drives new customers to you.

Also think about how you create value; it does not always have to be a direct discount on a product. Packaging might be a better option than a straight discount where you can increase sales of multiple items, even better if you can combine higher demand with lower demand stock. Quantity discounts, value added are also options.

The Christmas cost hangover

Costs tend to go up over Christmas. More staff, lower efficiency, downtime from non-trading days, increased promotional costs, all mean that the cost of doing business increases. It’s great to get into the Christmas spirit as long as you don’t end up with a New Year hangover. Cost control is important.

Many businesses also bring in casual staff. It’s essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.

Check the pay calculator to make sure you have it right.

New Year cashflow crunch

The New Year often leads into a quieter trading and tighter cashflow period. The March quarter is often the toughest cashflow quarter of the year. You will need a cash buffer. Don’t over commit yourself in the run up to the end of the year and start the new Year with a problem.

Take a lesson from Scrooge

If you work with account customers, start your debtor follow up early. If your customers are under cashflow pressure, the Christmas period will only exacerbate it. The creditors that chase debt hard and early will get paid first. Don’t be the last supplier on the list; the bucket might be empty by then.

Christmas is a great time of year. Just don’t get caught up in the rush and forget about the basics.

Trading stock headaches

If business activity spikes over the Christmas period and you sell goods, then there is a temptation to increase stock levels. That makes sense as long as you don’t go too far. Too much stock post the Christmas period and you will either be carrying product that is out of season, or you will have too much cash tied up in trading stock. Try to work with suppliers that can supply on short notice.

Managing your trading stock is not just about managing cost. If your customers are in your store but can’t find what they need, have an online option available in store to take the sale.

Are student loans too big

Mon, 25 Nov 2024 21:58:28 GMT

Are student loans too big?

Australian voters tend to reject US style education favouring more egalitarian systems where income does not determine access.

In the US, average student debt is USD $37,693 (public and private debt) taking an average of 20 years for individuals to repay. But, students often have a gap not fulfilled by loans.

For Australian domestic students, the cost of completing a bachelor degree is generally between $20,000 and $45,000, excluding some of the higher value courses. HECS-HELP loans are available for eligible students to cover the cost of tuition up to $121,844 for most degrees, and $174,998 for higher value degrees like medicine. The average higher education student debt in Australia is around $27,000 and on average takes just over 8 years to repay. Close to 3 million Australians have a student loan debt with debt totalling over $81 bn. Over 7 million have loans above $100,000.

Currently, student loans start to be paid back when an individual’s income reaches $54,435, with a repayment rate that scales according to income ranging from 0% to 10% when income reaches $159,664.

The Government has announced a series of changes to HECS-HELP including:

Indexation rate calculation change to the lower of consumer price index (CPI) or wage price index (WPI) – currently CPI. Intended to be backdated to student loans on 1 June 2023, effectively removing the 7.1% spike that occurred in 2023.
Increased minimum repayment threshold to $67,000 in 2025-26. The repayments will also be calculated on the income above the new $67,000 threshold rather than total annual income.
20% loan reduction for all study and training support loans before 1 June 2025 (around $16bn).

These changes are subject to the passage of legislation and are not yet law.

When overseas workers are Australian employees

Sun, 24 Nov 2024 22:13:43 GMT

When overseas workers are Australian employees

The Fair Work Commission has determined that a Philippines based “independent contractor” was an employee unfairly dismissed by her Australian employer.

Like us, you are probably curious how a foreign national living in the Philippines, who had an ‘independent contractors’ agreement with an Australian company, could be classified as an Australian employee by the Fair Work Commission?

The recent case of Ms Joanna Pascua v Doessel Group Pty Ltd highlights just some of the issues Australian businesses face when working with overseas contractors and staff.

What underpinned the Fair Work decision?

Ms Pascua worked under contract as a legal assistant, investigating credit claims on clients’ behalf, for a specialist credit repair legal firm based in Queensland between 21 July 2022 until 20 March 2024. She worked from home in the Philippines, using her own computer, a firm email address and a PBX phone system that gave the appearance that she was calling from the legal office.

The contract described the relationship as one of an independent contractor, with the standard clauses that the firm will not be liable for any other benefits or remuneration other than what was specified and that the firm was not liable for taxes, worker’s compensation, unemployment insurance, employer’s liability, social security or other entitlements. Ms Pascua also bore a liability in the event that something went awry with her work.

For her work, Ms Pascua was paid “AUD$18 per hour Salary all inclusive as a Full Time Employee,” capped at 8 hours per day, 5 days per week, excluding breaks. While working with the firm, Ms Pascua used a firm supplied pro forma invoice to bill 83 weekly invoices at the full hours allowable and 28 other invoices for lesser amounts when she worked less than 40 hours in the week.

For the first 12 months of her time with the legal firm she was supervised by a solicitor. Within 12 months, her work was unsupervised, and in the last 7 months of the relationship, she was the only person conducting investigative work.

Underpinning the Fair Work Commission’s decision were the recent High Court cases that changed the way in which disputes over the nature of employment relationships are determined (CFMMEU v. Personnel Contracting Pty Ltd and ZG Operations Pty Ltd and Jamsek). Whereas once the courts looked at the substance of the overall arrangement (let’s call it the ‘if it walks like a duck and talks like a duck, then it’s a duck’ principal), now greater weight is given to the contract, with reference to the rights and duties created by that contract.

To determine this case, the FWC stepped through the contract clause by clause to evaluate whether it suggested an employment or independent contractor relationship, and looked at how these clauses were brought into effect.

In this case, on weight, the FWC determined Ms Pascua was an employee because the contract indicated that Ms Pascua was required to perform work “in the business of another”, instead of for her own enterprise. The contract suggested that:

Despite being described as a paralegal, she did not appear to be working in a distinct profession, trade or distinct calling. Her contract outlined administrative tasks and ad hoc duties.
The contract did not enable her to assign the work to another.
While there were daily targets in the contract – a result that she was expected to achieve – these tasks referenced weekly requirements and often could be carried over, suggesting ongoing work.
There was a level of control exerted by the legal firm over how Ms Pascua performed her work that suggests she was not running her own enterprise – the PBX phone system, the email address, the level of direction in the tasks to be performed in the daily instruction she received.
Despite being invoiced by Ms Pascua, the hourly rate described in the contract was that of a full-time employee, and the invoices were to be forwarded weekly for the previous week’s work. The FWC also noted that the most likely rate for Ms Pascua as an employee would be $30.95 per hour (the casual rate for level 2 legal clerical work). To this, the FWC noted that genuine independent contractors would normally specify a fee that was greater, not less, than the minimum wage.

The FWC found that the description of the arrangement as that of independent contractor belied the actual nature of the contract.

When it came to the clauses excluding matters such as the payment of income tax, workers compensation, annual and personal leave relied on by the legal firm as confirmation of an independent contractor arrangement, the FWC referred to the Deliveroo Australia Pty Ltd v Diego Franco case and others. That is, the FWC considers, “the statements in the contract about meeting the obligations consequent upon the labelling of the arrangement as one of independent contractor to have little weight in determining the true nature of the relationship.”

The new definition of employee and employer

In August 2024, a new definition of what is an employee and employer came into effect in the Fair Work Act. This new definition extends the High Court’s decision in CFMMEU v. Personnel Contracting Pty Ltd and ZG Operations Pty Ltd and Jamsek to rely on the nature of the contract between the parties, not just what the contract says. The intent of the legislative change appears to be to ensure that clever drafting of a contract alone will not be sufficient to define an independent contractor arrangement.

The Fair Work Act now requires that the true relationship between the parties is, “determined by ascertaining the real substance, practical reality and true nature of the relationship between the individual and the person.” The totality of the relationship needs to be considered including how the contract is performed in practice.

What does this decision mean for employers?

The FWC’s decision in Ms Joanna Pascua v Doessel Group Pty Ltd highlights how cautious employers should be about the nature of employment relationships. Just because you label an arrangement as that of an independent contractor, does not mean it is. And if you get it wrong, beyond the industrial relations impact, you might be liable for the tax, payroll tax and workers compensation payments that should have been made.

What makes this decision unusual is how an international employment arrangement can be drawn into the national workplace system. Regardless of the geographic location of an employee, if your business is an Australian national system employer (bound by the Fair Work Act), and the individual is deemed to be an employee, the same rights and obligations may apply to that employee as to other employees located in Australia.

While not addressed in this case, the FWC also referred to the minimum wage for a paralegal performing work such as that undertaken by Ms Pascua. While not applicable to this case, from 1 January 2025, wage theft will become a criminal offence - where an employer is required to pay an amount to an employee but intentionally underpays. For international employees where rates might be significantly different to Australian expectations, it is more important than ever to ensure you have characterised the employment relationship correctly.

Tax obligations and international workers

We’re often asked about the implications of working with overseas, non-resident workers who are working for a resident Australian company.

Let’s say you want to engage the services of a non-resident individual.

Contactor or employee?

The first step is to ensure that the arrangement is correctly classified. As we have seen from the Ms Joanna Pascua v Doessel Group Pty Ltd case, this really depends on the specific situation. From a tax perspective, the ATO has outlined their guidance in Employee or independent contractor , but you might need specific advice if you are uncertain.

Implications of an employment relationship

If the worker is classified as an employee and they are a non-resident for Australian tax purposes, then they should only be taxed in Australia on income that has an Australian source. However, you need to check whether a double tax agreement (DTA) could impact on the outcome – Australia has around 45 bilateral DTAs. For example, if the employee was a resident of say the Philippines, then Article 15 of the double tax agreement (DTA) between Australia and the Philippines generally prevents Australia from taxing the employment income unless the work is performed in Australia.

Pay as you go (PAYG) withholding should not generally apply if the worker is a non-resident employee and is only deriving foreign sourced income. Generally, PAYG does not need to be withheld under the PAYGW rules from a payment of salary / wages to someone if the payments are not taxed in Australia.

Superannuation guarantee should not apply if all the work is performed overseas, and the worker is a non-resident.

It will be important to get specialist advice in the employee’s country of residency to determine whether there are any obligations that need to be satisfied under local tax or super systems (e.g., withholding, superannuation or superannuation like contributions, etc).

Tax implications of independent contractors

If the worker is classified as a genuine independent contractor (or they are working through a trust or company) and they are a non-resident, then they should only be taxed in Australia on Australian sourced income. Using the same example, if the contractor is a resident of the Philippines, then Article 7 of the DTA would generally prevent Australia from taxing their business profits or income unless they relate to a permanent establishment that the contractor has in Australia (see Will a foreign worker mean your business is carrying on a business overseas? below).

PAYG withholding should not apply as long as:

The contractor provides an ABN; or
A DTA prevents the income from being taxed in Australia; or
The contractor does not carry on an enterprise in Australia. If the contractor performs all their work overseas, they don't have any physical presence or employees in Australia, then it might be possible to argue that they don't carry on an enterprise in Australia. The company could ask the contractor to complete a statement by supplier .

Payments to foreign contractors might need to be reported to the ATO on the taxable payment annual report (TPAR) if your business provides building and construction, cleaning, courier and road freight, IT or security, investigation or surveillance services.

Will a foreign worker mean your business is carrying on a business overseas?

By having foreign workers, there is a risk that the business will be considered to be carrying on a business through a permanent establishment in the relevant foreign country. This could potentially expose an Australian business to tax in the foreign country on some of its business profits.

A permanent establishment is generally defined in Australia’s double tax agreements as being a fixed place of business through which the business of the enterprise is carried on in whole or part. Each DTA is a unique document which means that the definition of permanent establishment might be different depending on which foreign country you are dealing with.

This area can become complex very quickly and it is a good idea to get advice to ensure that you have certainty about your obligations.

Are you considering a new business vehicle purchase? If so, you should factor electric car FBT exemption.

Thu, 24 Oct 2024 02:33:31 GMT

Thinking about making a new business vehicle purchase?
If so, you should read about the electric car FBT exemption.

Electric cars under $89,332, and their associated car expenses, are currently exempt from fringe benefits tax (FBT). Businesses are not required to pay FBT on the provision of electric vehicles for employees for work-related-purposes.

To qualify for the FBT exemption, the vehicle needs to meet the following criteria:

The vehicle must be a zero or low emissions vehicle.
The first time the car is both held and used must be on or after 1 July 2022.
The car must be used by a current employee or their associates (such as family members).
Luxury Car Tax (LCT) must never have been payable on the importation or sale of the car.

The government will complete a review into this exemption by mid-2027 to consider electric car take-up. We will provide an update when this review begins.

Plug-in hybrid electric vehicles

From 1 April 2025, a plug-in hybrid electric vehicle (PHEV) will no longer be considered a zero or low emissions vehicle under FBT law.

PHEV’s have surged in popularity over the last few years. They are vehicles that have both electric and petrol engines, running, and charging from both an external power source and using petrol.

If you're considering a PHEV, here are some popular models available in Australia:

Mitsubishi Outlander PHEV
Hyundai Tucson PHEV
Volvo XC40 Recharge

Potential extension of the FBT Exemption

Given the growing popularity of EVs and the current government’s environmental targets, there has been speculation about the possibility of extending the FBT exemption for PHEVs beyond April, 2025. While no official decisions have been made, it is worth keeping an eye on our newsletter for any updates.

The tax advantages of owning a plug-in electric vehicle in Australia make it a compelling option for both individuals and businesses. However, it's important to be aware of the upcoming expiration of the FBT exemption. If you're considering an EV purchase, now may be the time to take advantage of these incentives.

For more information or to discuss your specific needs contact our office .

Find out more about recent FBT articles:

The Fringe Benefit Tax traps

FBT free electric cars

01 Succession: the series

Tue, 22 Oct 2024 02:40:47 GMT

01 Succession: the series

Ok, not that Succession series. Each month we’ll bring you a new perspective on transferring property. Be it estate planning, managing an inheritance, or the various forms of business succession. This month, we look at the tax consequences of inheriting property.

Beyond the difficult task of dividing up your assets and determining who should get what, it’s essential to look at the tax consequences of how your assets will flow through to your beneficiaries.

When assets pass from a deceased individual to a beneficiary of the estate, the tax impact will generally depend on the nature of the asset and the tax characteristics of the beneficiary, such as their residency status.

Inheriting cash

When cash passes from a deceased individual to their estate and then to a beneficiary, generally, there should not be any direct tax issues to deal with, assuming that the cash is denominated in AUD.

Inheriting assets

Death is a taxing event. When a change of ownership of an asset occurs, generally, a capital gains tax event (CGT) is triggered. However, the tax rules provide some relief from CGT when someone dies. The basic rule is that a capital gain or loss triggered by a death is disregarded unless the asset is transferred to one of the following:

An exempt entity (although there are some exceptions to this where the entity is a charity with deductible gift recipient status);
The trustee of a complying superannuation fund; or
A foreign entity and the asset is not classified as taxable Australian property.

The exemption applies if the asset passes to the deceased’s legal personal representative (i.e., executor) or to a beneficiary of the estate, which is not one of the entities listed above.

Once the asset has been transferred to the beneficiary, the beneficiary will need to manage the tax impact when they sell the asset.

Inheriting shares

Let’s assume you inherit an ASX listed share portfolio under your mother’s will. The tax outcome will depend on whether your mother was an Australian resident for tax purposes when she died, and whether the shares were acquired by your mother before or after 20 September 1985 (i.e., pre-CGT or post-CGT).

If your mother was an Australian resident for tax purposes when she died, and the shares were acquired post-CGT, then the cost base of the shares is normally based on the original purchase price. That is, the tax rules treat the inherited shares as if you purchased them. For example, if your mother purchased BHP shares for $17.82 on 2 January 1997, when you sell the shares, the gain is calculated based on your mother’s purchase price of $17.82.

If your mother was a resident of Australia when she died, and the shares were acquired pre-CGT, then the cost base of the shares is normally reset to their market value at the date of death. That is, if your mother passed away on 1 October 2024, the share price at close was $45.96. If you subsequently sold the shares in three years, the gain or loss is calculated using this value.

If your mother was a non-resident when she died, then the cost base of the shares is normally based on their market value at the date of death.

But it’s not all about the tax. Managing shares in your will can be difficult as prices and allocations change over time, and the companies you are invested in evolve. A portfolio that was once worth a small amount 20 years ago, might be worth significantly more when you die.

Inheriting property

Let’s assume you inherit an Australian residential property from your father under his will. For certain tax purposes, you are taken to have acquired the property at the date of his death.

The general rule is that the executor and/or beneficiaries of the estate inherit the cost base and reduced cost base of the CGT assets (the house) owned by the deceased just before their death, but this isn’t always the case, especially when it comes to pre-CGT properties and a property that was the main residence of the deceased individual just before they died.

Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. If the house was your father’s main residence before he died, he did not use the home to produce income (did not rent it out or use it as a place of business) and he was a resident of Australia for tax purposes, then a full CGT exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met:

The house is disposed of within two years of the date of death; or
The dwelling was the main residence of one or more of the following people from the date of death until the dwelling has been disposed of:
The spouse of the deceased (unless they were separated);
An individual who had a right to occupy the dwelling under the deceased’s will; or
The beneficiary who is disposing of the dwelling.

For example, if the house was your father’s main residence and was eligible for the full main residence exemption when he died, if you sell the house within the 2 year period, no CGT will apply. However, if you sell the house 10 years later, the CGT impact will depend on how the property has been used since the date of your father’s death.

An extension to the two year period can apply in limited certain circumstances, for example when the will is contested or is complex.

If your father did not live in the property just before he died, it still might be possible to apply the full exemption if your father chose to continue treating the home as his main residence under the ‘absence rule’. For example, if he was living in a retirement village for a few years but maintained the property as his main residence for CGT purposes (even if it was rented out).

If your father was not an Australian resident for tax purposes when he died, the cost base for CGT purposes will normally be based on the purchase price paid by your father if he acquired it post-CGT.

Inheriting foreign property

If you are an Australian resident who has inherited a foreign property or asset from an individual who was a non-resident just before they died, the cost base is normally taken to be the market value at the time of death. For example, if you inherited a house from your uncle in the UK, the cost base is likely to be the value of the house at the date of his death.

If a taxable gain arises on sale, then it is necessary to consider whether the CGT discount can apply, but the discount will sometimes be less than 50%. If the gain is also taxed overseas, then a tax offset can sometimes apply to reduce the amount of tax payable in Australia.

Managing an inheritance can become complex. For assistance with estate planning, or to understand the tax implications of an inheritance, please contact us .

Find out more on Estate Planning, wills and inheritance:

Why you need an Estate Plan

Tax 'safe harbour' for inherited property

Where to store your Will?

Wills and Estate Planning

Payday super: the details

Tue, 15 Oct 2024 00:30:51 GMT

Payday super: the details

‘Payday super’ will overhaul the way in which superannuation guarantee is administered. We look at the first details and the impending obligations on employers.

From 1 July 2026, employers will be obligated to pay superannuation guarantee (SG) on behalf of their employees on the same day as salary and wages instead of the current quarterly payment sequence.

The rationale is that speeding up the payment sequence for SG will not only help reduce the estimated $3.4 billion gap between what is owed to employees and what has been paid, but will also improve outcomes for employees – the Government estimates that a 25‑year‑old median income earner currently receiving super quarterly and wages fortnightly could be around 1.5% better off at retirement.

Announced in the 2023-24 Federal Budget, payday super is not yet law. However, given the structural changes required to administer the new law, Treasury has released a fact sheet to help employers better understand the implications of the impending change.

How will payday super work?

Under payday super, the due date for SG payments will be seven days from when an ordinary times earning* payment is made. That is, employers have seven days from an employee’s payday for their SG to be received by their super fund. The only exceptions are for new employees whose due date will be after their first two weeks of employment, and for small and irregular payments that occur outside the employee’s ordinary pay cycle.

Over the last few years, employers have moved to single touch payroll (STP) reporting for employee salary and wages. It is expected that payday super will fold into the existing electronic systems and some changes will be made to STP to collect ordinary times earning data.

The impact for some employers however will not be the compliance cost of administering the regular SG payments, but the cashflow. Employers will not be holding what will be 12% of their payroll until 28 days after the end of the quarter, but instead paying this amount out on the employee’s payday. The upside is that where an employer has either fallen behind or not paying SG, particularly when the business is insolvent, the damage is contained.

What happens if SG is paid late?

The penalties for underpaying or not paying SG are deliberately punitive and this approach will continue under payday super.

Currently, a super guarantee charge (SGC) applies to late SG payments - comprised of the employee’s superannuation guarantee shortfall amount, interest of 10% per annum from the start of the quarter the SG payment was due, and an administration fee of $20 for each employee with a shortfall per quarter. And, unlike normal superannuation guarantee contributions, SGC amounts are not deductible to the employer, even when the liability has been satisfied.

Under payday super, employees are fully compensated for delays in receiving SG amounts and larger penalties apply for employers that repeatedly fail to comply with their obligations. If you make a payment late, the SGC is made up of:

As you can see, if the proposed SGC becomes law, late SG payments can spiral out of control quickly. This will be a particular issue for employers that pay employees less than their entitlements over time, or have misclassified employees as contractors and have an outstanding SG obligation.

But, unlike the current SGC, the new SGC will be tax deductible (excluding penalties and interest that accrue if the SG charge amount is not paid within 28 days).

Payday super is not yet law. We will keep you up to date as change occurs and work with you to get it right once the details have been confirmed. If you have any other questions about super contribution payments, contact our office .

*Ordinary time earnings are the gross amount your employees earn for their ordinary hours of work including over-award payments, commissions, shift loading, annual leave loading and some allowances and bonuses.

To find out more about recent superannuation contribution changes, you can read some of our recent articles on the topic:

Workers owed $3.6bn in super guarantee

Contractor or employee?

The ban on genetic test insurance discrimination

Fri, 11 Oct 2024 02:53:36 GMT

The ban on genetic test insurance discrimination

The ability for life insurers to discriminate based on adverse predictive genetic test results will be banned under a new Government proposal.

Predictive genetic tests detect gene variants associated with heritable disorders that appear after birth, often later in life, but are not clinically detectable at the time of testing.

To overcome concerns about discrimination by life insurers, the Government has announced a total ban on predictive genetic testing.

Life insurance and genetic testing

Voluntary insurance, including life insurance is individually underwritten and ‘risk-rated’. The cost of premiums is proportionate to the unique risks of the person seeking the cover. Most of us would be familiar with the questions about family history, personal medical history and habits.

As life insurance is a guaranteed renewable product, once a policy has been underwritten and commenced, the life insurer cannot change or cancel a person’s cover, provided they pay all future premiums when due – premium prices will change across a risk pool, for example based on age. This is why it’s important to carefully assess changing life insurance policies if health issues or conditions have arisen since you put the original policy in place.

In 2019, Australia’s life insurance industry introduced a partial moratorium on the requirement to disclose genetic test results. The moratorium, which is in place for life insurance applications received from 1 July 2019, prevents genetic results being used for certain types of insurance cover below certain thresholds. However, using APRA data, when compared to the average sum insured, the moratorium coverage thresholds are well below par:

*any combination of income protection, salary continuance or business expenses cover.

Genetic test discrimination

Despite the moratorium, there is evidence that people are not undertaking genetic tests or participating in scientific research because of concerns about obtaining affordable life insurance. And, discrimination still exists.

The Australian Genetics and Life Insurance Moratorium: Monitoring the Effectiveness and Response Report by Monash University found that of the consumers surveyed who had undertaken a genetic test, 35% reported difficulties obtaining life insurance including insurers rejecting life insurance applications, financial advisers advising participants that their applications would be rejected, and insurers placing conditions on insurance policies or charging higher premiums.

Alarmingly, a 43 year old woman with a BRCA2 variant and no personal history of cancer, was denied life cover outright despite having her ovaries and fallopian tubes removed, and regular intensive breast imaging.

The Government response

The Government has stepped in and announced a total ban on the use of genetic testing in life insurance underwriting. The ban will be subject to a 5 year review. However, the Government has not introduced legislation enabling the reforms nor has it announced the date that the ban will take effect.

And, the total ban impacts predictive genetic testing only – it does not cover clinical diagnostic genetic testing to confirm a suspected condition based on signs or symptoms.

A global issue

Australia is not the first country to grapple with the issue of adapting to the increase in available genetic data.

In the UK, insurers cannot use predictive genetic test results unless the result is favourable, or the result has been given to the insurer (voluntarily or accidently). Huntington’s disease is a specific exception for life cover worth more than £500,000.

Canada’s Genetic Non-Discrimination Act prohibits any entity (including insurers) from requesting or using genetic test results. The exception is for individuals to voluntarily disclosure a test result showing they do not have a genetic change that runs in the family.

In the USA, the Genetic Information Nondiscrimination Act (GINA), prevents genetic test results being used in health insurance and employment contexts but not life insurance. The US state of Florida however introduced a law prohibiting life insurers from using predictive genetic test results in underwriting.

More women using ‘downsizer’ contributions to boost super

Thu, 10 Oct 2024 02:04:11 GMT

More women using ‘downsizer’ contributions to boost super

If you are aged 55 years or older, the downsizer contribution rules enable you to contribute up to $300,000 from the proceeds of the sale of your home to your superannuation fund (eligibility criteria applies).

In 2023-24, over 57% of people making a ‘downsizer’ contribution to super were women. And, the average value of the contribution was marginally higher at $262,000 versus $259,000 contributed by men.

The most likely age someone makes a downsizer contribution is between 65 and 69. From age 65, a downsizer contribution can be withdrawn from super if your circumstances change, even if you are still working. Those aged 55 to 64 generally won’t have access to these funds until they are at least 60 and retired.

Downsizer contributions are excluded from the existing upper age test, work test, and the total super balance rules (but the amount that can be moved to a retirement pension is limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you or your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

To be eligible to make a downsizer contribution you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one and make a downsizer contribution if you have access to other funds.

Please contact us if you would like the facts about downsizer contributions, or speak to your financial adviser for advice on your personal scenario.

You may also be interested in a recent article about using SMSF's to invest in property

Scam prevention - how to improve your security

Tue, 10 Sep 2024 05:10:19 GMT

Scam prevention - how to improve your security

Aspen Corp works closely with Metrowest IT , a Perth based IT company who specialises in helping to protect business.

They have kindly shared some of the practical steps they regularly advise their clients to take to help protect Banking, Financial, ATO and MyGov accounts:

It's important to ensure your security practices are up to date. With a rise in hacking and scam attempts targeting these platforms, safeguarding your personal information has never been more important.

Here are a few simple steps to improve your security and protect your sensitive data:

Create Strong, Unique Passwords : Choose passwords that are easy for you to remember but hard for others to guess by combining three distinct words, a number and a special character, like "BlueSocksSky7!".
It's essential to use a different password for each account so that if one gets compromised, the rest of your accounts stay secure. If passwords like this are hard to remember there are always Password Managers that make storing and accessing passwords easy, like LastPass and bitwarden .
Enable Two-Factor Authentication (2FA) : Always enable 2FA when available it adds an extra layer of security requiring a second step to log in protecting against your password being compromised.
Beware of Scams : Be cautious when you receive unexpected emails claiming to be from the ATO or MyGov.
Common signs of a scam email include an incorrect or suspicious sender address, a sense of urgency or pressure to take immediate action (like "act now" or "your account will be locked"), and poor spelling or grammar.
Always double-check the sender’s email address and avoid clicking on links or downloading attachments unless you’re sure the email is legitimate.
Use Trusted Devices : Avoid logging in to your ATO/MyGov account on public or shared devices like those at an internet cafe or library. Only use devices you own and trust.

Property and ‘lifestyle’ assets in the spotlight

Tue, 10 Sep 2024 03:58:24 GMT

Property and ‘lifestyle’ assets in the spotlight

Own an investment property or an expensive lifestyle asset like a boat or aircraft? The ATO are looking closely at these assets to see if what has been declared in tax returns matches up.

The Australian Taxation Office (ATO) has initiated two data matching programs impacting investment property owners and those lucky enough to hold expensive lifestyle assets.

Investment property

What investment property owners declare and claim in their personal income tax returns is a constant focus for the ATO. Coming off the back of data matching programs reviewing residential investment property loan data, and landlord insurance, the ATO have initiated a new program capturing data from property management software from the 2018-19 financial year through to 2025-26. Data collected will include:

Property owner identification details such as names, addresses, phone numbers, dates of birth, email addresses, business name and ABNs, if applicable;
Details of the property itself - property address, date property first available for rent, property manager name and contact details, property manager ABN, property manager licence number, property owner or landlord bank details; and
Property transaction details - period start and end dates, transaction type, description and amounts, ingoings and outgoings, and rental property account balances.

While the ATO commit to specific data matching campaigns, since 1 July 2016, they have also collected data from state and territory governments who are required to report transfers of real property to the ATO each quarter.

This latest data matching program ramps up the ATO’s focus on landlords, specifically targeting those who fail to lodge rental property schedules when required, omit or incorrectly report rental property income and deductions, and who omit or incorrectly report capital gains tax (CGT) details.

Lifestyle assets

Data from insurance providers is being used to identify and cross reference the ownership of expensive lifestyle assets. Included in the mix are:

Caravans and motorhomes valued at $65,000 or over;
Motor vehicles including cars & trucks and motorcycles valued at $65,000 or over;
Thoroughbred horses valued at $65,000 or over;
Fine art valued at $100,000 per item or over;
Marine vessels valued at $100,000 or over; and
Aircraft valued at $150,000 or over.

The data collected is substantial including the personal details of the policy holder, the policy details including purchase price and identification details, and primary use, among other factors.

The ATO is looking for those accumulating or improving assets and not reporting these in their income tax return, disposing of assets and not declaring the income and/or capital gains, incorrectly claiming GST credits, and importantly, omitted or incorrect fringe benefits tax (FBT) reporting where the assets are held by a business but used personally.

It wasn’t me: the tax fraud scam

Tue, 10 Sep 2024 03:58:20 GMT

It wasn’t me: the tax fraud scam

You login to your myGov account to find that your activity statements for the last 12 months have been amended and GST credits of $100k issued. But it wasn’t you. And you certainly didn’t get a $100k refund in your bank account. What happens now?

In what is rapidly becoming the most common tax scam, myGov accounts are being accessed for their rich source of personal data, bank accounts changed, and personal data used to generate up to hundreds of thousands in fraudulent refunds. For all intents and purposes, it is you, or at least that’s what it seems. And, the worst part is, you probably gave the scammers access to your account.

But it’s not just activity statements. Any myGov linked service that has the capacity to issue refunds or payments is being targeted. Scammers are using the amendment periods available in the tax law to adjust existing data and trigger refunds on personal income tax, goods and services tax (GST), and through variations to pay as you go (PAYG) instalments. In some cases, the level of sophistication and knowledge of how Australia’s tax and social security system operates is next level.

Once the scammers have access to your myGov account, there is a lot of damage they can do.

So, how does this happen and why is it so pervasive? Humans are often the weakest link.

Common scams utilise emails (78.9% of reported tax related scams in the last 12 months) or SMS (18.4% of reported scams) that mimic communication you might normally expect to see. The lines of attack used by tax related scammers are commonly:

Fake warnings about attempted attacks on your account (and requiring you to click on the link and confirm your details);
Opportunistic baiting where some form of reward is flagged, like a tax refund, that you need to click on the link to confirm and access; and
Mimicking common administrative notifications from the Australian Taxation Office (ATO) like a new message accessible from a link.

Approximately 75% of all email scams reported to the ATO to March 2024 were linked to a fake myGov sign in page.

How to spot a fake

Often the first sign that something is amiss is alerts about activity on your myGov account or a change in details - which might seem a little ironic if the way in which scammers got into your account in the first place is via these very same messages. But, there are ways to spot a fake:

The ATO, Centrelink and MyGov don’t use hyperlinks in messages. If you receive a message with a link, it’s a fake .
The ATO will not use QR codes as a method for you to access your account.
The ATO will never ask for your tax file number (TFN), bank account details or your myGov login details over social media. Some scammers have used fake social media accounts mimicking the ATO and other Government agencies. When a query comes in, they respond by asking for information to verify it’s you. The ATO will never slide into your DMs. ATO Assistant Commissioner Tim Loh said, “it’s like giving your house keys to a stranger and watching them change your locks.”
The ATO do not use pre-recorded messages to alert you to outstanding tax debt. The ATO will not cancel your TFN. Some scammers suggest that your TFN has been cancelled or suspended due to criminal activity or money laundering and then tell you to either pay a fee to correct it, or transfer your money to a ‘safe’ bank account to protect you against your corrupted TFN.
The ATO will not initiate a conference call between you and your tax agent and someone from a law enforcement agency. In one case, the taxpayer was told that the caller was from the ATO and a person from her accounting firm was on the call as well to represent her and work through a problem. The ATO caller and the tax agent were fake. Just hang up and call our office if you are ever concerned. The ATO will never initiate a conference call of this type.
The ATO will also not ask you to reconfirm your details because of security updates to myGov. The link, when activated, takes you to a fake myGov web page that can look very convincing.

In general, you should always log into your myGov account directly to check on any details alerted in messages rather than clicking on links. This way, you know that you are not being redirected to somewhere you should not be.

And, don’t log into your myGov account on free wifi networks. Ever.

Who is getting scammed?

There is a pervasive view that older, technology challenged individuals are the most at risk. And while this might be the case generally, scamming is impacting all age groups.

The ATO says that the demographic who most reported providing personal information to scammers was 25 to 34 year olds. And, the younger generation are more likely to fall for investment scams.

According to the AFP-led Joint Policing Cybercrime Coordination Centre (JPC3), people under the age of 50 are overtaking older Australians as the most reported victims of investment scams. Australians reported losing $382 million to investment scams in the 2023-24 financial year. Nearly half (47%) of the investment scam losses involved cryptocurrency.

Other scams

Scammers are in the business of scamming and they will use every trick and opportunity to part you from your money.

Investment scams.

Pig butchering . Pig butchering is a tactic where scammers devote weeks or months to building a close relationship with their victims on social media or messaging apps, before encouraging them to invest in the share market, cryptocurrency, or foreign currency exchanges. Victims think they are trading on legitimate platforms, but the money is siphoned into an account owned by the scammers, who created fake platforms that look identical to well-known trading and cryptocurrency sites. Scammers will show fake returns on these platforms to convince victims to invest more money. Once they have extracted as much money as possible, the scammers disappear with all the invested funds.

Deepfakes . Deepfakes are lifelike impersonations of real people created by artificial intelligence technologies. Scammers create video ads, images and news articles of celebrities and other trusted public figures to promote fake investment schemes, which can appear on social media feeds or be sent by scammers through messaging apps. Unusual pauses, odd pitches, or facial movement not matching their speaking tone are often giveaways but increasingly, the fakes are difficult to spot.

Invoice scams

The names and details of legitimate businesses are used to issue fake invoices with the money transferred to the scammer’s account. These scams are often tied to cyber breachers where hackers have accessed your systems and have identified your suppliers.

Bank scams

There has been a lot in the media of late about people receiving phone calls purporting to be from their bank, advising them there is a problem with their account, and then walking them through a resolution that involves transferring all their money into a ‘safe’ scammers account. Victims commonly state that they believed the scammer because of the level of personal information they relayed.

Your bank will never send an email or text message asking for any account or financial details, this includes updating your address or log in details for phone, mobile or internet banking.

A CHOICE survey found that four out of five of the victims of banking scams in their report said their banks did nothing to flag a scam before they transferred their money to the perpetrator.

The Australian Banking Association have stated that, if not already, banks will introduce warnings and payment delays by the end of 2024. And, in addition to other measures, they will limit payments to high-risk channels such as crypto platforms.

What to do if you have been scammed

If you have any concerns, small or large, please contact us immediately. We can help you with next steps.

myGov

If you have downloaded a fake myGov app, have given your details to a scammer, or clicked on a link from an email, text message or scanned a QR Code, contact Services Australia Scams and Identify Theft Helpdesk on 1800 941 126, or get help with a scam here .

Tax scams

Before acting on any instructions, please contact us and we will verify the information for you.

If you have already acted, contact the ATO to verify or report a scam on 1800 008 540.

The Government uses external agency recoveriescorp for debt collection but we will advise you if you have a tax debt outstanding.

Is the RBA to blame? The economic state of play

Tue, 10 Sep 2024 02:29:15 GMT

Is the RBA to blame? The economic state of play

The politicians have weighed in on the Reserve Bank of Australia’s economic policy and their reticence to reduce interest rates in the face of community pressure. We look at what the numbers are really showing.

Treasurer Jim Chalmers has stated that global uncertainty and rate rises are “smashing the economy”.

Former Treasurer Wayne Swan weighed in and told Channel 9 that the RBA was, “putting economic dogma over rational economic decision making, hammering households, hammering Mums and Dads with higher interest rates, causing a collapse in spending and driving the economy backwards” and that the RBA was, “simply punching itself in the face.”

Australian mortgage holders and renters have had no relief from interest rates following 13 successive interest rate rises to the official cash rate since May 2022.

The Reserve Bank’s position and the flow through effects
The Reserve Bank of Australia (RBA) Board opted to maintain the official cash rates at 4.35% at its September Board meeting. The rationale is that inflation remains persistently high and has been for the last 11 quarters. The consumer price index (CPI) rose 3.9% over the year to the June quarter and remains above the RBA’s target range of 2-3%.

But, it is not persistently high inflation that is causing the politicians to weigh in. RBA Governor Michele Bullock has warned that “it is premature to be thinking about rate cuts” and “the Board does not expect that it will be in a position to cut rates in the near term.”

The Australian Bureau of Statistics (ABS) June Quarter National Accounts paint a bleak picture of the Australian economy. Per capita GDP fell for the sixth consecutive quarter by -0.4% to -1.5%. The longest consecutive period of extended weakness ever recorded.

Household spending weakest since COVID Delta
Household spending fell by -0.2% in the quarter, the weakest growth rate since the Delta-variant lockdown affected September quarter 2021.

Discretionary spending – travel and hospitality impacted most

The ABS says that we spent less on discretionary items (-1.1%), particularly for events and travel. It will come as no surprise that spending on hotels, cafes and restaurants was down 1.5%. Spending on food also fell -0.1% as households looked to reduce grocery bills.

Household savings lowest since 2006
The savings ratio remains low. Households saved only 0.9% of their income over the year. This was the lowest rate of annual saving since 2006-07. Net savings reduce when household income grows slower than household spending.

Economic growth from Government spending
The Australian economy did grow by 0.2%, the eleventh consecutive quarter of growth but the growth rate was unimpressive. The ABS says that, “the weak growth reflects subdued household demand, which detracted 0.1 percentage points from GDP growth while government consumption contributed 0.3 percentage points, the same contribution to growth as previous quarter.”

Government spending increased by 1.4% over the quarter. Commonwealth social assistance benefits to households led the rise, with continued strength in expenditure on national programs providing health services. State and local government expenditure also rose with increased employee expenses across most states and territories.

The RBA’s position on interest rates
The RBA is on a narrow path. It’s trying to bring inflation back to target within a reasonable timeframe while preserving the gains in the labour market over the last few years. The RBA expects to reach this target range by the end of 2025.

Through 2022 and 2023, most components of the CPI basket were growing faster than usual (the CPI is literally a basket of 87 types of expenditure across 11 groups such as household spending, education and transport.) Over the last 18 months, the price of goods has come down as supply disruptions like COVID-19 and the war in Ukraine have eased, and are now growing close to the historical average.

The key problem areas are housing costs and services. In housing, the growth is from increased construction costs and strong increases in rent. For services, while discretionary spending is down, as we can see from the June National Accounts, inflation in this category remains high at 5.3% to the June quarter. Wage increases and lower productivity, combined with the increased costs of doing business (electricity, insurance, logistics, rent etc) are all impacting.

The RBA is keen to point out that inflation causes hardship for the most vulnerable in our community. Lower income households tend to allocate more of their spending towards essentials, including food, utility bills and rent. Higher income households tend to spend more on owner-occupied housing as well as discretionary items such as consumer durables.

Younger households and lower income households have been particularly affected by cost-of-living pressures.

26 August changes to workplace laws

Thu, 22 Aug 2024 01:29:18 GMT

26 August changes to workplace laws - are you ready?

On 26 August 2024, stage two of changes to the Fair Work Act, called “Closing Loopholes” reform come into effect.

“Closing the Loopholes” makes expansive changes to Australia's industrial relations. The reforms will have a substantial impact on employers, employees, principals, and contractors. It is clear that Australian businesses will need to give these reforms significant attention.

What changes on 26 August and how can you prepare?

Changes to casual employment including how casual work is defined, pathways to permanent employment, and employee and employer responsibilities.
Changes to independent contractor rules including a change to the definition of employment.
A new right to disconnect for employees which gives eligible employees the right to refuse contact outside their working hours unless that refusal is unreasonable. This doesn’t apply to small businesses until 26 August 2025.
New minimum standards and protections for ‘employee-like workers’ in the gig economy and certain industries.

If you have any further questions, contact your Aspen Corp advisor , and keep an eye out in our newsletter for information about future changes.

Divorce, you, and your business

Thu, 15 Aug 2024 04:50:34 GMT

Divorce, you, and your business

Breaking up is hard to do. Beyond the emotional and financial turmoil divorce creates, there are a number of issues that need to be resolved.

What happens when there is a family company?

For couples that have assets tied up in a company, the tax consequences of any settlements paid from the company will need to be assessed. Settlements paid out by a corporate entity can sometimes be treated as taxable dividends and taxed at the relevant spouse’s marginal tax rate.

If you are receiving assets from a corporate entity as part of a property settlement, it’s essential that you understand the tax implications prior to settlement or a sizeable portion of the settlement could go to the ATO.

For business owners, outside of the tax and financial issues, it’s important to not lose focus on what’s important to keep the business running efficiently.

What happens to your superannuation in a divorce?

A spouse’s interest in superannuation is a marital asset and can be split as part of the breakdown agreement. It’s important to be aware however that superannuation cannot be paid directly to a spouse unless the spouse is eligible to receive superannuation (they have met a condition of release) but it can be rolled over into the spouse’s fund until they are eligible to receive it. Laws exist to prevent taxes such as CGT being triggered when superannuation assets are transferred. This is particularly important where your superannuation fund holds property.

A Court order or Superannuation Agreement is required to give effect to the agreed split in the SMSF assets or to execute a rollover eligible for the CGT rollover concession.

If you have an SMSF and both spouses are members, it’s important to get advice to make sure that all of the appropriate administrative issues are taken care of. Where a divorce is not amicable, it’s important to keep in mind that the SMSF trustee is required under law to act in the best interests of the fund and its beneficiaries. Anything less and the fund members may seek compensation for loss or damage.

Can you protect both parties from divorce?

In a divorce, assets are split based on a multitude of factors such as earning capacity, maintenance of children, and the assets held pre-marriage. Many couples don’t go through their marriage with an equal view of how assets and income should be attributed until something goes wrong. If there is a disparity between the income levels of each spouse, there are a lot of benefits to the household in general of evening out how income flows through to the family. If your partner earns less than you, there is a very real financial benefit to topping up their super as superannuation has preferential tax rates. The same goes for taxable income. If you can even out income coming into the household, it spreads the tax burden. Good planning can make a difference.

When is a gift not a gift?

Thu, 15 Aug 2024 04:43:36 GMT

When is a gift not a gift?

The Tax Commissioner has successfully argued that more than $1.6m deposited in a couple’s bank account was assessable income, not a gift or a loan from friends.

The case of Rusanova and Commissioner of Taxation is enough for a telemovie. The plot features an Australian resident Russian couple ‘gifted’ over $1.6m in unexplained bank deposits, over $67,000 in interest, the Russian father-in-law seafood exporter, a series of Australian companies, and the generous friend loaning money in $20,000 tranches.

The crux of the case before the Federal Court is whether you can prove to the Australian Tax Office (ATO) that unexplained deposits should be treated as gifts or loans and what happens when the Tax Commissioner thinks otherwise? If the Commissioner suspects the deposits are income, he can issue a default tax assessment and decide what tax should be paid. The burden of proof is then on the taxpayer to prove the Tax Commissioner wrong.

The unexplained deposits

Between 2012 and 2016, an Australian resident husband and wife had an estimated $1,636,000 deposited into their bank accounts. The ATO became curious when neither spouse had lodged tax returns in the mistaken belief that they had not earned any income.

The money deposited, they said, was a gift from the wife’s father and therefore not assessable income. Curiously, there were no records produced to support the deposits and not a single text or email notifying that money had been remitted, or acknowledging its receipt.

In addition, a friend of the couple deposited money into the husband’s account including a series of $20,000 transactions over about a week. These, the friend said, were interest-free loans with no agreed terms but an expectation that they would be repaid. The friend could not remember how he was requested to make the loans and there were no loan documents, emails, or texts disclosed to support the loans. Around the same time as the loans were being advanced, there was evidence of the husband ‘repaying’ amounts in excess of what had been lent. In addition, documents show the husband transferred a Porsche Cayenne to his friend in Russia, said to be repayment of the loan.

Compounding the issue were the four directorships of Australian companies held by the husband, none of which had lodged tax returns. One of the companies was a seafood wholesaler, distributing the product of his father-in-law’s American registered Russian export company. The dedicated son-in-law stated that he was merely trying to develop his father-in-law’s business during 2010 and 2016, without remuneration.

Contesting the Tax Commissioner

In 2017, a covert tax audit utilised entries in the couple’s bank accounts to assess their income tax liability and the ATO issued a default assessment based on the unexplained deposits and expenses. The couple objected to the assessment and this objection was partly allowed. A second assessment was then issued to which the couple again objected before the Administrative Appeals Tribunal (AAT) on the grounds that the assessment was excessive.

Can the Tax Commissioner really decide how much tax you should pay?

The Tax Commissioner has the power to issue a ‘default assessment’ for the amount he believes is owing from overdue tax returns or activity statements. The assessment is the amount the ATO believes is owing, not what has been declared.

The problem with a default assessment is not just the Tax Commissioner deciding how much tax you should pay, it is the potential addition of an administrative penalty of 75% of the tax-related liability for each default assessment issued. This penalty may be increased to 95% of the tax-related liability in certain circumstances for taxpayers who have a pattern of non-compliance.

But, here is the problem for the couple. While genuine gifts of money are not taxable, the burden is on the taxpayer to prove that the gift is truly a gift, if the ATO asks. The AAT held that, “absent any reliable evidence..., there is no proper basis to make any findings as to whether the deposits constitute part of the applicants’ taxable income or not.”

The Tax Commissioner can rely on a “deficiency of proof”.

The couple’s stance that the deposits were either gifts from the father or loans from a friend were rejected by the AAT. This is despite an affidavit and evidence from the wife’s father stating that the amounts transferred to them were gifts. The couple did not demonstrate what their income actually was to prove the Tax Commissioner’s assessment was unreasonable, and they could not substantiate that the gifts were indeed gifts from a very generous father.

The Federal Court dismissed the couple’s appeal with costs, leaving the Tax Commissioner’s default tax assessment and penalties in place.

Avoiding the gift tax trap

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

However, there are some circumstances where tax might apply.

Gifts from a foreign trust

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

Inheritances

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

The property was their main residence; and
Your parents are Australian residents for tax purposes; and
You sell the property within 2 years.

However, CGT is likely to apply if for example:

You sell your parents former main residence more than 2 years after you inherit it; or
The property you inherit was not your parents’ main residence; or
Your parents were not Australian tax residents at the time of their death.

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

Gifting an asset does not avoid tax

Donating or gifting an asset does not avoid CGT. If you receive nothing or less than the market value of the asset, the market value substitution rule might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted when calculating any CGT liability.

For example, if Mum & Dad buy a block of land then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a CGT liability. It does not matter that Mum & Dad did not receive any money for the land. Mum & Dad might have a CGT bill for land they gifted with nothing in return.

Donations of cryptocurrency might also trigger CGT. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency.

The rise in business bankruptcy

Wed, 14 Aug 2024 05:50:48 GMT

The rise in business bankruptcy

ASIC’s annual insolvency data shows corporate business failure is up 39% compared to last financial year. The industries with the highest representation were construction, accommodation and food services at the top of the list.

Restructuring appointments grew by over 200% in 2023-24. Small business restructuring allows eligible companies – those whose liabilities do not exceed $1 million plus other criteria – to retain control of its business while it develops a plan to restructure its affairs. This is done with the assistance of a restructuring practitioner with a view to entering into a restructuring plan with creditors.

Of the 573 companies that entered restructuring after 1 January 2021 and had completed their restructuring plan by 30 June 2024, 89.4% remain registered, 5.4% have gone into liquidation, and 5.2% were deregistered as at 30 June 2024.

In the latest statement from the Reserve Bank of Australia, Michelle Bullock stated that, “...there’s also some signs that the business sector is under a bit of pressure, that the business outlook isn’t as rosy as it was.” Productivity is also lagging. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are - the things that make the difference between doing well and going under - then it’s time to find out.

A business becomes insolvent when it can’t pay its debts when they fall due.

The top three reasons why companies fail are:

Poor strategic management
Inadequate cashflow or high cash use
Trading losses

It’s easy to miss the warning signs and rely on optimism that things will get better if you can just get past a slump. The common problem areas are:

Significant below budget performance.
Substantial increases in fixed costs without an increase in revenues - Fixed costs are costs that you incur irrespective of your business activity level. When fixed costs go up, they have a direct impact on your profitability. If your fixed costs are increasing, such as leasing more space, hiring more people, buying more plant and equipment, but there is no measurable increase in your turnover and gross profit, it might tip you over.
Falling gross profit margins - Your gross profit margin is the margin between your sales, minus cost of goods sold. Every dollar you lose in gross profit is a dollar off your bottom line.
Funding your business primarily from debt rather than equity finance.
Falling sales - If sales are falling, it is going to have a ripple through effect on your business, reducing profit contribution and inhibiting growth.
Delaying payment to creditors - Your sales are good but you don’t seem to have enough cash in the business to pay your creditors on time.
Spending in excess of cashflow - Trying to pay today’s expenses with tomorrow’s income.
Poor financial reporting systems - Driving your business with a blindfold over your eyes!
Growing too quickly - You’re making more sales than your business can sustain.
Substantial bad debts or ‘dead’ stock - Customers who won’t pay their accounts and stock that you can’t sell.

If you have concerns about how your business or feel like you are at risk of business failure, we know that seeking help as early as possible improves your chance of turning things around. Aspen Corp has years of experience working with businesses across good and hard times. Speak to your Aspen Corp advisor today , so we can support and advise you through to reach the best outcome for your business.

$20k instant asset write-off passes Parliament

Tue, 02 Jul 2024 03:49:58 GMT

$20k instant asset write-off passes Parliament

Legislation increasing the instant asset write-off threshold from $1,000 to $20,000 for the 2024 income year passed Parliament just 5 days prior to the end of the financial year.

Purchases of depreciable assets with a cost of less than $20,000 that a small business makes between 1 July 2023 and 30 June 2024 can potentially be written-off in the year of purchase. It’s a major cashflow advantage because the tax deduction can be taken in the year of purchase instead of over a number of years.

To be eligible, the asset must be first used, or installed ready for use, for a taxable purpose between 1 July 2023 and 30 June 2024. For example, you cannot simply have a receipt for an industrial fridge, it must have been delivered and installed to be able to claim the write-off in 2024.

The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets across the 2024 year as long as the cost of each asset is less than $20,000. A Bill to extend the instant asset write-off threshold increase to 30 June 2025 is currently before Parliament.

If you would like further information, or support with a recently acquired asset, contact your Aspen Corp advisor today .

Find out more about instant asset write offs:

https://www.aspencorp.com.au/resources/reading_room/news_archives/_20k_accelerated_deductions_for_small_business_extended_another_year

https://www.aspencorp.com.au/the-essential-30-june-guide

What’s ahead for 2024-25?

Tue, 02 Jul 2024 03:28:21 GMT

What’s ahead for 2024-25?

Will 2024-25 be another year of volatility or a return to stability?

Personal tax & super

As you would be aware (at least we hope so after a $40m public education campaign), the personal income tax cuts came into effect on 1 July 2024. At the same time, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%.

For employers, it’s critically important to ensure that your payroll system, and all interactions with it, like salary sacrifice agreements, are assessed and updated. Your PAYG withholding will also be impacted.

While we are on the topic of obligations, the ATO have recently warned employers to be vigilant about their super guarantee obligations:

Are you paying super guarantee to the right people? The definition of an employee for SG purposes is broad and, in some cases, extends beyond typical classifications. Temporary residents, backpackers, and some company directors working in the business, family members working in the business, and some contractors must be paid SG. Check your classifications are correct for SG purposes.
Check the fund details are correct for the employee and the employee’s tax file number has been provided to the super fund. It’s the employer’s obligation to ensure that SG for the employee is directed to the correct super fund account.
Ensure SG is paid into the employee’s fund by the quarterly due date (next SG payments are due by 28 July). If your business misses the deadline, the super guarantee charge applies (even if you pay the outstanding amount quickly after the deadline). The SG charge (SGC) is particularly painful for employers because it is comprised of the outstanding SG, 10% interest p.a. from the start of the quarter, and an administration fee. And, unlike normal SG contributions, SGC amounts are not deductible.

Wages

On 1 July 2024, the national minimum wage increased by 3.75% ($24.10 per hour, or $915.90 per week). The increase applies from the first full pay period starting on or after 1 July 2024. Traditionally, there is no correlation between an increase in minimum wages and inflation.

Annual wage growth in the private sector fell slightly to 4.1% in the March quarter 2024 from 4.2% in December 2023 - the first fall since September quarter 2020, suggesting that wages growth is starting to even out.

Interest rates and cost of living

Reserve Bank of Australia (RBA) Governor Michelle Bullock has stated on several occasions that inflation, not interest rates, are at the heart of cost of living pressures. Interest rates are the RBA’s “blunt instrument” to bring inflation under control. With inflation easing more slowly than anticipated, the RBA is not ruling anything out because the path of interest rates is determined by the actions required to bring inflation to target.

Inflation has reduced from its peak of 7.8% in December 2022 to 3.6% in the March quarter, but increased again in May to 4% dampening expectations of an interest rate reprieve.

Business confidence

The latest NAB business survey is not happy reading with business confidence falling back into negative territory in May as conditions continued to gradually soften. Having experienced eight consecutive months of forward order declines, businesses are understandably circumspect over the outlook. GDP grew marginally in the March quarter and consumption per capita continued to decline.

However, labour market conditions are strong with unemployment at 4% for May.

Treasury forecasts that economic growth (GDP) will marginally improve to 2% in 2024-25. Not exciting but credible.

Migration & labour

Always a controversial topic. Post pandemic, Australia’s migration levels surged with the return of international students, working holiday makers, and an influx of temporary skilled labour to meet shortages.

In the year ending 30 June 2023, overseas migration contributed a net gain of 518,000 people to Australia's population - the largest net overseas migration estimate since records began.

The 2024-25 Federal Budget estimates that net migration will fall to 260,000. While demand pressures from migration have been well publicised, particularly on housing, the positive impact was the impact on supply. Post COVID, Australia faced crippling labour shortages that impeded the return and growth of supply.

From 1 January 2025, student visa numbers will be capped, and according to the University of Melbourne Deputy Vice-Chancellor Professor Michael Wesley, student visa grants are already down 34% in March 2024 compared to the same time in 2023.

The Government’s focus is on skilled migration. Employer sponsored places will rise by 7,175, however skilled independent visas will reduce by 13,475.

The minimum salary requirement to sponsor an employee (Temporary Skilled Migration Income Threshold) will also increase to $73,150 on 1 July 2024.

What now?

Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring within the business and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are, then it’s time to find out ( we can help you with that ).

A lack of profit will erode your business, but not enough cash will kill it stone dead. Businesses often fail because they don’t manage their cash position. Plan, track, and measure your cashflow. This not only means closely monitoring your debtor collections and inventory but also running a rolling three month cashflow position. This should provide an early warning of any brewing problems.

Cash flows, operating budgets, cost control and debt management all need to be part of your business management. The more in control you are the lower your risk position.

Many small businesses also tend to absorb increasing costs. Putting up your prices during difficult times is not an act of social betrayal. If the cost of doing business has increased, you should flow these through unless you are comfortable making less for the same amount of effort, or you are in an industry that is so price sensitive you have no choice but to follow the lead of larger businesses.

Is your family home really tax free?

Tue, 02 Jul 2024 03:06:07 GMT

Is your family home really tax free?

The main residence exemption exempts your family home from capital gains tax (CGT) when you dispose of it. But, like all things involving tax, it’s never that simple.

As the character of Darryl Kerrigan in The Castle said, “it’s not a house. It’s a home,” and the Australian Taxation Office’s (ATO) interpretation of a main residence is not fundamentally different. A home is generally considered to be your main residence if:

It's where you and your family live
Your personal belongings have been moved into the dwelling
It is where your mail is delivered
It’s your address on the electoral roll
You have connected services such as telephone, gas and electricity (in your name); and
It is your intention for the home to be your main residence.

The length of time you have lived in the home is important, but there are no hard and fast rules. Your intention takes precedence over time spent as every situation is different.

When does the main residence exemption apply?

In general, CGT applies to the sale of your home unless you have an exemption, partial exemption, or you can offset the tax against a capital loss.

If you are an Australian resident for tax purposes, you can access the full main residence exemption when you sell your home if:

Your home was your main residence for the whole time you owned it (see Can the main residence apply if you move out?).; and
You did not use your home to produce any income (see Partial exemption below), and
The land your home is on is 2 hectares or less. If your home is on more than 2 hectares, for example on farmland, the exemption can apply to the home and up to 2 hectares of adjacent land.

Partial exemption

If you have used your home to produce income, you won’t normally be able to claim the full main residence exemption, but you might be able to claim a partial exemption.

Common scenarios impacting your main residence exemption include:

Running a business from home (working from home is ok), and
Renting the home or part of the home.

In these scenarios, from the time you started to use the home to generate income, that part of the home is likely to be subject to CGT. And, a word of caution here, as of 1 July 2023, platforms such as Airbnb must report all transactions to the ATO every 6 months. This data will be used to match against the income reported on income tax returns.

Foreign residents and changing residency

Foreign residents cannot access the main residence exemption even if they were a resident for part of the time they owned the property.

If you are a non-resident at the time you enter into the contract to sell the property, you are unlikely to be able to access the main residence exemption. Conversely, if you are a resident at the time of the sale, and you meet the other eligibility criteria, the rules should apply as normal even if you were a non-resident for some of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if eligible, access the main residence exemption.

It’s important to recognise that the residency test is your tax residency, not your visa status. Australia’s tax residency rules can be complex. If you are uncertain, please contact us and we will work through the rules with you.

Can the main residence apply if you move out?

You might have heard about the ‘absence rule’. This rule allows you to continue to treat your home as your main residence for tax purposes:

For up to 6 years if the home is used to produce income, for example you rent it out while you are away; or
Indefinitely if it is not used to produce income.

When you apply the absence rule to your home, this normally prevents you from applying the main residence exemption to any other property you own over the same period. Apart from limited exceptions, the other property is exposed to CGT.

Let’s say you moved overseas in 2020 and rented out your home while you were away. Then, you came back to Australia in 2023 and moved back into your house. Then in early 2024, you decided it is not your forever home and sold it. You elected to apply the absence rule to your home and didn’t treat any other property as your main residence during that same period. In this case, you should be able to access the full main residence exemption assuming you are a resident for tax purposes at the time of sale.

The 6 year period also resets if you re-establish the property as your main residence again, but later stop living there. So, if the time the home was income producing is limited to six years for each absence, it is likely the full main residence exemption will be available if the other eligibility criteria are met.

Timing

Your home normally qualifies as your main residence from the point you move in and start living there. However, if you move in as soon as practicable after the settlement date of the contract, that home is considered your main residence from the time you acquired it.

If you buy a new home but haven’t yet sold your old home, you can treat both properties as your main residence for up to six months without impacting your eligibility to the main residence exemption. This applies if the old home was your main residence for a continuous period of 3 months in the 12 months before you disposed of it and you did not use your old home to produce income in any part of that 12 months when it was not your main residence.

If the sale takes more than six months and if eligible, the main residence exemption could apply to both homes only for the last six months prior to selling the old home. For any period before this it might be possible to choose which home is treated as your main residence (the other becomes subject to CGT).

If your new home is being rented to someone else when you purchase it and you cannot move in, the home is not your main residence until you move in.

If you cannot move in for some unforeseen reason, for example you end up in hospital or are posted overseas for a few months for work, then you still might be able to access the main residence exemption from the time you acquired the home if you move in as soon as practicable once the issue has been resolved. Inconvenience is not a valid reason and you will need to ensure that you have documentation to support your position.

Can a couple have a main residence each?

Let’s say you and your spouse each own homes that you have separately established as your main residences.

The rules don’t allow you to claim the full CGT exemption on both homes. Instead, you can:

Choose one of the dwellings as the main residence for both of you during the period; or
Nominate different dwellings as your main residence for the period.

If you and your spouse nominate different dwellings, the exemption is split between you:

If you own 50% or less of the residence chosen as your main residence, the dwelling is taken to be your main residence for that period and you will qualify for the main residence exemption for your ownership interest;
If you own greater than 50% of the residence chosen as your main residence, the dwelling is taken to be your main residence for half of the period that you and your spouse had different homes.

The same rule applies to your spouse.

The rule applies to each home that the spouses own regardless of how the homes are held legally, i.e., sole ownership, tenants in common or joint tenants.

What happens in a divorce?

Assuming the home is transferred to one of the spouses (and not to or from a trust or company), both individuals used the home solely as their main residence over their ownership period, and the other eligibility conditions are met, then a full main residence exemption should be available when the property is eventually sold.

If the home qualified for the main residence exemption for only part of the ownership period for either individual, then a partial exemption might be available. That is, the spouse receiving the property may need to pay CGT on the gain on their share of the property received as part of the property settlement when they eventually sell the property.

The main residence exemption looks simple enough but it can become complex quickly. You will need more than a ‘vibe’ to work with the exemption. In the words of the character of Dennis Denuto in The Castle, “it’s the vibe of it. It’s the constitution. It’s Mabo. It’s justice. It’s law. It’s the vibe and ah, no that’s it. It’s the vibe. I rest my case.”

Earned an income from the sharing economy?

Tue, 02 Jul 2024 02:52:56 GMT

Earned an income from the sharing economy?

It’s essential that any income earned from sharing economy platforms such as Airbnb, Stayz, Uber, etc., is declared in your tax return.

Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime. 2023-24 is the first year that the ATO will have the income tax returns of taxpayers to match to this data.

All other sharing economy platforms will be required to start reporting from 1 July 2024.

This reporting regime, combined with the ATO’s data matching programs, mean that if income is not declared, it’s likely you will receive a “please explain” request from the regulator.

Read more about what we have had to say about the gig economy in past articles:

https://www.aspencorp.com.au/the-essential-30-june-guide

https://www.aspencorp.com.au/new-laws-target-sharing-economy-platforms

https://www.aspencorp.com.au/the-airbnb-tax

https://www.aspencorp.com.au/afterpays-39bn-pay-day

The essential 30 June guide

Tue, 04 Jun 2024 02:17:30 GMT

The essential 30 June guide

The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.

For you

Opportunities

Take advantage of the 1 July 2024 tax cuts by bringing forward your deductible expenses into 2023-24. Prepay your deductible expenses where possible, make any deductible superannuation contributions, and plan any philanthropic gifts to utilise the higher tax rate.

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction.

And, if your superannuation balance on 30 June 2023 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and get an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 75, you can only make a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

And, if your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.

If you are likely to face a tax bill this year, for example, you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe.

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts over $2 as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy).

To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR.

Investment property owners

Risks

Work from home expenses

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

The short-cut method allows you to claim a fixed 67c rate for every hour you work from home. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates.

Landlords beware

If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property needs to be rented or genuinely available for rent to claim the expenses.

There are a series of issues the ATO is actively pursuing this tax season. These include:

Refinancing and redrawing loans – you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses.
The difference between repairs and maintenance and capital improvements . While repairs and maintenance can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets).
Co-owned property – rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses.

Gig economy income

It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, OnlyFans, youtube, etc., is declared in your tax return.

Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime. This is the first year that the ATO will have the income tax returns of taxpayers to match to this data.

All other sharing economy platforms will be required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest.

For your business

Opportunities

Bonus deductions

There are a series of bonus deductions available to small business in 2023-24, these include the instant asset write-off, energy incentive, and the skills and training boost.

Announced in the 2023-24 Federal Budget, the increase to the instant asset write-off threshold enables small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. In the 2024-25 Federal Budget, the Government extended this measure to 30 June 2025.

Without these measures, the instant asset write-off threshold would be $1,000.

However, legislation to enact the 2023-24 measure has not passed Parliament following a disagreement between the House of Representatives and the Senate about the amount of the threshold, and whether the measure should apply to medium businesses as well (up to $50m).

Similarly, the $20,000 energy incentive that provides an additional 20% deduction on the cost of eligible depreciating assets or improvements to existing depreciating assets that support electrification and more efficient use of energy in 2023-24, is not yet law.

Assuming both measures pass Parliament by 30 June 2024, any assets need to be first used or installed ready for use, or the improvement costs incurred, between 1 July 2023 and 30 June 2024 to be written off in 2023-24.

What is certain is the bonus 20% deduction for eligible expenditure for external training provided to your employees. The ‘skills and training boost’ is available to businesses with an aggregated annual turnover of less than $50 million. To claim the boost, the training needs to have been provided by a registered training provider and registered and paid for between 29 March 2022 and 30 June 2024. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June. Ensure you document the bad debt on your debtor’s ledger or with a minute.

Obsolete plant & equipment

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June.

For companies

If it makes sense to do so, bring forward tax deductions by committing to directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Risks

Tax debt and not meeting reporting obligations

Professional firm profits

For professional services firms – architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risks.

ATO fires warning shot on trust distributions

Tue, 04 Jun 2024 02:10:11 GMT

ATO fires warning shot on trust distributions

The ATO has warned that it is looking closely at how trusts distribute income and to who.

The way in which trusts distribute income has come under intense scrutiny in recent years. Trust distribution arrangements need to be carefully considered by trustees before taking steps to appoint or distribute income to beneficiaries.

What does your trust deed say?

An area of concern is that trustees are not considering the trust deed before income is appointed. The answer to what the trust can do, and who it can allocate income to and how, is normally in the trust deed. This should be your first point of call.

Review your deed

Conduct a review of the trust deed and any amendments to ensure trustees are making decisions consistent with the terms of the deed;
Check the trust vesting date . The trust deed will specify what happens when the trust vests. If the trust vests, the trustees might be directed to distribute the income and property of the trust to particular beneficiaries. The trustee may no longer have the discretion to decide who to appoint income or capital to;
Check who the intended beneficiaries are , and also keep in mind that some beneficiaries might have different entitlements to income and capital under the trust deed;
Timing and requirements for resolutions - Check the deed for any conditions and requirements for trustee resolutions, including the need to have the resolution in writing and the timing of when it’s required to be made. For example, the deed might require trustees to take certain actions before 30 June;
If you are looking to stream capital gains or franked distributions to certain beneficiaries, check the trust deed doesn’t prevent this and the streaming requirements have been met.

Family trust and interposed entity elections

A family trust election helps wrap the workings of the trust around a specific individual’s family group. These elections can help protect trust losses, company losses, and franking credits but can also cause significant tax problems if they are used incorrectly.

An interposed entity election makes an entity a member of the family group of an individual.

Where these elections are in place, it is essential that trustees understand the implications before making any decisions on distributions. Distributions of trust income outside the specified individual’s family group will trigger family trust distribution tax at penalty rates.

Who receives the benefit?

The ATO is also on the lookout for arrangements where amounts are allocated or appointed to beneficiaries, but they don’t receive the real financial benefit of the distribution. If the arrangement has the effect of reducing the overall tax paid on the income of the trust, then this will normally increase the level of risk involved and attract the ATO’s attention.

Increased reporting on tax returns

Changes have been made to capture more information on the tax return about how trusts distribute income. These include:

Trust tax return – four new capital gains tax labels have been added. This information should be provided to beneficiaries to match what is reported in their returns.
Beneficiaries – all beneficiaries of trust income will be required to lodge a new trust income schedule. This schedule should align to your distributions as set out in the trust’s statement of distribution.

Trusts can be an excellent vehicle for many reasons including the flexibility to determine how income is distributed. The cost of that flexibility is strong controls and compliance.

The ATO is increasingly strident about how trusts are distributing income, and the tax impact of those distributions. It’s important for trustees to get it right because if trust distributions are found to be invalid, the tax ramifications can be significant.

For further information about trust distrubtions check out other Aspen Corp blog posts

https://www.aspencorp.com.au/the-atos-final-position-on-risky-trust-distributions

https://www.aspencorp.com.au/the-atos-attack-on-trusts-and-trust-distributions

https://www.aspencorp.com.au/when-trust-distributions-to-a-company-are-left-unpaid

5 million+ struggle with mortgage payments

Tue, 04 Jun 2024 02:03:19 GMT

5 million+ struggle with mortgage payments

New nationwide research released by ASIC’s Moneysmart reveals that 47% of Australian adults with debt, the equivalent of 5.8 million people, have struggled to make repayments in the last 12 months.

Alarmingly, the research revealed that more than half surveyed, said they are not aware that they are entitled to ask their bank or lender for financial hardship assistance and just one in five said they had ever sought financial hardship assistance. Around 30% also stated that they would not seek a hardship assistance arrangement from their bank or lender and instead sell assets or get a second job rather than talking to their bank.

What’s changing on 1 July 2024?

Tue, 04 Jun 2024 01:54:47 GMT

What’s changing on 1 July 2024?

Here’s a summary of the key changes coming into effect on 1 July 2024:

· Tax cuts reduce personal income tax rates and change the thresholds.

· Superannuation guarantee increases from 11% to 11.5% - check the impact on any salary package arrangements.

· Superannuation caps increase from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions.

· Luxury car tax threshold increases to $91,387 for fuel-efficient vehicles and $80,567 for all others.

· Car limit for depreciation increases to $69,674.

· $300 energy relief credit for households comes into effect (credited automatically quarterly).

For business

· $325 energy relief credit for small business commences (for small businesses that meet the relevant State or Territory definition of a ‘ small customer ’).

· $20k instant asset write-off extended to 30 June 2025 (subject to the passage of legislation).

Do you have you Director ID number - don’t risk a $16,500 fine.

Wed, 01 May 2024 03:02:06 GMT

Do you have you Director ID number - don’t risk a $16,500 fine.

As of the 1st of November 2022, Australian Company Directors are required by law to verify their identity with the Australian Business Registry Service and obtain a Director ID. If you are operating as a director without a Director ID number, you risk a $16,500 fine

If you do not have a Director ID follow our guide to setting one up , there is no cost involved. Your Director ID will need to be recorded with our office should any changes be required for your entity. We do not want any changes to be delayed as a result of not having your Director ID in place.

ASIC has begun charging directors for non-compliance. On 19 March 2024, a director was formally charged with one count of failure to have a DIN when required to do so (s1272C(1) of the Corporations Act 2001). The defendant is facing a maximum penalty of $13,320. The matter is currently subject to an interim non-publication order.

If you have your Director ID, could you kindly update our office by uploading the information using the Aspen Corp portal

Improved security when approving Company Annual Returns

Wed, 01 May 2024 02:48:45 GMT

Improved security when approving Company Annual Returns

To improve the security when you sign Company Annual Return, Aspen Corp will now your send company documents digitally so you can sign them with DocuSign.

DocuSign is a document signing software that legally - and securely - lets you sign documents and agreements with enterprise-grade security.

If you run into any difficulties contact our Corporate Services Team

Company money crackdown

Wed, 01 May 2024 02:07:51 GMT

Company money crackdown

The ATO is cracking down on business owners who take money or use company resources for themselves.

It’s common for business owners to utilise company resources for their personal use. The business is often such a part of their life that the line distinguishing ‘the business’ from their life can be blurred.

While there are tax laws preventing individuals accessing profits or assets of the company in a tax-free manner, mistakes are being made and the Australian Taxation Office (ATO) has had enough.

The ATO has launched a new education campaign to raise awareness of these common problems and the serious tax consequences that can arise.

What the tax law requires

Division 7A is an area of the tax law aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. It can also apply where a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate.

Division 7A was introduced to prevent shareholders accessing company profits or assets without paying the appropriate tax. If triggered, the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes and taxed at their marginal tax rate. This unfavourable tax outcome can be prevented by:

Paying back the amount before the company tax return is due (this is often done by way of a set-off arrangement involving franked dividends); or
Putting in place a complying loan agreement between the borrower and the company with minimum annual repayments at the benchmark interest rate.

The problem areas

Division 7A is not a new area of the tax law; it has been in place since 1997. Despite this, common problems are occurring. These include:

Incorrect accounting for the use of company assets by shareholders and their associates. Often, the amounts are not recognised;
Loans made without complying loan agreements;
Reborrowing from the private company to make repayments on Division 7A loans;
The wrong interest rate applied to Division 7A loans (there is a set rate that must be used).

Like life, managing the tax consequences of benefits provided to shareholders and their associates can get messy quickly. Avoiding problems can often come down to a few simple steps:

Don't pay private expenses from a company account;
Keep proper records for your company that record and explain all transactions, including payments to and receipts from associated trusts and shareholders and their associates; and
If the company lends money to shareholders or their associates, make sure it's on the basis of a written agreement with terms that ensure it's treated as a complying loan – so the full loan amount isn't treated as an unfranked dividend.

There are strict deadlines for managing Division 7A problems. For example, if the borrower is planning to repay the loan in full or put a complying loan agreement in place, this needs to be done before the earlier of the due date and actual lodgement date of the company’s tax return for the year the loan was made.

Should you be the ‘bank of Mum & Dad’?

Tue, 30 Apr 2024 05:10:03 GMT

Should you be the ‘bank of Mum & Dad’?

The great wealth transfer from the baby boomer generation has begun and home ownership is the catalyst.

The average price of a home in NSW is $1,184,500, the highest in the country. Canberra is next at $948,500, followed by Victoria at $895,000, with the Northern Territory the lowest at $489,200 ¹ . With the target cash rate expected to remain steady at a 12 year high of 4.35% over 2024, the pressure is on parents and family to help the younger generation become homeowners.

Over the last 15 years, home ownership has fallen from 70% to 67% of the population. Over time, declining home ownership will increase the wealth gap in Australia as for many, home ownership is a significant factor in wealth accumulation. According to the Actuaries Institute, wealth inequality is significantly higher now than in the 1980s, with the wealthiest 20% of households currently having six times the disposable income of the lowest 20% ² .

The Domain’s First Home Buyer Report 2024 estimates the time for a couple aged between 25 and 34 to save a 20% deposit for an entry level home to be 6 years and 8 months in Sydney, and 5 years and 5 months in Melbourne (the Australian average is 4 years and 9 months). In that time, they are begrudgingly paying rent (or staying with Mum and Dad).

So, should you help your children buy a home? If they can, many parents would prefer to assist their children when they need it most, rather than benefiting from an inheritance later in life. However, it’s essential that any support does not risk your financial security, and that means looking at what support you can afford to provide.

The downside of cash gifts

A cash gift towards a deposit or mortgage is a simple and effective method of helping a family member. However, there are a few downsides:

Where the gift forms all or a significant portion of the deposit, lenders may want to ensure that the loan is serviceable and may require verification of the source of the funds to ensure the amount is not a loan and does not require repayment (i.e., a gift letter).
In the event of a divorce or separation, the gift may not overtly benefit your child, and instead form part of the property pool to be divided.

For income tax purposes, gifts from a family member out of natural love and affection are not normally taxed.

The ‘bank of Mum & Dad’

If you provide a loan to your child to purchase a home, it’s essential that the terms of the loan are documented, preferably by a lawyer.

There are many ways to structure the loan depending on what you’re trying to achieve. For example, the loan might mimic a bank loan with interest and regular payments, require repayment when the property is sold or ownership changes, and/or managed by your estate in the event of your death (treated as an asset of the estate, offset against the child’s share of the estate, or forgiven).

There is a lot to think about before lending large amounts of money; what should happen in a divorce, if your child remortgages the property, if you die, if your child dies, if the relationship becomes acrimonious, etc. As always, hope for the best but plan for the worst.

Providing security to lenders

A family guarantee can be used to support a loan in part or in full. For example, with some lenders you can use your security to contribute towards your child’s deposit to avoid lender’s mortgage insurance (which ranges between 1% to 5% of the loan).

When you act as a guarantor for a loan, you provide equity (cash or often your family home) as security. In the event your child defaults, you are responsible for the amount guaranteed. If you have secured your child’s loan against your home and you do not have the cashflow or capacity to repay the loan, your home will be sold.

If you are contemplating acting as guarantor for your child, you need to look at the impact on your finances and planning first. Your retirement should not be sacrificed to your child’s aspirations. And, where you have more than one child, look at equalising the impact of the assistance you provide in your estate.

Co-ownership

There are two potential structures for buying property with your children:

Joint tenants - the property is split evenly and in the event of your death, the property passes to the other owner(s) regardless of your will.
Tenant-in-common – the more popular option as it allows for proportions other than 50:50 (i.e., 70:30). If you die, your share is distributed according to your will.

Regardless of ownership structure, if the property is mortgaged and the other party defaults on the loan, the loan might become your responsibility. It is vital to consider this before loan arrangements are entered into.

It’s also essential to have a written agreement in place that defines how the co-ownership will work. For example, what happens if your circumstances change and you need to cash out? What if your children want to sell and you don’t? Will the property be valued at market value by an independent valuer if one party wants to buy the other one out? It’s not uncommon for children to assume that they will only need to pay the original purchase price to buy your share with no recognition of tax, stamp duty or interest. And, what happens in the event of death or dispute?

If you are not living in the home as your primary residence, then it is likely that capital gains tax (CGT) will apply to any increase in the market value of the property on disposal of your share (not the price you choose to sell it for). And, you will not benefit from the main residence exemption. In these situations, it is essential to keep records of all costs incurred in relation to the property to maximise the CGT cost base of the property and reduce any capital gain on disposal.

Utilising a family trust

A more complex option is to purchase a property in a family trust where you or a related company acts as trustee. This strategy is often used for asset protection purposes. Typically, at some point in the future, you would pass control of the trust to your child and it might be possible to do this without triggering material CGT or stamp duty liabilities, although this would need to be checked. On the eventual sale of the property, CGT will apply to any increase in value of the property and the main residence exemption cannot be used to reduce the tax liability, even if the child was living in the home.

Be wary of state tax issues. For example, in some states, owning property through a trust will mean that the tax-free land threshold will not apply, increasing any land tax liability. Also, if the trust has any foreign beneficiaries, this could result in higher rates of stamp duty.

Reduced or rent free property

Buying a house and allowing your child to live in the house rent-free or at a reduced rent enables you to put a roof over their heads but adds no value to your child’s ability to secure a loan or utilise the equity of the property to build their own wealth.

If you intend to treat the property your child is living in as an investment property and claim a full deduction for expenses relating to the property, then rent needs to be paid at market rates. If rent is below market rates, the ATO may deny or reduce deductions for losses and outgoings depending on the discount provided. Any rental income received is assessable to you. In addition, CGT will be payable on any gain when the property is sold, or ownership is transferred.

If the intention is to provide this property to your child in your estate, ensure your will is properly documented to support this intent.

Do your kids really want to take over your business?

Tue, 30 Apr 2024 02:37:06 GMT

Do your kids really want to take over your business?

Generational succession - handing your business across to your kids or family - sounds simple enough but, many families end up in a dispute right at the point when the parents, business, and children are most vulnerable. It’s important that generational succession is managed as closely and diligently as if you were selling your business to a stranger to avoid misunderstandings and disputes.

If you are looking to hand your business to your children or relatives, there are a few key issues to think about:

Capability and willingness of the next generation – do your kids really want the business?

There needs to be a realistic assessment of whether or not the business can continue successfully after the transition. In some cases, the exiting generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation. All of these are reasonable objectives, however, they only work where there is capability and willingness.

The alternative scenario can also exist where generational succession is pursued by the younger generation. In some cases, it’s seen as their birth right. In these cases, the willingness will exist but this does not automatically translate to capability.

Capital transfer – how much money needs to be taken out of the business during the transition?

What level of capital do the current business owners, generally the parents exiting the business, need to extract from business at the time of the transition? The higher the level of capital needed, the greater the pressure that will be placed on the business and the equity stakeholders.

In most cases, the incoming generation will not have sufficient capital to buy out the exiting generation. This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt.

In many cases, the exiting generation will want to maintain a level of equity investment. This might be a means of retaining an interest in the business or alternatively staging their transition. In either case, it is important to map the capital transition both from a business and shareholder perspective. This needs to be documented and signed off firstly from the business’s perspective and then by both generational groups. No generational transition should be undertaken without a clear and agreed capital program.

Income needs – ensuring remuneration is on commercial terms

In many SMEs, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little.

Under a generational succession, there should be an increased level of formality around compensation to directors and shareholders. Compensation should be matched to roles and where performance incentives exist these should be clearly structured.

Operating and management control

Once the capability and capital assessments have been completed, it is important to look at the transition of control. This can be a very sensitive area. It’s essential to establish and agree in advance how operating and management control will be maintained and transitioned.

The plan for operating and management control should be documented and signed off by all parties with either timelines for time driven succession or milestones for event-focussed transitions.

Transition timeframes and expectations

Generational succession is often a process rather than an event and achieved over an extended period of time. The critical issue is to identify and ensure that all parties have a common understanding and acceptance of the time period over which the transition will take place. This should be included in the documented succession plan.

The need for greater formality and management structure

Generational succession often requires a greater level of formality in the management and decision making process. This formality should achieve a separation of function between management, the Board, and shareholders.

Often in an SME business, these roles merge and there are no clear dividing lines or boundaries. Roles, responsibilities, and clear key performance indicators (KPIs) for management should be agreed and documented.

Need assistance? We can work with you to successfully transition your business.

Accessing money in your SMSF

Tue, 30 Apr 2024 02:15:02 GMT

Accessing money in your SMSF

The ATO has made a call to professional accountants to help identify and manage illegal early access to superannuation by members of self-managed superannuation funds (SMSFs).

In general, access to your super is only possible if:

You retire and turn 60; or
You turn 65 (regardless of whether you’re working).

Early access to superannuation is only possible in very limited circumstances such as terminal illness, permanent incapacity, and severe financial hardship and there are very strict protocols to follow before any amounts are paid out

One of the benefits of an SMSF is the control that it provides to members. The flip side of full control is the temptation to dip into the super account and approve transfers without proper controls.

There are two common ways illegal early access occurs:

When the trustees (or their business) are in financial distress and they use the superannuation account for a short-term loan; or
A promoter offers access through a scheme – often getting people to establish the SMSF and roll over their superannuation into the SMSF.

Illegal access to the SMSF’s account or assets is not difficult to identify and generally will be picked up by your auditor. Where illegal access has occurred, not only is it likely that your retirement savings have been lost or impaired, but you are likely to face additional tax, penalties and interest, and be disqualified as a trustee. In addition, your name will be published online.

One of the signs that there is a problem is when SMSF annual returns are not lodged on time or at all so ensure you are up to date with your SMSF compliance.

Budget 2024-25

Tue, 09 Apr 2024 05:00:47 GMT

Budget 2024-25

The 2024-25 Federal Budget is the third for the Albanese Government and consistent with previous years, the primary themes are expected to be the cost of living and the economic shift to net zero.

According to election guru Antony Green , the window for the next election starts on Saturday, 3 August 2024, “the first possible date for an election if writs are issued on 1 July. The election window will stay open until mid-May 2025, the last date being 17 or 24 May.” No doubt, the Government will have the election in mind when it presents the Budget on 14 May at 7.30pm AEST.

Stage 3 tax cuts

The redesigned stage 3 tax cuts have been passed by Parliament and will apply from 1 July 2024. The amendments broadened the benefits of the tax cut by focussing on individuals with taxable income below $150,000.

Investment incentives for small business

It remains to be seen whether an increased instant asset write-off threshold will apply to smaller businesses in the 2024-25 income year. The increased threshold to $20,000 announced in the 2023-24 Budget still has not passed Parliament (the Senate increased the threshold to $30,000). If the intent of this measure is to encourage investment, it is essential that legislation enabling these measures is passed by Parliament in a reasonable time to give business operators the certainty they need to commit to any additional investment spending.

Energy bill relief

The Prime Minister has hinted at another round of energy bill relief to ease cost of living pressures for low-income households and small business. The measure is subject to support from State and Territory governments.

Sign up to our newsletter to ensure you receive our analysis on how the 2024-25 Federal Budget will impact you, your business, and your superannuation. Sign up for

Warning on SMSF asset valuations

Tue, 09 Apr 2024 04:01:54 GMT

Warning on SMSF asset valuations

ATO data analysis has revealed that over 16,500 self managed superannuation funds (SMSFs) have reported assets as having the same value for three consecutive years. With many of these assets residential or commercial Australian property, you can forgive the ATO for being incredulous.

For trustees of SMSFs, where asset values are consistently reported at the same value, it’s likely your SMSF will be flagged for closer scrutiny by the ATO.

The value of assets in your SMSF impacts on member balances and by default, can impact the amount you can contribute, ability to segregate assets for exempt current pension income, the work test exemption and access to catch-up concessional contributions. And, as we move closer to the implementation of the Division 296 $3m superannuation tax, valuations will be very important for anyone with a member balance close to or in excess of $3m.

If the asset is an in-house asset, for example a related unit trust, then an accurate valuation is essential to ensure the fund remains within the 5% in-house asset limit. If the value of in-house assets rises above 5% of total assets, the asset/s need to be sold to bring the limit back below 5%.

Valuing at market value

Each year, the assets of your SMSF must be valued at ‘market value’ and evidence provided to your auditor. Broadly, market value is the amount that a willing buyer of the asset could reasonably be expected pay to acquire the asset from a willing seller assuming that the buyer and seller are dealing at arm’s length, and everyone acts knowledgeably and prudentially. It’s a common sense test that looks at the value you could reasonably expect to achieve for an asset.

If your SMSF holds collectible and personal use assets like artwork, jewellery, motor vehicles etc., a valuation must be performed by a qualified independent valuer on disposal. This does not necessarily mean that an independent valuation needs to be completed every year but at least every three years would be prudent. If you are not utilising an independent valuer, you will still need to make an active assessment based on market conditions. For example, if you hold artwork and the artist who created your investment artwork died, has this changed the value? Are the primary and secondary markets for the artwork transacting at a higher value? Leaving the value of the asset at its acquisition price calls into question the rationale for acquiring the asset within the fund in the first place. If the asset is unlikely to add any value to your retirement savings, then should it be held in your SMSF when you could achieve a higher rate of return elsewhere?

In most cases, the ATO require trustees to value an asset based on “objective and supportable data”. This means that you should document the asset being valued, a rational explanation for the valuation, and the method in which you arrived at it.

Valuing real property

Commercial and residential real estate does not need to be valued by an independent valuer. But, if there have been significant changes to the property, the market, or the property is unique or difficult to value, it is a good idea to have a written independent valuation from a valuer or estate agent undertaken (their report should also document the valuation method and list comparable properties).

If you are completing the valuation yourself, ensure that you document the time period the valuation applies to and the characteristics that contribute to the valuation. For example, a 10 year old brick four bedroom property on 640m ² of land in what suburb and any features that make it more or less attractive to a buyer, for example proximity to transport. And, you should access credible sales data either on similar properties in the same suburb that have sold recently or from a property data service. More than one source of data is recommended.

The estimates on a lot of online property sales sites are general in nature and not reliable for a valuation of a specific property. The average price change for the suburb however could be used as supporting evidence of your valuation.

For commercial property, net income yields are required to support the valuation. Where the tenants are related parties, for example your business leases a commercial property owned by your SMSF, you will need evidence that a comparative commercial rent is being paid and the rent is keeping pace with the market.

Valuing unlisted companies and unlisted trust investments

Valuing unlisted companies and unlisted investments can be difficult. The financials alone are not enough. But, if your SMSF invested in an unlisted company or shares in a unit trust, then there is an expectation that the trustees made the decision to make the initial acquisition based on the value of the asset, its potential for capital growth and income generation. That is, if you assessed the market value going into the investment, then it should not be a stretch to value the asset each year.

The difficulty for many investors is that in unlisted companies or trusts, the initial investment was broadly equivalent to the cash requirements of the activity being undertaken.

Generally, the starting point is the value of the assets in the entity and/or the consideration paid for the shares/units. For widely held shares or units, this is the entry and exit price.

Where property is the only asset, then the valuation principles for valuing real property are likely to apply.

Where there is no reliable data or market

We’ve seen a few scenarios where the assets purchased or created by the SMSF have no equal or there is no market – the true extent of the value will only really be known when the asset is realised. These unusual items default to either a professional valuation or a viable market assessment. This might be a derivative of the purchase price or data from a related market.

Valuations and the impending Division 296 tax on super earnings

The value of assets will be particularly important for those with super balances close to or above the $3m threshold for the impending Division 296 tax on fund earnings. Because the tax will measure asset values and tax the growth in earnings above the $3m threshold, accurate valuations will be important to ensure that the fund does not pay tax when it does not need to, and to reduce the likelihood of anomalies artificially inflating tax payable.

Ensure your SMSF's assets are accurately valued to optimize member balances and navigate evolving tax regulations. Contact us today for expert guidance on strategic asset valuation tailored to your retirement goals.

The assault on professional services

Tue, 09 Apr 2024 03:26:19 GMT

The assault on professional services

The ATO has signalled that it is willing to pursue professional services firms who divert profits to avoid tax.

Two new cases before the Administrative Appeals Tribunal demonstrate how serious the Australian Taxation Office (ATO) is about making sure professional services firms - lawyers, accountants, architects, medical practices, engineers, architects etc., – are appropriately taxed.

In both cases, the ATO pursued the practices using Part IVA. Part IVA is an area of the income tax law that enables the Tax Commissioner to attack schemes or arrangements undertaken to obtain a tax benefit, enabling him to cancel any benefit derived by the scheme. That is, you could have a legally viable structure in place but if the only purpose of that structure is to reduce tax, then the Commissioner can use Part IVA to remove the tax benefit. And, if Part IVA applies, you may end up with an additional tax liability as well as an administrative penalty of either 25% or 50% of the tax shortfall amount.

Broadly, the cases involved a solicitor who controlled a number of practice trusts that derived profits through marketing and facilitating tax planning arrangements.

While the arrangement in each case was complex and involved a large number of steps, the practice trusts ensured their business profits weren’t subject to tax by essentially making trust distributions on paper through a series of trusts and ultimately to either a company that had existing tax losses, or a tax-exempt entity. However, the real funds relating to the trust distribution (less a commission paid for the use of these entities) were ultimately received by the solicitor or their associated entities in the form of a loan.

Professional practices have been in the ATO spotlight for many years now for the way they distribute profits. Back in 2021, the ATO finalised its guidance on the allocation of professional firm profits, putting in place a series of risk ratings and gateway tests. These two cases however demonstrate the ATO’s willingness to pursue the issue in the courts using the Commissioner’s powers in Part IVA.

For professional services firms, it’s important to be aware that there are several ways in which the ATO can potentially challenge arrangements involving the distribution of profits from a professional practice. For example:

If a trading entity derives personal services income that mainly relates to the skills and efforts of a particular individual, the ATO has certain expectations around ensuring the profits are assessed to the individual performing the work.
If a trading entity doesn’t derive personal services income but income from a business structure involving a professional practice, the ATO has set out its compliance approach to targeting arrangements that don’t result in a reasonable level of profit being taxed in the hands of the individual practitioners.
If a trust makes paper distributions to loss entities to ‘soak up’ deductions or losses, there are integrity rules in section 100A, another area of tax law under intense scrutiny, that need to be considered.

For further information about ATOs changes for professional services, have a look at other Aspen Corp blog posts

https://www.aspencorp.com.au/ato-contacts-at-risk-professional-services-firms

https://www.aspencorp.com.au/professional-services-firm-profits-guidance-finalised

https://www.aspencorp.com.au/resources/reading_room/news_archives/ato_targets_profits_of_professional_service_firms

How much is my business worth?

Tue, 09 Apr 2024 03:21:23 GMT

How much is my business worth?

For many small business owners, their business is their largest asset and for many, one that is expected to help fund their retirement. But what is your business really worth and what sets a high value business apart?

Every business owner is naturally curious about just how much their business is worth. However, for every business that sells at an attractive price, there are others that struggle to sell, let alone fetch a premium. The question is, what makes a difference?

When you come to sell a business the first question is, what are you selling? In most cases, this is fixtures and fittings, plant and equipment, stock on hand, and the goodwill of the business. Generally, a buyer won’t want to purchase your liabilities or your business structure, nor will they want to collect your outstanding debtors. Most business sales become a sale of business assets.

These assets are relatively easy to value with the exception of the goodwill. The value of plant and equipment and trading stock can generally be agreed. The tension tends to be around the value of the goodwill because goodwill is made up of many intangible assets that can’t be readily quantified.

We can all agree that there is value in these assets but the question is, how much? Goodwill is basically the value of the future free cashflow of the business. Based on how your business is structured, it is the value of the profits the business can generate in the future. This is what a buyer is prepared to pay for.

If a buyer has a reasonable certainty of profits and free cashflow in the future, then this is worth something. By comparison, a start-up business will have a higher level of risk and no certainty that profits can be generated. In general, a new business may need to trade for a number of years at a loss before it can establish itself and generate profits. Goodwill is what you are prepared to pay to avoid the risk and the ‘time to establish’ factor.

So, what influences business value and what will people pay for?

A history of profits, profits, and more profits
Returns on capital invested (better than 30%)
Strong growth and growth prospects
Brand name and value
A business not dependent on the owners
A strong, verifiable customer list
Monopoly income – exclusive territories
A sustainable competitive advantage
Good systems and procedures

It is possible to get a price that is widely different from the norm. Unique businesses, unique circumstances, and unique opportunities can always produce ‘an out of the box’ price. If you can build something unique, then you may achieve a price beyond normal expectations. At the end of the day however, the market will set the price.

If you are planning on selling your business, identify who your buyers might be. There could be a purchaser who is prepared to pay a large premium to own your business because of the accretive value or because it is pivotal to their growth strategy.

And, even if you are not thinking about selling your business, the reality is that one day you will. If you build your business with this in mind, then you should look to do the things that will grow your business value from year to year.

If you are ready to uncover the true worth of your business and maximise its value for the future, contact us today for a personalised consultation and discover the strategic steps to enhance profitability and attract potential buyers when the time is right.

Non-compete clauses and worker restraints under review

Tue, 09 Apr 2024 03:11:00 GMT

Non-compete clauses and worker restraints under review

A new issues paper from Treasury’s Competition Review questions whether non-competes and other restraints are limiting job opportunities and movement.

A recent Australian Bureau of Statistics (ABS) survey found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

Over the last 30 years, Australia has seen a decline in job mobility. Australia is not alone in this and other advanced economies have experienced the same issue. While restraint clauses are not the only factor contributing to the decline – an ageing population and a rise in post-pandemic market concentration in some industries has also contributed, it is specifically the role of restraints that is the focus of the Competition Review issues paper (submissions close 31 May 2024).

The review states that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

For business however, this is the point - restricting the knowledge developed by a worker during their employment from benefiting a competitor, limiting the likelihood of a ‘mass exodus’ of key workers from the business to a competitor, preventing clients from employing key workers, and protecting the value of the business by preventing employees from walking away with customers that were hard won, at a cost, by the business.

However, the impact of restraints appears to be a psychological deterrent given that most are not contested. Of the 115 matters relating to restraints of trade between 2020 and 2023 dealt with by Legal Aid NSW, only one business commenced proceedings in court against a former worker. And, a further study indicates that where employers seek legal redress in the courts, they are more likely than not to fail.

The international trend is to either ban restraints for workers under a certain income level and time limit restraints for higher paid workers, or to limit the duration of restraints generally but specify a level of compensation to the worker for the restraint period.

How to take advantage of the 1 July super cap increase

Wed, 06 Mar 2024 05:05:56 GMT

How to take advantage of the 1 July super cap increase

From 1 July 2024, the amount you can contribute to super will increase. We show you how to take advantage of the change.

The amount you can contribute to superannuation will increase on 1 July 2024 from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions.

The contribution caps are indexed to wages growth based on the prior year December quarter’s average weekly ordinary times earnings (AWOTE). Growth in wages was large enough to trigger the first increase in the contribution caps in 3 years.

Other areas impacted by indexation include:

The Government super co-contribution – Income threshold
The super guarantee maximum contribution base (the limit for compulsory super guarantee payments)
The tax-free thresholds for redundancy payments
The CGT contribution cap (amount that can be contributed to super following the sale of eligible business assets)

For those with the disposable income to contribute, superannuation can be very attractive with a 15% tax rate on concessional super contributions and potentially tax-free withdrawals when you retire. For business owners who might have had an exceptional year or sold their business, it's an opportunity to get more into super. However, the timing of contributions will be important to maximise outcomes.

\If you know you will have a capital gains tax liability in a particular year, you may be able to use ‘catch up’ contributions to make a larger than usual contribution and use the tax deduction to help offset your capital gain tax bill. But, this strategy will only work if you meet the eligibility criteria to make catch up contributions and you lodge a Notice of intent to claim or vary a deduction for personal super contributions, with your super fund.

Using the bring forward rule

The bring forward rule enables you to bring forward up to 2 years’ worth of future non-concessional contributions into the year you make the contribution – this is assuming your total superannuation balance enables you to make the contribution and you are under age 75.

If you utilise the bring forward rule before 30 June, the maximum that can be contributed is $330,000. However, if you wait to trigger the bring forward until on or after 1 July, then the maximum that can be contributed under this rule is $360,000.

‘Catch up’ contributions

If your super balance is below $500,000 on the prior 30 June, and you want to quickly increase the amount you hold in super, you can utilise any unused concessional super contributions amounts from the last 5 years.

Let’s look at the example of Gary who has only been using $15,000 of his concessional super cap for the last few years. Gary’s super balance at 30 June 2023 was $300,000, so he is well within the limit to make catch up contributions.

Gary could access his $27,500 concessional cap for 2023-24 plus the unused $55,000 from the prior 5 financial years.

If Gary doesn’t access the unused amounts from 2018-19 by 30 June 2024, the $10,000 will no longer be available.

Transfer balance cap unchanged

The general rate for the transfer balance cap (TBC), that limits how much money you can transfer into a tax-free retirement account, will remain at $1.9 million for 2024-25. The TBC is indexed by the December consumer price index (CPI) each year.

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

Wed, 06 Mar 2024 04:00:48 GMT

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

It’s not uncommon for business owners to pour their money into a business to get it up and running and to sustain it until it can survive on its own. A recent case highlights the dangers of taking money out of a company without carefully considering the tax implications.

A case before the Administrate Appeals Tribunal (AAT) was a loss for a taxpayer who blurred the lines between his private expenses and those of his company.

The taxpayer was a shareholder and director of a private company that operated a business. Over a number of years, he made withdrawals and paid personal private expenses out of the company bank account, but the amounts were not recognised as assessable income.

Following an audit, the ATO assessed the withdrawals and payments as either:

Ordinary income assessable to the taxpayer, or
Deemed dividends under Division 7A.

Division 7A contains rules aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. If Division 7A is triggered, then the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes.

The taxpayer tried to convince the AAT that the withdrawals were repayments of loans originally advanced by him to the company and therefore should not be assessable as ordinary income. Alternatively, he argued that the payments were a loan to him and there was no deemed dividend under Division 7A because the company did not have any "distributable surplus” (a technical concept which limits the deemed dividend under Division 7A).

The AAT found issues with the quality of the taxpayer’s evidence, concluding that he failed to prove that the ATO’s assessment was excessive. This was based on a number of factors, including:

The taxpayer produced a number of different iterations of his financial affairs and tax return.
He could not satisfactorily explain how he was able to fund the original loans to the company, especially given he had declared tax losses in multiple years around the time when the loans were made.

While the taxpayer had tried to explain that some of his loans to the company were sourced originally from borrowings from his brother, the AAT considered this was implausible given the brother’s own tax return showed modest income.

So, how should a contribution from a company owner to get a business up and running be treated? It really depends on the situation, but for small start-ups, the common avenues are:

Structure the contribution you make as a loan to the company, or
Arrange for the company to issue shares, with the amounts paid being treated as share capital.

In making a decision on which is the best approach, it is necessary to consider a range of factors, including commercial issues, the ease of withdrawing funds from the company later and regulatory requirements.

The way you put money into the company also impacts on the options that are available to subsequently withdraw funds from the company. However, the key issue to remember is that if you take funds out of a company then there will probably be some tax implications that need to be carefully managed.

Revised stage 3 tax cuts confirmed for 1 July

Wed, 06 Mar 2024 03:42:24 GMT

Revised stage 3 tax cuts confirmed for 1 July

The revised stage 3 tax cuts have passed Parliament and will come into effect on 1 July 2024.

Before the new tax rates come into effect, check any salary sacrifice agreements to ensure that they will continue to produce the result you are after.

Resident individuals

Non-resident individuals

Working holiday markers

The ATO Debt Dilemma

Wed, 06 Mar 2024 02:58:34 GMT

The ATO Debt Dilemma

Late last year, thousands of taxpayers and their agents were advised by the Australian Taxation Office (ATO) that they had an outstanding historical tax debt. The only problem was, many had no idea that the tax debt existed.

The ATO can only release a taxpayer from a tax debt in limited situations (e.g., where payment would result in serious hardship). However, sometimes the ATO will decide not to pursue a debt because it isn’t economical to do so. In these cases, the debt is placed “on hold”, but it isn’t extinguished and can be re-raised on the taxpayer’s account at a future time. For example, these debts are often offset against refunds that the taxpayer might be entitled to. However, during COVID, the ATO stopped offsetting debts and these amounts were not deducted.

In 2023, the Australian National Audit Office advised the ATO that excluding debt from being offset was inconsistent with the law, regardless of when the debt arose. And by this stage, the ATO’s collectible debt had increased by 89% over the four years to 30 June 2023.

The response by the ATO was to contact thousands of taxpayers and their agents advising of historical debts that were “on hold” and advising that the debt would be offset against any future refunds. These historical debts were often across many years, some prior to 2017, and ranged from a few cents to thousands of dollars. For many, the notification from the ATO was the first inkling they had of the debt, because debts on hold are not shown in account balances as they have been made “inactive”. In other words, taxpayers were accruing debt but did not know as the debts were effectively invisible because they were noted as “inactive.”

In a recent statement, the ATO said: “The ATO has paused all action in relation to debts placed on hold prior to 2017 whilst we review and develop a pragmatic and sensible way forward that takes into account concerns raised by the community.

It was never our intention to cause frustration or concern. It’s important to us that taxpayers have trust in our tax system and our records.”

For any taxpayer with a debt on hold, it is important to remember that just because the ATO might not be actively pursuing recovery of the debt, this doesn’t mean that it has been extinguished.

Small business tax debt blows out

Out of the $50bn in collectible debt owing to the ATO, two thirds is owed by small business. As of July 2023, the ATO moved back to its “business as usual” debt collection practices. For entities with debts above $100,000 that have not entered into debt repayment terms with the ATO, the debt will be disclosed to credit reporting agencies.

If your business has an outstanding tax debt, it is important to engage with the ATO about this debt. Hoping the problem just goes away will normally make things worse.

The Fringe Benefit Tax traps

Wed, 06 Mar 2024 02:49:10 GMT

The Fringe Benefit Tax traps

The Fringe Benefits Tax year (FBT) ends on 31 March. We explore the problem areas likely to attract the ATO’s attention.

Electric vehicles causing sparks

In late 2022, the Government introduced a concession that enables employers to provide some electric vehicles to employees without incurring the 47% fringe benefits tax (FBT) on private use.

The exemption applies to the use of electric cars, hydrogen fuel cell electric cars or plug-in hybrid electric cars if:

The value of the car is below the luxury car tax (LCT) threshold for fuel efficient vehicles ($89,332 for 2023-24 financial year) at the time it is first sold in a retail sale; and
The car is both first held and used on or after 1 July 2022.

If your business is planning on acquiring an electric vehicle, be aware that from 31 March 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles unless the vehicle met the conditions for the exemption before this date and there is already a binding agreement to continue to use the vehicle privately after this date.

The problem areas

The exemption only applies to employees - For the FBT exemption to apply, the vehicle needs to be supplied by the employer to an employee (including under a salary sacrifice agreement). Partners of a partnership and sole traders are not employees and cannot access the exemption personally.

If LCT applies to the car it will never qualify for the FBT exemption. For example, if the EV failed the eligibility criteria in 2022-23 when it was first purchased because it was above the luxury car limit of $84,916, the fact that it resold in 2023-24 for $50,000 does not make it eligible for the exemption on resale. Likewise, if the car was used by anyone (including a previous owner) before 1 July 2022 then it will probably never qualify for the FBT exemption.

Home charging stations are not included in the exemption. The FBT exemption includes associated benefits such as registration, insurance, repairs or maintenance, but it does not include a charging station at the employee’s home. If the employer installs a home charging station at the employee’s home or pays for the cost, then this is a separate fringe benefit.

FBT might not apply but you do the paperwork as if it did. While the FBT exemption on EVs applies to employers, the value of the fringe benefit is still taken into account when working out the reportable fringe benefits of the employee. That is, the value of the benefit is reported on the employee’s income statement. While you don’t pay income tax on reportable fringe benefits, it is used to determine your adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and certain social security payments.

What about the cost of electricity? The ATO’s short-cut method can potentially be applied to calculate reportable fringe benefit amounts and applies a rate of 4.20 cents per kilometre. If you are not using the short-cut method, you need to have a viable method of isolating and calculating the electricity consumption of the car.

The exemption does not apply if the employee directly purchases or leases the EV. If an employee purchases or leases the EV directly, and the employer reimburses them under a salary sacrifice arrangement, the FBT exemption does not apply because this is not a car fringe benefit. However, the exemption can potentially apply to novated lease arrangements if they are structured carefully.

Not all electric vehicles are cars. To qualify for the exemption, the EV needs to be a car – electric bikes and scooters do not count, nor do vehicles designed to carry a load of 1 tonne or more or that carry 9 passengers or more.

Stage 3 personal income tax cuts redesigned

Tue, 30 Jan 2024 02:33:34 GMT

Stage 3 personal income tax cuts redesigned

The personal income tax cuts legislated to commence on 1 July 2024 will be realigned and redistributed under a proposal released by the Federal Government.

After much speculation, the Prime Minister has announced that the Government will amend the legislated Stage 3 tax cuts scheduled to commence on 1 July 2024. Relative to the current Stage 3 plan, the proposed redesign will broaden the benefits of the tax cut by focussing on individuals with taxable income below $150,000. If enacted, an additional 2.9 million Australian taxpayers are estimated to take home more in their pay packet from 1 July.

It's not how Stage 3 of the 5 year plan to restructure the personal income tax system was supposed to work, but a sharp escalation in the cost of living has reshaped community sentiment. As the Prime Minister said, “we are focussed on the here and now” and by default, not on long term structural change.

The redesign will increase Government revenues from personal income tax by an estimated $28 billion to 2034-35 as bracket creep takes its toll.

What will change?

The revised tax cuts redistribute the reforms to benefit lower income households that have been disproportionately impacted by cost of living pressures. The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

Under the proposed redesign, all resident taxpayers with taxable income under $146,486, who would actually have an income tax liability, will receive a larger tax cut compared with the existing Stage 3 plan. For example:

An individual with taxable income of $40,000 will receive a tax cut of $654, in contrast to receiving no tax cut under the current Stage 3 plan (but they are likely to have benefited from the tax cuts at Stage 1 and Stage 2).
An individual with taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3 plan.
However, an individual earning $200,000 will have the benefit of the Stage 3 plan slashed to around half of what was expected from $9,075 to $4,529. There is still a benefit compared with current tax rates, just not as much.

There is additional relief for low-income earners with the Medicare Levy low-income threshold increasing by 7.1% in line with inflation. It is expected that an individual will not start paying the Medicare Levy until their income reaches $26,000 and will not pay the full 2% until $32,500 (for singles).

While the proposed redesign is intended to be broadly revenue neutral compared with the existing budgeted Stage 3 plan, it will cost around $1bn more over the next four years before bracket creep starts to diminish the gains.

It’s not a sure thing yet!

The Government will need to quickly enact amending legislation to make the redesigned Stage 3 tax cuts a reality by 1 July 2024. This will involve garnering the support of the independents or minor parties to secure its passage through Parliament – Parliament sits from 6 February 2024.

How did we get here?

First announced in the 2018-19 Federal Budget, the personal income tax plan was designed to address the very real issue of ‘bracket creep’ – tax rates not keeping pace with growth in wages and increasing the tax paid by individuals over time. The three point plan sought to restructure the personal income tax rates by simplifying the tax thresholds and rates, reducing the tax burden on many individuals and bringing Australia into line with some of our neighbours (i.e., New Zealand’s top marginal tax rate is 39% applying to incomes above $180,000).

The three point plan introduced incremental changes from 1 July 2018 and 1 July 2020, with stage 3 legislated to take effect from 1 July 2024.

What now?

If you have any concerns about the impact of the proposed changes, please call us to discuss .

For tax planning purposes, for those with taxable income of $150,000 or more, the redesigned Stage 3 tax cuts offer less planning opportunity than the current plan. But, any change in the tax rates is an opportunity to review and reset to ensure you are taking advantage of the opportunities available, and not paying more than you need.

Can my SMSF invest in property development?

Tue, 30 Jan 2024 02:11:19 GMT

Can my SMSF invest in property development?

Australians love property and the lure of a 15% preferential tax rate on income during the accumulation phase, and potentially no tax during retirement, is a strong incentive for many SMSF trustees to dream of large returns from property development. We look at the pros, cons, and problems that often occur.

An SMSF can invest in property development if trustees ensure the investment complies with the rules. And, there are a lot of rules. A key is the sole purpose test. Trustees need to ensure the fund is maintained to provide benefits for retirement, ill health or death. Breaches of this fundamental tenet are serious and include the loss of the fund’s concessional tax treatment and civil and criminal penalties.

By its nature property development is high risk and fund trustees need to ensure that the SMSF is not simply a handy cash-cow for a pipe dream, particularly when the developers are related parties.

There are multiple ways an SMSF can invest in property development if the investment strategy of the fund allows:

Directly developing property
An ungeared unit trust or company (the parties can be related)
Investment in an unrelated entity
A joint venture

Directly developing property from fund assets

An SMSF can purchase land from an unrelated party and develop the property in its own right. Common issues that often arise include:

Acquiring the land from a related party - An SMSF cannot purchase land from a related party (unless it is business real property used wholly and exclusively in a business). This means that the lovely block of land inherited by one of the members, or owned by a family trust, that is perfect for development cannot be purchased by the SMSF.
An SMSF cannot borrow to develop property – An SMSF can borrow money to purchase land using a limited recourse borrowing arrangement but it cannot use a loan to improve the asset. That is, borrowings cannot be used to develop the land. And, where the SMSF has borrowed to purchase land, it cannot change the nature of that asset until the loan has been repaid. That is, no development.
Who will develop the property? - Problems often occur when the property developers are related to the fund members. Whilst it is possible to engage a related party builder to undertake the work, there are strict rules that mean that the work and materials must be acquired at market value. That is, there is no advantage from “mates rates”. If you are using a related party builder, ensure that the paperwork is pristine, any transactions are at market value, and all interactions are documented.
GST might apply - Goods and services tax might apply to the development and the sale of any developed property. If the ATO considers that an SMSF is in the business of developing property or is undertaking a one-off development in a commercial manner then GST could potentially apply.

If your SMSF is not undertaking a property development project in its own right, there are a few ways for an SMSF to invest in property development projects:

Related ungeared trust or company

An ungeared company or trust is often used (under SIS Regulation, section 13.22C ) when related parties want to invest in a property development together. The SMSF can invest in a company or trust that is undertaking a property development as long as the company or trust:

Does not lease to a related party (unless business real property)
Does not borrow money or have borrowings (must be ungeared)
Does not conduct a business
Conducts any dealings at arm’s length
And, the assets of the unit trust or company:

o Do not include an interest in another entity (i.e., cannot have shares in a company)

o Do not have a charge over them (i.e., mortgage over any asset)

o Are not purchased from a related party (or was ever an asset of a related party) unless the asset is business real property acquired at market rates.

See section 13.22C for full details.

Profits from the company or trust are then distributed to the SMSF according to its share.

Using the provisions of 13.22C means that the SMSF can invest in property development with a related party without the development being considered an in-house asset. However, if the criteria are not met (at any point), the in-house asset rules apply, and the SMSF might have to sell the units in the trust or shares in the company to return to the maximum 5% in-house asset limit. Generally, this means the sale of the underlying property or a significant restructure.

Problems arise with 13.22C arrangements where the trust or company:

Needs more money to complete the development and borrows money, or issues more units and sells them (is in business)
Accepts a loan from a member of the SMSF
Overdrafts (may be considered loans and breach 13.22C)
Uses a related party builder who either under charges for the work completed or overcharges and strips the profits that should have been returned to the SMSF.

Warning on conducting a business

One of the criteria for the exemption in 13.22C to apply is that the trust or company cannot be conducting a business. This requirement may prevent short-term property developments that are built and sold for profit.

Typically, 13.22C arrangements are used for long term investments where the development enables the creation of an asset that is then leased by the trust or company. This could be commercial premises leased to a related or unrelated party (e.g., premises for a child care centre or manufacturing), or residential premises leased to unrelated parties (e.g., townhouses or small developments).

Unrelated property developments

Investing in unrelated entities for a property development is attractive as there is no limit to how much of the fund’s assets can be invested (subject to the investment strategy and trust deed allowing the investment), and unlike ungeared entities, the entity is able to borrow money/place charge over the assets.

Where related parties are investing in the same entity, there are rules governing the percentage of ownership the SMSF and their related parties can hold. To meet the definition of unrelated entity for in-house asset purposes, the SMSF and their related parties must not own more than 50% of the units available. This is because the SMSF cannot control or hold sufficient influence over the entity and remain an unrelated entity. If the ATO considers the entity is related to the SMSF, then it would become a related party and the investment an in-house asset.

Joint venture arrangements

An SMSF can potentially invest in a joint venture (JV) property development, but the criteria are necessarily strict and there are a range of issues that need to be considered carefully. One of the issues that needs to be considered up-front is determining the substance of the arrangement between the parties, because the term JV can be used to describe a variety of arrangements. The ATO confirms that care must be taken to ensure that arrangements with related parties are true JVs.

Under a JV, the SMSF invests in and has a share of the property being developed (not the entity undertaking the development). Each party bears the costs (time and/or money) of the JV and receives this same proportionate contribution from the returns. If the arrangement is not structured properly then the SMSF’s stake in the JV could be treated as an investment in or loan to a related party and be treated as an in-house asset. For example, this could be the case if the SMSF only provides a capital outlay for the arrangement and has no rights other than a contractual right to a return on the final investment.

It is also necessary to consider whether the arrangement between the parties could be treated as a partnership for tax, GST and legal purposes. For example, this could be the case if the arrangement involves the sharing of income, sale proceeds or profits, rather than sharing the output from the project.

It's essential to get advice well in advance - tax, legal and financial - before pursuing a JV.

Is your SMSF the best vehicle for property development?

Trustees need to carefully consider any investment decisions and have a sound rationale for the investment.

Any advice on a property development needs to be from a licenced financial adviser. A lawyer should be used for any contracts or agreements between parties. And, compliance assistance from a qualified accountant.

Contractor or employee?

Tue, 30 Jan 2024 02:03:42 GMT

Contractor or employee?

Just because an agreement states that a worker is an independent contractor, this does not mean that they are a contractor for tax and superannuation purposes, new guidance from the ATO warns.

Where there is a written contract, the rights and obligations of the contract need to support that an independent contracting relationship exists. The fact that a contractor has an ABN does not necessarily mean that they have genuinely been engaged as a contractor. The ATO says that “at its core, the distinction between an employee and an independent contractor is that:

an employee serves in the business of an employer, performing their work as a part of that business
an independent contractor provides services to a principal's business, but the contractor does so in furthering their own business enterprise; they carry out the work as principal of their own business, not part of another.”

Contracts over time

The ATO points out that a contracting agreement at the start of a relationship may not continue to be one over time. For example, if the project the contractor was engaged to complete has finished, but the worker continues working for the company then the classification needs to be revisited.

What happens if there is no contract?

If no contract exists, then it’s important to look at the form and substance of the relationship to come to a reasonable position about whether an employment or contractor relationship exists.

The problem when the evidence doesn’t match what the taxpayer tells the ATO

Tue, 30 Jan 2024 01:56:48 GMT

The problem when the evidence doesn’t match what the taxpayer tells the ATO

A recent case before the Administrative Appeals Tribunal (AAT) highlights the importance of ensuring that the evidence supports the tax position you are taking.

The case involves heritage farmland originally purchased for $1.6m that sold 7 years later for $4.25m and the GST debt that the ATO is now pursuing on the sale.

In 2013, the taxpayer purchased Sutton Farms in Western Australia – 1.47 hectares consisting of an uninhabitable homestead, large barn and quarters.

Over the course of 7 years, the taxpayer rezoned the property, obtaining conditional subdivision approval to subdivide the property into four lots with plans for a further subdivision into approximately 15 lots, as well as undertaking sewerage, water and electrical works. The work was supported by a $1m loan from a bank and a further $1.5m from his brother-in-law.

While the property was never used for this purpose, the taxpayer’s stated intention was to use the property as their home, gift the subdivided lots to his daughter and son for use as their own respective residences, and use the last subdivided lot as a memorial dedicated to another child who had passed away.

Without being subdivided, the property was eventually sold at a profit as a single lot in 2020 for $4.25m.

When the ATO audited the transaction and issued an assessment notice for GST on the sale transaction, the taxpayer objected. The taxpayer’s argument was that Sutton Farms was intended to be used as a family home and the subdivision application had no commercial purpose. Therefore, GST should not apply as the sale was not made in the course of an enterprise. However, there were a number of factors and inconsistencies working against the taxpayer’s argument:

Local media articles that outlined the taxpayer’s plan to commercialise the property, “with the plans to lease it out as a restaurant, wine bar or coffee house, turn the barn into an art studio and add 8 – 10 finger jetties in the canal adjacent.”
Statements made to the ATO during the objection stage of the dispute indicating that the taxpayer intended to subdivide the property to sell some of these lots to repay loans owed to the taxpayer’s brother-in-law; and
GST credits were claimed on the original development costs. The taxpayer’s accountant also made representations to the ATO stating that the GST credits were claimed because the intended subdivision and sale of the several lots within the property amounted to an enterprise.

The problem for the taxpayer is that although he did not develop the property in the way he originally intended and ended up selling the property as one lot, through the ownership period he acted as if the project was a commercial venture with a stated commercial outcome.

The importance of objective evidence

Determining the tax treatment of a property transaction can sometimes be a difficult exercise and there are a number of factors that need to be considered. This will often include the intention or purpose of the taxpayer when acquiring a property. However, merely stating your intention isn’t enough, it needs to be supported by objective evidence. This might include loan terms, correspondence with advisers and real estate agents, the way expenses have been accounted for, or the conversation you have with a journalist.

Tax on super balances above $3m hits Parliament

Tue, 12 Dec 2023 03:17:48 GMT

Tax on super balances above $3m hits Parliament

Legislation enabling an extra 15% tax on earnings on super balances above $3m is before Parliament.

While not a concern for the average worker, if enacted, those with significant property or other illiquid assets in their superannuation fund are most at risk, for example farmers and business operators who own their business property in their self managed superannuation fund (SMSF).

The issue is how the tax is calculated. The tax captures the growth in the balance of a member’s superannuation over the financial year (allowing for contributions and withdrawals). It captures both:

Realised gains from the sale of assets, and
Unrealised gains triggered by an increase in the value of superannuation assets. For example, if the value of a property increases.

If the member’s total super balance has decreased - the loss can be offset against future years.

The ATO will calculate the tax each year. Members with balances in excess of $3 million will be tested for the first time on 30 June 2026, with the first notice of assessment expected to be issued to those impacted in the 2026-27 financial year.

If you are likely to be impacted by the impending new tax, it is important to speak to your financial adviser. While keeping assets within superannuation will remain the best option for many from a tax and planning perspective, it’s important to ensure that you’re in the best possible position.

The key influences of 2024

Tue, 12 Dec 2023 02:42:55 GMT

The key influences of 2024

Uncertainty has reigned over the last few years, but can we expect more consistency as we head into 2024? We explore some of the key issues and influences.

Inflation and labour supply

RBA Governor Michelle Bullock stated, “Inflation is past its peak and heading in the right direction, but it is likely to return to target a bit more slowly than we previously thought.” While there have been encouraging signs, uncertainty remains. Domestically, inflation is persistent, growth has slowed but the labour market remains tight. And, the Australian economy remains at risk with uncertainty over the Chinese economy and ongoing international conflicts. At this stage, the RBA have not ruled out further interest rate increases.

The unemployment rate remains at 3.7% and the labour market tight. Wages grew 1.3% for the September 2023 quarter and 4.0% over the year, pushing wages to a 14 year high. High-skilled workers are particularly difficult to source, and we appear to have reached a point now where employers are unwilling to pay inflated salaries to acquire those willing to move.

Income tax cuts and the end of some concessions

From 1 July 2024, the stage 3 tax cuts that radically simplify the personal income tax brackets come into effect. The tax cuts collapse the 32.5% and 37% tax brackets into a single 30% rate for those earning between $45,001 and $200,000 – this is assuming the May Federal Budget does not postpone or scrap them!

The superannuation guarantee rate will rise again on 1 July 2024 to 11.5%.

For small and medium businesses with group turnover of less than $50m, a series of concessions are set to end or reduce back to conventional levels:

The Skills and Training Boost ends on 30 June 2024. The boost provides a bonus deduction equal to 20% of eligible expenditure for external training provided to your workers for costs incurred between 29 March 2022 and 30 June 2024.
The Small Business Energy Incentive is scheduled to end on 30 June 2024, although legislation to introduce this concession still hasn’t passed through Parliament. The incentive is intended to provide an additional 20% deduction on the cost of eligible depreciating assets that support electrification and more efficient use of energy.

The instant asset write-off for businesses with group turnover of less than $10m is due to reduce back to $1,000 from 1 July 2024. The cost threshold is meant to be $20,000 for the 2024 financial year, but legislation relating to this measure hasn’t passed through Parliament yet.

Worker rights and rewards

There have been a myriad of changes and enhancements to workplace laws across 2023 and employers can expect greater scrutiny in 2024:

A 5.75% increase in the minimum wage to $23.23 per hour from 1 July 2023.
New rules and a 2 year limit to some fixed term employment contracts (no renewing).
A landmark case that defined how to determine whether a worker is a contractor or employee. The ATO has followed through with new rulings to ensure employers are paying the correct entitlements. It’s essential that employers have assessed contractors to ensure that they are classified correctly.
Greater flexibility for unpaid parental leave.

The controversial case of the taxpayer who claimed a loss on their home

Tue, 12 Dec 2023 02:33:40 GMT

The controversial case of the taxpayer who claimed a loss on their home

A decision by the Administrative Appeals Tribunal has the tax world in a flurry after the Tribunal found in favour of a taxpayer who sold the apartment she lived in for a loss, then claimed the $265,935 loss in her tax return as a deduction.

In this case, the taxpayer successfully argued that the purchase and sale of the apartment was a short-term profit making venture and that the loss generated from this could be claimed as a tax deduction. The tax rules generally allow you to deduct losses that relate to a commercial activity, although you cannot claim the loss if it is private or capital in nature. The taxpayer argued that she acquired the apartment in order to make a short-term profit and that the loss that was made on the sale should be deductible, even though she had lived in the property as her private residence across the ownership period. The Australian Taxation Office (ATO), as you can imagine, had a different point of view.

The facts of the case were:

July 2015 – The taxpayer lived in a large family home. When her husband passed away, she entered into an ‘off-the-plan’ contract to purchase an apartment intended to be completed by 30 June 2019.
December 2016 – The taxpayer was notified that completion of the off-the-plan apartment was delayed until 30 June 2020.
May 2018 – Taxpayer settles on the sale of her family home on advice from her real estate agent that it was a good time to sell.
May 2018 – Taxpayer settled on another apartment, as a purchaser, in the same complex that had been completed. She had money from the sale of her family home that she could use, and only intended to keep the property for a short period of time as she needed to use the funds to settle the off-the-plan apartment. Her position was that it was an opportunity to make a profit.
April 2020 – The taxpayer entered into a contract to sell the apartment at a loss during the first COVID lockdown.
July 2020 – Settlement on sale of the apartment occurred.
July 2020 – The purchase of the off-the-plan apartment completed and was settled. A substantial portion of the proceeds of the sale of the other apartment, and some of the proceeds of the sale of the family home, were used to settle the off-the-plan apartment.

The Tax Commissioner’s position was that someone approaching the opportunity in a business-like manner as a profit-making venture would not live in the apartment and would have waited to sell if the market was not favourable.

The Tribunal set a low bar for proof of a profit-making intention and found that the fact that the taxpayer lived in the property was secondary to her profit-making intent.

The reason why this case is controversial is not simply because of the loss claimed by one taxpayer. It is because of the broader implications to property owners if the ATO determines that a transaction is commercial in nature and taxes any profit as ordinary income rather than under the Capital Gains Tax (CGT) provisions. For example, if the taxpayer in this case had made a profit instead of a loss, she would have paid tax on the profit at her marginal tax rate. She would not have been able to apply the main residence exemption or the CGT discount.

One of the important things to take from this case is that living in a property doesn’t necessarily guarantee that the sale of the property will be taxed under the CGT rules or will qualify for the main residence exemption. For example, property ‘flippers’ who buy and renovate a house may face a significant personal tax bill on any gain they make with no access to the concessions that exist within the CGT rules.

It will be some time before we know the full implications of this case and the ATO is yet to confirm whether it will appeal the decision. Either way, determining whether a transaction is taxed on revenue or capital account can be a complex process and it is important to seek advice before entering into transactions involving property.

Bah humbug: The Christmas tax dilemma

Tue, 12 Dec 2023 02:07:11 GMT

Bah humbug: The Christmas tax dilemma

Don’t want to pay tax on Christmas? Here are our top tips to avoid giving the Australian Tax Office a bonus this festive season.

1. Keep team gifts spontaneous

$300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a gift to the ATO at a rate of 47%. To qualify as a minor benefit, gifts also have to be ad hoc - no monthly gym memberships or giving one person multiple gift vouchers amounting to $300 or more.

Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is normally subject to the superannuation guarantee.

Aside from the tax issues, think about what will be of value to your team. The most appreciated gift is the one that means something to the individual. Giving a bottle of wine to someone who doesn’t drink, chocolates to a health fanatic, or time off to someone with excess leave, isn’t going to garner much in the way of goodwill. A sincere personal message will often have a greater impact than a generic gift.

2. The FBT Christmas party crunch

If you really want to avoid tax on your work Christmas party then host it in the office on a workday. This way, Fringe Benefits Tax (FBT) is unlikely to apply regardless of how much you spend per person. Also, taxi travel that starts or finishes at an employee’s place of work is exempt from FBT. So, if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer, the ride home is exempt from FBT.

If your work Christmas party is out of the office, keep the cost of your celebrations below $300 per person if you want to avoid paying FBT. The downside is that the business cannot claim deductions or GST credits for the expenses if there is no FBT payable in relation to the party.

If the party is held somewhere other than your business premises, then the taxi travel is taken to be a separate benefit from the party itself and any Christmas gifts you have provided. In theory, this means that if the cost of each item per person is below $300 then the gift, party and taxi travel can potentially all be FBT-free. Just remember that the minor benefits exemption requires a number of factors to be considered, including the total value of associated benefits provided across the FBT year.

If entertainment is provided to employees and an FBT exemption applies, you will not be able to claim tax deductions or GST credits for the expenses.

If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event. Just bear in mind that deductions are only useful to offset against tax. If your business is paying no or limited amounts of tax, a tax deduction is not going to help offset the cost of the party.

3. Avoid client lunches and give a gift

The most effective way of sharing the Christmas joy with customers is not necessarily the most tax effective. If, for example, you take your client out or entertain them in any way, it’s not tax deductible and you can’t claim back the GST. There are specific rules designed to prevent deductions and GST credits from being claimed when the expenses relate to entertainment, regardless of whether there is an expectation of generating goodwill and increased business sales. Restaurants, a show, golf, and corporate race days all fall into the ‘entertainment’ category.

However, if you send your customer a gift, then the gift is tax deductible as long as there is an expectation that the business will benefit (assuming the gift does not amount to entertainment). Even better, why don’t you deliver the gift yourself for your best customers and personally wish them a Merry Christmas. It will have a much bigger impact even if they are not available and the receptionist tells them you delivered the gift.

From a marketing perspective, if your budget is tight, it’s better to focus on the customers you believe deliver the most value to your business rather than spending a small amount on every customer regardless of value. If you are going to invest in Christmas gifts, then make it something people remember and appropriate to your business.

You could also make a donation on behalf of your customers (where your business takes the tax deduction) or for your customers (where they receive the tax deduction).

4. Charities love cash

Charities love cash. They don’t have to spend any of their precious resources to receive it – unlike a lot of charity dinners, auctions, and promotional campaigns. And, from a tax perspective, it’s the safest way to ensure that you or your business can claim a deduction for the full amount of the donation.

There are a few rules to giving to charities that make the difference between whether you will or won’t receive a tax deduction.

The charity must be a deductible gift recipient (DGR). You can find the list of DGRs on the Australian Business Register (use the advanced search).

If you buy any form of merchandise for the ‘donation’ – biscuits, teddies, balls or you buy something at an auction – then it’s generally not deductible. Your donation needs to be a gift, not an exchange for something material. Buying a goat or funding a child’s education in the third world is generally ok because you are generally donating an amount equivalent to the cause rather than directly funding that thing.

The tax deduction for charitable giving over $2 goes to the person or entity who made the gift and whose name is on the receipt.

5. Christmas bonuses

If you are planning to provide your team with a cash bonus rather than a gift voucher or other item of property, then remember that this will be taxed in much the same way as salary and wages. A PAYG withholding obligation will be triggered and the ATO’s view is that the bonus will also be treated as ordinary time earnings (unless it relates specifically to overtime work) which means that it will be subject to the superannuation guarantee provisions.

The Christmas tax quick guide

Here’s our quick guide to the tax impact of Christmas celebrations. The information is for GST registered businesses that are not using the 50-50 split method for meal entertainment.

When is food GST-free?

Tue, 07 Nov 2023 03:09:37 GMT

When is food GST-free?

Chobani plain yoghurt is GST-free but Chobani’s ‘flip’ range is taxable? A recent case before the AAT demonstrates how fine the dividing line is between GST-free and taxable foods.

Back in 2000 when the Goods & Services Tax (GST) was first introduced, basic food was excluded to secure the support of the Democrats for the new tax regime. Thirteen years later, the result of this exclusion is an unwieldy dividing line between GST-free and taxable foods that is consistently tested and altered. It is this dividing line that US yoghurt giant Chobani Pty Ltd recently tested in a case before the Administrative Appeals Tribunal (AAT).

At the centre of the case was Chobani’s Flip Strawberry Shortcake flavoured yoghurt and whether the product, composed of a tub of strawberry flavoured yoghurt with a separate tub of baked cookie and white chocolate pieces, is subject to GST. If the two components were sold in isolation, the baked cookie pieces would be taxable and the yoghurt GST-free.

Chobani had originally treated the flip yoghurt range as GST-free, relying on a 2001 GST ruling that allowed “a supply that appears to have more than one part but is essentially a supply of one thing” to be a composite supply. A product that is a composite supply could be treated as GST-free if the other components did not exceed the lesser of $3 or 20% of the overall product. In Chobani’s case, this meant that they could treat the flip yoghurt as GST-free.

Then in 2021, the ATO advised Chobani that its position had changed and it intended to treat the flip yoghurt as a combination food and therefore taxable.

Under the GST system, ‘combination foods’ where at least one of the food components is taxable, are subject to GST. Lunch packs of tuna and crackers, for example, are a combination food and therefore GST applies to the whole product because it is intended that the tuna and crackers are eaten together. But, where the food is a ‘mixed supply’, where each item is separate from the other and not intended to be consumed together, the GST will apply (or not) to each individual product. An example would be a hamper.

In the Chobani case, the AAT found in favour of the Commissioner’s interpretation that the flip product was a combination food and therefore subject to GST on the whole product.

The outcome of the Chobani test case has a number of implications. The first is that the ATO has issued a new draft GST ruling on combination foods ( GST 2023/D1 ) replacing the previous guidance. The guidance states that three principles apply when determining whether there is a supply of a combination food:

There must be at least one separately identifiable taxable food.
The separately identifiable taxable food must be sufficiently joined together with the overall product.
The separately identifiable taxable food must not be so integrated into the overall product, or be so insignificant within that product, that it has no effect on the essential character of that product.

The second implication is that at least one classification on the ATO’s GST status of major product lines list will change. Weirdly, dip (with biscuits, wrapped individually and packaged together), was listed as a mixed supply, not a combination food.

In a previous case, Birds Eye (Simplot Australia) was also unsuccessful in its appeal to the Federal Court that their frozen vegetable products that combined omelette, rice or grains were GST-free. The Court determined that the foods were either prepared meals or a combination of foods and therefore taxable.

For food manufacturers, importers and distributors, it is important to keep up to date with the changing GST landscape and ensure that you are utilising the correct classifications - it’s a moving feast!

Fixed-term employment contracts limited to 2 years

Tue, 07 Nov 2023 03:05:58 GMT

Fixed-term employment contracts limited to 2 years

From 6 December 2023, employers can no longer employ an employee on a fixed-term contract that:

is for 2 or more years (including extensions)
may be extended more than once, or
is a new contract:
that is for the same or a substantially similar role as previous contracts
with substantial continuity of the employment relationship between the end of the previous contract and the new contract, and either:
the total period of the contracts is 2 or more years,
the new contract can be renewed or extended, or
a previous contract was extended.

The changes were introduced as part of the Pay secrecy, job ads and flexible work amendments. See the Fair Work Ombudsman’s website for more details.

Workers owed $3.6bn in super guarantee

Tue, 07 Nov 2023 02:59:25 GMT

Workers owed $3.6bn in super guarantee

Workers are owed over $3.6 billion in superannuation guarantee according to the latest Australian Taxation Office estimates – a figure the Government and the regulators are looking to dramatically change.

Superficially, the statistics on employer superannuation guarantee (SG) compliance look pretty good with over 94%, or over $71 billion, collected without intervention from the regulators in 2020-21.

The net gap in SG has also declined from a peak of 5.7% in 2015-16 to 5.1% in 2020-21. The COVID-19 stimulus measures helped drive up the voluntary contributions with the largest increase in 2019-20, which the Australian Taxation Office (ATO) says they “suspect reflects the link between payment of super contributions and pay as you go (PAYG) withholding by employers. PAYG withholding is linked to the ability to claim stimulus payments such as Cash Flow Boost.”

Despite these gains, a little adds up to a lot and 5.1% equates to a $3.6 billion net gap in payments that should be in the superannuation funds of workers. Lurking within the amount owed is $1.8 billion of payments from hidden wages. That is, off-the-books cash payments, undisclosed wages, and non-payment of super where employees are misclassified as contractors.

In addition, the ATO notes that as at 28 February 2022, $1.1 billion of SG charge debt was subject to insolvency, which is unlikely to ever be recovered. Quarterly reporting enables debt to escalate before the ATO has a chance to identify and act on an emerging problem.

Employers should not assume that the Government will tackle SG underpayments the same way they have in the past with compliance programs. Instead, technology and legislative change will do the work for them.

Single touch payroll matched to super fund data

Single touch payroll (STP), the reporting mechanism employers must use to report payments to workers, provides a comprehensive, granular level of near-real time data to the regulators on income paid to employees. The ATO is now matching STP data to the information reported to them by superannuation funds to identify late payments, and under or incorrect reporting.

Late payment of quarterly superannuation guarantee is emerging as an area of concern with some employers missing payment deadlines, either because of cashflow difficulties (i.e., SG payments not put aside during the quarter), or technical issues where the timing of contributions is incorrect. Super guarantee needs to be received by the employee’s fund before the due date. Unless you are using the ATO’s superannuation clearing house , payments are unlikely to be received by the employee’s fund if the quarterly payment is made on the due date. The super guarantee laws do not have a tolerance for a ‘little bit’ late. Contributions are either on time, or they are not.

When SG is paid late

If an employer fails to meet the quarterly SG contribution deadline, they need to pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement within a month of the late payment. The SGC applies even if you pay the outstanding SG soon after the deadline. The SGC is particularly painful for employers because it is comprised of:

The employee’s superannuation guarantee shortfall amount – i.e., the SG owing.
10% interest p.a. on the SG owing for the quarter - calculated from the first day of the quarter until the 28 ^th day after the SG was due, or the date the SG statement is lodged, whichever is later; and
An administration fee of $20 for each employee with a shortfall per quarter.

Unlike normal SG contributions, SGC amounts are not deductible, even if you pay the outstanding amount.

And, the calculation for SGC is different to how you calculate SG. The SGC is calculated using the employee’s salary or wages rather than their ordinary time earnings (OTE). An employee’s salary and wages may be higher than their OTE, particularly if you have workers who are paid overtime.

It's important that employers that have made late SG payments lodge a superannuation guarantee statement quickly as interest accrues until the statement is lodged. The ATO can also apply penalties for late lodgment of a statement, or failing to provide a statement during an audit, of up to 200% of the SG charge. And, where an SG charge amount remains outstanding, a company director may become personally liable for a penalty equal to the unpaid amount.

The danger of misclassifying contractors

Many business owners assume that if they hire independent contractors, they will not be responsible for PAYG withholding, superannuation guarantee, payroll tax and workers compensation obligations. However, each set of rules operates slightly differently and, in some cases, genuine contractors can be treated as if they were employees. There are significant penalties faced by employers that get it wrong.

A genuine independent contractor who is providing personal services will typically be:

Autonomous rather than subservient in their decision-making;
Financially self-reliant rather than economically dependent on your business; and
Chasing profit (that is, a return on risk) rather than simply accepting a payment for the time, skill and effort provided.

‘Payday’ super from 1 July 2026

The Government intends to introduce laws that will require employers to pay SG at the same, or similar time, as they pay employee salary and wages. The logic is that by increasing the frequency of SG contributions, employees will be around 1.5% better off by retirement, and there will be less opportunity for an SG liability to build up where the employer misses a deadline.

Originally announced in the 2023-24 Federal Budget, Treasury has released a consultation paper to start the process of making payday super a reality. Subject to the passage of the legislation, the reforms are scheduled to take effect from 1 July 2026.

What is proposed?

The consultation paper canvasses two options for the timing of SG payments: on the day salary and wages are paid; or a ‘due date’ model that requires contributions to be received by the employee’s superannuation fund within a certain number of days following ‘payday’. A ‘payday’ captures every payment to an employee with an OTE component.

The SGC would also be updated with interest accruing on late payments from ‘payday’.

Currently, 62.6% of employers make SG payments quarterly, 32.7% monthly, and 3.8% fortnightly or weekly.

We’ll bring you more on ‘payday’ super as details are released. For now, there is nothing you need to do.

Up to 10 years in prison for deliberate ‘wage theft’

Tue, 07 Nov 2023 02:50:44 GMT

Up to 10 years in prison for deliberate ‘wage theft’

Legislation currently being debated in Parliament will introduce a new criminal offence for intentional “wage theft”. If enacted, in addition to the criminal offence, a fine will apply. The fine is three times the underpayment and:

For individuals - 5,000 penalty units (currently $1,565,000).
For businesses - 25,000 penalty units (currently $7,825,000).

The reforms are not intended to capture unintentional mistakes and a compliance ‘safe harbour’ will be introduced by the Fair Work Ombudsman for small businesses.

In addition to addressing wage theft, the Bill also seeks to:

Replace the definition of a ‘casual employee’ and create a pathway to permanent work.
Change the test for ‘sham contracting’ from a test of ‘recklessness’ to ‘reasonableness.’
Bolster the powers of the Fair Work Commission including the ability to set minimum standards for ‘employee-like’ workers including those in the gig economy.
Introduce a new offence of “industrial manslaughter” in the Work Health and Safety Act 2011.

The Bill introducing the reforms has been referred to the Senate Education and Employment Legislation Committee. The Committee is scheduled to report back in February 2024.

“Wage-theft” is illegal in Queensland, South Australia and Victoria under State laws. While the Federal Bill is not intended to interfere with State legislation, the impact of the interaction between the existing State legislation and the proposed Federal reforms is unclear.

Over the last two years, the Fair Work Ombudsman has recovered over $1 billion in back-payments, mostly from large corporates and universities. Court ordered penalties of $6.4 million were paid by employers across this same time period.

When trust distributions to a company are left unpaid

Tue, 07 Nov 2023 02:46:59 GMT

When trust distributions to a company are left unpaid

What happens when a trust appoints income to a private company beneficiary but does not actually make the payment?

The tax treatment of this unpaid amount was at the centre of a recent case before the Administrative Appeals Tribunal (AAT) that saw a taxpayer successfully challenge the ATO’s long held position (Bendel and Commissioner of Taxation [2023] AATA 3074). For many years, the ATO’s position has been that if a trust appoints income to a private company beneficiary but does not actually make the payment, this unpaid amount can be treated as a loan. Under Division 7A of the tax rules, these loans can be taxed as unfranked dividends unless they are managed using a complying loan agreement with annual principal and interest repayments.

This AAT decision challenges an important ATO position, with the tax outcomes being potentially significant for trust clients that currently owe (or may have owed in the past) unpaid trust entitlements to related private companies.

But this is not the end of this story. On 26 October 2023, the Tax Commissioner lodged a notice of appeal to the Federal Court. There is no guarantee that the Federal Court will reach the same conclusion as the AAT. We will need to wait and see.

As the case progresses, we will let you know about the impact.

For further information about trust distrubtions check out other Aspen Corp blog posts

https://www.aspencorp.com.au/the-atos-final-position-on-risky-trust-distributions

https://www.aspencorp.com.au/the-atos-attack-on-trusts-and-trust-distributions

https://www.aspencorp.com.au/ato-fires-warning-shot-on-trust-distributions

30% tax on super earnings on balances above $3 million

Tue, 07 Nov 2023 02:34:45 GMT

30% tax on super earnings on balances above $3 million

Treasury has released draft legislation for consultation to enact the Government’s plan to increase the tax rate on earnings on superannuation balances above $3m from 15% to 30% from 1 July 2025. This is the final step before the legislation is introduced into Parliament.

From a planning perspective, for those with superannuation balances close to or above $3m, it will be important to explore the implications of your personal situation – there is no one size fits all strategy and what is best for you will depend on how a potentially wide array of factors impact on your individual scenario.

Warning: Redrawing investment loans

Tue, 07 Nov 2023 02:06:23 GMT

Warning: Redrawing investment loans

The ATO estimates that incorrect reporting of rental property income and expenses is costing around $1 billion each year in forgone tax revenue. A big part of the problem is how taxpayers are claiming interest on their investment property loans.

We’ve seen an uptick in ATO activity focussing on refinanced or redrawn loans. This activity is a result of a major data matching program of residential property loan data from financial institutions from 2021-22 to 2025-26. This data is being matched to what taxpayers have claimed on their tax returns. Those with anomalies can expect contact from the ATO to explain the discrepancy.

If you have an investment property loan and redraw on the loan for a different purpose to the original borrowing, the loan account becomes a mixed purpose account. Interest accruing on mixed purpose accounts need to be apportioned between each of the different purposes the money was used for.

On the other hand, if the redrawn funds are used to produce investment income, then the interest on this portion of the loan should be deductible.

For example, if you have redrawn on the loan to pay for a private holiday, or pay down personal debt, then the interest relating to this portion of the loan balance is not deductible. Not only will the interest expenses need to be apportioned into deductible and non-deductible parts, but repayments will normally need to be apportioned too.

Withdrawals from an offset account are treated as savings rather than a new borrowing. If you have a loan account and an interest offset account is attached to this account that reduces the interest payable on the loan, withdrawing funds from the offset account will typically increase the amount of interest accruing on the loan, but won’t change the deductible percentage of the interest expenses. That is, when you withdraw funds from the offset account this is really a withdrawal of savings and won’t impact on the extent to which interest accruing on the loan account is deductible.

If you have a home loan that was used to acquire your private home and you have funds sitting in an offset account, withdrawing those funds to pay the deposit on a rental property won’t enable you to claim any of the interest accruing on the home loan. However, if you redraw funds from the home loan to acquire a rental property then interest accruing on this portion of the loan should be deductible. The tax treatment always depends on how the arrangement is structured.

Think you might have a problem? Contact us and we can investigate the issue before the ATO contact you.

ATO General Interest Charge increases

Tue, 17 Oct 2023 05:37:28 GMT

General Interest Charge to increase

From 1 October, the annual interest rate will be increasing by to 11.15% - the highest it’s been in over 10 years.

This means your daily GIC rate will be .03%.

What is General interest charge

General interest charge (GIC) is applied to unpaid tax liabilities and is worked out daily on a compounding basis.

When GIC applies

GIC applies to unpaid tax liabilities, such as when:

an amount of tax, charge, levy or penalty is paid late (or is unpaid)
there is an excessive shortfall in an incorrectly varied or estimated income tax instalment.

Directors at risk from security breaches

Tue, 17 Oct 2023 05:34:50 GMT

Directors are at risk of security breaches.

ASIC has warned that Directors should avoid being caught out by cyber security breaches.

Directors are duty-bound to ensure their company has “adequate” cyber security and the ability to recover from an attack or they could face action by ASIC.

According to ASIC, ‘cyber preparedness’ can no longer be considered enough; businesses must demonstrate an ability to respond or the board will be held accountable, the regulator says.

“For all boards, cyber security and cyber resilience have got to be top priorities. “If boards do not give cyber security and cyber resilience sufficient priority, this creates a foreseeable risk of harm to the company and thereby exposes the directors to potential enforcement action by ASIC based on the directors not acting with reasonable care and diligence.”

“If you’re not evaluating your third-party cyber security risk, you’re deceiving yourself. And recent events show that you will suffer for it.”

“Don’t put yourself in that position.”

For a small business, even a minor cyber security incident can have devastating impacts. In the 2021-2022 financial year, the average cost per cybercrime reported to the ACSC rose to over $39,000 for small businesses.

The ACSC has published a range of resources to help directors and small businesses protect themselves against common cyber security threats, including the Small Business Cyber Security Guide .

30% tax on super earnings above $3m

Tue, 17 Oct 2023 05:18:21 GMT

30% tax on super earnings above $3m

Treasury has released draft legislation to enact the Government’s plan to increase the tax rate on earnings on superannuation balances above $3m from 15% to 30% from 1 July 2025. This is the final step before the legislation is introduced into Parliament and a step closer to reality.

The draft legislation appears largely unchanged from the Government’s original announcement.

The proposed calculation aims to capture growth in total super balance (TSB) over the financial year allowing for contributions (including insurance proceeds) and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.

The ATO will perform the calculation for the tax on earnings. TSBs in excess of $3 million will be tested for the first time on 30 June 2026 with the first notice of assessment expected to be issued to those impacted in the 2026-27 financial year.

From a planning perspective, for those with superannuation balances close to or above $3m, it will be important to explore the implications to your personal situation – there is no one size fits all strategy here and what is best for you will depend on your circumstances. Superannuation, even with the increased tax, remains a tax efficient vehicle.

The ‘Airbnb’ Tax

Tue, 17 Oct 2023 05:12:39 GMT

The ‘Airbnb’ Tax

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

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

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

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

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

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

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

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

What happens overseas?

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

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

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

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

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

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

But do restrictions on Airbnb create rental stock?

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

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

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

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

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

$20k deduction for ‘electrifying’ your business

Tue, 17 Oct 2023 03:57:01 GMT

$20k deduction for ‘electrifying’ your business

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

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

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

How much?

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

What qualifies?

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

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

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

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

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

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

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

What doesn’t qualify?

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

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

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

What does qualify?

The legislation contains a few examples of what would qualify:

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

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

The Billion Dollar TikTok Scandal

Tue, 05 Sep 2023 04:49:31 GMT

The billion dollar TicTok scandal

$1.7 billion paid out in fraudulent refunds, another $2.7bn in fraudulent claims stopped, around 56,000 alleged perpetrators and over 100 arrests to date. How did the TikTok tax scandal get out of control?

It was promoted as a victimless hack that delivered tens of thousands of dollars into your bank account. Like any hack, taking part was as simple as following the instructions. The streamlined process designed to make it easy for a small business to start-up under Australia’s self-assessment system, also made it easy for the ‘TikTok fraud’ to go viral.

How did it happen?

At some point in 2021, videos started to spread that spelt out how to get the Australian Taxation Office (ATO) to deliver money into your account. Not quite a loan but a hack that sometimes saw tens of thousands delivered into accounts, no questions asked. As the message gained traction, and with more and more people validating the hack, facilitators emerged. All you had to do was hand over your personal details to the facilitators and they would take care of the rest.

The fraud saw offenders inventing fake businesses, applying for an Australian Business Number (ABN), many in their own names, then submitting fictitious Business Activity Statements (BAS) to claim GST refunds.

By late 2021, the Banks noticed the uptick in suspicious activity, mostly large refunds that were out of character for those accounts - in some cases, Centrelink recipients receiving large credits from the ATO. The banks froze a number of accounts and reported the suspicious matters as they are required to do under the Anti-Money Laundering & Counter Terrorism legislation, including to the ATO.

In April 2022, the ATO formed Operation Protego to disrupt the rapid increase in GST refund fraud by individuals that were not genuinely in business. By that stage however, the strategy had gone viral.

By May 2022, the average GST refund paid was $20,000, claimed by around 40,000 people. The ATO conceded around $850 million had been paid out in potentially fraudulent claims. By June 2022, that figure had blown out to $1.2bn but the ATO had stemmed the flow, rejecting $1.7bn in fraudulent claims. Search warrants and arrests of scheme promoters followed.

It's hard to understand how so many people - an estimated 56,000 Australians - made the leap in logic that some sort of hack had been discovered that enabled you to claim thousands of dollars in tax refunds as a ‘loan’ from the ATO. At the best of times the ATO is not known for its sporadic acts of generosity and laissez faire attitude to tax revenue. We know the opposite is true.

And, why so many accepted a view promoted on TikTok - the act of participating in the fraud required falsifying records at several stages and yet, failed to ring alarm bells. Unfortunately, naivety is not a compelling defence against fraud.

Caught in the web?

“The ATO has zero tolerance to any fraudulent or corrupt behaviour that may in any way impact the ATO.”

The TikTok tax fraud is extensive and has several layers of impact across the 56,000 taxpayers caught up in it.

The closest circle are the scheme promoters and facilitators. To date, more than 100 people have been arrested including members of outlaw motorcycle gangs, organised criminal organisations, and youth crime gangs – and more than 10 people have been convicted for their involvement.

The maximum penalty for promoting a tax fraud scheme is 10 years in prison.

The second circle are those actively engaged in the scheme - who declared that they were carrying on a business, established an ABN, and submitted GST refund claims for expenses they did not incur. For those who received fraudulent GST refunds, the money will need to be paid back, penalties are likely to apply, and there is a risk of criminal proceedings. If the ATO have contacted you, engagement will be the key to reducing penalties and preventing an escalation to criminal proceedings. If you were engaged in the GST refund fraud but the ATO has not contacted you yet, it will be important to work with us as soon as possible to declare and manage the issue.

Where to now for identify theft victims?

The third circle is comprised of the unwitting identity theft victims whose details have been used to generate fraudulent GST refunds. The ATO have had reports of people offering to buy and sell myGov details in order to access refunds. The conversation within the accounting community is that the ATO are inundated at present trying to manage the fallout, not just from the TikTok GST refund fraud but identity theft in general. So, keep on top of your myGov account and if you notice any unusual activity, contact us asap.

The TikTok fraud timeline

“Nobody is giving money away for free or offering loans that don’t need to be paid back.”
ATO Deputy Commissioner and Chief of the Serious Financial Crime Taskforce (SFCT) John Ford.

Late 2021

Banks freeze suspicious accounts and refer unusual behaviour to ATO.

Apr-22

Operation Protego formed

May 2022

ATO issue a warning on fake businesses, ABN applications and fraudulent business activity statements to generate GST refunds after around $850 million in potentially fraudulent payments made to around 40,000 individuals, with the average amount fraudulently claimed being $20,000.

June 2022

ATO tallies the cost of fraudulent claims at $1.2bn. Between April and June 2022, the ATO rejected $1.7bn in fraudulent claims.
ATO launches coordinated action across three days in 12 locations across NSW, Victoria, Tasmania, South Australia, Western Australia, and Queensland, which saw warrants executed against 19 individuals suspected of being involved in GST fraud.

July 2022

ATO executes search warrants for five suspected offenders.

Dec 2022

ATO tallies fraudulent rejected claims at $2.5bn by more than 53,000 individuals.

Feb 2023

Warrants executed against 10 individuals suspected of promoting the fraud including on social media.

Aug 2023

ATO tallies fraudulent rejected claims at $2.7bn.

The upshot to date; $2.7bn in fraudulent claims rejected before being paid, $1.7bn fraudulent payments made with around $66m recovered by 30 June 2022. Another $700m in liabilities, including around $300 million in penalties, raised in 2023-24.

The shape of Australia’s future

Tue, 05 Sep 2023 03:21:24 GMT

The shape of Australia's future

What will the Australian community look like in 40 years? We look at the key takeaways from the Intergenerational Report.

The 2023 Intergenerational Report (IGR) is a crystal ball insight into what we can expect Australian society to look like in 40 years and the needs of the community as we grow and evolve. It doesn’t map out our path to flying cars and Jetsons style robotic domestic help (unfortunately) but it does forecast structural trends that will give many of us a level of anxiety about what we need to be doing now to successfully navigate the future.

The report links the continued growth and prosperity of Australia to five significant areas of influence:

We’re ageing

Thanks for the reminder. The number of people aged 65 and over will more than double and the number aged 85 and over will more than triple. We’re expected to live longer with the life expectancy of men increasing from 81.3 to 87 years and from 85.2 to 89.5 for women by 2062-63. And that’s a problem for the younger generation.

Who bears the burden of an ageing population?

Australia’s low birth rate, limited migration and increased longevity all have an impact. The old age percentage - the number of people aged 65 and over for every 100 people of traditional working age (15 to 64) in the population - will increase from 26.6% to 38.2%.

From a tax perspective, Australia’s reliance on personal tax means workers will bear an increasing proportion of the tax burden under current fiscal policy. In a recent interview, former Treasury boss Ken Henry labelled it an “intergenerational tragedy” with personal tax growing from 11.7% of GDP to 13.5% based on current policy. The report says that “only 12% of Australians aged 70 and over pay income tax and this age group now makes up 12.2% of the total population. This age group is expected to increase to 18.1% of the total population in 2062-63.” Wholesale tax reform will be required to prevent the growing tax burden on individuals dragging on the economy. With economic growth expected to slow to 2.2% from 3.1% over the next 40 years, the solution will not magically arise from corporate Australia. If it was not for our high rate of inflation you would think an increase to the GST was imminent.

Services and who pays

Demographic ageing alone is estimated to account for around 40% of the increase in Government spending over the next 40 years.

The outcome of an ageing population, as you would expect, is increased demand for care and support services that will push the Federal Budget back to a point where deficits are the norm if the current policies remain in place.

From a consumer perspective, it also means that the trend towards user-pays will only increase. As individuals, we need to ensure that we have the means to fund our old age because Government resources will be limited by increasing demand and this demand is funded by a deteriorating percentage of workers contributing to tax revenue.

It's also likely that we will need to look at how we generate income. For some that might mean working longer, for others it is value adding - creating, buying and selling assets in some form, whether that is business, innovation, or through more traditional assets such as property or financial products.

Superannuation the size of a nation

Australia currently has the fourth largest pool of retirement assets in the world, with total superannuation balances projected to grow from 116% of GDP in 2022-23 to around 218% by 2062-63. Our superannuation system will be what underwrites retirement for most Australians. At present, around 70% of people over aged pension age receive some form of Government income support. Over time, and as our superannuation system matures, this percentage is expected to decline sharply as a percentage of GDP with Government support supplementing rather than providing for retirement (the first generation of workers with superannuation guarantee throughout their working life hit retirement age around 2058).

However, the IGR points out that, “the cost of superannuation concessions will increase, driven by earnings on the larger superannuation balances held by Australians.” The proposed tax on future earnings on super balances above $3m may not be the last.

You can expect the management of superannuation to be a priority for Government to ensure that retirement savings are maximised to reduce the reliance on Government support, and to ensure that this enormous pool is leveraged for the gain of not only members, but the nation.

Growth of services

Like most advanced economies, global competition has shifted Australia’s industrial base from the production of goods to services. Ninety percent of jobs are now in services.

With an ageing population, demand for health and care services is expected to soar. People aged 65 or older currently account for around 40% of total Australian health expenditure, despite being about 16% of the population. The IGR estimates that the workforce required to support this sector will need to be twice the size of what it is now to meet demand by 2049-50.

The Government’s biggest spending pressures will be health, aged care, the NDIS, defence and interest payments on government debt. Of these, the NDIS is the fastest growing at 7% per year.

The role of technology

The speed of technological change is difficult to predict, and the IGR doesn’t attempt to make predictions. But what we do know is that technology has had a transformational impact on labour productivity (the value of output of goods and services produced per hour of work). Over the last 30 years, labour productivity has accounted for around 70% of the growth in Australia’s real gross national income. But, tempering this is a slowing of labour productivity growth since the mid-2000s.

We know technological disruption is coming and the debate about the role of artificial intelligence is only just beginning. We also know that unless technology is accessible, our future will be one polarised by those who have and have not benefited from technological change.

Climate change transformation

There are two key aspects to climate change; the cost of rising temperatures, and the opportunity created by the shift to renewable energy.

Temperatures are anticipated to increase by 1.5 degrees before 2100, potentially before 2040.

From 1960 to 2018, climate disasters reduced annual labour productivity in the year they occurred by about 0.5% in advanced economies. However, for severe climate disasters labour productivity is estimated to be around 7% lower after three years. With rising temperatures, floods, bushfires and other extreme weather events are expected to increase in frequency and severity. The impact of climate change spelt out in the report is sobering with disruptions and changing patterns impacting agriculture, tourism, recreation and industries that rely on labour intensive outdoor work.

On the positive side, Australia could benefit from new “green” industries, such as hydrogen and other clean energy exports, critical minerals and green metals. It is also likely to drive new, innovative ideas as businesses invest in and develop low emissions technologies, providing a source of future productivity growth in a more sustainable economy. Australia’s potential to generate renewable energy more cheaply than many countries could also reduce costs for both new and traditional sectors, relative to the costs faced by other countries.

Geopolitical risks

Australia relies on open international markets. Trade disputes and military conflicts pose an external threat to Australia’s economy and well being. While the IGR cannot predict the nature of geopolitical events, it notes the importance of investing in national security, presumably this includes cybersecurity, ensuring access to international markets, and deepening regional partnerships to reduce supply chain vulnerabilities.

The case of the taxpayer who was paid too late

Tue, 05 Sep 2023 03:19:34 GMT

The case of the taxpayer who was paid too late

What a difference timing makes. A recent case before the Administrative Appeals Tribunal (AAT) is a reminder about the tax impact of the timing of employment income.

In this case, the taxpayer was a non-resident working in Kuwait. As part of his work, he was entitled to a ‘milestone bonus’ but, the employer was not in a position to pay the bonus at the time.

When the job ended, the taxpayer moved to Australia and became a resident. Once in Australia, the former employer honoured the performance bonus and paid it as a series of instalments.

The dispute between the ATO and the taxpayer started when the Commissioner issued amended assessments taxing the bonus payments received.

The dispute focused on when the bonus was derived. Had the bonus been derived while the taxpayer was still a non-resident then it would not have been taxed in Australia. This is because non-residents are normally only taxed in Australia on Australian sourced income. Employment income is typically sourced in the place where the work is performed (although there can be exceptions to this).

Australian tax case law says that employment income is normally derived on receipt. In the taxpayer’s case, this was when he received the payments from his former employer, not when he became entitled to the bonus. Because the taxpayer received the bonus when he was a tax resident of Australia, the bonus was subject to tax.

The difference for the taxpayer was quite dramatic. Had he been paid the bonus when it was due, he would have paid no tax as Kuwait does not impose income tax.

Please call us if you are concerned about tax residency or managing overseas income.

Legislating the ‘objective’ of super

Tue, 05 Sep 2023 01:55:32 GMT

Legislating the ‘objective’ of super

The proposed objective of superannuation released in recently released draft legislation is: ‘ to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way .’

The significance of legislating the objective of super is that any future legislated changes to the superannuation system must be in line with this objective. It’s a fairly broad definition. For example, “equitable” seeks to address the distributional impact of superannuation policy. That is, latitude for the Government to target tax concessions to address differences in demographic factors and structural inequities including intergenerational inequity and outcomes for different groups including women, First Nations Australians, vulnerable members and low-income earners.

“Sustainable” encapsulates the changing needs of an ageing population including reducing the reliance on the Age Pension. The draft also alludes to the viability of the cost of tax concessions used to incentivise Australians to save for retirement.

“Deliver income” appears to reinforce the concept that superannuation savings “should be drawn down to provide individuals with a source of income during their retirement.”

More than 15 million Australians now have a superannuation account. Australia’s superannuation pool has grown from around $148 billion in 1992 to $3.5 trillion in 2023, and will continue to grow. Total superannuation balances as a proportion of GDP are projected to almost double from 116% in 2022–23 to around 218% of GDP by 2062-63.

The consultation also recognises the value of the superannuation system as a source of capital, “which can support investment in capacity-building areas of the economy where there is alignment between the best financial interests of members and national economic priorities.”

Protect your business during financial uncertainty –cash flow forecasting.

Tue, 08 Aug 2023 05:48:57 GMT

During times of economic uncertainty, a tried-and-true method to protect your business is to review to your short-term cash flow forecast.

A reliable and robust forecast which shows the incoming and outgoing cash flows over the next three months (daily or weekly) will help you understand if you can operate within your available cash resources.

Early identification of cash flow problems allows you to take early actions so you can prevent significant issues down the line.

If you identify cash flow concerns, there are a number if steps you can focus on to it back on track:

Have conversations with customers about the option of early or stage payments. Working with customers to bring forward or staggering payments of invoices so they come once a week, rather than at the end of the month can have an immediate effect on your cash flow.
Review upcoming expenses, and proritise expenditures essential to your business operations, and decide whether to pause or stop things that aren’t.
Does your business have a tax arrears? We recommend reaching out to the ATO early to negotiation a payment plan over an extended period. Proactively working with the ATO can provide much-needed relief for your businesses cash flow.
Review your inventory. It can be a significant element in your capital and should always be reviewed in times of cash pressure. Consider shifting slow-moving or out of date stock through sales or liquidation.
Speak to your financier to discuss what support is available to you. Can you access an increased draw-down rate on invoice-based facilities, can you get a temporary overdraft extension? Before you approach your financier, have a proposal prepared detailing the funding requirements, how you will repay it.

The current environment is unprecedented, and managing the cash position of your business is likely to require the support of all stakeholders. In our experience, timely, open, and clear communication with stakeholders and a sensible transparent proposal is critical to obtaining support.

Aspen Corp can work with you to develop a robust and realistic cash flow forecast that recognises the crucial differences between the revenue and expenses of your P&L or budget, and the actual cash flowing into and out of your bank account. We can also help you create proposals and negotiate with the ATO, banks and other financial institutions.

Succession: What does it take to get you and your business to the next generation?

Tue, 08 Aug 2023 03:44:14 GMT

What is the end game for your business? Succession is not just a topic for a TV series or billionaire families, it’s about successfully transitioning your business and maximising its capital value for you, the owners.

When it comes to generational succession of a family business, there are a few important aspects:

Succession of the business;
Succession of the ownership of the business;
Succession planning/pathway; and
Moving from a business family to an investment family.

For generational succession to succeed, even if that succession is the sale of the business and the management of the sale proceeds for the benefit of the family, communication is essential. Where generational succession fails, it is often because succession has not been formalised until a catalyst event or retirement planning requires it.

A concept of ‘legacy’ is not enough. Successful succession occurs when the guiding principles of governance, family rules, aligning values, dispute resolution, succession and estate planning are managed well before discontent tears it apart.

Generational succession usually involves the transfer of an interest in a business to another generation of a family (usually younger). It is often a family in business rather than simply a family business.

“ One-third of Australian family businesses expect that the next generation will become the majority shareholders within 5 years time. Yet only 25% of Australian family businesses have a robust, documented and communicated succession plan in place.”
PWC Family Business Survey

The options for how a movement of an interest may occur are many and varied but usually focus on the transfer of some or all of the equity held in the business over a period or at a defined point in time and the payment of some form of consideration for the equity transferred. Alternatively, a part of the equity transfer may ultimately be dealt with through the estate.

Generational succession comes with its own set of issues that need to be dealt with:

Capability and willingness of the next generation

A realistic assessment of whether the business can continue successfully after the transition. In some cases, the older generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation. While reasonable objectives, they only work where there is capability and willingness. Communication of expectations is essential.

Capital transfer

Consider the capital requirements of the exiting generation. To what extent do you need to extract capital from the business at the time of the transition? The higher the level of capital needed, the greater the pressure on the business and the equity stakeholders.

In many cases, the incoming generation will not have sufficient capital to buy-out the exiting generation. This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt. Either scenario needs to be assessed for its sustainability at a business and shareholder level. In some scenarios the exiting owners will transition their ownership on an agreed timeframe.

Managing remuneration

In many small and medium businesses, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little. Under generational succession, there should be an increased level of formality around compensation. Compensation should be matched to roles, and where performance incentives exist, these should be clearly structured.

Who has operational management and control?

Transition of control is often a sensitive area. It is essential to establish and agree in advance how operating and management control will be maintained and transitioned. This is important not only for the generational stakeholders but also for the business. Often the exiting business owners have a firm view on how the business should be run. Uncertainty in the management and decision making of the business can lead to confusion or a vacuum - either will have an adverse impact. Tensions often arise because:

The incoming generation want freedom of decision making and the ability to put their imprint on the business.
Without operating control, they feel that they have management in name only.
The exiting generation believe that their experience is necessary to the business and entitles them to a continued say.
A perception that capital investment should equate to ultimate operating control.
An uncertainty by either or both generations about the extent of their ongoing roles.

Agreeing transition of control in advance, on an agreed timeframe, can significantly reduce tensions.

Transition timeframes and expectations

Generational succession is often a process rather than an event. The extended timeframe for the transition requires active management to ensure that there are mutual expectations and to avoid the process being derailed by frustration.

The established generation may have identified that they want to scale down their business involvement and bring on other family members to succeed them. This does not necessarily mean that they want to withdraw completely. An extended transition period is not uncommon and can often assist the business in managing the change. This can also work well in managing income and capital withdrawal requirements.

The need for greater formality and management structure

A danger for many SMEs is the blurring of the boundaries between the role of the Board, shareholders, and management. With generational succession, this can become even more pronounced. Formality in these structures is important, with clear definitions of the roles and clarification of the expectations. For example, who should be a director and what is their role?

For some, the role of the family is managed by a family constitution – an agreed set of rules. For others there will be an external advisory group that advises the family to ensure that the required independent expertise is brought to bear.

Successfully managing generational change is a process we can help you navigate. Talk to us about how we can help to structure an effective transition path.

Why is my tax refund so small?

Tue, 08 Aug 2023 03:44:11 GMT

The tax refund many Australians expect has dramatically reduced. We show you why.

There is a psychology to tax refunds that successive Governments have been reticent to tamper with. As a nation, Australia relies heavily on personal and corporate income tax, with personal income tax including taxes on capital gains representing 40% of revenue compared to the OECD average of 24%. And, for the amount we pay, we expect a reward.

The reward is in the form of tax deductions that reduce the amount of net income that is assessed for tax purposes and tax offsets that reduce the tax payable, generating a refund for some. And refunds have a positive impact on tax compliance.

As part of the previous Government’s efforts to flatten out the progressive individual income tax system, a time-limited low and middle income tax offset was introduced. The lifespan of the offset was extended twice, partly as a stimulus measure in response to COVID-19. The offset delivered up to $1,080 from 2018-19 to 2020-21, and up to $1,500 in 2021-22 for those earning up to $126,000. This was a significant boost for many people each tax time and bolstered the tax returns of millions of Australians. For many, the end of this offset has meant that their tax refund has reduced dramatically compared to previous years.

Do we pay more tax than other nations?

It depends on how you look at the statistics. Australia relies heavily on income tax, collecting 40% of tax revenue from personal income. That makes Australia the fourth highest taxing nation for personal tax in the OECD – but we were second highest in 2019 if that makes you feel better. But, if you are looking at take home pay there is a separate measure for that. The Employee tax on labour income looks at our take home pay once tax is taken out and benefits have been added back in. This shows that the take home pay of an average single worker is 77% of their gross wage compared to the OCED average of 75.4%. For the average worker with a family (one married earner with 2 children), once tax and family benefits are taken into account, the Australian take home pay average is 84.1% compared to the OECD average of 85.9%. All of this means that Australia is a high taxing nation but returns much of that in the form of means tested benefits.

Australia also does not have social security contributions like other nations. These contributions represent an average of 27% of the total tax take for OECD nations.

And, because Australia has a progressive tax system, the pain of taxation is felt more by higher income earners. The top 11.6% of Australian income earners contribute 55.3% of the tax revenue from personal income tax.

With the final round of legislated income tax cuts due to commence on 1 July 2024, this should reduce the overall dependence on personal income tax relative to corporate and other taxes.

So, do we personally pay more tax than other nations? If you are a high-income earner the answer is likely to be yes. If not, the answer is no.

As Benjamin Disraeli reportedly said, “…lies, damn lies, and statistics”. It’s all how you read it.

Is a second job worth it?

In an Uber the other day, the driver revealed that he had become a driver to pay for his second mortgage. He invested in property but with interest rates spiking, the only way he could hold onto the property was to earn additional income. His “day job” starts early and ends at 3pm at which time he heads off to start driving.

He is not alone. The latest stats from the Australian Bureau of Statistics reveal that the number of workers holding multiple jobs has increased by 2.1% since December 2022 – in total, Australia has 947,300 people holding multiple jobs or 6.6% of the working population.

The reason why people take on second jobs is varied. For some, it is to manage increasing costs, for others it is to start up a new venture but with the security of a regular income stream from their primary occupation.

Is it worth it?

From a tax perspective, Australia has a progressive income tax system – the more you earn the more tax you pay, and access to social benefits tapers off. It’s important when looking at a second job to understand your overall position – how much you are likely to earn, your costs of generating income, and what this income level will mean.

The trap for many picking up a ‘gig economy’ second job is that they are often independent contractors. That is, you are responsible for managing your tax affairs. All Uber drivers for example, are required to hold an ABN and be registered for GST. There is a compliance cost to this and from a cashflow perspective, 1/11 ^th of the fee collected needs to be remitted to the Tax Office once a quarter. It’s important to quarantine both the GST owing and income tax to ensure you have the cashflow to pay the tax when it is due. The upside is you can claim the expenses related to your second job.

If you are taking on a second job, ensure that your tax-free threshold applies to your highest paying job from a PAYG withholding perspective.

Aspen Corporate announces Domenic Tartaglia as our new managing director

Tue, 08 Aug 2023 03:44:09 GMT

Aspen Corporate is pleased to announce that Domenic Tartaglia will become our Managing Director.

Sergio Di Vincenzo will move into the role of Executive Chairman.

We have worked hard to ensure that this is a seamless change with business as usual.

In the role as Executive Chairman, Sergio will oversee Aspen Corporate’s strategy and governance. He will also focus on business development and growth while continuing to provide advice to clients.

Domenic will continue to provide tax, accounting, and business advisory services to his existing clients, along with his Managing Director duties.

Sergio is “confident that Dom will continue to deliver outstanding client services and lead the Aspen Corp team to build quality relationships and work with clients to transform their businesses and deliver custom solutions.”

Sergio started Aspen Corporate in 1990, with Domenic joining one year later. Domenic went on to become a Director in 2004.

Thinking of subdividing? The tax implications and pitfalls of small-scale subdivisions

Tue, 08 Aug 2023 03:00:12 GMT

You’ve got a block of land that’s perfect for a subdivision. The details have all been worked out with Council, the builders, and the bank. But, one important aspect has been left out; the tax implications.

Many small-scale developers often assume that their tax exposure is minimal – but this is not always the case and the tax treatment of a subdivision project can significantly impact on cashflow and the financial viability of the project.

New guidance from the Australian Taxation Office (ATO) walks through the tax impact of small-scale subdivision projects. We look at some of the leading issues:

Tax treatment of the subdivision

Subdividing land

The tax treatment of even a small subdivision can become complex very quickly and tax applies according to the circumstances. You cannot simply assume that just because it’s a small development, any profit from the eventual sale will be taxed as a capital gain and qualify for CGT concessions.

In general, if you own a property personally, it has been held and used for private purposes over an extended period, you subdivide it and sell the newly created block, then capital gains tax is likely to apply to any gain you make. The gain is recognised from the point you first acquired the land, although you will ned to apportion the amount paid for the property between the subdivided lots. If you are subdividing a property that contains your home – the main residence exemption will not generally be available if you sell a subdivided block separately from the block containing your home, even if the land has only ever been used for private purposes in connection with your home.

If a property is initially owned jointly but the property is subdivided and the lots split between the owners, then this will normally trigger upfront tax implications even though the land hasn’t been sold to an unrelated party yet. Arrangements like this (referred to as partitioning) can be complex to deal with from a tax perspective.

Developing a property

But what happens if you develop the land? It’s not uncommon for people to decide to subdivide and develop their block by building a house or duplex and then selling the new dwelling.

When someone develops a property with the intention of selling the finished product at a profit in the short term, there is a risk that this will be taxed as income rather than under the capital gains tax rules. This limits the availability of CGT concessions (such as the 50% CGT discount) and will often expose the owners to GST liabilities as well. This can be the case even for one-off property developments.

Let’s look at an example. Claude purchased his home on 1 July 2001 for $300,000. In July 2020, Claude began investigating the idea of subdividing his block and building a new house, then selling it. A registered valuers report on the subdivision says that the original house and land is now worth $360,000, and the subdivided lot is worth $240,000 (the valuation is an important step before commencement to prevent any debates with the ATO). Claude decides to go ahead and build a dwelling on the newly subdivided block and takes out a loan of $400,000 for the development. He intends to pay off the loan as soon as the house sells.

In July 2021, Claude sells the subdivided block and new home for $1,210,000 (GST-inclusive).

Here is how the tax works for Claude’s scenario:

Claude made an overall economic gain of $580,000.
The overall gain ($580,000) is based on the GST exclusive sale proceeds ($1,100,000, although we are assuming that the GST margin scheme isn’t applied) minus the GST exclusive development expenses ($400,000) and the original cost attributable to the newly subdivided lot of $120,000 ($300,000 × 40%).
The increase in the value of the newly created subdivided lot from when it was originally acquired (1 July 2001) up to when the profit-making activities began (1 July 2020) should be treated as a capital gain.
The value of the newly created subdivided lot at the time Claude began to undertake profit-making activities on 1 July 2020 was $240,000. The original cost, attributable to the newly created subdivided lot was $120,000 (40% × $300,000) on 1 July 2001. This means that there is a capital gain of $120,000.
As Claude has held the subdivided block for greater than 12 months he is entitled to a 50% CGT discount, hence there is a discounted capital gain of $60,000.
The increase in the value of the newly created subdivided lot from when the profit-making activities began up to the time of sale should be treated as ordinary income.
The net profit ($460,000) will be based on the GST exclusive sale proceeds ($1,100,000) minus the GST exclusive development expenses ($400,000) and the value of the subdivided lot ($240,000).

If Claude is not carrying on a business, he cannot claim a deduction for the development expenses as they are incurred. They will be taken into account in determining the net profit on sale.

If Claude finished the development but decided not to sell the property, then this would complicate the income tax and GST treatment. We would need to explore what Claude plans to do with the property.

Do I need to register for GST?

If you are an individual who is subdividing land that has been held and used for private purposes then you might not need to GST, although this will depend on the situation. However, if you are engaged in a property development business or a one-off project that is undertaken in a business-like manner, then it is more likely that you would need to register for GST.

In Claude’s scenario, because the projected sale price of the developed land was above the GST threshold of $75,000, he will probably need to register for GST. This will mean that he:

Has a ‘default’ GST liability of $110,000 on the sale price of the developed block, although it might be possible to reduce the GST liability by applying the GST margin scheme
Needs to provide a notification to the purchaser of the amount at settlement to be withheld and paid to the ATO
Is able to claim $40,000 credits for the GST included in the development expenses (subject to the normal GST rules), and
Must report these transactions by completing business activity statements.

The tax consequences of subdivision and other property projects can be complex. If you are contemplating undertaking a subdivision and any property development activities, please contact us and we can help walk you through the scenarios and tax impact of the project.

Backing a winner: Digital games tax

Tue, 04 Jul 2023 00:30:49 GMT

The digital games and interactive entertainment sector is the largest creative sector in the world and one of the fastest growing industries worldwide. The global digital games industry is worth around $250 billion and in Australia, grew 22% between 2020 and 2021 generating $226.5 million in income and employing over 1,300 fulltime workers. And, it’s an industry the Government wants to support with a new tax offset.

The Digital Games Tax Offset is equal to 30% of the company’s total qualifying Australian development expenditure incurred from 1 July 2022. Companies can claim up to $20 million per company (or group of companies) per year (to reach the cap a company would need to spend around $66.7 million in eligible expenditure).

State based tax incentives are also available in South Australia, Victoria and New South Wales offering an additional 10% and Queensland offering 15% on top of the federal support. Globally, a 40% tax offset is standard for this industry so the tax offset brings Australia back into a competitive position.

Who is eligible?

Companies that are Australian tax residents or foreign tax residents with a permanent establishment in Australia can qualify.

To access the offset, the company needs a certificate issued by the Arts Minister following the completion of a new digital game, the porting of a digital game to a new platform, or for ongoing development of one or more existing digital games during the income year. This certificate then determines the offset claimed in the tax return with the Minister determining the amount of qualifying expenditure. More information will be available on the arts.gov.au website in early July 2023.

The company’s qualifying Australian development expenditure incurred needs to be at least $500,000 (could be over multiple years).

What is development expenditure?

The way the rules work is that any expenditure that a company incurs in relation to the development of the qualifying game is eligible expenditure…unless it is specifically excluded. A company develops a game by doing any of the activities necessary to complete, port, update, improve or maintain an eligible game.

The legislation takes a further step by specifically including employee remuneration or independent contractors engaged by the company to carry out work on the development of the game (excluding bonuses linked to the performance of the company or the game). Prototyping is also specifically included as is underlying game technology.

Employees that are not developing the game, for example admin staff or overseas contractors, are excluded. As are corporate costs like business overheads, marketing, travel, entertainment etc.

What games are eligible?

A digital game that can receive a classification and is made available to the general public over the internet (i.e., games developed for in-house purposes don’t qualify). The game does not include gambling or gambling like elements (loot boxes are likely to make a game ineligible if for example, the virtual items can be sold for currency) nor is used for advertising or for commercial purposes.

Australian digital games successes

Remember Fruit Ninja? Fruit Ninja, founded by HalfBrick , became a sensation in 2015 with over 1 billion downloads. Who knew a game that slices fruit with a sword would capture so much attention. Anyone with kids would have seen Crossy Road developed by Melbourne based Hipster Whale. Ninety days after it release it had 50 million downloads, earning over $10m. The Sims Freeplay was created by a merger of Melbourne studios Iron Monkey and Firemint when they were purchased by EA Games. Then there is Melbourne based Big Ant Studios, one of the world’s biggest sports game developers and known for games such as the Tennis World Tour Game, Cricket 22 and an upcoming Rugby World Cup 2023 game.

What changed on 1 July 2023

Tue, 04 Jul 2023 00:27:16 GMT

Employers & business

Superannuation guarantee increases to 11% from 10.5%
National and Award minimum wage increases take effect.
The minimum salary that must be paid to a sponsored employee - the Temporary Skilled Migration Income Threshold - increased to $70,000 from $53,900.
Work restrictions for student visa holders reintroduced to 48 hours per fortnight.
The cap on claims via the small claims court procedures for workers to recover unpaid work entitlements increases from $20,000 to $100,000.
Energy Bill Relief Fu nd for small business kicks in – it will apply to your energy bills if you meet the criteria.
Sharing economy reporting to the ATO commences for electronic distribution platforms.

Superannuation

Superannuation guarantee increases to 11%
Indexation increases the general transfer balance cap to $1.9 million.
Minimum pension amounts for super income streams return to default rates.
SMSF transfer balance event reporting moves from annual to quarterly for all funds.

For you and your family

The new 67 cent fixed rate method for working from home deductions – make sure you have a record of when you work from home. The ATO won’t accept a simple “I work from home every Wednesday” x 8 hours calculation.
Access to the first home loan guarantee expands to “friends, siblings, and other family members.”
The Medicare low income threshold has increased for 2022-23.
The child care subsidy will increase from 10 July 2023 for families with household income under $530,000. See the Services Australia website for details.
New parents able to claim up to 20 weeks paid parental leave.
Access to the age pension increased to 67 years of age.

The 120% technology and skills ‘boost’ deduction

Tue, 04 Jul 2023 00:16:47 GMT

The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament. We’ll show you how to maximise your deductions.

Almost a year after the 2022-23 Federal Budget announcement, the 120% tax deduction for expenditure by small and medium businesses (SME) on technology, or skills and training for their staff, is finally law. But there are a few complexities in the timing - to utilise the technology investment boost, you had to of purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023; that’s just seven days from the date the legislation passed Parliament.

Who can access the boosts?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

$20k technology investment boost

The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.

You ‘incur’ an expense when you are in debt for it; this might be a tax invoice or it might be a contract where you are legally liable for the cost.

For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use. For example, if you ordered 10 computers, you need to have received the computers and had them set up ready to use by at least 30 June 2023. Ordering them on 29 June won’t be enough to claim the boost if you did not receive them.

The types of expenses that might be eligible for the technology boost include:

Digital enabling items - computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
Digital media and marketing - audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
E-commerce - goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
Cyber security - cyber security systems, backup management and monitoring services.

The technology also must be “wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations”. That is, there must be a direct link to your business’s digital operations. For example, claiming the drone you bought at say Christmas 2022 won’t be deductible unless your business is, for example, a real estate agency that needed a drone to take aerial images of client homes to market on their website. The expense needs to relate to how the business earns its income, in particular its digital operations.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for business use.

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).

Capital works costs (for example, improvements to a building used as business premises).
Financing costs such as interest expenses.
Salary or wage costs.
Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost).
Trading stock or the cost of trading stock.

Let’s look at the example of A Co Pty Ltd (A Co) that purchased multiple laptops on 15 July 2022 to help its employees to work from home. The total cost was $100,000. The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use.

As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the cost of the laptops ($100,000) as a deduction under the temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

The Skills and Training Boost

The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.

Sole traders, partners in a partnership, independent contractors and other non-employees do not qualify for the boost as they are not employees. Similarly, associates such as spouses or partners, or trustees of a trust, don’t qualify.

As always, there are a few rules:

Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024. If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.
The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.
A registered training provider needs to charge your business (either directly or indirectly) for the training (see What organisations can provide training for the boost).
The training must be for employees of your business and delivered in-person in Australia or online.
The training provider cannot be your business or an associate of your business.

Training expenditure can include costs incidental to the training, for example, the cost of books or equipment necessary for the training course but only if the training provider charges the business for these costs.

Let’s look at an example. Animals 4U Pty Ltd is a small entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 for the employee to undertake external training in veterinary nursing. The training meets the requirements of a GST-free supply of education. The training is delivered by a registered training provider, registered to deliver veterinary nursing education.

The bonus deduction is calculated as 20% of the amount of expenditure the business could typically deduct. In this case, the full $3,500 is deductible as a business operating expense. Assuming the other eligibility criteria for the boost are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

What organisations can provide training for the boost?

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by:

Tertiary Education Quality and Standards Agency ( search the register – includes States and Territories)
Australian Skills Quality Authority (ASQA)
Victorian Registration and Qualifications Authority ( search the register )
Training Accreditation Council of Western Australia

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.

Super savings and strategies

Tue, 06 Jun 2023 06:00:09 GMT

Tax deductions for topping up super

You can make up to $27,500 in concessional contributions each year assuming your super balance has not reached its limit. If the contributions made by your employer or under a salary sacrifice agreement have not reached this $27,500 limit, you can make a personal contribution and claim a tax deduction for the contribution. It’s a great way to top up your super and reduce your tax.

For those aged between 67 and 74, you will need to meet the ‘work test’ to contribute personal concessional contributions and claim a deduction - you must have worked at least 40 hours within 30 consecutive days in a financial year before your super fund can accept voluntary contributions from you.

To be able to claim the tax deduction for these contributions, the contribution needs to be with the super fund before 30 June (watch out for processing times). You will also need to lodge a Notice of intent to claim or vary a deduction for personal super contributions with your super fund before you lodge your tax return to advise them of the amount you intend to claim as a deduction.

Bringing forward unused contribution caps

If your total super balance is below $500,000, and you have not reached your cap in the previous four years, you might be able to carry forward any unused contributions and make a larger tax deductible contribution this year. For example, if your total concessional contributions in the 2021-22 financial year were $10,000, you can ‘carry forward’ the unused $17,500 into this financial year, make a higher personal contribution and take the tax deduction. This is a helpful way to reduce your tax liability particularly if you have made a capital gain.

If you have never used your contribution cap, for example you have recently become a resident or have returned from overseas, you can also bolster your superannuation by contributing the five years’ worth of concessional contributions in one year (assuming you have not reached your balance cap).

Doubling the benefit for SMSFs

For self managed superannuation funds, a quirk in the way concessional contributions are reported means that a concessional contribution can be made in June, but not allocated to the member until 28 days later in July. The practical effect is that a member can make a contribution of up to $55,000 this financial year (2 x the $27,500 cap - assuming you have not used your cap) and take the full tax deduction, but the fund recognises the contribution in two amounts; one amount in June and the second allocated to the member from the SMSF’s reserve in July. This strategy is particularly helpful for the self-employed who need to boost their superannuation and reduce their tax liability in a particular year.

Top up your partner’s super

With a cap on how much you can transfer into a tax-free retirement account, it makes sense to even out how much super each person holds to maximise the tax savings for a couple.

If your spouse’s assessable income is less than $37,000, make a contribution of $3,000 or more on their behalf and you can take a tax offset of up to $540.

Another way of topping up your spouse super is super splitting. If your spouse has not retired and below their preservation age, you can roll over up to 85% of a financial year’s taxed splitable contributions to their account.

Thinking of retiring? Wait until 1 July

From 1 July 2023, indexation will increase the general transfer balance cap, the amount you can transfer into a tax-free retirement account, by $200,000 to $1.9m.

For those contemplating retiring very soon, by waiting until after 1 July 2023 before starting a retirement income stream, you will have access to this additional $200,000 cap of tax-free superannuation savings.

It's important to speak to your financial adviser before taking any action on superannuation strategies.

Tax savings for your business

Tue, 06 Jun 2023 05:23:40 GMT

Bring forward the purchase of assets

If there are large assets your business needs to buy (or upgrade), you have until 30 June 2023 to use the temporary full expensing rules. These rules enable businesses with an aggregated turnover of up to $5bn to fully deduct the cost of the asset upfront rather than being claimed over the asset’s life, regardless of the cost of the asset.

The temporary full expensing rules are of benefit if your business would like to reduce the tax it pays in 2022-23, and the purchase of the asset is not going to put a strain on cashflow. If the business does not have tax to pay, and you utilise the rules, this will often give rise to a tax loss that can be carried forward to future years, although companies have access to some loss carry back rules for the 2022-23 year.

Timing is important. The asset needs to be “first held and ready for use” by the 30 June 2023 deadline to qualify for an immediate deduction in the 2023 tax return. Just having a contract in place won’t qualify if you have not taken possession of the asset.

If you are buying a work vehicle which is classified as a car and is mainly designed to carry passengers then remember that there are rules which limit the deductions that can be claimed if the cost of the car is above the car limit ($64,741 in 2022-23).

From 1 July 2023 until 30 June 2024, small businesses with an aggregated turnover below $10m will be able to immediately deduct assets costing less than $20,000 in the year of purchase using the instant asset write off. For other businesses, assets will be depreciated using the general depreciation rules over time.

Declare dividends to pay any outstanding shareholder loan accounts

If your company has advanced funds to a shareholder or related party, paid expenses or allowed a shareholder or other related party to use assets owned by the company, then this can be treated as a taxable dividend. The regulators expect that top-up tax (if any applies) should be paid by shareholders at their marginal tax rate once they have access to these profits. This is unless a complying loan agreement is in place.

If you have any shareholder loan accounts from prior years that were placed under complying loan agreements, the minimum loan repayments for the 2022-23 income year need to be made by 30 June 2023. It may be necessary for the company to declare dividends before 30 June 2023 to make these loan repayments.

Commit to directors’ fees and employee bonuses

Any expected directors’ fees and employee bonuses may be deductible for the 2022-23 financial year if you have ‘definitely committed’ to the payment of a quantified amount by 30 June 2023, even if the fee or bonus is paid to the employee or director after 30 June 2023 (within a reasonable time). You would generally be definitely committed to the payment by year-end if the directors pass a properly authorised resolution to make the payment by year-end. The employer should also notify the employee of their entitlement to the payment or bonus before year-end.

Write-off bad debts

You can claim a bad debt as a deduction if the income is brought to account as assessable income and you have given up all attempts to recover the debt. It needs to be written-off your debtors’ ledger by 30 June. If you don’t maintain a debtors’ ledger, a director’s minute confirming the write-off is a good idea.

Review your asset register and scrap any obsolete plant

Check to see if obsolete plant and equipment is sitting on your depreciation schedule. Rather than depreciating a small amount each year, if the plant has become obsolete, scrap it and write it off before 30 June. Small business entities can choose to pool their assets and claim one deduction for each pool. This means you only have to do one calculation for the pool rather than for each asset.

Bring forward repairs, consumables, trade gifts or donations

To claim a deduction for the 2022-23 financial year, consider paying for any required repairs, replenishing consumable supplies, trade gifts or donations before 30 June.

Pay June quarter employee super contributions now

Pay June quarter super contributions this financial year if you want to claim a tax deduction in the current year. The next quarterly superannuation guarantee payment is due on 28 July 2023. However, some employers choose to make the payment early to bring forward the tax deduction instead of waiting another 12 months.

Realise any capital losses and reduce gains

Neutralise the tax effect of any capital gains you have made during the year by realising any capital losses – that is, sell the asset and lock in the capital loss. These need to be genuine transactions to be effective for tax purposes.

Raise management fees between entities by June 30

Where management fees are charged between related entities, make sure that the charges have been raised by 30 June. Where management charges are made, make sure they are commercially reasonable and documentation is in place to support the transactions. If any transactions are undertaken with international related parties then the transfer pricing rules need to be considered and the ATO’s documentation expectations will be much greater. This is an area under increased scrutiny.

Protecting against risk: Is it a business expense? Really?

For a few years now, very generous provisions have been in place that allow business to claim the cost of assets used in the business in the year of purchase instead of having to deduct them over time. But, this has led to some serious problems where some products have been promoted as being tax deductible without proper consideration being given to the way the tax rules operate.

Artwork is one example.

If your business buys an artwork to display in areas of your office where it would be viewed by clients, then assuming it is used in connection with your business and is likely to decline in value, the business can generally claim depreciation deductions for tax purposes. Depending on the situation, it might be possible to claim an immediate deduction. If, however, the artwork is displayed in a home office then the risk of the ATO querying this is much higher.

If the artwork is an investment piece and you expect it to appreciate in value, then it’s unlikely to be a depreciating asset and would not normally qualify for an immediate deduction.

Another scenario is a boat used for “marketing purposes”. If your business buys a boat, claims the cost of the boat and the expenses, the ATO will expect to see the benefit to your business of this and will be checking to see if the boat has been used privately by employees or shareholders (yes, they do look at your social media). If there is private usage of the boat then this can give rise to a range of complex tax issues. For example, this could trigger an FBT liability or a deemed unfranked dividend under the rules in Division 7A. It gets very messy.

In general, the ATO is likely to review any expense where the cost outweighs the likely value to the business of acquiring it, particularly for assets that people are likely to want for their own pleasure. The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

Tax Savings For the Taking!

Tue, 06 Jun 2023 05:17:14 GMT

It’s that time of year when we all look at what last minute things we can do to maximise tax savings.

In the wise words of the late Kerry Packer to a Senate estimates committee, “Of course I am minimising my tax. And if anybody in this country doesn’t minimise their tax, they want their heads read.” Here’s our top tips:

Tax savings for you

There are some simple things you can do to reduce your personal tax:

Claim the cost of working from home - If you work from home some days, keep a diary of the hours you have worked at home to claim the 67 cents per hour shortcut rate. Other methods apply for home based businesses and where your expenses are higher and claimed separately.
Costs connected to your job - If you spent money related to your work that was not reimbursed by your employer – e.g., meals while you were away overnight, etc. - you can generally claim these (make sure you have receipts). Check the ATO’s industry specific guides on what’s reasonable to claim.
Donations reduce your tax - If you are likely to have a big tax bill this year from gains you have made, consider a larger than usual donation to a deductible gift recipient (DGR) charity before 30 June.
Top up your super – You can claim a deduction for contributions you personally make to super from after-tax income up to $27,500 per annum (assuming you have not reached your transfer balance cap). You need to lodge a notice of intent to claim with your super fund. See below for super strategies.
Pay in advance - While paying in advance for deductible expenses doesn’t save you cash, if you need to reduce your tax bill, you can pay some deductible expenses for next year by 30 June and take the tax deduction this year.
Studying for work – Self education expenses that are related to the work you do are often tax deductible, although there are some parameters around this. So, if you have been taking short courses to improve your knowledge, you can often claim the cost of the course and some other related expenses. Just be aware that study costs to obtain new work or to start a new business are not covered. The study needs to be related to how you earn your income now.
Building and managing your investments – The costs of earning interest, share dividends and income from your investments is generally deductible. This includes the account fees for investment accounts, interest on loans for investments you earn income from, the cost of investment seminars if they are directly related to investments you have made (not intending to make), fees for investment advice relating to existing investments, ongoing investment management fees, and specialist journals and subscriptions related to your investments. But, brokerage fees, an initial investment plan, transaction fees, etc are not generally deductible.

Avoiding penalties

The ATO can apply a penalty if you fail to declare income in your tax return that results in a tax shortfall. Penalties start at 25% of the tax liability owing and then escalate quickly if you were reckless (50%), or intentionally tried to evade tax (75%). Then, if they are really unhappy with you, they can increase the penalty base amount by 20%. There are also penalties that can apply if there is no shortfall but you didn’t take reasonable care, were reckless, or intentionally disregarded your obligations. Penalties of up to 75% of the tax liability can also apply if you don’t lodge your tax return and the ATO takes a position on what they believe you owe - tax is still owing even if you don’t lodge your return.

If you are an Australian resident for tax purposes (and not classified as a temporary resident), you are taxed on your worldwide assessable income - salary, wages, director or consulting fees, some allowances, bonuses, commissions, interest, pensions, rental and other investment income, and if you are a content creator, gifts and other income. For those with income from overseas, if you have paid tax on that income overseas, you will need to declare the income on your tax return but you might be eligible to reduce your Australian tax bill by the tax you have already paid overseas.

The ATO is upfront about what their tax time targets are so if you ignore the warnings then it’s less likely they will consider any omission an honest mistake. A bit like watching those border control shows when someone claims that they had no idea that seafood is considered a food and should have been declared.

Getting rental properties right

If you are earning income from an investment property, you can claim deductions for your expenses. These expenses fit into two categories; what you can claim now, and what is claimed over time.

You can claim interest on loans, council rates, repairs and maintenance, and depreciating assets costing $300 or less, in the year that you paid for them. Other items, like structural improvements, ovens, adding fences and retaining walls, are depreciated over time.

Rental properties are a major target for the ATO this year:

Rental income – Declare all rental income (including short term stays, renting out a room in your house, insurance payouts, rental bonds retained).
Rental expenses – Rental expenses can only be claimed for the portion of time that the property was rented or genuinely available for rent. If, for example, you did not make the property available for rent while you were renovating it, you cannot claim the cost of the expenses over this period. Sometime the ATO will argue that a property is not genuinely available for rent even if it is advertised as being available. This can be relevant for properties in locations where there is very little demand during certain times of the year.
Rental loans - if you have bundled your rental property loan with personal items, such as a car or holiday, then the interest must be apportioned for the cost of those items over the life of the loan, even if those items don’t last the length of the loan.
Interest and redraws – If you have refinanced or redrawn on your rental property loan for personal expenses like holidays or a car, this will impact on the interest you can claim.
Sale of assets – If you earned income from a residential property (renting out a room or the whole house), then it’s likely you will pay capital gains tax on any gain you make on the sale of the property. However, if the property was your home for a period of time, you might be able to claim a full or partial exemption from CGT. In some cases it will be necessary to obtain a valuation of the property at the time it is first used to produce income if it has previously only been used as your main residence.

Tax Time Targets for Individuals

Key tax time targets include:

Rental property income and expenses
Income and ‘gifts’ from online content creation (Instagram, OnlyFans, YouTube, TikTok etc.,)
Cryptocurrency gains
Gig economy workers (not declaring income)
Foreign income (not declared)
Work from home expenses (inaccurately claimed)
And as always, work related expenses (overclaimed).

Increasingly sophisticated datamatching programs mean that the ATO is more likely to notice if you have failed to declare income from the sale of assets, income earned through platforms, and made a gain on crypto transactions.

You can offset your assessable income against any allowable deductions you can claim. To be tax deductible, an expense must be directly related to how you earn your income. When it comes to expenses, if you are claiming for items not normally associated with your industry, claim the same amount or same items each year (cut and paste claims), or claim amounts outside of the norm, then it is likely the ATO will take a closer look.

$20k Small Business Energy Incentive

Tue, 02 May 2023 05:44:59 GMT

In a pre-Budget announcement, the Government has committed to a Small Business Energy Incentive Scheme that offers a bonus tax deduction of up to $20,000.

The Small Business Energy Incentive encourages small and medium businesses with an aggregated turnover of less than $50 million to invest in spending that supports “electrification” and more efficient use of energy.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction of $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 to qualify for the bonus deduction.

If your business is contemplating upgrading to improve energy efficiency, it’s worth waiting to see the detail of the proposal. We’ll bring you more details of the scheme and how your business might benefit as soon as they are released.

Look out for our 2023-24 Budget update with the details important to you, your business, and your superannuation.

Question of the month: Company loan to pay down the mortgage

Tue, 02 May 2023 05:42:06 GMT

A friend’s accountant suggested that they could reduce interest on non-deductible debt by using company cash to offset their personal mortgage, then transferring the cash back by 30 June. Is this an acceptable strategy?

This might initially sound like a brilliant strategy but what is really happening is that you are using company funds to derive a personal benefit. Doing this once might not attract attention, but doing this more than once might trigger a deemed unfranked dividend under Division 7A. Section 109R is designed for scenarios like this. If this occurs, the repayment you made will be ignored, meaning that a deemed dividend could be triggered in relation to the funds initially borrowed from the company unless a complying loan agreement is put in place, in which case minimum loan repayments would need to be made to prevent a deemed dividend from arising.

For example, let's assume you are a shareholder of the company (or an associate of a shareholder) and you borrow money from the company on 1 July 2022. This loan would generally fall within the scope of Division 7A, but a deemed dividend can be avoided if the loan is fully repaid by the earlier of the due date and actual lodgement date of the company's 2023 tax return.

However, if you repay the loan but it appears that you intend to borrow a similar or larger amount from the company when making the repayment then the repayment can be ignored. The main exception to this is where the repayment is made in a way that is taxable to the individual (e.g., dividends or directors’ fees are set-off against the loan balance).

One of the most common situations where section 109R could apply is where funds are taken from the company bank account and placed into a director's home loan offset account. Even if the funds are transferred back to the company before the end of the year, there is a significant risk of section 109R applying if the pattern repeats. That is, the money will be treated as a dividend and taxed as assessable income.

TikTok Tax Risk Warning

Tue, 02 May 2023 05:41:17 GMT

The explosion of TikTok, YouTuber, OnlyFans and others all offer an opportunity for ‘content creators’ to profit from the audiences they generate. But now the Tax Office has given notice to the booming industry.

Back in October 2022, OnlyFans CEO Ami Gan announced that the platform had reached a milestone - paying out $10 billion to content creators since its launch in 2016. While known for its adult content, the OnlyFans CEO intends to broaden the platform’s scope and provide a means for other content creators – chefs, personal trainers, etc – to utilise its subscription and reward model to generate income. While there are plenty of stories of content creators generating large incomes from the platform like Perth creator Lucy Banks who told Channel 7 she earnt $60,000 in one month, the average income per month is reportedly around USD $150-$180. Creators might also receive ‘gifts’ in various forms from their subscribers.

OnlyFans is not the only platform generating revenue for Australians; there are plenty of other stories. Google’s AdSense calculator estimates that for finance channels with 50,000 monthly views, estimated income is $15,012 ($9,390 for beauty & fitness channels). The message is, there are a lot of content creators generating benefits in a wide variety of forms and the Tax Office wants to ensure everyone is crystal clear about their expectations.

How content creators are taxed

A new update released by the Australian Taxation Office (ATO) in April outlines the regulator’s expectations for how content creators will be assessed for tax purposes:

Income tax on money, gifts and goods

If you make an income as a content creator, then it’s likely it will be assessed for tax purposes unless what you are doing is a genuine hobby with no expectation of generating a profit (see When is a side hustle a business?). For subscriber-based sites like OnlyFans, there is normally no question about the profit-making expectation.

The ATO’s guide also makes it clear that assessable income covers not only money but appearance fees, goods you receive, cryptocurrency, or gifts from fans. And, this is where the problem lies for most content creators. Income in the form of money is easy to track and report. Non-monetary income in the form of goods is not so easy. Let’s say a company sends you a handbag with a retail value of $800. The bag is yours to keep. The Tax Office expects you to declare the market value of the bag as income and pay tax on that income. If you receive multiple items throughout the year, or larger inducements like a destination holiday, then this might create a cashflow problem when you need to pay real money to the Tax Office for a ‘free’ product.

The ATO’s blanket statement that all ‘gifts’ and products should be reported as assessable income fails to recognise that it is not always quite that simple in practice. If you create content as a hobby and not as a profit-making venture for example, and a company sends you an unsolicited gift, the position is a little less clear. It really comes down to the specific scenario.

The timing of when you receive income is also important for content creators. The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. If you are an OnlyFans content creator for example, this is when your OnlyFans account is credited, not when you direct the money to be paid to your personal or business account. So, squirrelling it away from the ATO in your platform account won’t protect you from paying tax on it. And, from 1 July 2023, a new reporting regime will require electronic distribution platforms to report their transactions to the ATO. The regime starts with ride sharing and short-term accommodation platforms, then extends to all other platforms, including OnlyFans, from 1 July 2024.

Do I need to register for GST?

Generally, once you earn or expect to earn $75,000 or more per annum, you will need to register for GST. The exception to the $75,000 threshold is Uber and other ride-sourcing drivers who must have an ABN and be registered for GST regardless of how much they earn.

However, even if a content creator is required to register for GST, this doesn’t necessarily mean that all of the money and goods they receive will trigger a GST liability. For example, the GST rules contain some special provisions which sometimes enable supplies made to foreign resident customers to be GST-free (although they still normally need to be taken into account in determining whether the supplier needs to register for GST).

Even if GST-free income is received from foreign resident customers, it will normally still be possible to claim back GST credits for the expenses incurred in connection with these activities.

What deductions can I claim?

The upside of being a profit-making venture is that if you spend money to generate income, you can claim a deduction for certain expenses that directly relate to that income. Items such as video production equipment, microphones, online stores etc., might be deductible although in some cases the deductions will be spread over a number of income years. However, you can’t normally claim items such as cosmetic surgery, gym memberships, ‘every day’ clothes, or the cost of your hairdresser ‘because you need to look good’. The Tax Office does not consider that these are directly related to how you earn your income and that in many cases, these are still primarily private expenses (see the ATO’s occupation specific guides for what you can claim).

When is a side hustle a business?

The distinction between something you do on the side and carrying on a business can be a fine line. There is no one test for what determines whether you are carrying on a business versus a hobby but factors such as the regularity of your transactions, whether or not you are promoting yourself as a business (developing a brand name etc.,), if you engage in marketing activities, whether you intend to develop a business and make a profit (or have the capacity to generate a profit over time), the size, scale and permanency of your activities, and whether you operate in a business-like manner, all go toward determining whether what you are doing is a business or merely a hobby.

If your activities are just a hobby then the income is not assessable, and the expenses are not deductible. If you are carrying on a business, then you need to declare the income earned but you also get to claim deductions for the cost of the business activities (although this still needs to be analysed to see whether amounts can be deducted upfront or over a period of time).

ATO Rental Property Blitz

Tue, 02 May 2023 05:36:22 GMT

The Australian Taxation Office (ATO) has launched a full-on assault on rental property owners who incorrectly report income and expenses.

The ATO’s assessment, based on previous data matching programs, is that there is a tax gap of around $1 billion from incorrect reporting of rental property income and expenses. And, they would like that back now please.

As a result, banks and other financial institutions will be required to hand the ATO residential investment loan data on an estimated 1.7 million rental property owners for the period from 2021-22 through to 2025-26.

The data collected will include:
identification details (names, addresses, phone numbers, dates of birth, etc.)
account details (account numbers, BSB's, balances, commencement and end dates, etc.)
transaction details (transaction date, transaction amount etc.)
property details (addresses, etc.)

In addition to identifying whether landlords are declaring their residential investment property income at all, the data matching program is looking specifically at how rental property loan interest and borrowing expense deductions have been reported in the rental property schedules, and whether net capital gains have been declared for property used to generate income.

Banks are not the only source of data. In a complimentary program, the ATO is targeting rental property management software. Over the last decade, much of the financial management of residential rental property has moved online, facilitated by various platform providers. The ATO will require these rental property software providers to provide details of property owners including their bank details, income, expenses and the amount of those expenses, and details of their associated rental properties and agents. Data collection of the estimated 1.6 million individuals in this data program will cover the period from 2018-19 to 2022-23.

With that, let’s recap on the common problem areas:

Claiming interest and redrawing on the loan

The interest component of your investment property loan is generally deductible. However, if you redraw on your invest loan for personal purposes, interest on this portion of the loan will not be deductible. This means that interest expenses will need to be apportioned into deductible and non-deductible parts and repayments will often need to be apportioned too. If the redrawn funds are used to produce investment income, then the interest on this portion of the loan should be deductible.

Borrowing costs

You can claim a deduction for borrowing costs (typically over five years) such as application fees, mortgage registration and filing, mortgage broker fees, stamp duty on mortgage, title search fee, valuation fee, mortgage insurance and legals on the loan. Life insurance to pay the loan on death is not deductible even if taking out the insurance was a requirement to get finance. If the loan is repaid early or refinanced, the whole amount including mortgage discharge expenses and penalty interest can often be deductible.

Repairs or maintenance

Deductions claimed for repairs and maintenance is an area that the Tax Office always looks closely at so it’s important to understand the rules. An area of major confusion is the difference between repairs and maintenance, and capital works. While repairs and maintenance can be claimed immediately, the deduction for capital works is generally spread over a number of years.

Repairs must relate directly to the wear and tear resulting from the property being rented out. This generally involves a replacement or renewal of a worn out or broken part – for example, replacing damaged palings of a fence or fixing a broken toilet. The following expenses will not qualify as deductible repairs, but are capital:

Replacement of an entire asset (for example, a complete fence, a new hot water system, oven, replacing a shower curtain with a glass wall, etc.)
Improvements and extensions.

Also remember that any repairs and maintenance undertaken to fix problems that existed at the time the property was purchased are not deductible.

Access to home guarantee scheme expanded to friends and siblings

Tue, 02 May 2023 05:23:30 GMT

From 1 July 2023, access to the Government’s Home Guarantee Scheme will be expanded to joint applications from “friends, siblings, and other family members” and to those who have not owned a home for at least 10 years.

The eligibility criteria for access to the First Home Guarantee Scheme and Regional First Home Buyers Scheme will be expanded. From 1 July 2023, the schemes will no longer be limited to individuals and couples who are married or in de facto relationships, but will also include eligible friends, siblings, and other family members for joint applications. In addition, the requirement for the applicants to be Australian citizens at the time they enter the loan has been extended to include permanent residents.

The schemes guarantee part of a first home owner’s home loan enabling them to purchase a home with as little as 5% deposit without paying Lenders Mortgage Insurance. Guarantees are capped at 15% of the value of the property. Thirty five thousand places are available for the First Home Guarantee Scheme each financial year. From 1 October 2022 there will be ten thousand places available each financial year until 30 June 2025 for the Regional First Home Buyers Scheme.

Eligibility to the Family Home Guarantee will also be extended. From 1 July 2025, the scheme will no longer be restricted to single parents with at least one dependant natural or adopted child, but will also be available to borrowers who are single legal guardians of dependent children such as aunts, uncles and grandparents.

The Family Home Guarantee guarantees the home loan of an eligible single parent with at least one dependent child enabling them to purchase a home with as little as 2% deposit without paying Lenders Mortgage Insurance. The guarantee is capped at 15% of the value of the property. Five thousand places are available to the scheme each year to 30 June 2025.

Right to Super to be enshrined in National Employment Standards

Tue, 02 May 2023 05:02:19 GMT

The Government has announced that it will enshrine a right to superannuation payments in the National Employment Standards (NES).

Currently, workers not covered by a modern award or an enterprise agreement containing a term requiring an employer to make superannuation contributions have to rely on the ATO to recover their lost superannuation entitlements.

By bringing the right to superannuation into the NES, workers will have the right to directly pursue superannuation owed to them. Employers may also face civil penalties if they do not comply with the entitlement.

Penalties of up to $82,500 per breach apply to companies that are found to have contravened the NES.

The ATO’s most recent estimate of unpaid superannuation indicates that workers lost $3.4 billion in unpaid super in 2019‑20.

Selling a business? The pros and cons of earn-out clauses

Wed, 12 Apr 2023 07:20:01 GMT

Earn-out clauses for the sale of a business are increasingly common. We look at the positives and negatives that every business owner should consider.

Business transactions often include earn-out clauses where the vendors ‘earn’ part of the purchase price based on the performance of the business post the transaction.

Typically, an earn-out will run for a period of one to three years post transaction date.

There are two main reasons to include an earn-out in a sale:

To bridge a gap in the sale price expectations between the vendor and the purchaser. The earn out represents an ‘at risk’ form of consideration. If the business produces the result, the vendors are rewarded through a higher sale price.
To incentivise the vendors who are continuing to work in the business and maintain the growth momentum of the business post sale.

Advantages of earn-outs include:

The ultimate sale price has a performance component to it – both buyer and seller benefit.
May assist in achieving a sale where a price impasse would otherwise prevent the sale.
If the calculation of the earn-out is transparent and easily measurable, there should be no dispute between the parties.
Creates equity where the business has lagging income, new business initiatives in play at the time of sale or a high growth rate.
The incremental sale price can be effectively funded by the business out of realised growth.

The key to an effective earn-out is in their construction, both from a commercial and a legal perspective. Get them right and they can enhance the continuity and succession of a business.

2023-24 Budget - what will it cover

Wed, 12 Apr 2023 06:25:00 GMT

The 2023-24 Federal Budget will be released on Tuesday, 9 May 2023. Look out for our update the next day on the important issues to you, your superannuation and your business.

Little has been released to date on the impending Budget beyond the tax on super balances above $3m and the decision not to extend the temporary $1,500 low and middle income tax offset beyond 30 June 2023.

Cost of living is a focus but on this, the Government is walking a tightrope between easing pressure without increasing inflation.

In the election cycle, if there is going to be a tightening, the mid-term Budgets are the time to do it. The Government will undoubtedly look at concessions provided within the tax system and whether those concessions meet their stated objective and when it comes to spending, potentially redraw the allocations.

Some of the areas to watch include:

The legislated stage three tax cuts , that collapse the 32.5% and 37% tax brackets to a single rate of 30% for those with assessable income between $45,000 and $200,000 are not due to commence until 1 July 2024. The Government committed to keeping the tax cuts during the election and can bypass the issue until the 2024-25 Budget, but we’ll see.
Provision for announced defence spending .
Active support to develop a viable clean energy industry and transition to clean energy (see the joint submission from the Business Council of Australia, Australian Council of Trade Unions, World Wide Fund for Nature-Australia and the Australian Conservation Foundation).
Productivity measures - Temporary full expensing - the productivity measure designed to encourage business investment that enables a business to fully expense the cost of depreciable assets in the first year of use – is set to expire on 30 June 2023. The Government will either extend, redevelop the small business instant asset write-off, or remove the concession altogether.
Technology and training boosts - In the 2022-23 Federal Budget, the former Government announced that it would provide certain business taxpayers with ‘bonus’ tax deductions for investing in employee training or improving digital operations. The Skills and Training Boost allows small businesses (aggregated turnover less than $50 million) to claim a 120% deduction for eligible expenditure incurred on external training for employees between 29 March 2022 and 30 June 2024. The Technology Investment Boost provides a 120% deduction for eligible expenses that are incurred for the purposes of improving digital operations or digitising business operations. This can include the cost of depreciating assets. The boost is aimed at costs incurred between 29 March 2022 and 30 June 2023 and is limited to a maximum bonus deduction of $20,000. But, the legislation enabling both boosts has not passed Parliament. There is an opportunity in the Budget to extend the scope and nature of the concession.

How Does Tax Apply to Electric Cars?

Wed, 12 Apr 2023 05:34:43 GMT

Just in time for the Fringe Benefits Tax (FBT) year that started on 1 April, the Australian Taxation Office (ATO) has released new details on electric vehicles.

The FBT exemption for electric cars

If your employer provides you with the use of a car that is classified as a zero or low emissions vehicle there is an FBT exemption that can potentially apply to the employer from 1 July 2022, regardless of whether the benefit is provided in connection with a salary sacrifice arrangement or not. The FBT exemption should normally apply where:

The value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for 2022-23) when it was first purchased. If you buy an EV second-hand, the FBT exemption will not apply if the original sales price was above the relevant luxury car tax limit; and
The car is both first held and used on or after 1 July 2022. This means that the car could have been purchased before 1 July 2022, but might still qualify for the FBT exemption if it wasn’t made available to employees until 1 July 2022 or later.

The exemption also includes associated benefits such as:

Registration
Insurance
Repairs or maintenance, and
Fuel, including electricity to charge and run the vehicle.

But, it does not include a charging station (see How do the tax rules apply to home charging units?).

While the FBT exemption on EVs applies to employers, the value of the fringe benefit is still taken into account when working out the reportable fringe benefits of the employee. That is, the value of the benefit is reported on the employee’s income statement. While you don’t pay income tax on reportable fringe benefits, it is used to determine your adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and certain social security payments.

Who the FBT exemption does not apply to

By its nature, the FBT exemption only applies where an employer provides a car to an employee. Partners of a partnership and sole traders are not employees and cannot access the exemption personally.

If you are a beneficiary of a trust or shareholder of a company, the exemption can only apply if the benefit is provided in your capacity as an employee or as a director of the entity (you need to be able to show you have an active role in the running of the entity).

How do the tax rules apply to home charging units?

The ATO has confirmed that charging stations don’t fall within the scope of the FBT exemption for electric cars. This means that FBT could be triggered if an employer provides a charging unit to an employee.

If an employee purchases a home charging unit then it might be possible to claim depreciation deductions for the cost of the unit over a number of income years if the unit is used to charge a vehicle that is used for income producing purposes. However, if an employee is only using the vehicle for private purposes then the cost of the charging unit is a private expense and not deductible.

What about the cost of electricity?

A friend of mine travels a lot for work and used to rack up large travel expenses…right up until he switched to an electric vehicle. Now it costs him 3 cents per km in electricity.

Because it is often difficult to distinguish home electricity usage, the ATO has set down a rate of 4.20 cents per km for running costs for EVs provided to an employee (from 1 April 2022 for FBT and 1 July 2022 for income tax).

What sharing platforms are sharing with the ATO

Wed, 12 Apr 2023 05:33:51 GMT

From 1 July 2023, a new reporting regime will require platforms that enable taxi services including ride sourcing, and short-term accommodation to report their transactions to the ATO each year. From 1 July 2024, the regime will expand to include all other platforms.

While the legislative instrument for the reporting regime is still in draft (see LI 2022/D27 ), it is expected that platform providers will report their transactions to the ATO every six months.

What information on sellers will the ATO know?

The platforms will submit data on the sellers for transactions on their platform including:

ABN and business / trading name (where applicable)
First, middle and surname/family name (for individuals)
Date of birth (for individuals)
Residential or business address
Email address and telephone numbers
Bank account details.
And, for platforms facilitating short-term accommodation:
Listed property name
Listed property address
Number of nights booked.

In addition, the platforms will provide aggregate quarterly data on the value of transactions, industry types, total gross income etc.

The reporting regime does not include platforms that simply match suppliers to sellers and are not engaged in the transaction such as quotes for hiring tradies where the job is not accepted through the website.

Company money: A guide for owners

Wed, 12 Apr 2023 05:33:47 GMT

When you start up a business, inevitably, it consumes not just a lot of time but a lot of cash and much of this is money you have already paid tax on. So, it only seems fair that when the business is up and running the business can pay you back. Right?

There a myriad of ways owners look for payback from a company they have invested their time and money into it from dividends, salary and wages, jobs for sometimes underqualified family members to cash advances and personal expenses like school fees and nights out picked up as a company expense. But, once the cash is in the company, it is company money.

We look at the flow of money in and out of a company and the problems that trip business owners up.

Repaying money loaned to the company

If you have lent money to your company, you can draw this money back out as a loan repayment. The loan repayment is not deductible to the company but any interest payments made to you will be as long as the borrowed money has been used in the company’s business activities (assuming interest has actually been charged on the loan).

Conversely, any repayments made by the company on the loan principal are not income for tax purposes but you will need to declare any interest earned in your income tax return. All loans, including the loan term and repayments, should be documented.

Dividends: Paying out profits

Dividends basically represent company profits being paid out to the shareholders of a company. If the company has franking credits from income tax it has paid, the dividends might be franked and the credits can often be used by the shareholder to reduce their personal tax liability.

When a dividend is paid by a private company it must provide a distribution statement to the shareholders within four months after the end of the financial year. This gives private companies up to four months after the end of the financial year to work out the extent to which dividends will be franked.

If any of the shares in the company are held by a discretionary trust then there are some additional issues that will need to be considered, including whether the trust has a positive amount of net income for the year, whether the trust has made a family trust election for tax purposes and who will become entitled to distributions made by the trust for that year.

Repaying share capital

Many private companies are set up with a relatively small amount of share capital. However, if a company has a larger share capital balance then there might be scope for the company to undertake a return of share capital to the shareholders. Whether this is possible will depend on the terms of the company constitution and there are some corporate law issues that need to be addressed.

From a tax perspective, a return of share capital will normally reduce the cost base of the shares for CGT purposes, which means that a larger capital gain could arise on future sale of the shares but there won’t necessarily be an immediate tax liability. Having said that, there are some integrity rules in the tax system that need to be considered. The risk of these rules being triggered tends to be higher if the company has retained profits that could be paid out as dividends.

Shareholder loans, payments and forgiven debts: Using company money

There are some rules in the tax law (known as Division 7A) that determine how money taken out of a company is treated. Division 7A is a particularly tricky piece of tax law designed to prevent business owners accessing funds in a way that circumvents income tax. While amounts taken from a company bank account by the owners are often debited to a shareholder’s loan account in the financial statements, Division 7A ensures that any payments, loans, or forgiven debts are treated as if they were dividends for tax purposes unless there is a loan agreement in place which meets certain strict requirements. These ‘deemed’ dividends cannot normally be franked.

If you have taken money out of the company bank account then the main ways of avoiding this deemed dividend from being triggered are to ensure that the loan is fully repaid or placed under a complying loan agreement before the earlier of the due date and actual lodgement date of the company’s tax return for that year. To be a complying loan agreement the agreement requires minimum annual repayments to be made over a set period of time and there is a minimum benchmark interest rate that applies – currently 4.77% for 2022-23.

For example, if your company is paying school fees for your kids, or you take money out of the company bank account to pay down your personal home loan, if you don’t pay back this amount or put a complying loan agreement in place then this amount is likely to be treated as a deemed unfranked dividend. That is, you need to declare this amount in your personal income tax return as if it was a dividend and without the benefit of any franking credits. This means that even though the company might have already paid tax on this amount, you will be taxed on it again without the ability to claim a credit for the tax already paid by the company (causing double taxation of the same company profits).

The rules are very strict when it comes to loan repayments. If a repayment is made but the same amount or more is loaned to the shareholder shortly afterwards then there are some special rules that can apply to basically ignore the repayment. There are some exceptions to these rules and the position needs to be managed carefully to avoid adverse tax implications.

Update: Tax on super balances above $3m

Wed, 12 Apr 2023 03:05:17 GMT

In a very quick turnaround from announcement to draft legislation, Treasury has released the exposure draft legislation for consultation to enact the Government’s intention to impose a 30% tax on future superannuation fund earnings where the member’s total superannuation balance is above $3m.

The draft legislation confirms the Government’s intention to:

Impose the tax on member accounts with superannuation balances above $3 million from 1 July 2025 (not indexed); and
Apply the additional 15% tax to ‘unrealised gains’. This will mean that a tax liability will arise if the value of the assets goes up

Currently, all fund income is taxed at either 15%, or 10% for capital assets that have been held by the fund for more than 12 months. Unrealised gains, that is gains that are made because of changes in value, gains on paper, are not currently taxed – only when the gain is realised on sale or disposal of the asset.

If enacted, the legislation would mean that those impacted, could be paying tax on gains in value but without the cash from a sale to support the tax payment.

If you have concerns about how this legislation will impact your superannuation or long term financial strategy, contact your Aspen Corp advisor today.

What’s the Deal with Working from Home?

Wed, 01 Mar 2023 03:32:14 GMT

The Australian Taxation Office (ATO) has updated its approach to how you claim expenses for working from home.

The ATO has ‘refreshed’ the way you can claim deductions for the costs you incur when you work from home. From 1 July 2022 onwards, you can choose either to use a new ‘fixed rate’ method (67 cents per hour), or the ‘actual cost’ method depending on what works out best for your scenario. Either way, you will need to gather and retain certain records to make a claim.

The first issue for claiming any deduction is that there must be a link between the costs you incurred and the way you earn your income. If you incur an expense but it doesn’t relate to your work, or only partially relates to your work, you cannot claim the full cost as a deduction.

The second key issue is that you need to incur costs associated with working from home. For example, if you are living with your parents and not picking up any of the expenses for running the home then you can’t claim deductions for working from home as you have not incurred the expenses, even if you are paying board (the ATO treats this as a private arrangement).

Let’s take a look at the detail:

The new ‘fixed rate’ method

Previously, there were two fixed rate methods to choose from for the 2021-22 income year:

· A cover-all 80 cents per hour rate for expenses incurred while working from home (which was available from 1 March 2020). This COVID-19 related rate was intended to cover all additional running expenses incurred while working from home; or

· If you had a space dedicated to work but were not running a business from home, you could claim 52 cents for every hour you worked from home to cover the running expenses of your home.

This rate doesn’t cover certain items such as the depreciation of electronic devices, which can be claimed separately.

It’s clear that working from home arrangements are here to stay for many workplaces even though COVID restrictions have eased. So, from the 2022-23 financial year onwards, the ATO has combined these two fixed rate methods to create one revised method accessible by anyone working from home, regardless of whether they have a dedicated space or are just working at the kitchen table.

The new rate is 67 cents per hour and covers your energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. You can separately claim the cost of the decline in value of assets such as computers, repairs, and maintenance for these assets, and if you have a dedicated home office, the cost of cleaning the office. If there is more than one person working from the same home, each person can make a claim using the fixed rate method if they meet the basic eligibility conditions.

What proof do the ATO need that I am working from home?

To use the fixed rate method, you will need a record of all of the hours you worked from home. The ATO has warned that it will no longer accept estimates or a sample diary over a four week period. For example, if you normally work from home on Mondays but one day you have an in-person meeting outside of your home, your diary should show that you did not work from home for at least a portion of that day.

Having said that, the ATO will allow taxpayers to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.

There is nothing in the ATO guidance to suggest that claims are limited to standard office hours. That is, if you work from home outside standard office hours or over the weekend, then make sure you keep an accurate record of the hours you are working so that you can maximise your deductions.

You also need to keep a copy of at least one document for each running cost you have incurred during the year which is covered by the fixed rate method. This could include invoices, bills or credit card statements. Where bills are in the name of one member of a household but the cost is shared, each member of the household who contributes to the payment of that expense will be taken to have incurred it. For example, a husband and wife, or flatmates where they jointly contribute to costs.

You need to keep these records for five years so that if the ATO come calling, you can prove your claim. If this proof is not available at the time, the deduction will be denied. If your work from home diary is electronic, ensure you can access this diary over time (such as producing a PDF summary of your calendar clearly showing the dates and times of your work at the end of each financial year).

The ‘actual’ method

Some people might find that the actual method produces a better result if their expenses are higher. As the name suggests, you can claim the actual additional expenses you incur when you work from home (and reduce the claim by any personal use and use by other family members). However, you will need to ensure you have kept records of these expenses and the extent to which the expenses relate to your work.

Using this method, you can claim the work related portion of:

· The decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.

· Electricity and gas (energy expenses) for heating, cooling and lighting.

· Home and mobile phone, data and internet expenses.

· Stationery and computer consumables, such as printer ink and paper.

· Cleaning your dedicated home office.

Be careful with this method because the ATO are looking closely to ensure these expenses are directly related to how you earn your income. For example, you can’t claim personal expenses such as coffee, tea and toilet paper even if you do use these items when you are at work. Nor can you claim occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates unless your home is a place of business. It is unusual for an employee’s home to be classified as a place of business.

I run a business from home, what can I claim?

Where your home is also your principal place of business and an area is set aside exclusively for business activities, you can potentially claim a deduction for an appropriate portion of occupancy expenses as well as running costs. An example would be a doctor who runs their surgery from home.

The doctor may have one-third of the home set aside as a place of business where they see patients.

It is important to keep in mind that Capital Gains Tax (CGT) might be payable on the eventual sale of the home. While your main residence is normally exempt from CGT, the portion of the home set aside as a place of business will not generally qualify for the main residence exemption for the period it is used for this purpose, although if you are eligible, the small business CGT concessions and general CGT discount may reduce any resulting capital gain.

Future earnings for super balances above $3m taxed at 30% from 2025-26

Wed, 01 Mar 2023 03:32:12 GMT

The Government has announced that from 2025‑26, the 15% concessional tax rate applied to future earnings for superannuation balances above $3 million will increase to 30%.

The concessional tax rate on earnings from superannuation in the accumulation phase will remain at 15% up to $3m. From $3m onwards, the rate will increase to 30%. The amendment applies to future earnings; it is not retrospective.

80,000 people are expected to be impacted by the measure.

The announcement doesn't propose any changes to the transfer balance cap or the amount that a member can have in the tax-free retirement phase.

The ‘Super’ Wars

Wed, 01 Mar 2023 03:32:09 GMT

A consultation paper released by Treasury has sparked a national debate about the role, purpose and access to superannuation ahead of the 2023-24 Federal Budget.

What is the purpose of superannuation? At first glance, the consultation released by Treasury in February titled Legislating the objective of Superannuation sounds innocuous enough. The consultation seeks to anchor future policies relating to superannuation to a legislated objective:

The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside Government support, in an equitable and sustainable way.

But what seems self-evident has opened a Pandora’s Box of what superannuation is not. If superannuation is to “preserve savings”, that is, restricting access to superannuation savings to retirement only, by default it is not a means of accumulating wealth in a concessionally taxed environment. It is not a strategy to manage intergenerational wealth. The definition would also prevent initiatives such as the COVID-19 early access scheme used widely during the pandemic to give those in financial distress access to quick cash (over 3 million people withdrew $37.8 billion from their superannuation funds). And, it is not a method of purchasing a home sooner.

As an aside, the Treasurer points out that the average super balance in Australia is $150,000 - taking account of all those with a super balance including new entrants into the workforce. For those 65 and over, the average balance is around $400,000 across all income brackets.

1 July 2023 Super Balance Increase but no Change for Contributions

Wed, 01 Mar 2023 03:32:07 GMT

The general transfer balance cap (TBC) – the amount of money you can potentially hold in a tax-free retirement account, will increase by $200,000 on 1 July 2023 to $1.9 million. The TBC is indexed to the consumer price index each December.

The TBC applies individually. If your transfer balance account reached $1.7m or more at any point before 1 July 2023, your TBC after 1 July 2023 will remain at $1.7m. If the highest amount in your account was between $1 and $1.7m, then your cap is proportionally indexed based on the highest ever balance your transfer balance account reached.

That is, the ATO will look at the highest amount your transfer balance account has ever been, then apply indexation to the unused cap amount.

For example, if you started a retirement income stream valued at $1,275,000 on 1 October 2022 and this was the highest point your account reached before 1 July 2023, then your unused cap is $425,000 ($1.7m-$1.275m). This unused cap amount is used to work out your unused cap percentage ($425k/$1.7m=25%). The unused cap percentage is then applied to the indexation increase ($200k*25%=$50k) to create your new TBC of $1,750,000.

But don’t worry, you don’t have to calculate this yourself, you can see your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov.

The caps on the contributions you can make into super however, will remain the same. That is, $27,500 for concessional contributions and $110,00 for non-concessional contributions. The contribution caps are linked to December’s average weekly ordinary time earnings (AWOTE) figures.

What will the ATO be Asking about your Holiday Home?

Wed, 01 Mar 2023 03:32:04 GMT

Taxpayers claiming deductions on holiday homes are in the ATO’s sights.

The ATO is more than a little concerned that people with holiday homes are claiming more deductions than they should and have published the starting questions they will be asking to scrutinise claims:

· How many days was it rented out and was the rent in line with market values?

· Where do you advertise for rent and were any restrictions placed on tenants?

· Have you, your family or friends used the property?

The problem is blanket claims for the holiday home regardless of the time the home was rented out or available for rent. You will need to apportion your expenses if:

· Your property is genuinely available for rent for only part of the year.

· Your property is used for private purposes for part of the year.

· Only part of your property is used to earn rent.

· You charge less than market rent to family or friends to use the property.

The ATO has also indicated that deductions might be limited if a property is only made available for rent outside peak holiday times and the location of the property (or other factors) mean that it is unlikely to be rented out during those periods.

The regulator is also likely to be suspicious if the owner claims that the property was genuinely available for rent during peak holiday periods but wasn’t deriving any income during those periods. This might indicate that the property was really being used for private purposes or that the advertised rental rate was unrealistic.

Whether a property is genuinely available for rent is a matter of fact. Factors that help demonstrate a property is genuinely available for rent include; it is available during key holiday periods, kept in a condition that people would want to rent it, tenants are not unreasonably turned away, advertised in ways that give it broad exposure to possible tenants, and the conditions are not so restrictive that tenants are unlikely to rent the property

A new businesses guide to bookkeeping and payroll services

Tue, 21 Feb 2023 03:31:57 GMT

Bookkeeping and payroll services are both important financial tasks for businesses in Australia, but they have different functions.

Bookkeeping

Bookkeeping is the process of recording your business's financial transactions so that you know exactly how much you're making and where your money is going.

Good bookkeeping processes are vital to running a profitable business. After all, if you don't know how much you're making or where that money is going, you'll have a hard time finding ways to expand your profitability.

There are five bookkeeping accounts you should know and understand:

Assets: Anything of value in your business is considered an asset. This includes cash in your bank accounts, your accounts receivable (A/R), balance (since that is money owed to you by customers), as well as inventory, computers, and furniture.
Liabilities: Any debts owed by your business are considered liabilities, such as your accounts payable (A/P) balance, (since that is what’s owed to vendors), as well as any loans the business owes.
Revenue/income: Revenue, also called income, is simply any monies earned by your business either through products sold or services rendered.
Expenses: We’re all familiar with expenses. Your electric bill, your employees’ salaries, and your working lunch with a potential client are all considered expenses.
Equity: When you subtract your business liabilities from your business assets, you have equity, which reflects your financial interest in the business.

You also need to understand what debits and credits are before you can start to enter any transactions. Any transaction posted in your ledger or your accounting software will be a debit or a credit.

Payroll

Payroll is the process of verifying and distributing payments to employees at the agreed rate at designated award rates. While the process should be straightforward and easily automated, however, it can easily become a complicated process with lots of room for error and risk that may require help from skilled financial experts as well as Human Resources to ensure it is completed without issue or potential penalties.

The primary function of a business’s payroll department is to ensure its employees are being paid accurately. This includes the recording and compensation of salaries through Single Touch Payroll, superannuation, bonuses and deductions.

Understanding how payroll works is vital for the success of a business. Firstly, because it’s a legal requirement for businesses to do so, and secondly, because your employees deserve to be paid for the work they do.

While bookkeeping and payroll services have different functions, they are often closely related. For example, accurate payroll processing requires up-to-date financial records, which are provided by bookkeeping. Bookkeeping also ensures that financial records related to payroll, such as employee expenses and taxes, are accurately recorded and maintained.

In Australia, many businesses outsource their bookkeeping and payroll services to third-party providers, such as accounting firms or specialized service providers. This can help businesses ensure accurate and timely financial records and payroll processing while allowing them to focus on their core business activities.

If you would like help with setting up your payroll or bookkeeping processes, contact Aspen Corp and speak to one of our expert accountants or bookkeepers.

Full throttle in 2023

Tue, 07 Feb 2023 04:59:17 GMT

In a volatile market, keeping to a strategy, or let’s face it creating one, can be tough.

The downside of not taking time out for your strategy is that there is a tendency to keep a short-term focus at an operational level to try and pick quick wins to generate financial returns. Sometimes in the process, this short-term focus undermines longer term value and returns.

Here are our ‘must dos’:

Know what your position is.

A business health check is an analysis of the current state of your business. It is an analytical review of its operation with view to providing a broad overview of operating performance and identifying potential issues. Understanding your position will reveal your risks and capacity to develop.

Know what to look for.

Once you know your position, the next question is what are the measures that are going to give you the best insight into business performance. In a volatile market, this information will give you what you need to make informed decisions at any one point in time.

Be prepared to make quick decisions.

If you know your position and have the data you need, be prepared to make quick decisions and take the first mover advantage. If you have the two elements above, you have your radar for identifying opportunities and mitigating risk. Most businesses are simply a replication of what they see. While the pandemic and market instability is difficult, we have also seen a wave of innovation as people adapt to find solutions.

Don’t bank on a single opportunity.

If COVID has taught us anything it is that things change, and we need to adapt and change with the circumstances. While one single opportunity might make all the difference, an overreliance on one product, service, or methodology of delivering those products and services, exposes you to risk.

Understand your end game.

What are you aiming for? Family empire? Fast growth and sale? Sustainable growth and sale as a retirement plan? Public listing? Even if you plan on simply running and growing your business for decades to come, that is a decision. Your end game and your progress towards that end game impacts your structure, focus, and decision making.

Document your strategy.

Document your strategy - knowing it in your head is not enough. This does not have to be an onerous War & Peace approach. It is understanding what you are aiming for, and breaking that down into measurable objectives, then into measurable outcomes and timeframes (preferably actionable against rolling 90 day plans). This approach also makes management meetings a lot more meaningful.

Is ‘downsizing’ worth it?

Tue, 07 Feb 2023 04:59:16 GMT

From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has reduced to 55 from 60, more people have an opportunity to use this strategy if it suits their needs.

What’s a ‘downsizer’ contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.

Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

Let’s look at the eligibility criteria:

You are 55 years or older (from 1 January 2023) at the time of making the contribution.
The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.
The home is in Australia and is not a caravan, houseboat, or other mobile home.
The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.
You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution.
The downsizer contribution is made within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.
You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one.

The ATO’s final position on risky trust distributions

Tue, 07 Feb 2023 04:59:13 GMT

The ATO has released its final position on how it will apply some integrity rules dealing with trust distributions - changing the goal posts for trusts distributing to adult children, corporate beneficiaries, and entities with losses. As a result, many family groups will pay higher taxes because of the ATO’s more aggressive approach.

Section 100A

The tax legislation contains an integrity rule, section 100A, which is aimed at situations where income of a trust is appointed in favour of a beneficiary, but the economic benefit of the distribution is provided to another individual or entity. For section 100A to apply, there needs to be a 'reimbursement agreement’ in place at or before the time the income is appointed to the beneficiary. Distributions to minor beneficiaries and other beneficiaries who are under a legal disability are not impacted by these rules.

If trust distributions are caught by section 100A, this generally results in the trustee being taxed on the income at penalty rates rather than the beneficiary being taxed at their own marginal tax rates.

While section 100A has been around since 1979, until recently there has been relatively little guidance on how the ATO approaches section 100A. This is no longer the case and the ATO’s recent guidance indicates that a number of scenarios involving trust distributions could be at risk.

For section 100A to apply:

The present entitlement (a person or an entity is or becomes entitled to income from the trust) must relate to a reimbursement agreement;
The agreement must provide for a benefit to be provided to a person other than the beneficiary who is presently entitled to the trust income; and
A purpose of one or more of the parties to the agreement must be that a person would be liable to pay less income tax for a year of income.

High risk areas

Until recently many people have relied on the exclusions to section 100A which prevent the rules applying when the distribution is to a beneficiary who is under a legal disability (e.g., a minor) or where the arrangement is part of an ordinary family or commercial dealing (the ‘ordinary dealing’ exception). It is the ordinary dealing exception that is currently in the spotlight.

For example, let’s assume that a university student who is over 18 and has no other sources of income is made presently entitled to $100,000 of trust income. The student agrees to pay the funds (less tax they need to pay to the ATO) to their parents to reimburse them for costs that were incurred when the student was a minor. This situation is likely to be considered high risk if the student is on a lower marginal tax rate than the parents because the parents are receiving the real benefit of the income.

The ATO is also concerned with scenarios involving circular distributions. For example, this could occur when a trust distributes income to a company that is owned by the trust. The company then pays dividends back to the trust, which distributes some or all of the dividends back to the company. And so on. The ATO views these arrangements as high risk from a section 100A perspective.

Common scenarios identified as high risk by the ATO include:

The beneficiary is a company or trust with losses and the beneficiary is not part of the same family group as the trust making the distribution.
A company or trust which is entitled to distributions from the trust returns the funds to the trustee (i.e., circular arrangements).
The beneficiary is issued units by the trustee of the trust (or a related trust) with the amount owed for the units being set-off against the entitlement and where the market value of the units is less than the subscription price or the trustee is able to do this without the consent of the beneficiary.
Adult children are made presently entitled to income, but the funds are paid to a parent in relation to expenses incurred before the beneficiary turned 18.

Where to from here?

If you have a discretionary trust, it will be important to ensure that all trust distribution arrangements are reviewed in light of the ATO’s guidance to determine the level of risk associated with the arrangements. It is also vital to ensure that appropriate documentation is in place to demonstrate how funds relating to trust distributions are being used or applied for the benefit of the beneficiaries.

The ATO’s new approach applies to entitlements before and after the publication of the new guidance but for entitlements arising before 1 July 2022, the ATO will not generally pursue these if they are either low risk under the new guidance, or if they comply with the ATO’s previous guidance on trust reimbursement agreements.

What do the ‘Secure Jobs, Better Pay’ reforms mean?

Wed, 07 Dec 2022 02:15:45 GMT

The Government’s ‘Secure Jobs, Better Pay’ legislation passed Parliament on
2 December 2022. We explore the issues.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 passed Parliament on 2 December 2020. The legislation is extensive and brings into effect a series of changes and obligations that will impact on many workplaces.

The Bill also addresses many of the complexities of the enterprise bargaining process by streamlining the initiation and approval process. For example, to initiate bargaining to replace an existing single-employer agreement, unions and representatives no longer need a majority work determination and instead can make the request to initiate bargaining in writing to the employer.

Fact sheets on key elements of the ‘Secure Jobs, Better Pay’ legislation will be available on the Department of Employment and Workplace Relations website . Please seek advice from a professional industrial relations specialist if your business is impacted.

Fixed term contracts limited to 2 years

Employers are prohibited from entering into fixed-term employment contracts with employees for a period of longer than two years (in total across all contracts). The prohibition also prevents a fixed term contract being extended or renewed more than once for roles that are substantially the same or similar. Some exclusions exist such as for casuals, apprentices or trainees, high income workers ($162k pa), work covering peak periods of demand, where the work is performed by a specialist engaged for a specific and identifiable task, or where the modern award or FWA allows for longer fixed term contracts.

Employers will need to provide employees with a Fixed Term Contract Information Statement (to be drafted by the Fair Work Ombudsman) before or as soon as practicable after entering into a fixed term contract.

From 1 January 2023, the maximum penalty for contravening the 2 year limitation is $82,500 for a body corporate and $16,500 for an individual.

If your workplace has existing fixed term contracts in place, it will be important to review the operation of these to ensure compliance with the new laws.

Gender equality and addressing the pay gap

The concept of gender equality is now included as an object in the Fair Work Act. Previously, to grant an Equal Remuneration Order (ERO) the Fair Work Commission (FWC) assessed claims utilising a comparable male group (male comparator). The legislation removes this requirement opening the way for historical gender based undervaluation to be taken into account and for the FWC to issue a ERO on that basis. That is, female dominated industries may be undervalued generally not specifically compared to men working in that industry or sector. The FWC is no longer required to find that there is gender-based discrimination in order to establish that work has been undervalued. And, the FWC will be able to initiate an ERO on its own volition without a claim being made.

Pay secrecy banned

Prohibits pay secrecy clauses in contracts or other agreements and renders existing clauses invalid.

Employees are not compelled to disclose their remuneration and conditions but have a positive right to do so.

Flexible work requests strengthened

Provides stronger access to flexible working arrangements by enabling employees to seek arbitration before the FWC to contest employer decisions or where the employer has not responded to a request for flexible work conditions within the required 21 days.

If an employer refuses a request for flexible work conditions, the requirements for refusal have been expanded so that employers must discuss requests with the employee and genuinely try and reach agreement prior to refusing an employee’s request. Now, to refuse a request the employer must have:

Discussed the request with the employee;
Genuinely tried to reach an agreement with the employee about making changes to the employee’s working arrangements that would accommodate the employee’s circumstances; and
the employer and employee have been unable to reach agreement;
the employer has had regard to the consequences of the refusal for the employee; and
the refusal is based on reasonable business grounds.

The provisions also expand the circumstances in which an employee may request a flexible working arrangement, for example where they, or a member of their immediate family or household, experiences family or domestic violence.

Accountability for sexual harassment in the workplace

The amendments introduce stronger provisions to prevent sexual harassment and a new dispute resolution framework. Employers may be vicariously liable for acts of their employees or agents unless they can prove they took all reasonable steps to prevent sexual harassment. The amendments build on the Respect@Work report and the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 that passed Parliament in late November 2022. Broadly, the amendments:

Apply to workers, prospective workers and persons conducting businesses or undertakings; and
Create a new dispute resolution function for the FWC that enables people who experience sexual harassment in the workplace to initiate civil proceedings if the FWC is unable to resolve the dispute.

Anti-discrimination

Adds special attributes to the FWA to specifically prevent discrimination on the grounds of breastfeeding, gender identity and intersex status.

Aligning pay rates in job advertising with the FWA

Prohibits employers covered by the FWA from advertising jobs at a rate of pay that contravenes the FWA or a fair work instrument. For piecework, any periodic rate of pay to which the pieceworker is entitled needs to be included. The measure addresses concerns raised by the Migrant Workers’ Taskforce and the Senate Unlawful Underpayments Inquiry.

Multi-employer enterprise bargaining

The reforms make it easier for unions/applicants to negotiate pay deals across similar workplaces with common interests creating two new pathways for multi-employer agreements, supported bargaining, and single-interest. The FWC will need to authorise the multi-employer bargaining before it commences.

Supported bargaining for low paid industries

Applies to low-paid industries and is intended to support those who have difficulty negotiating at a single enterprise level – e.g., aged care, disability care, and early childhood education and care. The Minister will have authority to declare an industry or occupation eligible for supported multi-employer bargaining (MEB) and the FWC will decide if it is appropriate for the parties to bargain together. The employer does not have to give their consent to be included.

Employers cannot negotiate a separate agreement once they are included in supported multi-employer bargaining – they need to apply to the FWC to be removed from the supported bargaining authorisation.

Single interest multi-employer bargaining

Single interest multi-employer bargaining draws together employers with “common interests”. These may include geographical location, regulatory regime, and the nature of the enterprise and the terms and conditions of employment. It’s a very broad test.

Unless the employer consents, the FWC will not authorise multi-employer bargaining where it applies to a business with fewer than 20 employees. For businesses with less than 50 employees, to be excluded, the employer needs to prove that they are not a common interest employer or its operations and business activities are not reasonably comparable with the other employers.

For the FWC to authorise single interest multi-employer bargaining, the applicant will need to prove that they have the majority support of the relevant employees.

‘Zombie’ enterprise agreements

A Productivity Commission report found that 56% of employees covered by an enterprise agreement are on an expired agreement, or ‘zombie agreement’. Prior to the reforms, pre 2009 enterprise agreements could operate past their expiry date unless they were replaced with new agreements or terminated by the FWC. As these ‘zombie agreements’ remained fully enforceable, despite being expired, the terms of the agreement were often out of sync with modern awards. The Government notes one zombie agreement terminated in January 2022 saw employees $5 per hour on Saturdays, $10 per hour on Sundays and $24+ per hour on public holidays, worse off than the relevant modern award. The ‘Secure Pay, Better Pay’ reforms generally sunset these zombie agreements.

If you have questions about how the "secure Jobs, Better Pay" reforms impact your business, contact your Aspen Corporate Advisor today.

Important: This article is for information only. If your workplace is likely to be impacted by the amendments, please ensure you seek professional assistance from an industrial relations specialist. We are not specialists and cannot assist with the application of industrial law, awards, or applicable pay rates.

Missed the director ID deadline? Now what?

Wed, 07 Dec 2022 02:15:43 GMT

If you missed the 30 November 2022 deadline for obtaining a Director ID, the Australian Business Registry Services have stated that they will not take action against directors that apply for their ID by 14 December 2022.

If you are required to but have not yet applied for your ID, you should seek an extension immediately to avoid fines and penalties applying ( https://www.abrs.gov.au/sites/default/files/2021-10/Application_for_an_extension_of_time_to_apply_for_a_director_ID.pdf ), or contact the ABRS on 13 62 50 (+61 2 6216 3440 outside of Australia).

Avoiding the FBT Christmas Grinch!

Tue, 06 Dec 2022 03:20:06 GMT

It’s that time of year again - what to do for the Christmas party for the team, customers, gifts of appreciation for your favourite accountant (just kidding), etc. Here are our top tips for a generous and tax effective Christmas season:

Tax & Christmas

For GST registered businesses (not tax exempt) that are not using the 50-50 split method for meal entertainment.

For your business

What to do for customers?

You could also make a donation on behalf of your customers (where your business takes the tax deduction) or for your customers (where they receive the tax deduction). Donations to deductible gift recipients (DGRs) above $2 are often tax deductible and can make an active difference to a cause.

What to do for your team?

Christmas is expensive. Some businesses simply can’t afford to do much because cashflow is too tight. Expectations are high so if you are doing something then it’s best not to exacerbate cashflow problems and take advantage of any tax benefits or concessions you can.

Christmas parties

Also, taxi travel that starts or finishes at an employee’s place of work is exempt from FBT. So, if you have a few team members that need to be loaded into a taxi after over indulging in Christmas cheer, the ride home is exempt from FBT.

If entertainment is provided to employees and an FBT exemption applies, you will not be able to claim tax deductions or GST credits for the expenses.

Christmas gifts for staff

$300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a gift to the Tax Office as well at a rate of 47%. To qualify as a minor benefit, gifts also have to be ad hoc - no monthly gym memberships or giving one person multiple gift vouchers amounting to $300 or more.

Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is subject to the superannuation guarantee.

If you have further questions about

How to apply for a Director ID

Wed, 30 Nov 2022 03:00:13 GMT

Applying for a DIN

1. Set up a myGovID

You will need a ‘standard’ or ‘strong’ identity strength myGovID to apply for your director ID online.

If you don’t have a myGovID, you can find information on how to download the app at how to set up myGovID .

2. Gather supporting documents

your tax file number (TFN)
your residential address as held by the ATO
information from two documents to verify your identity:
bank account details
an ATO notice of assessment
super account details
a dividend statement
a Centrelink payment summary
PAYG payment summary.

3. Complete your application

Once you have a standard or strong identity strength myGovID, and your documents, from November 2021 you can log in to the ABRS website and apply for your director ID. The application process should take less than 5 minutes.

Note - Directors must apply for their director ID themselves because they need to verify their identity. No one can apply on their behalf.

If you have questions about submitting an application for a director ID or, would like assistance with your application, contact your Aspen Corporate Advisor .

Can you prevent a hack?

Tue, 15 Nov 2022 04:45:33 GMT

In the wake of the Optus data leak, legislation before Parliament will lift the maximum fine for serious or repeated breaches of the Privacy Act from $2.2m to up to $50m. But there are no guarantees that even the strongest safety measures will prevent an attack. So, what does that mean for business and their customers?

Legislation before Parliament will lift penalties for serious or repeated privacy breaches, provide new powers to the Australian Information Commissioner, require entities to provide detailed data to the Information Commissioner to assess public risk, and give the regulator greater information sharing powers. In a statement, Attorney General Mark Dreyfus said, “When Australians are asked to hand over their personal data they have a right to expect it will be protected.” But the question is, can any business claim that customer data will be protected from hackers?

If a customer needs to disclose their personal information to your business to work with you, at the point the data is collected, your business is the custodian of that data. A duty of care exists from the moment the data is collected to the point the information is no longer required and destroyed.

The Privacy Act requires organisations to take “reasonable steps” to protect the data collected. ‘Reasonable’ steps “requires the existence of facts which are sufficient to [persuade] a reasonable person.” That is, in the event of a data breach, the business will need to prove the steps they have taken to protect client data.

Lessons from RI Advice

Australian Competition and Consumer Commission v RI Advice Group Pty Ltd was a landmark case. While specific to the obligations of an Australian Financial Services License (AFSL), it demonstrates that ASIC are willing to pursue not just companies that breach their duty of care but the directors and officers involved.

RI advice is a financial services company that, through its AFSL, authorised representatives to provide financial services. As you would expect, as part of providing financial services, the authorised representatives received, stored and accessed confidential and sensitive personal information. Between June 2014 and May 2020, nine cybersecurity incidents occurred at practices of RI Advice’s Authorised Representatives. Enquiries following the incidents revealed:

Computer systems which did not have up-to-date antivirus software installed and operating
No filtering or quarantining of emails
No backup systems or back-ups being performed; and
Poor password practices including sharing of passwords between employees, use of default passwords, passwords and other security details being held in easily accessible places or being known by third parties.

RI Advice took steps to manage their cybersecurity introducing a cyber resilience program, controls and risk management measures for its representatives including training, incident reporting, and contractual professional standard terms, but by its own admission, it took too long to implement.

RI Advice was ordered to pay $750,000 towards ASIC's costs. Handing down the decision Justice Rofe said, “It is not possible to reduce cybersecurity risk to zero, but it is possible to materially reduce cybersecurity risk through adequate cybersecurity documentation and controls to an acceptable level.”

Scams and how to avoid them

Tue, 15 Nov 2022 04:42:19 GMT

The ACCC’s Targeting Scams report states that in 2021, nearly $1.8bn in losses were reported but the real figure is likely to be well over $2bn.

I got a text the other day “Hi Mum, I have broken my phone and I am using this number.” The “Hi Mum” scam has exploded with more than 1,150 Australians falling victim to the ploy in the first seven months of 2022, with total reported losses of $2.6 million. Once the scammer establishes contact, they start requesting money for an urgent bill or a replacement phone etc. For those with children or dependant family members, it is not that hard to believe. According to the Australian Consumer and Competition Commission (ACCC), two-thirds of family impersonation scams were reported by women over 55 years of age.

Another common scam is the lost or unable to deliver package texts and voicemail. With Christmas just around the corner, we can expect to see another escalation of this scam where tracking links purportedly from Australia Post, Toll, or Amazon etc., are used to instal malware. Once accessed, the malware will access your contacts and spread the malware and potentially access your personal information and bank details.

In July, the Australian Taxation Office (ATO) reported a new wave of ‘Tax refund SMSF scams’. The texts purported to be from the ATO stating that the individual had a tax refund and to click on the link and complete the form. Another scam purporting to be from the ATO advised that the recipient was suspected of being involved in cryptocurrency tax evasion and requested that they connect their wallet. At which point the wallet was accessed and any assets stolen.

The ACCC’s Targeting Scams report states that in 2021, nearly $1.8bn in losses were reported but the real figure is likely to be well over $2bn.

The largest combined losses in 2021 were:

$701 million lost to investment scams with 2021 figures significantly increased by cryptocurrency scams - more scammers are seeking payment with cryptocurrency and losses to this payment method increased 216% to $84 million.
$227 million lost to payment redirection scams.
$142 million lost to romance scams.

Protecting yourself from scams

Help educate older relatives. The over 55s are the most likely to fall victim to a scam.
Always use the primary website or app of your suppliers not a link from a text or email.
Don’t click on links from emails or text messages unless you are (absolutely) certain of the source. For email, if the sending email domain is not clear or hidden, hover over the name of the sending account to check if the email is from the company domain.
For Government services, use your MyGov account. Any messages to you from the ATO or other Government services need will be published to your MyGov account. Never click on links purporting to be from a bank, ATO or Government department.

Protecting your business from scams

Payment redirection scams, where the email of the business is compromised, caused the highest reported level of loss for business in 2021 at a combined $227 million.

Payment redirection scams involve scammers impersonating a business or its employees via email and requesting an upcoming payment be redirected to a fraudulent account. In some cases, scammers hack into a legitimate email account and pose as the business, intercepting legitimate invoices and amending the bank details before releasing emails to the unsuspecting business. Other times, scammers impersonate people using a registered email address that is very similar to one from a legitimate business.

Educate your team about threats and what to look out for, the importance of passwords and password security, and how to manage customer information. Phishing attacks, if successful, provide direct access into your systems.
Ensure staff only have access to the business systems and information they need. Assess what is required and close out access to anything not required. Also assess how customer personal information is accessed and communicated. Personal information should not be emailed. Email is not secure and it is too easy for staff to inadvertently send data to the wrong person.
No shared login details or passwords.
Complete a risk assessment of your systems and add cybersecurity to your risk management framework.
Develop and implement cyber security policies and protocols. Have policies and procedures in place for who is responsible for cybersecurity, the expectations of staff, and what to do in the event of a breach . Your policies should prevent shadow IT systems, where employees download unauthorised software.
Understand your organisation’s legal obligations. For example, beyond the Privacy Act some businesses considered critical infrastructure such as some freight and food supply operations are subject to the Security of Critical Infrastructure Act 2018. This might involve small businesses in the supply chain.
Use multifactor authentication on your systems and third-party systems.
Update software and devices regularly for patches
Back-up data and have backup protocols in place. If hackers use ransomware to lock your systems, you can revert to your backup.
If customer data is being shared with related or third parties domiciled overseas, ensure your customer is aware of where their data is domiciled and your business has taken all reasonable steps to enforce the Australian Privacy Principles . Your business is responsible for how the overseas recipient utilises your customer’s data.
Only collect the customer data you need to provide the goods and services you offer.
Ensure protocols are in place for accounts payable.
Don’t forget the hardware – laptops, computers, phones.

How high will interest rates go?

Tue, 15 Nov 2022 04:05:44 GMT

Low interest rates have been a mainstay since the global financial crisis of 2008. When the pandemic hit, Governments pushed stimulus measures through the economy and central banks reduced interest rates even further.

Coming out of COVID, housing market demand was strong and prices boomed but at the same time, supply chains remained restricted and the problems amplified by geo-political tensions increasing input costs. Supply could not keep up with demand to support the recovery, pushing inflation higher and broader than expected for a longer period of time. To control inflation, central banks have responded by tightening monetary policy and lifting interest rates. But the good news is that inflation is likely to ease.

Inflation in the US has started to decrease from a high of over 9% in June 2022 to 7.7% in October, suggesting that interest rates may not rise as high and as aggressively as expected.

Similarly in Australia, the Reserve Bank of Australia (RBA) Board raised the cash rate by 0.25% to 2.60% at its October 2022 meeting, a lower increase than many expected. The lower than expected rise suggests that inflation pressures, particularly wages growth, will be more subdued in Australia than overseas. Comparatively, Australian households are more sensitive to interest rates with more than 60% of mortgages variable rate loans. This is unlike the US where most borrowers are on 30-year fixed loans.

The increase in interest rates is starting to take effect helping to restore price stability. However, in its statement, the RBA said that it will be a challenge to return inflation to 2-3% while at the same time “keeping the economy on an even keel”. It concluded the path to achieving this balance is “a narrow one and it is clouded in uncertainty”.

In housing, the correction in house prices deepened and broadened across Australia, with capital city prices falling by 1.4% in September 2022, rounding out a 4.3% decline over the third quarter. Housing finance approvals also continued to mirror the broader correction to date, with further declines across investor and owner-occupier loans.

So, where does all of this leave us? Inflation will stay higher for longer than originally anticipated. As a result, interest rates are expected to continue to increase, albeit at a slower rate, with the RBA resetting their view along the journey. Economists are predicting that the cash rate will increase to somewhere between 3.10% and 3.85% in the first half of 2023 and then remain stable until early 2024 before RBA policy pivots and interest rates lower in early 2024.

Canstar analysis suggests that a 3.85% cash rate translates to an average variable rate of 6.73%. The difference between a 5.73% variable rate mortgage and 6.73% is $650 per month on a $1 million, 30 year mortgage.

If you have concerns about increasing interest rates and how they may impact you, contact your Aspen Corporate Advisor, we have strategies that can assist you.

30 November director ID deadline

Tue, 15 Nov 2022 03:45:16 GMT

The deadline for existing directors of Australian companies to obtain a Director Identification Number is 30 November 2022.

All directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation (ATSI) will need a director ID. This includes directors of a corporate trustee of a self-managed super fund (SMSF).

A director ID is a 15 digit identification number that, once issued, will remain with that director for life regardless of whether they stop being a director, change companies, change their name, or move overseas.

For those who have been a director since 31 October 2021, the deadline for obtaining a director ID is 30 November 2022 unless you are a director of an Aboriginal and Torres Strait Islander corporation, then the deadline is 30 November 2023.

For overseas directors, the process to obtain a director ID can be onerous as applications cannot be made online. In addition to the paper application form, you will need copies of one primary and one secondary identity document (or primary identity documents) certified by notaries public or at an Australian embassy.

For those who have been invited to become a director but are not a director as yet, if you do not have a director ID, you will need to obtain one prior to being appointed.

You do not need a director ID if you are running a business as a sole trader or partnership, or you are a director in your job title but have not been appointed as a director under the Corporations Act or Corporations (Aboriginal and Torres Strait Islander) Act (CATSI).

Need an extension?

If you need an extension, as soon as possible contact the Australian Business Registry service on 13 62 50 (+61 2 6216 3440 outside of Australia). Your identity will need to be established so have your documentation ready. You can also apply for an extension using the paper form ( https://www.abrs.gov.au/sites/default/files/2021-10/Application_for_an_extension_of_time_to_apply_for_a_director_ID.pdf )

What happens if I don’t obtain an ID?

If you are required to obtain a director ID but don’t, a criminal penalty of up to $13,200 might apply or a civil penalty of up to $1,100,000. Where an individual has deliberately applied for multiple IDs or misrepresented the director ID, the criminal penalty escalates to $26,640 and up to one year in prison.

For more information, or for help setting up your director ID contact your Aspen Corporate advisor on 92280700 .

Federal Budget Brief 2022-23 2.0

Wed, 26 Oct 2022 03:54:25 GMT

Shuffling the Deck: 2022-23 Budget 2.0

There is nothing in the 2022-23 Federal Budget 2.0 that will create a UK style crisis. The stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned, and most funding initiatives appear to be a reallocation of previous Government initiatives.

With seven months before the 2023-24 Budget released in May 2023, this Budget is a shuffling of the deck not a new set of cards.

Download our Budget Brief

If you have any further questions about the budget, or would like any assistance, please contact your Aspen Corporate Advisor on 08 9228 0770 or at advisor@aspencorp.com.au .

ATO contacts ‘at risk’ professional services firms

Tue, 18 Oct 2022 05:30:05 GMT

New guidelines for professional services firms - lawyers, architects, medical practitioners etc., came into effect on 1 July 2022. The guidance takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. The ATO is now contacting professionals who they believe might be at risk. Any structural changes that need to be made to reduce risk, should be completed by the end of the 2022-23 financial year. Where the ATO deems that income has been diverted inappropriately to create a tax benefit, they will remove that benefit and significant penalties may apply.

To cut or not to cut? Stage three personal tax cuts

Tue, 18 Oct 2022 05:18:07 GMT

In September, amid a climate of startling interest rates, UK Chancellor Kwasi Kwarteng announced a series of tax cuts, including the reduction of the top personal income tax rate that applies to those earning more than £150,000 from 45% to 40%. Just ten days later, following market turmoil that saw the British Pound drop at one point to a low of $1.035 USD, its lowest level since 1985, the decision was reversed calling the cuts “a massive distraction.”

Heading into the 2022-23 Federal Budget on 25 October, the question for the Australian Government is different. It is not whether to introduce personal income tax cuts but whether to keep, amend or repeal the cuts legislated to commence on 1 July 2024.

In Australia, the 2018-19 Budget introduced the Personal Income Tax Plan. The plan implemented three stages of income tax cuts over seven years that will, by 2024-25, simplify the tax brackets and enable taxpayers to earn up to $200,000 before paying a new top marginal tax rate of 45%. Stages of the plan, bringing relief for low and middle income earners, were brought forward in the 2019-20 Budget and again in 2020-21.

Labor’s pre-election Lower Taxes policy states, “An Albanese Labor Government will deliver tax relief for more than 9 million Australians through the legislated tax cuts that benefit everyone with incomes above $45,000.” But this month, the Treasurer has subtly changed the narrative from simply “our policy has not changed on stage three tax cuts” to “We do need to ensure that spending in the Budget, particularly in these uncertain global times, is geared toward what's affordable and sustainable and responsible and sufficiently targeted. I think that's one of the lessons from the UK.”

The public appeal of repealing the final stage three tax cuts is understandable. Back in 2018-19 when the plan was first introduced, the economy was in surplus and Australia was yet to feel the effects of a global pandemic, environmental extremities, and the Russian invasion of Ukraine. The tax cuts forego around $240bn of tax revenue over the next 10 years, and because it is percentage based, favours high income earners. The public policy think tank, the Grattan Institute , previously warned that if the government progressed with the stage three cuts “Australia’s income tax system will be less progressive than it’s been since the 1950s”.

Conversely, the rationale for reforming the current personal income tax regime where the highest marginal tax rate applies from around 2.5 times average full-time earnings (compared to around 4 times in Canada and 8 times in the US), is also understandable. When it comes to international competitiveness, New Zealand’s top marginal tax rate is 33% (from $180,000) and Singapore’s is 22%, increasing to 24% in 2023-24. If implemented, stage 3 of the income tax plan would see around 95% of taxpayers paying a marginal tax rate of 30% or less.

The 1 July 2024 tax cuts

Stage three of the Personal Income Tax Plan is legislated to take effect from 1 July 2024.

What the tax stats say

Personal income and withholding tax represents around 48% of the annual Commonwealth tax collections. Company tax, by comparison, is around 16%, and the goods and services tax (GST) just under 15% of total tax revenue collected.

Australia has a progressive personal tax system. That is, those with higher incomes pay not only a higher amount of tax, but a higher proportion of their income in tax. As a result, the 3.6% of taxpayers with taxable incomes of over $180,000 pay 31.6% of the total.

Where to from here?

The second 2022-23 Federal Budget will be announced on 25 October 2022. If the Government make no mention of the stage three tax cuts, they have another opportunity to refine their position in the 2023-24 Federal Budget released in May 2023, more than a year before the 1 July 2024 tax cuts come into effect.

Our best guess? The Government will announce a review of the stage three tax cuts, then open the issue to consultation, locking in the position, whatever it is, in the 2023-24 Federal Budget.

We’ll keep you posted!

Look out for our 2022-23 Federal Budget update at the end of this month!

Lessons from a data breach

Tue, 18 Oct 2022 04:02:20 GMT

The Optus data breach is top of mind for a lot of Australians, particularly those who have had their data breached.

For business, the breach is a timely warning on the importance of understanding what data is held on your customers (and should you hold it?), how it is secured, how your systems work and the process to identify gaps and deficiencies, the appropriate actions if and when a breach occurs, and the impact on your relationship to your customer. This is not something that can be outsourced to IT but a whole of business issue.

The obligations on business

We all know that no system is 100% secure. For Optus, this is not the first time. In 2015, Optus agreed to an enforceable undertaking for breaching the Privacy Act in 2015.

A data breach happens when personal information is accessed or disclosed without authorisation or is lost. If the Privacy Act 1988 covers your business , you must notify affected individuals and the Office of the Australian Information Commissioner when a data breach involving personal information is likely to result in serious harm. The notification must be as soon as practicable but is expected to be no later than 30 days. Every day counts.

A business must take all reasonable steps to comply with its obligations to prevent data breaches occurring. These obligations are not limited to preventing cyber attacks. Malicious or criminal attacks represent 55% of all reported data breaches. But, human error is responsible for 41% and 4% through system faults. Where human error was involved, 43% was where personal information was emailed to the wrong recipient and 21% the unintended release or publication of personal information.

How to apologise

Your relationship with your client is about trust. Beyond the breach notification requirements, the other issue is the client relationship.

So, how should a business apologise? University of Chicago economist John List, Professor Benjamin Ho from Vassar College along with other academics studied this issue for Uber ride sharing – the experiment came about after John List, who was at the time Uber’s Chief Economist, had a bad ride sharing experience. The bottom line? The apology must come at a cost to be effective. That cost can be reputational, a commitment to do better in the future (the cost is the higher standard), or a monetary cost. The paper states: First, apologies are not a panacea - the efficacy of an apology and whether it may backfire depend on how the apology is made. Second, across treatments, money speaks louder than words - the best form of apology is to include a coupon for a future trip. Third, in some cases sending an apology is worse than sending nothing at all, particularly for repeated apologies and apologies that promise to do better.

Helping to protect against data breaches

Understand your Privacy Act obligations. Specific industries and businesses that hold specific types of data often have advanced requirements.
Review the personal information held on customers. Is their full date of birth a necessary part of what your business does? If you need to verify identify, do those identification documents really need to be stored once they have been validated? Or is positive confirmation enough? Is the data held securely and is access limited to only those who require access?
Ensuring systems have multifactor authentication
Improving staff awareness of not only cyber threats and how to prevent them - phishing, fraudulent messages etc, but reviewing how personal data is managed and accessed.
Understanding your systems and how they work together to prevent security gaps or ‘backdoor’ systems access.

Australian super funds gorge on cryptocurrency

Tue, 18 Oct 2022 03:58:13 GMT

The value of cryptocurrency assets inside Australian self managed superannuation funds (SMSFs) increased by 589.9% ($1.17bn) between June 2019 and June 2022, according to the latest ATO statistics.

While cryptocurrency is a relatively small asset class at only 0.16% of the $837bn held in SMSFs, it is a growing asset class, larger than collectibles and personal use assets, and overseas property.

Smaller funds, with an asset value below $200,000, are more likely to have a larger proportion of their value in cryptocurrency.

ASIC warns of SMSF cryptocurrency scams

Earlier this year, the Australian Securities and Investments Commission (ASIC) issued a warning on an increase in marketing encouraging Australians to switch from retail superannuation funds to SMSFs so they can invest in ‘high return’ portfolios. The regulator states that crypto-assets are a high risk and speculative investment and best practice is to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF.

An example of one of these schemes was A One Multi Services Pty Ltd that was shut down by ASIC late last year. The company promoted a scheme encouraging investors to roll their superannuation into an SMSF, then for the SMSF to loan money to A One Multi to generate “returns of between 10% and 20% on the investment and perhaps as high as 26%.” Over 60 SMSFs transferred $25 million into A One Multi’s accounts between January 2019 and June 2021. The money “invested” for the clients, between $7 million to $22 million of Bitcoin, was held in the name of one of the directors. An additional $5.7m was used by the directors to acquire property and luxury cars.

Investing in crypto

Trustees are free to invest in assets that meet the requirements of the fund and comply with the regulatory requirements:

Trust Deed - must allow for cryptocurrency assets. Most SMSF trust deeds are drafted broadly to enable trustees to invest in assets permitted by the superannuation laws and leave the investment strategy to manage the choice of assets and their appropriateness. However, it is important to check.
Investment strategy - With cryptocurrency’s high volatility and risks, there must be clearly articulated information in the Investment Strategy. That is, it must articulate the trustees’ plan for making, holding and realising assets in a in a way that is consistent with the retirement goals of members being mindful of the member’s individual circumstances.
Separation of assets – cryptocurrency assets must be held in a wallet in the name of the SMSF and the IP address is provided to the SMSF auditors to verify the transactions (against the fund bank account). Problems often arise when a wallet (in the name of the SMSF) is connected to a personal credit card to acquire cryptocurrency. In these cases, the payment may be considered as either a contribution or a loan to the SMSF.
Sole purpose test - Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

120% deduction for skills training and technology costs

Tue, 13 Sep 2022 04:38:54 GMT

The Government has reinvigorated the 120% skills training and technology costs deduction for small and medium business.

An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in recent exposure draft by Treasury.

Timing

Two investment ‘boosts’ will be available to small and medium businesses with an aggregated annual turnover of less than $50 million:

Skills & Training Boost
Technology Investment Boost

The Skills and Training Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to start claiming the bonus deduction until the 2023 tax return. That is, for expenditure incurred between 29 March 2022 and 30 June 2022, the additional 20% ‘boost’ deduction will not be claimable until the 2022-23 tax return (assuming the announced start dates are maintained if and when the legislation passes Parliament).

The Technology Investment Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.

The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred.

When it comes to expenditure on depreciating assets, the bonus deduction is equal to 20% of the cost of the asset that is used for a taxable purpose. This means that, regardless of the method of deduction that the entity takes (i.e., whether immediate or over time), the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost.

Technology Investment Boost

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.

The boost is capped at $100,000 per income year with a maximum deduction of $20,000.

To be eligible for the bonus deduction:

The expenditure must be eligible for deduction (salary and wage costs are excluded for the purpose of these rules)
The expenditure must have been incurred between 7.30pm (AEST), 29 March 2022 and 30 June 2023
If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023.

To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example:

digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
e-commerce – supporting digitally ordered or platform enabled online transactions.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose.

The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:

Assets that are sold while the boost is available
Capital works costs (for example, improvements to a building used as business premises)
Financing costs such as interest expenses
Salary or wage costs
Training or education costs
Trading stock or the cost of trading stock

For example:

A Co Pty Ltd (A Co) is a small business entity. On 15 July 2022, A Co purchased multiple laptops to allow its employees to work from home. The total cost was $100,000 (GST-exclusive). The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use. As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense.

A Co can claim the full purchase price of the laptops ($100,000) as a deduction under temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

Skills and Training Boost

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees.

External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia.

To be eligible for the bonus deduction:

The expenditure must be for training employees, either in-person in Australia, or online
The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration
The registered training provider must not be the small business or an associate of the small business
The expenditure must be deductible
Enrolment for the training must be on or after 7.30pm, 29 March 2022.

The training must be necessarily incurred in carrying on a business for the purpose of gaining or producing income. That is, there needs to be a nexus between the training provided and how the business produces its income.

Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The training boost is not available to:

· Sole traders, partners in a partnership, or independent contractors (who are not employees)

· Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.

For example:

Cockablue Pets Pty Ltd is a small business entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 (GST exclusive) for the

employee to undertake external training in veterinary nursing. The training is delivered by a registered training provider, whose scope of registration includes veterinary nursing.

The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible under section 8-1 of the ITAA 1997 as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

How to sell your business

Tue, 13 Sep 2022 04:10:31 GMT

We’re often asked the best way to sell a business.

There are two key components at play in the sale of a business: structuring the transaction; and positioning the business to the market. Both elements are important and can significantly impact your result.

Structuring the transaction covers areas such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising the vendor’s position.

Positioning the business for sale is all about ensuring that you achieve a sale and maximise your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be.

Positioning is about doing everything needed to maximise the probability of a sale occurring, whereas structuring is about getting the best outcome from a transaction once it has occurred. A lot of people make the mistake of spending most of their energy on the structuring of the transaction. It is important but only becomes important if the sale is achieved.

Structuring should be addressed first to help identify any key decisions that need to be made but put most of your effort into positioning the business for sale. To do this, you need an objective assessment of how the business compares in its market, its competitive position, and what if any impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer’s market and will try to drive down price expectations. Whether or not you are in a buyer’s market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business to similar businesses but also opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this well in advance of putting your business on the market.

Thinking of selling your business? Talk to us today about preparing your business for sale.

Register your .au domain!

Tue, 13 Sep 2022 04:09:33 GMT

23:59 UTC* on 20 September 2022 is the cut-off to register for your .au direct domain. The .au domain is the new, general purpose, shorter Australian domain name option.

If you do not register the direct match of your existing domain for the direct .au domain, you risk your brand equity being consumed by someone else, rivals redirecting your clients to their products and services, squatters holding the domain, or cybercriminals impersonating your business. The opening of the new .au domain is the single biggest shift in Australian cyber real estate in decades and the risks for business are high.

If you are registering:

an exact match of your existing domain name, for example .com.au or net.au ; and
you held your domain name prior to 24 March 2022

then you have priority access but only up until 23:59 UTC on 20 September 2022 (7.59am AWST on 21 September). Once this deadline has passed, the .au direct domain name will be available to anyone with a connection to Australia to register from 21:00 UTC 3 October 2022 (5:00am AWST 4 Oct).

While you can register for the .au domain through any number of providers , the most efficient method is to utilise your existing provider. To do this, you will need your domain’s access information. If these details cannot be found, for example, the details were held by a former staff member, it can take some time to recover them so do not leave the registration process until the last minute.

Once you have applied for your matching .au domain, if your application is uncontested, you will be able to use the .au direct name soon after applying for priority status.

What happens if .com.au and .net.au both apply for the .au name?

If you share a domain name with another entity, for example, one entity owns .com.au and the other .net.au, the right to register the .au domain will cascade according to priority . Category 1 are those that secured the domain on or before 4 February 2018. Category 1 applicants have priority over Category 2 applicants who registered their domain after 4 February 2018. If the name is contested by a Category 1 and a Category 2 applicant, the Category 1 applicant will secure the name. If two Category 2 applicants apply for the name, the name is allocated to the applicant with the earlier domain license creation date. But, it gets tricky when two Category 1 applicants apply for the name. In these circumstances, both parties must agree on the allocation or the name remains unallocated.

*CTC - Coordinated Universal Time, previously Greenwich Mean Time

Tax reprieve for double taxation of Indian technical support

Tue, 13 Sep 2022 03:41:00 GMT

The tax system currently allows Australia to tax payments made by an Australian customer in relation to technical services provided by an Indian firm, even when the services are provided remotely. This is due to the wording contained in the double tax agreement between Australia and India.

Under an agreement reached in connection with the Australia‑India Economic Cooperation and Trade Agreement (AI-ECTA), these payments will no longer be taxed in Australia. The typical categories of services intended to be covered by the amendments include:

engineering services;
architectural services; and
computer software development.

The amendment to the tax rules is in consultation phase and not yet law. If enacted, it will apply once the amendments receive Royal Assent, assuming the AI-ECTA has been entered into force.

Acquiring collectibles inside your SMSF

Tue, 13 Sep 2022 03:36:59 GMT

Clients with self managed superannuation funds (SMSF) often ask what assets the SMSF can acquire.

‘Why’?

The golden rule for acquiring assets inside your SMSF is why? To be compliant, your fund must be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement. The sole purpose test (section 62 of the Superannuation Industry (Supervision) Act 1993), is your starting point. If the collectible you are looking to acquire does not fulfil this purpose, then you have an immediate problem.

Let’s assume you are looking to acquire vintage cars. The question to ask is, is the acquisition a viable investment or simply a desire of the members to own vintage cars. Does the investment ‘stack up’ relative to other forms of investment to build/protect the retirement savings of members?

The sole purpose test extends to how the collectible is managed once acquired. Given the asset is for the sole purpose of the member’s retirement benefits, the members (or their associates) cannot use or enjoy the asset in any way. This means:

Storage of the collectible cannot be at the trustee’s residence or displayed at their office. The ATO says, “You can store (but not display) collectables and personal use assets in premises owned by a related party provided it is not their private residence. They can’t be displayed because this means they are being used by the related party. For example, if your SMSF invests in artwork it can’t be hung in the business premises of a related party where it is visible to clients and employees.”
Leasing or use of the collectible can only be undertaken with an unrelated party.
The collectible must have its own insurance policy owned by the SMSF (multiple items can be listed on the same policy i.e., wines of different brands). The insurance policy must be in place within 7 days of acquisition.
Like all other assets, if a collectible is sold to a related party, then it must be sold at market value. Collectibles also require a qualified independent valuation if sold to a related party.

This means you cannot stay in a holiday home owned by your SMSF, you cannot drive a vehicle owned by the SMSF, and you cannot enjoy artwork held by the SMSF. And, those bottles of Penfolds Grange owned by the SMSF that broke (wink, wink) are likely to trigger an audit as they should have been properly stored in a way that prevents breakage.

Your investment strategy

An SMSF investment strategy should articulate the plan trustees have for a fund and the investments they choose to hold. It should drill down into the reasons why certain assets will be acquired (or sold) and how these choices align to the retirement goals of the members. If your SMSF is considering purchasing collectibles, it is essential that your investment strategy is aligned to these types of investments and articulates why the asset fits within the strategy. This is particularly important if the collectible/s will dominate the types of assets held by the fund, its liquidity, and diversity.

A common question is, can my SMSF purchase, let’s say artwork, from a member or a related party of the fund? The answer is no. SMSFs are not allowed to purchase assets, other than listed shares and business real property, from related parties. But, the SMSF could transfer the artwork to a member as an in-specie lump sum payment if the member meets a condition of release, or sell the asset to the member but only if the transaction is at arms length, and an independent valuation confirms the market value of the asset.

ATO targets under reporting of contractor payments.

Wed, 10 Aug 2022 03:27:55 GMT

The ATO has reminded businesses who pay contractors that they have until 28 August to complete a taxable payment annual report (TPAR).

TPAR is a part of the taxable payment reporting system (TPRS) obligations that apply to businesses in building and construction, cleaning, courier, road freight, information technology and security, among others.

Early this year, the ATO state that from 23 March 2022, they will apply failure to lodge penalties to organisations who have TPAR requirements that are overdue. And recently, The ATO have warned that they will be focusing on off the-books payments to contractors.

The Assistant Commissioner, Peter Holt, said that “the ATO has sophisticated data and analytics to identify businesses that fail to lodge a TPAR.

“Not reporting payments to contractors may be seen as a red flag and will prompt closer scrutiny from the ATO on your own affairs as well as those of your contractors.

“Businesses and tax professionals can view the data the ATO receivies about their business, like taxable payments reported under the TPRS, as a reported transaction in ATO Online platforms.”

What do you need to report?

You need to report the following information about each contractor:

ABN
Name & Address
The gross amount you paid them for the financial year (including any GST)
Total tax withheld where ABN was not quoted

Payments you need to report

You are required to report the total payments made to each contractor for services provided that are performed on, or in relation to, any part of the industries listed above.

If a payment is for both labour and materials, you are required to report the whole amount.

Payments you do not report

Do not report the following:

Payments for materials only or where labour is incidental to supply of materials.
Any invoices that you have received but not paid as at 30 June each year.
Payment which are reported through PAYG withholding annual report or single touch payroll.
Payments for private and domestic projects.

Aspen Corporate can help you

Following the recent public announcements by The ATO about their intent to actively monitoring and following up on TPAR obligations, we strongly advise ensuring your TPAR is lodged by the due date of 28 August.

If you are unsure whether you have TPAR requirements, or for help with completing and lodging your TPAR, contact your Aspen Corp Advisor today.

FBT-free Electric Cars

Wed, 10 Aug 2022 03:02:21 GMT

New legislation before Parliament, if enacted, will make zero or low emission vehicles FBT-free. We explore who can access the concession and how.

Electric vehicles (EV) represent just under 2% of the new car market in Australia but it is a rapidly growing sector with a 62.3% jump in new EV registrations between 2020 and 2021.

Making EVs FBT-free is just the first step in the Government’s plan to make zero and low emission vehicles the car of choice for Australians, focussing on affordability and overcoming “range anxiety” by:

Cutting import tariffs
Placing EV fast chargers once every 150 kilometres on the nation’s highways
Creating a national Hydrogen Highways refuelling network, to deliver stations on Australia's busiest freight routes
Converting the Commonwealth fleet to 75% no-emissions vehicles

It is on this last point, fleet cars, that the FBT exemption on EVs is targeted. In Australia, business account for around 40% of light vehicle sales according to a research report by Griffith and Monash Universities . However, EV sales to business fleets comprised a mere 0.08% of the market in 2020. The Government can control what it purchases and has committed to converting its fleet to no-emission vehicles, but for the private sector, there is a wide gap between the total cost of ownership of EVs and traditional combustion engine vehicles. It’s more expensive overall and the Government is looking to reduce that impediment through the FBT system.

How the EV FBT exemption will work

The proposed FBT exemption is intended to apply to cars provided by an employer to an employee under the following conditions:

If an electric car qualifies for the FBT exemption, then associated benefits relating to running the car for the period the car fringe benefit is provided, can also be exempt from FBT.

Government modelling states that if an EV valued at about $50,000 is provided by an employer through this arrangement, the FBT exemption would save the employer up to $9,000 a year.

While the measure provides an exemption from FBT, the value of that fringe benefit is still taken into account in determining the reportable fringe benefits amount of the employee. That is, the value of the benefit is reported on the employee’s income statement. While income tax is not paid on this amount, it is used to determine the employee’s adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments.

Can I salary sacrifice an electric car?

Assuming your employer agrees, and the car meets the criteria, salary packaging is an option. While some FBT concessions are not available if the benefit is provided under a salary sacrifice arrangement, the exemption for electric cars will be available. In order for a salary sacrifice arrangement to be effective for tax purposes, it needs to be agreed, documented, and in place prior to the employee earning the income that they are sacrificing.

Government modelling suggests that for individuals using a salary sacrifice arrangement to pay for a $50,000 electric vehicle, the saving would be up to $4,700 a year.

Who cannot access the FBT exemption

Your business structure makes a difference

By its nature, the FBT exemption only applies where an employer provides a car to an employee. Partners of a partnership and sole traders will not be able to access the benefits of the exemption as they are not employees of the business. When it comes to beneficiaries of a trust and shareholders of a company it will be important to determine whether the benefit will be provided to them in their capacity as an employee or director of the entity.

Exemption is limited to cars

As the FBT exemption only relates to cars, other vehicles like vans are excluded. Cars are defined as motor vehicles (including four-wheel drives) designed to carry a load less than one tonne and fewer than nine passengers.

EV State and Territory tax concessions

The Federal Government is not alone in using concessions to encourage electric vehicle ownership.

ACT

The ACT Government offers a stamp duty exemption on new zero emission vehicles, and up to two years free registration for new or second hand zero emission vehicles (registered between 24 May 2021 and before 30 June 2024).

New South Wales

Reimbursement of stamp duty paid on purchases of new or used full battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs), with a dutiable value up to and including $78,000.

Northern Territory

For plug-in electric vehicles (battery and hybrid plug-in), from 1 July 2022 until 30 June 2027, access free registration for new and existing vehicles and a stamp duty concession of up to $1,500 on the first $50,000 of the car’s market/sale value – 3% thereafter.

Queensland

Discounted registration duty for hybrid and electric vehicles. And, a limited $3,000 rebate for new eligible zero emission vehicles with a purchase price (dutiable value) of up to $58,000 (including GST) on or after 16 March 2022.

South Australia

A limited $3,000 subsidy and a 3-year registration exemption on eligible new battery electric and hydrogen fuel cell vehicles first registered from 28 October 2021.

Tasmania

From 1 July 2022 until 30 June 2022, no stamp duty applies to light electric or hydrogen fuel-cell motor vehicle (including motorcycles). Vehicles with an internal combustion engine do not qualify.

Victoria

A limited $3,000 subsidy is available for new eligible zero emission vehicles purchased on or after 2 May 2021. More than 20,000 subsidies are available under the program. Plus, stamp duty for ‘green passenger cars’ is set at the one rate regardless of value ($8.40 per $200 or part thereof).

Zero emission vehicles receive a $100 annual registration concession but are also subject to a per kilometre road user charge .

Western Australia

A $3,500 rebate on the purchase of a new zero emission, hydrogen fuel cell or battery light vehicle with a value of up to $70,000 purchased on or after 10 May 2022.New Paragraph

Can I claim my crypto losses?

Wed, 10 Aug 2022 03:02:19 GMT

The ATO has released updated information on claiming cryptocurrency losses and gains in your tax return.

The first point to understand is that gains and losses from crypto are only reported in your tax return when you dispose of it - you sell it, convert it to fiat currency, exchange it for another type of asset, buy something with it, etc. You cannot reco gnise market fluctuations or claim a loss because the value of your crypto assets changed until the loss is realised or crystallised.

Gains and losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred.

If you made a capital gain on crypto that was held as an investment and you held the crypto for more than 12 months then you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you pay.

If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). But, you can only offset capital losses against capital gains. You cannot offset these losses against other forms of income like salary and wages, unfortunately. If you don’t have any capital gains to offset, you can hold the losses and carry them forward for another future year when you can use them.

If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return.

And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place and cryptocurrency reporting is a major area of focus.

How High Will Interest Rates Go?

Wed, 10 Aug 2022 03:02:16 GMT

The RBA lifted the cash rate to 1.85% in early August 2022. The increase comes a few weeks after Reserve Bank Governor Philip Lowe told the Australian Strategic Business Forum that “…we're going through a process now of steadily increasing interest rates, and there's more of that to come. We've got to move away from these very low levels of interest rates we had during the emergency.” He went on to say that we should expect interest rates of 2.5% - how quickly we get there really depends on inflation.

The RBA Governor has come under increasing pressure over comments made in October 2021 suggesting that interest rates would not rise until 2024. At the time however, Australia was coming out of the Delta outbreak, wage and pricing pressure was subdued, and inflation was low. That all changed and changed dramatically. Inflation is now forecast to reach 7.75% over 2022 before trending down. We’re not expected to reach the RBA’s target inflation rate range of 2% to 3% until the 2023-24 financial year.

In the UK, the situation is worse with the Bank of England predicting that inflation will reach around 13% over the next few months. The UK has been heavily impacted by the war in Ukraine with the price of gas doubling, compounding pressure from post pandemic supply chain issues and price increases.

With interest rates rising, what can we expect? Deputy RBA Governor Michele Bullock recently said that Australia’s household credit-to-income ratio is a relatively high 150%, increasing in an environment that enabled households to service higher levels of debt. But it is not all doom and gloom. “Strong growth in housing prices over 2021 and early 2022 has boosted asset values for many homeowners, with housing assets now comprising around half of household assets,” she said. The recent downturn in house prices has only marginally eroded the large increases over recent years. Plus, households have saved around $260m since the pandemic creating a buffer for rising interest rates. This, however, is a macro view of the economy at large and individual households and businesses will face different pressures depending on their individual circumstances.

For businesses, the rate increase has a twofold effect. It is not just the rate rise and the higher cost of funds in their borrowings. That by itself is significant but at this stage, if anything, it is the lesser issue. The more significant impact comes from negative consumer sentiment and the flow through effect on sales and cash flow.

In general, your debts should not exceed around 35-40% of your assets. There will be some exceptions to this with new business start-ups and first home buyers.
Review the cost of cash in your business, reviewing rates, and the configuration and mix of loans to ensure you are not paying more than you need to.
If possible, avoid having private debt as well as business and investment debts. You can't get tax relief on your private debt.
Keep an eye on debtors and don’t become your customer’s bank.

It's Not Easy Being Green

Wed, 10 Aug 2022 03:02:12 GMT

Climate change featured heavily during the election and now the Albanese Government is putting into place some of the promises it made. We look at the current state of play and the likely impact.

The Government’s Climate Change Bill passed the House of Representatives in early August and is now before the Senate Environment and Communications Legislation Committee for review. But what impact does the legislation have on business and consumers in Australia?

Under the Paris Agreement, a legally binding international treaty, Australia and 192 other parties committed to substantially reduce global greenhouse gas emissions to limit the global temperature increase in this century to 2 degrees Celsius while pursuing efforts to limit the increase even further to 1.5 degrees. At this level, the more extreme impacts of climate change - floods, heatwaves, rising sea levels, threats to food production - can be arrested. As part of this commitment, the parties are required to communicate their emissions reduction ambitions through a Nationally Determined Contribution (NDC). On 16 June 2022, Australia communicated its updated NDC to the UN, confirming Australia’s commitment to achieve net zero emissions by 2050, and a new, increased target of 43% below 2005 levels by 2030 (a 15% increase on the previous target). The Climate Change Bill enshrines these emission targets into legislation.

The Bill itself sets an accountability framework for climate targets but does not introduce mechanisms to cut emissions.

Impacted industries

The energy sector is at the heart of climate change producing around three-quarters of global greenhouse gas emissions. In Australia, the CSIRO says energy contributes approximately 33.6% of all emissions, with a further 20.54% from stationary energy (from manufacturing, mining, residential and commercial fuel use), transport 17.6%, and agriculture 14.6%. The future of the energy industry is also at the crux of the Government Powering Australia policy.

Emissions reduction is not just a social obligation but a necessity as investment tilts towards lower emission suppliers. As an example, the 2022-23 Federal Budget committed a $120 billion 10-year infrastructure pipeline. The June 2022 Business Council of Australia Infrastructure in a world moving to net zero report provides a series of recommendations to address the way in which Government invests including the adoption of low carbon materials on public projects and options for reducing emissions during construction, understanding the whole of life emissions impact of infrastructure projects and potentially adopting the UK style PAS2080 standard on carbon management infrastructure, and a shift in procurement to lower carbon supply chains. If these considerations have not made it into business production and supply chain planning, they will soon.

Amongst other initiatives the Government have committed to :

$20bn investment in Australia’s electricity grid to accelerate the decarbonisation.
An additional $300m to deliver community batteries and solar banks across Australia.
Up to $3bn investment in the new National Reconstruction Fund to support renewables manufacturing and low emissions technologies.
Powering the Regions Fund to support the development of new clean energy industries and the decarbonisation priorities of existing industry.
Double existing investment in electric vehicle charging and establish hydrogen refuelling infrastructure (to $500m).
Review the effectiveness of the Emissions Reduction Fund that provides businesses with the opportunity to earn Australian carbon credit units for every tonne of carbon dioxide equivalent a business stores or avoids emitting through adopting new practices and technologies.
New standardised and internationally-aligned reporting requirements for climate risks and opportunities for large businesses.
Reduce the emissions of Commonwealth Government agencies to net zero by 2030.

In essence, business can expect directed funding for co-investment in emission reduction technology, Government spending to be through the lens of the renewed emissions targets, and for new funding opportunities to advance low emission technology.

But emissions reduction is not just about industry. Land use change can have a significant impact on emissions through reductions. For example, a reduction in forest clearing in 2020 reduced emissions by 4.9%. One initiative needs to go hand in hand with the other.

In 2021 , fossil fuels represented 67.5% (59.1% coal) of the total annual electricity generation and renewables 32.5% (an increase of 5% on the previous year with the spike contributed by small scale solar, and large scale solar and wind farms).

Client Portal - changes

Tue, 12 Jul 2022 03:19:15 GMT

Changes to how you share documents with us

In recent years we have been sharing documents with you using two portals which you access through our website:

Data Login - for loading large documents
Business Login - the portal where we send you documents, and you can upload smaller documents and you can sign documents

At the end of May, we retire the data login portal and moved onto a new platform as part of a program to keep your data more secure.

Since 1 June 2022, the new portal has been accessible from our website, or directly from http://aspenbusinessservices.acclipse.com/ .

Your previous log in details will not work on this new portal, so you should have received an email from aspenbusinessservices@cchifirm.com with the subject line ‘Register for Client Portal’, which invites you to set up your login details for the account we have set up for you on the new portal.

If you have any queries or need support, please call your Aspen Corporate Advisor on 9228 0700 or email advisor@aspencorp.com.au . You can also use the online help centre: http://cp-help.cchifirm.com

Overcome your customers fear of spending

Thu, 07 Jul 2022 02:16:43 GMT

One of the biggest complaints from salespeople in a tight economy is the time it takes to achieve a sale. So, what can you do to speed up the sales process?

Sell the solution not the product

Branding is wonderful but unless your brand is as mighty as Coca Cola, it’s unlikely people will purchase what you have based on brand alone. It’s more important than ever to have clarity about why your product or service is valuable to your client and why they should be buying it from you.

Back in 2000, Berlei bras demonstrated the art of solution selling with their sports bra campaign, “only the ball should bounce.” For anyone that has seen a sports bras you know that aesthetically, they are the ugly duckling of the lingerie world; highly functional but very unattractive. Berlei used science to demonstrate how much damage exercising in anything but a sports bra could do (using television advertising, print, point of sale advertising, media, etc). The point is to understand what the most meaningful message is for your customer and that is unlikely to be a product feature list.

Sell the savings

Does your product offer your customer any form of efficiency gain or benefit beyond value over time? Can you justify it with real examples such as testimonials and worked examples? If it does, you need to ensure that you articulate this message. If there is a benefit, ensure you highlight it and emphasise the result. Try and stay away from long range forecasts. If it is going to take a few years to see the real value then this is not a compelling selling point in the current market.

You are only as strong as the weakest link in your sales process

If your first point of contact is the weakest link in your sales chain, then you need to fix it. Help your team identify and capitalise on opportunities by giving them the training and structure they need.

Value added discounts

Discounting is a common strategy to increase sales but it comes at the cost of your margin. If you are going to discount, do it strategically. For example, when David Jones wanted to build the number of customers holding a David Jones AMEX, they offered a limited time 30% discount store wide to everyone who either held or applied for the card on the spot. And, staff were trained to encourage the adoption of the AMEX at the checkout. Yes, it was a big discount, but it created an event for existing store card holders and ramped up acquisition to the store card program. The added benefit is that loyalty programs work; the probability of selling to an existing customer is around 14 times higher than a new customer.

In tough economic times, it’s common for the volume of products purchased by customers to go down. You can overcome some of this reticence by packaging items together and encouraging sales volume by offering a discount on the second item or on bundles. If you are going to package, ensure you are not packaging low margin products and then discounting them. Packaging works best when you package products with higher profit margins or where you boost the sales volume of slow moving stock by combining it with faster selling stock.

What changed on 1 July?

Thu, 07 Jul 2022 02:12:13 GMT

A reminder of what changed on 1 July 2022

Business

Superannuation guarantee increased to 10.5%
$450 super guarantee threshold removed for employees aged 18 and over
Small business GST and PAYG tax instalments lowered (the total tax liability remains the same, just the amount the business needs to pay through the year is lowered)
ATO guidance on how profits of professional firms are structured comes into effect introducing new risk criteria
New guidance on unpaid trust distributions to corporate beneficiaries comes into effect that may treat some unpaid distributions as loans and trigger tax consequences

Individuals

Superannuation guarantee increased to 10.5%
Work-test repealed for those under 75 to make or receive non-concessional or salary sacrifice super contributions (the work test still applies to personal deductible contributions)
Age for downsizer super contributions reduced to 60 years and older
Value of voluntary super contributions that can be withdrawn under the First Home Saver Scheme increased to a total of $50,000
New ATO guidelines on trust distributions come into effect primarily impacting distributions to adult children
Home loan guarantee scheme extended to 35,000 per year for first home buyers and 5,000 per year for single parents
Australia’s minimum wage increased

Tax & the family home

Thu, 07 Jul 2022 02:07:14 GMT

Everyone knows you don’t pay tax on your family home when you sell it…right? We take a closer look at the main residence exemption that excludes your home from capital gains tax and the triggers that reduce or exclude that exemption.

Capital gains tax (CGT) applies to gains you have made on the sale of capital assets (assets you make money from). Unless an exemption or reduction applies, or you can offset the tax against a capital loss, any gain you made on an asset is taxed at your marginal tax rate.

What is the main residence exemption?

Your main residence is the home you live in. In general, CGT applies to the sale of your home unless you have an exemption, partial exemption, or you are able to offset the tax against a capital loss.

If you are an Australian resident for tax purposes, you can access the full main residence exemption when you sell your home if your home was your main residence for the whole time you owned it, the land your home is on is or is under 2 hectares, and you did not use your home to produce an income – for example running a business from your home or renting it out.

If the home is on more than 2 hectares, if eligible, you can treat the home and up to 2 hectares of the land it is on as one asset and claim the main residence exemption on this asset.

However, if you use your home to produce an income by running a business from home or renting it out, CGT can apply to the portion of the home used to produce income from that time onwards.

What’s a main residence?

For CGT purposes, your home normally qualifies as your main residence from the point you move in and start living there. However, if you move in as soon as practicable after the settlement date of the contract, that home is considered your main residence from the time you acquired it.

If you cannot move in straight away because you are in the process of selling your old home, you can treat both homes as your main residence for up to six months without impacting your eligibility to the main residence exemption. For example, where you have moved into your new home while finalising the sale of your old home. This applies if you were living in your old home for a continuous period of 3 months in the 12 months before you disposed of it, you did not use your old home to produce an income (rented it out or used it as a place of business) in any part of that 12 months when it was not your main residence, and your new property becomes your main residence.

If your new home is being rented to someone else when you purchase it and you cannot move in, the home is not your main residence until you move in.

Proof that your property is first established or continues to be your main residence is subjective and if the issue is ever queried, some of the factors the ATO will look at include:

The length of time you have lived in the dwelling
Where your family live
Whether you moved your personal belongings into the dwelling
The address you have your mail delivered
Your address on the Electoral Roll
Your connection to services such as telephone, gas and electricity, and
Your intention.

Foreign resident or resident?

The main residence rules changed in 2017 to exclude non-residents from accessing the main residence exemption. [1]

The rules focus on your tax residency status at the time of the CGT event (normally the time the contract of sale is entered into). That is, in most cases if you are a non-resident at the time you enter into the contract of sale, you will be unable to access the main residence exemption. This is the case even if you were a resident for part of the ownership period.

Conversely, if you are a resident at the time of the sale, and you meet the other eligibility criteria, the rules should apply as normal even if you were a non-resident for some of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if eligible, access the main residence exemption.

It’s important to recognise that the residency test is your tax residency not your visa status. Australia’s tax residency rules can be complex. If you are uncertain, please contact us and we will work through the rules with you.

The tax rules also contain integrity provisions that can deny the main residence exemption where someone circumvents the rules by deliberately structuring their affairs to access the exemption – for example, transferring the property to a related party prior to becoming a foreign resident to access the main residence exemption.

Can I treat my home as my main residence even if I don’t live there?

Once you have established your home as your main residence, in certain circumstances, you can treat it as your main residence even if you have stopped living there. The absence rule allows you to treat your home as your main residence for tax purposes:

For up to 6 years if it's used to produce income, for example you rent it out while you are away; or
Indefinitely if it is not used to produce income.

By applying the absence rule to your home, this normally prevents you from applying the main residence exemption to any other property you own over the same period. Apart from limited exceptions, the other property is exposed to CGT.

Let’s say you moved overseas in 2019 and rented out your home while you were away. Then, you came back to Australia in 2021 and moved back into your house. Then in early 2022, you decided it is not your forever home and sold it. You elected to apply the absence rule to your home and didn’t treat any other property as your main residence during that same period. In this case, you should be able to access the full main residence exemption assuming you are a resident for tax purposes at the time of sale.

The 6 year period also resets if you re-establish the property as your main residence and subsequently stop living there but rent it out in between. So, if the time the home was income producing is limited to six years for each absence, it is likely the full main residence exemption will be available if the other eligibility criteria are met.

What happens if I have been running my business from home?

If your home is also set aside as a dedicated place of business (i.e., you do not have another office or workshop), then you might only be able to claim a partial main residence exemption. This is because income producing assets are excluded from the main residence exemption.

If you are running a business from home, you can usually claim a tax deduction for occupancy expenses such as interest on the mortgage, council rates, and insurance. If you claimed or were eligible to claim these expenses, then you will only be able to access a partial main residence exemption. These rules apply even if you have not claimed these expenses as a deduction; the fact that you are eligible to make a claim is enough to impact your access to the main residence exemption.

In many cases, if your home would have qualified for a full main residence exemption before it is used as a dedicated place of business, the cost base of your home for CGT purposes should also be reset to its market value at that time.

Also, if only a partial main residence exemption is available, you will need to check whether you can access the small business CGT concessions on any remaining capital gain. As these rules are complex, please contact us and we will work through the rules with you.

However, if you have only been working from home out of convenience and there is another office that you normally work from, then your eligibility to access the main residence exemption should be unaffected. The ATO has confirmed that all that time working from home temporarily during the pandemic should not impact your ability to access the main residence exemption.

If I rent out a room on AirBnB, can I still claim the exemption?

If your home has been used to produce income while you are living in it, the portion used to produce income will be excluded from the main residence exemption. The rules might apply differently if you move out of the home completely – see Can I treat my home as my main residence even if I don’t live there?

Before you start renting out a portion of your home, it is a good idea to have it valued. If you would have qualified for the main residence exemption just before it was rented out, there are some rules that can apply in most cases and for CGT purposes, you are taken to have re-acquired your home for its market value at that time. So, if your home has increased in value over and above its cost base, this should reduce any gain when you eventually sell.

Can I have a different main residence to my spouse?

Let’s say you and your spouse each own homes that you have separately established as your main residences for the same period. The rules do not allow you to claim the full CGT exemption on both homes. Instead, you can:

Choose one of the dwellings as the main residence for both of you during the period; or
Nominate different dwellings as your main residence for the period.

If you and your spouse nominate different dwellings, the exemption is split between you:

If you own 50% or less of the residence chosen as your main residence, the dwelling is taken to be your main residence for that period and you will qualify for the main residence exemption for your ownership interest;
If you own greater than 50% of the residence chosen as your main residence, the dwelling is taken to be your main residence for half of the period that you and your spouse had different homes.

The same rule applies to the spouse.

The rule applies to each home that the spouses own regardless of how the homes are held legally, i.e., sole ownership, tenants in common or joint tenants.

Divorce and the main residence rules

The last two years have seen the highest divorce rate in Australia for a decade. When a property settlement occurs between spouses and if the conditions are met, the marriage breakdown rollover rules apply to ignore any CGT gain on the property settlement.

I have inherited a property, if I sell it, do I have to pay CGT?

Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. Assuming the house was the main residence of the deceased just before they died, they did not then use the home to produce an income, and the other eligibility criteria are met, a full exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met:

The dwelling is disposed of within two years of the deceased’s death; or
The dwelling was the main residence of one or more of the following people from the date of death until the dwelling has been disposed of:
The spouse of the deceased (unless they were separated);
An individual who had a right to occupy the dwelling under the deceased’s will; or
The beneficiary who is disposing of the dwelling.

An extension to the two year period can apply in limited certain circumstances, for example when the will is contested or complex.

If the deceased did not actually live in the property prior to their death and other eligibility criteria are satisfied, it still might be possible to apply the full exemption where the home was treated as their main residence under the absence rule.

If the full exemption is not available, a partial exemption might apply.

If you have any questions about how the main residence rules might apply to you, please drop us a line and we will be happy to work though it with you.

[1] Transitional rules ended on 30 June 2020.

ATO refocus on debt collection

Wed, 15 Jun 2022 03:06:39 GMT

The ATO has not pursued many business tax debts during the pandemic and allowed tax refunds to flow through even if the business had a tax debt. That position has now changed and the ATO has resumed debt collection and offsetting tax debts against refunds.

If you have a tax debt, it is important that you contact your Aspen Corporate Advisor to proactively engage with the ATO. Otherwise the ATO will use every means in their power to try and recover the debt.

What to expect from the new Government

BridgetS@Aspencorp.com.au (Bridget Swarbreck) — Wed, 15 Jun 2022 02:51:59 GMT

Anthony Albanese has been sworn in as Australia’s 31 ^st Prime Minister and a Government formed. We look at what we know so far about the policies of the new Government in an environment with plenty of problems and no easy fixes.

The economy

The Government has stated that its economic priority is, “creating jobs, boosting participation, improving and increasing productivity, generating new business investment, and increasing wages and household incomes.”

A second Federal Budget will be released in October this year to set the fiscal policy direction of the Government. The Albanese Government has stated that its focus is on growing the economy as opposed to increasing taxes, but it is a delicate balance to keep growth ahead of inflation. Treasurer Jim Chalmers has said that the Government will look to “redirect spending from unproductive purposes to more productive purposes.”

In a recent speech , Treasury Secretary Dr Steven Kennedy, summed it up when he said that the most significant economic development of late has been the, “…higher-than-expected surge in inflation. Headline inflation reached 5.1% in the March quarter of 2022, the highest rate of inflation in more than 2 decades… Price increases are reflecting a range of shocks, some temporary and some more persistent.” These shocks include:

Increased global demand for goods straining supply chains, increasing shipping costs, and clogging ports;
The Russian invasion of Ukraine which sharply increased the price of oil, energy and food. Russia accounts for 18% of global gas and 12% of global oil supply. Together Russia and Ukraine account for around one quarter of global trade in wheat; and
COVID-19 lockdowns in China impacting supply chains. China maintains a zero-COVID policy.

In Australia, energy prices have contributed strongly to inflation (the temporary reduction in fuel excise ends on 28 September 2022).

Personal income tax

The 2019-20 Budget announced a series of personal income tax reforms. Stage 3 of those reforms is legislated to commence on 1 July 2024. Stage 3 radically simplifies the tax brackets by collapsing the 32.5% and 37% rates into a single 30% rate for those earning between $45,001 and $200,000. Mr Albanese told Sky News, “People are entitled to have that certainty of the tax cuts that have been legislated… We won’t be changing them. What we want going forward is that certainty.”

Where will the money come from?

It is unclear at this stage how the Government intends to tackle the $1.2 trillion deficit. The general commentary from Finance Minister Katy Gallagher is that Treasury and Finance have been tasked with working through the Budget line by line to, “…see where there are areas where we can make sensible savings and return that money back to the Budget.”

Multinationals

Multinationals paying their fair share of tax was a go-to target during the election campaign. The plan for multinationals implements elements of the OECD’s two-pillar framework to reform international taxation rules and ensure Multinational Enterprises (MNEs) are subject to a minimum 15% tax rate from 2023. Australia and 129 other countries and jurisdictions, representing more than 90% of global GDP, are signatories to the framework.

The Government’s multinational policy supports the OECD framework by:

Limiting debt-related deductions by multinationals at 30% of profits, consistent with the OECD's recommended approach, while maintaining the arm's length test and the worldwide gearing ratio.
Limiting the ability for multinationals to abuse Australia's tax treaties when holding intellectual property in tax havens from 1 July 2023. A tax deduction would be denied for payments for the use of intellectual property when they are paid to a jurisdiction where they don’t pay sufficient tax.
Introducing transparency measures including reporting requirements on tax information, beneficial ownership, tax haven exposure and in relation to government tenders.

The reforms will follow consultation and are not anticipated to take effect until 2023.

No change to SG rate and rate increase

No change to the legislated superannuation guarantee rate increase. The SG rate will increase to 10.5% on 1 July 2022 and steadily increase by 0.5% each year until it reaches 12% on 1 July 2025.

Tax Time Targets

Wed, 15 Jun 2022 02:20:21 GMT

The ATO has flagged four priority areas this tax season where people are making mistakes.

With tax season almost upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season.

1. Record-keeping

2. Work-related expenses

3. Rental property income and deductions, and

4. Capital gains from crypto assets, property, and shares.

In general, there are three ‘golden rules’ when claiming tax deductions:

You must have spent the money and not been reimbursed.
If the expense is for a mix of work related (income producing) and private use, you can only claim the portion that relates to how you earn your income.
You need to have a record to prove it.

1.0 Record keeping

101 of working with the ATO is that you can’t claim it if you can’t prove it. If you are audited, the ATO will disallow deductions for unsubstantiated or unreasonable expenses. Even if the expense is below the substantiation threshold of $300 ($150 for laundry), the ATO might ask how you came up with that number. For example, if you claim $300 in work related expenses (that is, make a claim right up to the substantiation threshold), how did you come up with that number and not something else?

In addition to the obvious records of salary, wages, allowances, government payments or pensions and annuities, you need to keep records of:

· Interest or managed funds.

Records of expenses for any deductions claimed including a record of how that expense relates to the way you earn your income. That is, the expense must be related to how you earn your income. For example, if you claim the cost of RAT tests, you need to be able to prove that the RAT test was necessary to enable you to work. If you were working from home and not required to leave home, it will be harder to claim the cost of the test.

· Assets such as shares or units in a trust, rental properties or holiday homes, if you purchased a home or inherited a property, or disposed of an asset (including cryptocurrency).

You need to keep your records for five years. These can be digital copies of the records as long as they are clear and legible copies of the original. If your records are digital, keep a backup.

Records can be tax invoices, receipts, diary entries or something else that proves you incurred the expense and how it related to how you earn your income.

2.0 Work-related expenses

To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, and the expense needs to be directly related to your work.

What expenses are related to work?

You can claim a deduction for all losses and outgoings “to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.” That is, there must be a nexus between the expenses you are claiming and how you earn your income.

It all sounds simple enough until you start applying this rule. Take the example of an actor. To land the acting job she needs to attend auditions. She wants to claim the cost of having her hair and make-up done for the audition. But, because she is not generating income at the stage of the audition, she cannot claim her expenses. The expense must be related to how you are currently earning your income, not future potential income. The same issue applies to upskilling. If you attend investment seminars with the intention of building your investment portfolio the seminar is not deductible as a self-education expense unless it relates to managing your existing investment portfolio - not a future one. Or, a nurse’s aide who attendees university to qualify as a nurse. The university degree and the expenses associated with this are not deductible as the nursing degree is not required to fulfil the role of a nurse’s aide.

The second area of confusion is over what can be claimed for work. If the item is “conventional” it’s unlikely to be deductible. For example, you can't claim conventional clothing (including footwear) as a work-related expense, even if your employer requires you to wear it and you only wear the items of clothing at work. To be deductible clothing must be protective, occupation specific such as a chef’s chequered pants, a compulsory uniform, or a registered non-compulsory uniform.

Work related or private?

Another area of confusion is where expenses are incurred for work purposes but used privately. Internet access or mobile phone services are typical. A lot of people take the view that the expense had to be incurred for work so what does it matter if it’s used for private purposes? But, if you use the service on more than an ad-hoc basis for any purpose other than work, then the expense needs to be apportioned and only the work-related percentage claimed as a deduction. And yes, the ATO does check usage in an audit.

Claims for COVID-19 tests will be a test of this rule. COVID-19 tests are deductible from 1 July 2021 if the purpose was to determine whether you may attend or remain at work. The tax deduction does not apply if you worked from home and didn’t intend to attend your workplace, or the test was used for private purposes (for example, to tests the kids before school).

Claiming work from home expenses

Last financial year, one in three Australians claimed working from home expenses. Now we’re out of the pandemic, the ATO will be focussing specifically on what is being claimed. If you claimed work from home expenses last year and returned to the office this year, then there should be a reduction in your work from home claim. The ATO will be looking for discrepancies.

If you are claiming your expenses, there are three methods you can use:

The ATO’s simplified 80 cents per hour short-cut method – you can claim 80 cents for every hour you worked from home from 1 March 2020 to 30 June 2022. You will need to have evidence of hours worked like a timesheet or diary. The rate covers all of your expenses and you cannot claim individual items separately, such as office furniture or a computer.
Fixed rate 52 cents per hour method – applies if you have set up a home office but are not running a business from home. You can claim 52 cents for every hour and this covers the running expenses of your home. You can claim your phone, internet, or the decline in value of equipment separately.
Actual expenses method – you can claim the actual expenses you incur (and reduce the claim by any personal use and use by other family members). You will need to ensure you have kept records such as receipts to use this method.

It’s this last method, the actual method, the ATO is scrutinising because people using this method tend to lodge much higher claims in their tax return. Ineligible expenses include:

Personal expenses such as coffee, tea and toilet paper
Expenses related to a child’s education, such as online learning courses or laptops
Claiming large expenses up-front (instead of claiming depreciation for assets), and
Occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates, that cannot generally be claimed by employees working from home (especially by those who are working from home solely due to a lockdown).

3.0 Rental property income and deductions

For landlords, the focus is on ensuring that all income received, whether long-term, short-term, rental bonds, back payments, or insurance pay-outs, are recognised in your tax return.

If your rental property is outside of Australia, and you are an Australian resident for tax purposes, you must recognise the rental income you received in your tax return (excluding any tax you have paid overseas), unless you are classified as a temporary resident for tax purposes. You can claim expenses related to the property, although there are some special rules that need to be considered when it comes to interest deductions. For example, if you have borrowed money from an overseas lender you might be subject to withholding tax obligations.

Co-owned properties

For tax purposes, rental income and expenses need to be recognised in line with the legal ownership of the property, except in very limited circumstances where it can be shown that the equitable interest in the property is different from the legal title. The ATO will assume that where the taxpayers are related, the equitable right is the same as the legal title (unless there is evidence to suggest otherwise such as a deed of trust etc.,).

This means that if you hold a 25% legal interest in a property then you should recognise 25% of the rental income and rental expenses in your tax returns even if you pay most or all of the rental property expenses (the ATO would treat this as a private arrangement between the owners).

The main exception is where the parties have separately borrowed money to acquire their interest in the property, then they would claim their own interest deductions.

4.0 Capital gains from crypto, property or other assets

If you dispose of an asset - property, shares, crypto or NFTs, collectables (costing $500 or more) - you will need to calculate the capital gain or loss and record this in your tax return. Capital gains tax (CGT) does not apply to personal use assets such as a boat if you bought it for less than $10,000.

Crypto and capital gains tax

A question that often comes up is when do I pay tax on cryptocurrency?

If you acquire the cryptocurrency to make a private purchase and you don’t hold onto it, the crypto might qualify as a personal use asset. But in most cases, that is not the case and people acquire crypto as an investment, even if they do sometimes use it to buy things.

Generally, a CGT event occurs when disposing of cryptocurrency. This can include selling cryptocurrency for a fiat currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services.

Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event.

Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of the coin.

Record keeping is extremely important – you need receipts and details of the type of coin, purchase price, date and time of transactions in Australian dollars, records for any exchanges, digital wallet and keys, and what has been paid in commissions or brokerage fees, and records of tax agent, accountant and legal costs. The ATO regularly runs data matching projects, and has access to the data from many crypto platforms and banks.

If you make a loss on cryptocurrency, you can generally only claim the loss as a deduction if you are in the business of trading.

Gifting an asset might still incur tax

Donating or gifting an asset does not avoid capital gains tax. If you receive nothing or less than the market value of the asset, the market value substitution rules might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted for the purpose of your CGT calculations.

For example, if Mum & Dad buy a block of land then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a capital gains tax liability. It does not matter that Mum & Dad did not receive any money for the land.

Donations of cryptocurrency might also trigger capital gains tax. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency.

Are you Ready for Changes to the Super Guarantee?

Wed, 25 May 2022 04:01:15 GMT

On 1 July 2022 there are two important super guarantee (SG) changes that businesses need to be aware of.
These are:

the rate of SG is increasing from 10% to 10.5%
the $450 per month eligibility threshold for when SG is paid is being removed

What this means for you?

These changes mean that from 1 July 2022:

you'll need to make SG contributions at the new rate of 10.5%
employees can be eligible for SG, regardless of how much they earn. You may have to pay SG for the first time for some or all of your employees.

The ATO are working with accounting software companies to make sure payroll software is updated in time. Aspen Corporate is also able to assist you with any questions. The ATO and our online tools and calculators will be updated to help you from 1 July 2022.

What you need to do?

Check that your software is updated to correctly calculate your employees' SG entitlement from 1 July 2022.

If the removal of the $450 threshold means you'll be paying SG for one or more employees for the first time, you'll need to give them a Standard Choice Form .

If your employee does not provide you with a choice of super fund, review the Stapled Super Fund information on our website for guidance on what you need to do next. A stapled super fund is an existing super account linked to an individual employee.

If you have questions, or need support, speak to your Aspen Corporate advisor today.

Reckon Accounts Hosted Notice: Accounts Hosted Backups Deletion

Wed, 11 May 2022 04:58:34 GMT

As you may be aware, Reckon Accounts Hosted users are responsible for creating their own backups via File Menu > Save Copy or Backup. Over the years, there has been a large build-up of backup files stored on the Reckon Hosted system.

Reckon has announced that Accounts Hosted will automatically remove all backup (QBB) files that are over 365 days old, this will occur on the 28th of May and will then be performed on an ongoing quarterly basis. If you have not saved files elsewhere, they will be deleted.

Aspen Corporate advises backing up all files ASAP. This has the added benefit of cleaning your transaction log, which will make your files more responsive and quicker.

For information and steps on how to download your Reckon Accounts Hosted Backup (QBB) files, Reckon has information here , with updated terms and conditions that reflect the above changes, please review the latest copy here . For any other questions, or for support speak to our Senior Bookkeeping Manager David Scott

Fuel tax credit changes

Tue, 10 May 2022 03:06:09 GMT

The Government temporarily halved the excise and excise equivalent customs duty rates for petrol, diesel and all other petroleum-based products (except aviation fuels) for 6 months from 30 March 2022 until 28 September 2022. This has caused a reduction in fuel tax credit rates.

During this 6 month period, businesses using fuel in heavy vehicles for travelling on public roads won't be able to claim fuel tax credits for fuel used for this purpose. This is because the road user charge exceeds the excise duty payable, and this reduces the fuel tax credit rate to nil.

You can find the ATO’s updated fuel tax credit rates that apply for the period from 30 March 2022 to 30 June 2022 here . The ATO’s fuel tax credit calculator has been updated to apply the current rates.

Can I claim a tax deduction for my gym membership?

Tue, 10 May 2022 02:52:39 GMT

There are lots of reasons to keep fit but very few of them have to do with how we earn our income. As a result, a tax deduction for a gym membership isn’t available to most people. And yes, the Tax Office has heard all the arguments before about how keeping fit reduces sickness and therefore is important to earning an income, and ‘…the way I look is important to my job’.

In general, a tax deduction for fitness expenses is only available if your job requires you to have an extremely high level of fitness. The nexus between how you earn your income and the deduction is about the physical demands and requirements of your specific role. Firefighters are a case in point. A person with what the ATO describes as a “general duties firefighter” role cannot claim a deduction for the money they have spent keeping fit, but a firefighter in a specialist search and rescue operations team for example, trained in a range of specialist skills including structural collapses and tunnel emergencies, and who is tested on fitness and ongoing strenuous physical activity as an essential part of their job, would be able to claim fitness expenses. Similarly, a professional ballet dancer is likely to be able to claim their fitness expenses. A model however, might not be able to claim their expenses as, while they need to look a particular way, their modelling role does not require physical training and exertion (clearly the ATO has not seen some the poses that models have to hold!). So, access to a deduction is about the specialist physical demands and requirements of your role.

A recent case before the administrative appeals tribunal (AAT) explored the boundary of who can claim fitness expenses, confirming that a prison dog handler could claim a deduction for the cost of his gym membership. In this case, the dog handler was responsible for training and maintaining two dogs. He was required to be available to assist in emergencies that might arise. While these emergencies didn’t arise often, the handler had to be prepared for the possibility of an emergency arising at any time. Reaching this decision, the AAT noted the handler:

Was required to maintain a high degree of anaerobic fitness (including muscle strength sufficient to control a large German shepherd on a lead in a volatile situation);
Was required to maintain a high degree of aerobic fitness (that is, a degree of speed and agility sufficient to enable him to move effectively with, and control and direct, his dog in an emergency); and
Must also be prepared to restrain prisoners himself.

While the employer in this case did not specify any particular level of fitness for the dog handler role, the AAT held that a superior level of fitness was implicitly demanded. However, it did not all go the way of the dog handler. His claim for supplement expenses, travel to and from the gym, and gym clothing was denied.

While some commentators have suggested that the floodgates are now open for gym membership claims, as always, the devil is in the detail. To claim a tax deduction for fitness expenses it is generally necessary to be part of a specialist workforce. Police Officers for example cannot generally claim fitness expenses despite the fact that, like the dog handler in the AAT case, they need to respond quickly to emergencies and may need to subdue people. Unless they are part of a specialist response unit that is required to have a specific, high level of fitness, they are unlikely to be able to claim their gym membership expenses.

So, for the rest of us, gym memberships will continue to be a labour of self-love and care and not an essential part of how we earn our income.

The 120% deduction for skills training and technology costs

Tue, 10 May 2022 02:52:31 GMT

It’s a great headline isn’t it? Spend $100 and get a $120 tax deduction. Days after the Federal Budget announcement that businesses will be able to claim a 120% deduction for expenditure on training and technology costs, we started receiving marketing emails encouraging us to spend now to access the deduction.

But, there are a few problems. Firstly, the announcement is just that, it is not yet law. And, given the Government is in caretaker mode for the Federal election, we do not know the position of the incoming Government on this measure. And, even if the incoming Government is supportive, we are yet to see draft legislation or detail to determine the practical application of the measure.

What was announced?

The 2022-23 Federal Budget announced two ‘Investment Boosts’ available to small businesses with an aggregated annual turnover of less than $50 million.

The Skills and Training Boost is intended to apply to expenditure from Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to claim the deduction until the 2023 tax return. That is, for expenditure between 29 March 2022 and 30 June 2022, the boost, the additional 20%, will not be claimable until the 2022-23 tax return, assuming the announced start dates are maintained if and when the legislation passes Parliament.

The Technology Investment Boost is intended to apply to expenditure from Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.

The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred.

Technology Investment Boost

A 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services, capped at $100,000 per annum.

We have received a lot of questions about the specific expenditure the boost might apply to, for example does it cover website development or SEO services? But until we see the legislation, nothing is certain.

Skills and Training Boost

A 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.

We are waiting on further details of this initiative to be released to confirm whether there will need to be a nexus between the training program and the current employment activities of the employees undertaking the course. So once again, until we have something more than the announcement, we cannot confirm how the measure will apply in practice or how broad (or otherwise) the definition of skills training is.

What happens if I have already spent money on training and technology in anticipation of the bolstered deduction?

If the measure becomes law, and the start date of the measure remains the same, we expect that any qualifying expenditure incurred in the 2021-22 financial year will be claimed in your tax return. But, the ‘boost’, the extra 20% will not be claimable until the 2022-23 financial year.

If the measure does not come to fruition, you should be able to claim a deduction under normal rules for the actual business expense.

What’s changing on 1 July 2022?

Tue, 10 May 2022 02:33:50 GMT

A series of reforms and changes will commence on 1 July 2022. Here’s what is coming up:

For business

Superannuation guarantee increase to 10.5%

The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025.

If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

$450 super guarantee threshold removed

From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation.

For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.

Profits of professional services firms

The ATO has been concerned for some time about how many professional services firms are structured - specifically, professional practices such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.

New ATO guidance that comes into effect from 1 July 2022, takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Tax Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Significant penalties can also apply when Part IVA is triggered.

A new method of assessing the level of risk associated with profits generated by a professional services firm and how they flow through to individual practitioners and their related parties, will come into effect from 1 July 2022. Professional firms will need to assess their structures to understand their risk rating, and if necessary, either make changes to reduce their risks level or ensure appropriate documentation is in place to justify their position.

Lowering tax instalments for small business – PAYG

PAYG instalments are regular prepayments made during the year of the tax on business and investment income. The actual amount owing is then reconciled at the end of the income year when the tax return is lodged.

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government has set this uplift factor at 2% instead of the 10% that would have applied. The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year:

Up to $10 million annual aggregated turnover for GST instalments, and
$50 million annual aggregated turnover for PAYG instalments

The effect of the change is that small businesses using this PAYG instalment method will have more cash during the year to utilise. However, the actual amount of tax owing on the tax return will not change, just the amount you need to contribute during the year.

Trust distributions to companies

The ATO recently released a draft tax determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If the amount owed by the trust is deemed to be a loan then it can potentially fall within the scope of the integrity provisions in Division 7A. If certain steps are not taken, such as placing the unpaid amount under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate. The ATO guidance deals specifically with, and potentially changes, when an unpaid entitlement to trust income will start being treated as a loan depending on the wording of the resolution to pay a distribution. The new guidance applies to trust entitlements arising on or after 1 July 2022.

For you

Home loan guarantee scheme extended

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. An additional 25,000 guarantees will be available for eligible first home owners (35,000 per year), and 2,500 additional single parent family home guarantees (5,000 per year).

Your superannuation

Work-test repeal – enabling those under 75 to contribute to super

Currently, a work test applies to superannuation contributions made by people aged 67 or over. In general, the work test requires that you are gainfully employed for at least 40 hours over a 30 day period in the financial year.

From 1 July 2022, the work-test has been scrapped and individuals aged younger than 75 years will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.

The work test will still apply to personal deductible contributions.

This change will also see those aged under 75 be able to access the ‘bring forward rule’ if your total superannuation balance allows. The bring forward rule enables you to contribute up to three years’ worth of non-concessional contributions to your super in one year.

Downsizer contributions from age 60

From 1 July 2022, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home. Currently, you need to be 65 years or older to utilise downsizer contributions.

Downsizer contributions can be made from the sale of your principal residence that you have owned for the past ten or more years. These contributions are excluded from the age test, work test and your total superannuation balance (but not exempt from your transfer balance cap).

First home saver scheme – using super to save for a first home

The First Home Super Saver Scheme enables first home buyers to withdraw voluntary contributions they have made to superannuation and any associated earnings, to put toward the cost of a first home. At present, the maximum amount of voluntary contributions you can make and withdraw is $30,000. From 1 July 2022, the maximum amount will increase to $50,000. The benefit of this scheme is the concessional tax treatment of superannuation.

If you would like assistance with any of the up coming changes, speak to your Aspen Corporate Advisor today.

ATO ramps up heat on directors

Tue, 10 May 2022 01:42:08 GMT

Throughout March, the ATO sent letters to directors who are potentially in breach of their obligations to ensure that the company they represent has met its PAYG withholding, superannuation guarantee charge, or GST obligations.

These letters are a warning shot and should not be ignored.

The director penalty regime ensures that directors are personally liable for certain debts of the company if the debts are not actively managed. The liability applies to both current and former directors.

To recover this debt, the ATO will issue a director penalty notice to the individual directors. The ATO can then take action to recover the unpaid amount, including:

By issuing garnishee notices,
By offsetting tax credits owed to the director against the penalty, or
By initiating legal recovery proceedings against the director.

In some cases it is possible for the penalty to be remitted but this depends on when the PAYGW, GST or SGC amounts are reported to the ATO. For example, in some cases the penalty can be remitted if an administrator or small business restructuring practitioner is appointed to the company, or the company begins to be wound up. However, this is normally only possible for PAYGW and GST amounts if they are reported to the ATO within 3 months of the due date. For SGC amounts this is only possible if the unpaid amount is reported by the due date of the SGC statement.

If the unpaid amounts are not reported to the ATO by the relevant deadline then the only way for the penalty to be remitted is for the debt to be paid in full. Winding up the company at this stage will not make the liability of the directors go away.

If you have received a warning letter from the ATO or a director penalty notice then please contact us immediately.

Federal Budget 2022-23

Thu, 10 Mar 2022 03:56:28 GMT

The Federal Budget has been brought forward to 29 March 2022. With the pandemic and the war in Ukraine we have seen a lot less commentary this year about what to expect in the Budget.

But, as an election budget, we typically expect to see a series of measures designed to boost productivity, many of which are likely to benefit businesses willing to invest in the future.

Bolstering the workforce, and measures to increase the participation of women, is also a potential feature as Australia struggles with post pandemic worker shortages.

Fiscally, the Budget is likely to be in a better position than expected in previous Budgets so there is more in the Government coffers to spend on initiatives. Look out for our update on the important issues the day after the Budget is released.

Are Your Contractors Really Employees?

Tue, 08 Mar 2022 02:31:11 GMT

Two landmark cases before the High Court highlight the problem of identifying whether a worker is an independent contractor or employee for tax and superannuation purposes.

Many business owners assume that if they hire independent contractors they will not be responsible for PAYG withholding, superannuation guarantee, payroll tax and workers compensation obligations. However, each set of rules operates a bit differently and in some cases genuine contractors can be treated as if they were employees. Also, correctly classifying the employment relationship can be difficult and there are significant penalties faced by businesses that get it wrong.

Two cases handed down by the High Court late last month clarify the way the courts determine whether a worker is an employee or an independent contractor. The High Court confirmed that it is necessary to look at the totality of the relationship and use a ‘multifactorial approach’ in determining whether a worker is an employee. That is, if it walks like a duck and quacks like a duck, it’s probably a duck, even if on paper, you call it a chicken.

In CFMMEU v Personnel Contracting and ZG Operations Australia v Jamse, the court placed a significant amount of weight on the terms of the written contract that the parties had entered into. The court took the approach that if the written agreement was not a sham and not in dispute, then the terms of the agreement could be relied on to determine the relationship. However, this does not mean that simply calling a worker an independent contractor in an agreement classifies them as a contractor. In this case, a labour hire contractor was determined to be an employee despite the contract stating he was an independent contractor.

In this case, Personnel Contracting offered the labourer a role with the labour hire company. The labourer, a backpacker with some but limited experience on construction sites, signed an Administrative Services Agreement (ASA) which described him as a “self-employed contractor.” The labourer was offered work the next day on a construction site run by a client of Personnel Contracting, performing labouring tasks at the direction of a supervisor employed by the client. The labourer worked on the site for several months before leaving the state. Some months later, he returned and started work at another site of the Personnel Contracting’s same client. The question before the court was whether the labourer was an employee.

Overturning a previous decision by the Full Federal Court, the High Court held that despite the contract stating the labourer was an independent contractor, under the terms of the contract, the labourer was required to work as directed by the company and its client. In return, he was entitled to be paid for the work he performed. In effect, the contract with the client was a “contract of service rather than a contract for services”, as such the labourer was an employee.

The second case, ZG Operations Australia v Jamse produced a different result.

In this case, two truck drivers were employed by ZG Operations for nearly 40 years. In the mid-1980’s, the company insisted that it would no longer employ the drivers, and would continue to use their services only if they purchased their trucks and entered into contracts to carry goods for the company. The respondents agreed to the new arrangement and Mr Jamsek and Mr Whitby each set up a partnership with their wife. Each partnership executed a written contract with the company for the provision of delivery services, purchased trucks from the company, paid the maintenance and operational costs of those trucks, invoiced the company for its delivery services, and was paid by the company for those services. The income from the work was declared as partnership income for tax purposes and split between each individual and their wife.

Overturning a previous decision in the Full Federal Court, the High Court held that the drivers were not employees of the company.

Consistent with the decision in the Personnel Contracting case, a majority of the court held that where parties have comprehensively committed the terms of their relationship to a written contract (and this is not challenged on the basis that it is a sham or is otherwise ineffective under general law or statute), the characterisation of the relationship must be determined with reference to the rights and obligations of the parties under that contract.

After 1985 or 1986, the contracting parties were the partnerships and the company. The contracts between the partnerships and the company involved the provision by the partnerships of both the use of the trucks owned by the partnerships and the services of a driver to drive those trucks. This relationship was not an employment relationship. In this case the fact that the workers owned and maintained significant assets that were used in carrying out the work carried a significant amount of weight.

For employers struggling to work out if they have correctly classified their contractors as employees, it will be important to review the agreements to ensure that the “rights and obligations of the parties under that contract” are consistent with an independent contracting arrangement. Merely labelling a worker as an independent contractor is not enough if the rights and obligations under the agreement are not consistent with the label. The High Court stated, “To say that the legal character of a relationship between persons is to be determined by the rights and obligations which are established by the parties' written contract is distinctly not to say that the “label” which the parties may have chosen to describe their relationship is determinative of, or even relevant to, that characterisation.”

A genuine independent contractor who is providing personal services will typically be:

Autonomous rather than subservient in their decision-making;
Financially self-reliant rather than economically dependent upon the business of another; and,
Chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.

Every business that employs contractors should have a process in place to ensure the correct classification of employment arrangements and review those arrangements over time. Even when a worker is a genuine independent contractor this doesn’t necessarily mean that the business won’t have at least some employment-like obligations to meet. For example, some contractors are deemed to be employees for superannuation guarantee and payroll tax purposes.

Immediate Deductions Extended

Tue, 08 Mar 2022 02:04:45 GMT

Temporary full expensing enables your business to fully expense the cost of:

new depreciable assets
improvements to existing eligible assets, and
second hand assets

in the first year of use.

Introduced in the 2020-21 Budget and now extended until 30 June 2023, this measure enables an asset’s cost to be fully deductible upfront rather than being claimed over the asset’s life, regardless of the cost of the asset. Legislation passed by Parliament last month extends the rules to cover assets that are first used or installed ready for use by 30 June 2023.

Some expenses are excluded including improvements to land or buildings that are not treated as plant or as separate depreciating assets in their own right. Expenditure on these improvements would still normally be claimed at 2.5% or 4% per year.

For companies it is important to note that the loss carry back rules have not as yet been extended to 30 June 2023 – we’re still waiting for the relevant legislation to be passed. If a company claims large deductions for depreciating assets in a particular income year and this puts the company into a loss position then the tax loss can generally only be carried forward to future years. However, the loss carry back rules allow some companies to apply current year losses against taxable profits in prior years and claim a refund of the tax that has been paid. At this stage the loss carry back rules are due to expire at the end of the 2022 income year, but we are hopeful that the rules will be extended to cover the 2023 income year as well.

The ATO’s Attack on Trusts and Trust Distributions

Tue, 08 Mar 2022 01:59:36 GMT

Late last month, the Australian Taxation Office (ATO) released a package of new guidance material that directly targets how trusts distribute income. Many family groups will pay higher taxes (now and potentially retrospectively) as a result of the ATO’s more aggressive approach.

Family trust beneficiaries at risk

The tax legislation contains an integrity rule, section 100A, which is aimed at situations where income of a trust is appointed in favour of a beneficiary but the economic benefit of the distribution is provided to another individual or entity. If trust distributions are caught by section 100A, then this generally results in the trustee being taxed at penalty rates rather than the beneficiary being taxed at their own marginal tax rates.

The latest guidance suggests that the ATO will be looking to apply section 100A to some arrangements that are commonly used for tax planning purposes by family groups. The result is a much smaller boundary on what is acceptable to the ATO which means that some family trusts are at risk of higher tax liabilities and penalties.

ATO redrawing the boundaries of what is acceptable

Section 100A has been around since 1979 but to date, has rarely been invoked by the ATO except where there is obvious and deliberate trust stripping at play. However, the ATO’s latest guidance suggests that the ATO is now willing to use section 100A to attack a wider range of scenarios.

There are some important exceptions to section 100A, including where income is appointed to minor beneficiaries and where the arrangement is part of an ordinary family or commercial dealing. Much of the ATO’s recent guidance focuses on whether arrangements form part of an ordinary family or commercial dealing. The ATO notes that this exclusion won’t necessarily apply simply because arrangements are commonplace or they involve members of a family group. For example, the ATO suggests that section 100A could apply to some situations where a child gifts money that is attributable to a family trust distribution to their parents.

The ATO’s guidance sets out four ‘risk zones’ – referred to as the white, green, blue and red zones. The risk zone for a particular arrangement will determine the ATO’s response:

White zone

This is aimed at pre-1 July 2014 arrangements. The ATO will not look into these arrangements unless it is part of an ongoing investigation, for arrangements that continue after this date, or where the trust and beneficiaries failed to lodge tax returns by 1 July 2017.

Green zone

Green zone arrangements are low risk arrangements and are unlikely to be reviewed by the ATO, assuming the arrangement is properly documented. For example, the ATO suggests that when a trust appoints income to an individual but the funds are paid into a joint bank account that the individual holds with their spouse then this would ordinarily be a low-risk scenario. Or, where parents pay for the deposit on an adult child’s mortgage using their trust distribution and this is a one-off arrangement.

Blue zone

Arrangements in the blue zone might be reviewed by the ATO. The blue zone is basically the default zone and covers arrangements that don’t fall within one of the other risk zones. The blue zone is likely to include scenarios where funds are retained by the trustee, but the arrangement doesn’t fall within the scope of the specific scenarios covered in the green zone.

Section 100A does not automatically apply to blue zone arrangements, it just means that the ATO will need to be satisfied that the arrangement is not subject to section 100A.

Red zone

Red zone arrangements will be reviewed in detail. These are arrangements the ATO suspects are designed to deliberately reduce tax, or where an individual or entity other than the beneficiary is benefiting.

High on the ATO’s list for the red zone are arrangements where an adult child’s entitlement to trust income is paid to a parent or other caregiver to reimburse them for expenses incurred before the adult child turned 18. For example, school fees at a private school. Or, where a loan (debit balance account) is provided by the trust to the adult child for expenses they incurred before they were 18 and the entitlement is used to pay off the loan. These arrangements will be looked at closely and if the ATO determines that section 100A applies, tax will be applied at the top marginal rate to the relevant amount and this could apply across a number of income years.

The ATO indicated that circular arrangements could also fall within the scope of section 100A. For example, this can occur when a trust owns shares in a company, the company is a beneficiary of that trust and where income is circulated between the entities on a repeating basis. For example, section 100A could be triggered if:

The trustee resolves to appoint income to the company at the end of year 1.
The company includes its share of the trust's net income in its assessable income for year 1 and pays tax at the corporate rate.
The company pays a fully franked dividend to the trustee in year 2, sourced from the trust income, and the dividend forms part of the trust income and net income in year 2.
The trustee makes the company presently entitled to some or all of the trust income at the end of year 2 (which might include the franked distribution).
These steps are repeated in subsequent years.

Distributions from a trust to an entity with losses could also fall within the red zone unless it is clear that the economic benefit associated with the income is provided to the beneficiary with the losses. If the economic benefit associated with the income that has been appointed to the entity with losses is utilised by the trust or another entity then section 100A could apply.

Who is likely to be impacted?

The ATO’s updated guidance focuses primarily on distributions made to adult children, corporate beneficiaries, and entities with losses. Depending on how arrangements are structured, there is potentially a significant level of risk. However, it is important to remember that section 100A is not confined to these situations.

Distributions to beneficiaries who are under a legal disability (e.g., children under 18) are excluded from these rules.

For those with discretionary trusts it is important to ensure that all trust distribution arrangements are reviewed in light of the ATO’s latest guidance to determine the level of risk associated with the arrangements. It is also vital to ensure that appropriate documentation is in place to demonstrate how funds relating to trust distributions are being used or applied for the benefit of beneficiaries.

Companies entitled to trust income

As part of the broader package of updated guidance targeting trusts and trust distributions, the ATO has also released a draft determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If the amount owed by the trust is deemed to be a loan then it can potentially fall within the scope of another integrity provision in the tax law, Division 7A.

Division 7A captures situations where shareholders or their related parties access company profits in the form of loans, payments or forgiven debts. If certain steps are not taken, such as placing the loan under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate.

The latest ATO guidance looks at when an unpaid entitlement to trust income will start being treated as a loan. The treatment of unpaid entitlements to trust income as loans for Division 7A purposes is not new. What is new is the ATO’s approach in determining the timing of when these amounts start being treated as loans. Under the new guidance, if a trustee resolves to appoint income to a corporate beneficiary, then the time the unpaid entitlement starts being treated as a loan will depend on how the entitlement is expressed by the trustee (e.g., in trust distribution resolutions etc):

If the company is entitled to a fixed dollar amount of trust income the unpaid entitlement will generally be treated as a loan for Division 7A purposes in the year the present entitlement arises; or
If the company is entitled to a percentage of trust income, or some other part of trust income identified in a calculable manner, the unpaid entitlement will generally be treated as a loan from the time the trust income (or the amount the company is entitled to) is calculated, which will often be after the end of the year in which the entitlement arose.

This is relevant in determining when a complying loan agreement needs to be put in place to prevent the full unpaid amount being treated as a deemed dividend for tax purposes when the trust needs to start making principal and interest repayments to the company.

The ATO’s views on “sub-trust arrangements” has also been updated. Basically, the ATO is suggesting that sub-trust arrangements will no longer be effective in preventing an unpaid trust distribution from being treated as a loan for Division 7A purposes if the funds are used by the trust, shareholder of the company or any of their related parties.

The new guidance represents a significant departure from the ATO’s previous position in some ways. The upshot is that in some circumstances, the management of unpaid entitlements will need to change. But, unlike the guidance on section 100A, these changes will only apply to trust entitlements arising on or after 1 July 2022.

Pandemic Leave Disaster Payments rules change

Tue, 08 Feb 2022 03:42:54 GMT

The rules for the Pandemic Leave Disaster Payment changed on 18 January 2022.

The rules for the Pandemic Leave Disaster Payment, the payment accessible to those who have lost work because they have had to self-isolate with COVID-19, or are caring for someone who contracted it, changed on 18 January 2022.

The new rules change the definition of a close contact in line with the harmonised national definition. The payment is now accessible if you are a close contact because you either usually live with the person who has tested positive with COVID-19, or have stayed in the same household for more than 4 hours with the person who has tested positive with COVID-19 during their infectious period.

The payment provides:

· $450 if you lost at least 8 hours or a full day’s work, and less than 20 hours of work

· $750 if you lost 20 hours or more of work.

To claim the payment, you will need to be an Australian citizen, permanent visa holder (or temporary visa holder with a right to work) or a New Zealand passport holder. The payment is also subject to means testing with a $10,000 illiquid assets test.

Cash injection for struggling businesses

Tue, 08 Feb 2022 03:42:52 GMT

Businesses struggling with the Omicron wave of the pandemic have been offered new grants and support in WA, NSW and SA.

Western Australia

Western Australia has been hit with compounding issues of border closures, COVID-19 and natural disasters.

The latest grant provides financial assistance of up to $12,500 ($1,130 for each impacted day) to small businesses in the hospitality, music events or arts sectors that were directly financially impacted by the Chief Health Officer’s COVID Restrictions (Directions) from 23 December 2021 to 4 January 2022. Non-employing businesses will receive up to $4,400 ($400 per day).

To be eligible, your business must:

Be located within the Perth, Rottnest or Peel regions; and
Have a valid ABN; and
Have an annual turnover of more than $50,000; and
Australia wide payroll of less than $4m in 2020-21; and
Operate in the hospitality sector, the music events industry or the creative and performing arts sectors that were directly impacted by the restrictions; and
Have experienced a decline in turnover of at least 30% compared to the same period in the prior year (or another comparable period for new businesses).

Applications are open through SmartyGrants .

New South Wales

The NSW Small Business Support package provides eligible employing businesses with a lump sum payment of 20% of weekly payroll, up to a maximum of $5,000 per week for the month of February 2022. The minimum weekly payment for employers is $750 per week.

Eligible non-employing businesses will receive $500 per week (paid as a lump sum of $2,000).

To access the package, businesses must:

Have an aggregated annual turnover between $75,000 and $50 million (inclusive) for the year ended 30 June 2021; and
Experienced a decline in turnover of at least 40% due to Public Health Orders or the impact of COVID-19 during the month of January 2022 compared to January 2021 or January 2020; and
Experienced a decline in turnover of 40% or more from 1 to 14 February 2022 compared to the same fortnight in either 2021 or 2020 (you must use the same comparison year utilised in the decline in turnover test for January); and
Maintain their employee headcount from “the date of the announcement of the scheme” (30 January 2022).

The support package only covers the month of February 2022. Applications for support are expected to open mid-February.

South Australia

The South Australian Government has introduced two rounds of support for businesses impacted by health restrictions:

The Tourism, hospitality and gym grant provides $6,000 for employing businesses and $2,000 for non-employing business whose turnover reduced by 30% or more between 10 January 2022 to 30 January 2022 (inclusive) comparable to 2019-20 (or 2020-21 for new business). The grant will automatically be paid to those who applied for and received the grant based on the turnover period 27/12/21 to 9/1/22.
The Business hardship grant provides $6,000 for employing businesses and $2,000 for non-employing businesses whose turnover reduced by 50% or more between 10 January 2022 to 30 January 2022 (inclusive) comparable to 2019-20 (or 2020-21 for new business). The grant will automatically be paid to those who applied for and received the grant based on the turnover period 27/12/21 to 9/1/22.

Applications for the grants open 14 February 2022.

Professional Services Firm Profits Guidance Finalised

Tue, 08 Feb 2022 03:42:46 GMT

The Australian Taxation Office’s finalised position on the allocation of profits from professional firms starts on 1 July 2022.

The ATO’s guidance uses a series of factors to determine the level of risk associated with profits generated by a professional services firm and how they flow through to individual practitioners and their related parties. The ATO may look to apply the general anti-avoidance rules in Part IVA to practitioners who don’t fall within the low-risk category.

With the new guidelines taking effect on 1 July 2022, professional firms will need to assess their structures now to understand their risk rating, and if necessary, either make changes to reduce their risks level or ensure appropriate documentation is in place to justify their position.

The problem

The finalised guidance has had a long gestation period. The ATO has been concerned for some time about how many professional services firms are structured – specifically, professional practices such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.

The ATO guidance takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Significant penalties can also apply when Part IVA is triggered.

Determining the risk rating

The guidance sets out a series of tests which are used to calculate a risk score. This risk score is then used to classify the practitioner as falling within a Green, Amber or Red risk zone, which determines if the ATO should take a closer look at you and your firm. Those in the green zone are at low risk of the ATO directing its compliance efforts to you. Those in the red zone, however, can expect the ATO to conduct further analysis as a matter of priority which could lead to an ATO audit.

Before calculating the risk score it is necessary to consider two gateway tests:

Gateway 1 - considers whether there is commercial rationale for the business structure and the way in which profits are distributed, especially in the form of remuneration paid. Red flags would include arrangements that are more complex than necessary to achieve the relevant commercial objective, and where the tax result is at odds with the commercial venture, for example, where a tax loss is claimed for a profitable commercial venture.
Gateway 2 - requires an assessment of whether there are any high-risk features. The ATO sets out some examples of arrangements that would be considered high-risk, including the use of financing arrangements relating to transactions between related parties.

If the gateway tests are passed, then you can self-assess your risk level against the ATO’s risk assessment factors. There are three factors to be considered:

The professional’s share of profit from the firm (and service entities etc) compared with the share of firm profit derived by the professional and their related parties;
The total effective tax rate for income received from the firm by the professional and their related parties; and
The professional’s remuneration as a percentage of the commercial benchmark for the services provided to the firm.

The resulting ‘score’ from these factors determines your risk zone. Some arrangements that were considered low risk in prior years under the ATO’s previous guidance may now fall into a higher risk zone. In these cases, the ATO is allowing a transitional period for those practitioners to continue to apply the previous guidelines until 30 June 2024.

For professional services firms, it will be important to assess the risk level and this needs to be done for each principal practitioner separately. Those in the amber or red zone who want to be classified as low risk need to start thinking about what needs to change to move into the lower risk zone.

Where other compliance issues are present - such as failure to recognise capital gains, misuse of the superannuation systems, failure to lodge returns or late lodgement, etc., - a green zone risk assessment will not apply.

We will contact clients who might be impacted by the incoming guidance. If you are concerned about your position, please contact your Aspen Corporate Advisor .

For further information about ATOs changes for professional services, have a look at other Aspen Corp blog posts

https://www.aspencorp.com.au/the-assault-on-professional-services

https://www.aspencorp.com.au/ato-contacts-at-risk-professional-services-firms

https://www.aspencorp.com.au/resources/reading_room/news_archives/ato_targets_profits_of_professional_service_firms

Year of the Tiger: Roaring or Bellowing?

Tue, 08 Feb 2022 03:42:42 GMT

The 2022 Luna New Year, Year of the Tiger, is courage and bravery. It is a year to drive out evil and one of momentum and change. The message; walk boldly with courage. And it seems the Reserve Bank Governor is aligned with this sentiment.

The Tiger economy

At a recent speech to the National Press Club, Reserve Bank Governor Philip Lowe was optimistic about Australia's prospects in 2022. This optimism is driven by strong GDP growth that saw growth outstrip the RBA’s forecast to reach 5%, and strong jobs growth with the unemployment rate at 4.2% - the lowest rate since the resources boom. Unemployment is expected to reduce further to 3.75% by the end of 2022, and if it does, it will be the lowest unemployment level since the early 1970s. Underemployment is also at its lowest rate in 13 years.

In addition, “household and business balance sheets are generally in good shape and wages growth is picking up.”

The surprise inflation figures

While wages growth is “picking up”, the forecast remains sluggish at 2.25%. Australia’s wages growth has remained lethargic for a decade now, which will come as a surprise to many business operators competing for skilled workers as, on the ground, the opposite feels true. Combined with a surprise spike in inflation (CPI) well above expectations at 3.5% (+2% on RBA forecasts), pushed predominantly by a sharp increase in petrol prices (32% over the past year) and the cost of constructing new homes, the purchasing power of Australians has declined. There has also been a large increase in the price of consumer durables (cars, fridges etc.,) and less discounting in the face of strong demand as supply chain problems take hold.

Australia is not alone in this. The UK inflation rate jumped to 5.4%, 5.7% in the United States and 5.9% in New Zealand in the same period.

Supply woes

The sharp increase in interest rates comes on the back of, “very significant disruptions in supply chains and distribution networks,” with labour shortages in particular dominating news coverage as businesses struggle to maintain momentum with staff impacted by either COVID-19 or isolation requirements. National Cabinet harmonised the definition of a ‘close contact’ at the end of December 2021 for most Australian States and Territories and reduced the isolation period to seven days (from 14).

The recent NAB quarterly business survey reported that, “ongoing supply chain issues and border closures saw 85% of firms report availability of labour as a constraint on output, while 47% reported availability of materials as a constraint – both records in the history of the survey. As a result, both cost growth and retail price growth remained elevated.” With global staff shortages, come bottlenecks in the supply chain. For many businesses, estimating what stock they need has become a crystal ball exercise rather than a predictable science and in some cases they are ordering ahead to reduce the supply risks, which has a knock-on effect of increasing demand for raw materials. And, this is without factoring in the problem of panic buying (toilet paper anyone) as customers anxiously watch dwindling supplies on supermarket shelves. Supply chain problems, both in Australia and globally, are not anticipated to normalise for another 12 to 24 months.

The RBA Governor’s three takeaways are:

· The economy has been remarkably resilient;

· The link between the strength of the real economy and prices and wages remains alive; and

· The supply side matters for both economic activity and prices.

You could almost add, no one really knows, as a fourth point as an unexpected change, like a new virulent COVID variant, or further lockdowns, could rewrite the forecasts. But, there is plenty of room for optimism. What we have seen to date is that when there is an opportunity to rebound, to return to normal, the economy bounces back quickly and often much faster than anticipated. Afterall, health, not the economy, has been the catalyst for the crisis.

When will interest rates rise?

During his National Press Club address, Mr Lowe was asked the question, “those people are now looking very carefully at your words, trying to read the tea leaves and work out what they do with their mortgages? You obviously can’t go to the RBA Governor looking for individual financial advice. But, if it was your mortgage, would you be scrambling for a fixed rate or sticking with a variable?”

His response, “… the advice that I would give to people is, make sure that you have buffers. Interest rates will go up. And the stronger the economy, the better progress on unemployment, the faster and the sooner the increase in interest rates will be. So, interest rates will go up.”

A rate increase by the RBA would be the first since November 2020. Westpac and AMP Capital are both forecasting the first increase to occur in August this year, then a second towards the end of 2022.

While the RBA might be taking a ‘steady as she goes’ approach, many lenders have already factored in increases as the international cost of funding increases. RateCity data shows that, “a total of 17 lenders have hiked fixed rates so far this year, but that number will rise and quickly” - Westpac increased its fixed rates at the end of January and the CBA and ING (for new customers only) at the start of February.

But with households having accumulated more than $200 billion in additional savings over the past 2 years, the RBA is hopeful that any increase will dampen inflation pressures but not impinge on growth.

2022: The year ahead

Wed, 08 Dec 2021 02:52:30 GMT

2021 was to be the year we returned to a post-COVID normal however the pandemic has fundamentally changed the way many of us operate in our personal and work lives. Here is some of what we can expect in 2022:

Federal Election

The Federal election will be held between March and May 2022. Annoying text messages, robo messages and advertising are on their way!

Federal Budget in March

The timing of the election will bring the Federal Budget forward to March 2022. It’s an election year; expect many of the productivity based tax concessions to be extended.

Lock-in digital gains

McKinsey & Company reports that consumer digital adoption rates accelerated dramatically during the pandemic.
Many sectors will lock in the digital gains they made. Some, however, will see a decline in digital sales as consumers are no longer forced to shop online – groceries for example.
To lock in the gains of digitalisation, consumers expect trust, end-to-end digital service (from start to after sales service), and an improved online experience.
Forced online adoption has changed the consumption habits of an older and wealthier portion of the market. The average age of online users in the McKinsey Global Sentiment Survey increased by around 3 years and spend around 4% more.
Coming off a lower base, developing nations have experienced a much higher growth in digital adoption than developed nations; evening out global access.

Going green

Business and consumers will be expected to be mindful of their carbon footprint. A wasteful process is likely to diminish consumer appeal.

The ‘Backpacker Tax’ and the High Court

Wed, 08 Dec 2021 02:43:50 GMT

The High Court has ruled that the ‘backpacker tax’ is discriminatory. We look at the impact.

Since 2017, the ‘backpacker tax’ has taxed the first dollar of income a backpacker earns in Australia - regardless of their residency status - at the working holiday maker tax rate of 15% up to:

$37,000 in an income year for 2019-20 and earlier income years
$45,000 for 2020–21 and later income years.

When the tax was introduced in 2017, a backpacker would pay a maximum of $5,500 in tax on the first $37,000 of income. However, an Australian national performing the same work would have a maximum tax liability of $3,572.

In this case, Catherine Addy, a UK national working in Australia since 2015, contested her 2017 amended income tax assessment which imposed the backpacker tax on the grounds that it contravened the Double Tax Agreement (DTA) with the United Kingdom. Article 25(1) of the DTA seeks to ensure that nationals of the UK are not subject to "other or more burdensome" taxation than is imposed on Australian nationals "in the same circumstances, in particular with respect to residence". Ms Addy was a tax resident of Australia.

The ATO did not accept Ms Addy’s argument and she launched action in the Federal Court. The Federal Court initially upheld the Tax Commissioner’s position. However, Ms Addy appealed the decision and the High Court overturned the Federal Court’s decision. The question for the Court was whether a more burdensome tax was imposed on Ms Addy owing to her nationality. The short answer was “yes”.

The High Court decision found that the backpacker tax is inconsistent with the non-discrimination clause in the UK DTA. That is, the flat working holiday maker tax rate is not valid in some situations. Non-discrimination clauses that are similar to the one in the UK DTA can also be found in the DTAs with Chile, Finland, Japan, Norway, Turkey, Germany and Israel.

So, what does this mean?

Some individuals who have been taxed under the backpacker tax rules may be able to obtain a tax refund from the ATO. However, there are a couple of key points to bear in mind:

The decision only impacts those classified as an Australian tax resident. Many individuals who are living or working in Australia on a working holiday visa will be classified as non-residents, in which case this decision will be less relevant.
The decision is only likely to be relevant to individuals who are a citizen/national of a country that has a DTA with Australia containing a non-discrimination clause similar to the clause found in the UK DTA.

The top Christmas tax questions

Wed, 08 Dec 2021 02:31:51 GMT

Every year, we are asked about the tax impact of various Christmas or holiday related gestures. Here are our top issues:

Staff gifts

The key to Christmas presents for your team is to keep the gift spontaneous, ad hoc, and from a tax perspective, below $300 per person. $300 is the minor benefit threshold for Fringe Benefits Tax (FBT) so anything at or above this level will mean that your Christmas generosity will result in a gift to the Tax Office as well. To qualify as a minor benefit, the gifts also have to be ad hoc (no ongoing gym membership payments or giving the same person regular gift vouchers amounting to $300 or more).

A question we often get is what is the tax impact if you give your team say a hamper and a gift card? The good news is that the tax rules treat each item (the hamper and the gift card) separately. FBT won’t necessarily apply as long as the value of each item is less than $300. However, the minor benefits exemption is a bit more complex than this. For example, you need to look at the total value of similar benefits provided to the employee across the FBT year etc.

If you are planning to provide your team with a cash bonus rather than a gift voucher or other item of property, then this will be taxed in much the same way as salary and wages. A cash bonus at Christmas is not a gift; it’s still income for the employee regardless of the intent. A PAYG withholding obligation will be triggered and the ATO’s view is that the bonus will also be treated as ordinary time earnings which means that it will be subject to the superannuation guarantee provisions unless it relates solely to overtime that was worked by the employee.

The staff Christmas Party

If you really want to avoid tax on your work Christmas party then host it in your office on a work day (COVID rules allowing!). This way, Fringe Benefits Tax is unlikely to apply regardless of how much you spend per person. Also, taxi travel that starts or finishes at an employee’s place of work is also exempt from FBT. So, if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer, the ride home is exempt from FBT.

If your work Christmas party is out of the office, keep the cost of your celebrations below $300 per person. This way, you won’t generally pay FBT because anything below $300 per person is a minor benefit and exempt.

If the party is not held on your business premises, then the taxi travel is taken to be a separate benefit from the party itself and any Christmas gifts you have provided. In theory, this means that if the cost of each item per person is below $300 then the gift, party and taxi travel can all be FBT free. However, the total cost of all benefits provided to the employees needs to be considered in determining whether the benefits are minor.

The trade-off to this is that if the costs associated with hosting the party are not subject to FBT then it would be difficult to claim a tax deduction or GST credits for the expenses.

If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will generally pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Client gifts

Few of us have that much time in the diary for pre-Christmas entertainment so why not give a gift instead? In addition to a few extra hours saved and a lot less calories to work-off, there is also a tax benefit. As long as the gift you give to the client is given for relationship building with the expectation that the client will keep giving you work (that is, there is a link between the gift and revenue generation), then the gift is generally tax deductible as long as it doesn’t involve entertainment.

Entertaining your clients at Christmas is not tax deductible. If you take them out to a nice restaurant, to a show, or any other form of entertainment, then you can’t claim it as a deductible business expense and you can’t claim the GST credits either.

Charitable gift giving

The safest way to ensure that you or your business can claim a deduction for the full amount of the donation is to give cash to an organisation that is classified as a deductible gift recipient (DGR). And, the charities love it as they don’t have to spend any of their precious resources to receive it.

There are a few rules that make the difference between whether you will or won’t receive a tax deduction.

The charity must be a DGR. You can find the list of DGRs on the Australian Business Register .
If you buy any form of merchandise for the ‘donation’ – biscuits, teddies, balls or you buy something at an auction – then it’s generally not deductible (the rules become more complex in this area). Your donation needs to be a gift, not an exchange for something material. Buying a chicken or funding a child’s education in the third world is generally ok because you are generally donating an amount equivalent to the cause rather than directly funding that thing.
The tax deduction for charitable giving over $2 goes to the person or entity whose name is on the receipt.

If your business is making a donation on behalf of someone else, such as a client or that friend ‘who has everything’, it will depend on how the donation is structured. The tax rules generally ensure that the deduction is available to the individual or entity who actually makes the gift or contribution. Having receipts issued in someone else’s name can make this more complex.

If you have further questions about the tax impact of Christmas and holiday gestures - contact your Aspen Corporate Advisor today.

Why is Cashflow so important for Businesses?

Thu, 18 Nov 2021 04:04:46 GMT

Businesses often focus on profits to determine how they are tracking, but at Aspen Corporate, we find that keeping an eye on your cashflow is just as important, but often ignored.

Cash flow by definition, is a measurement of the total amount of cash moving in and out of your business during a given financial period.

Why should you maintain a positive cashflow?

COVID-19 has highlighted the necessity for any business to maintain a positive cash flow position to assist with business continuity.

ScotPac’s SME Growth Index, released on 18 October found that almost 80% of small businesses surveyed reported having cash-flow issues in the past 12 months. The survey also found that just under 50% of respondents closed an office or shopfront in the past 12 months, moved premises or negotiated rent reductions.

There is no doubt that a positive cash flow helps build a better business as you always feel in control of being able to meet your businesses commitments providing you with a financial security.

You can make timely key decision for your business as they arise.

It assists in allowing you to boost your buying power.

Your business can take on new initiatives as they arise with confidence, including new technology to assist with your business growth.

Your business can assess taking on new investors and opportunities.

It provides any third parties/stakeholders with confidence in continuing to partner with your business (e.g. Financial Institutions, Government Bodies, suppliers, customers, and employees).

Tips for positive cash flow for SME Cash Flow

Pay attention to cash flow as key indicator of business health,
Maintain some cash reserves in an offset bank account,
Reduce debt as much as possible, and look for the benefits of low interest rates,
Perform appropriate checks when offering credit to your customers,
Implement an online management cash flow tool – this will allow you to assess your business’s ability to respond to daily and future cash requirements,
Consider applying for the Federal Government's SME Recovery Loan Scheme which was recently extended so that more small businesses are eligible, and
If cash flow forecast is poor, seek professional business services advice.

Aspen Corporate has over 30 years of experience working with business small and large on cash flow management. If you would like assistance in understanding how to track cash flow, or are concerned about your cash flow position, contact your Aspen Corporate Advisor today.

Overseas gifts and loans in the spotlight

Wed, 10 Nov 2021 02:42:18 GMT

The ATO has recently issued an alert on gifts or loans from overseas. The ATO is particularly concerned about schemes and arrangements designed specifically to circumvent Australian tax laws.

In general, Australian-resident taxpayers need to declare their worldwide income in their Australian tax return. Some schemes however disguise offshore capital gains or income as a gift or loan.

So, how do the ATO know if money from overseas is a genuine gift or loan? Generally, the ATO will expect to see some form of evidence that the gift is genuine such as a deed of gift prepared by the donor, formal identification of the donor, a copy of the donor’s bank account, or in the case of an inheritance, the will or distribution statement from the estate.

If you have received a loan from overseas, the ATO will expect to see properly executed loan documentation, and other documentation supporting why the loan was made and its purpose. Third party documentation is best as documentation from a family member may not be accepted as conclusive evidence of a loan.

The ATO will form its view based on the evidence available.

Loans received from companies or trusts can still trigger tax issues in Australia.

Tax and the Normalisation of Cryptocurrency

Wed, 10 Nov 2021 01:56:32 GMT

The Australian Taxation Office recently updated its guidance on tax and cryptocurrency

In early November, the Commonwealth Bank announced that it is now Australia’s first bank to offer customers the ability to buy, sell and hold crypto assets, directly through the CommBank app. You know when the banks come on board, cryptocurrency has become normal.

But cryptocurrency is only one part of the blockchain universe. Non-fungible tokens or NFTs (fungible means interchangeable) are one-of-a-kind digital assets which are part of the Ethereum blockchain. An example is the CryptoKitties game that allows players to purchase, collect, breed and sell unique virtual cats – and, before you laugh, the game transacted over $1 million in virtual cats in its first few days of launching.

NFTs are also rapidly rising in popularity in the artworld because ownership of the asset is on the blockchain and in some cases, the artist can take a percentage of every transaction of that artwork – so, no more starving artists because they can generate an income from the asset over time not just on the first sale. A stellar example is the sale of a NFT artwork by the digital artist Beeple, which was sold at auction by Christies in March 2021 for $69 million (USD).

Let’s look at what the Australian Taxation Office has to say about some of the commonly asked questions about the implications of investing in blockchain.

Is mining cryptocurrency income or an asset?

If you receive crypto from providing services to others, this can represent income. If you create crypto, you acquire a capital gains tax (CGT) asset. A taxing event will arise when you exchange crypto for Australian Dollars or another crypto asset.

Does the ATO really know about my crypto transactions?

The ATO is using various sources for data collection including digital service providers (DSPs) and analysis software to track taxpayer compliance. There are several data-mining projects (no pun intended) underway looking specifically at cryptocurrency and cryptocurrency platforms.

What happens if my cryptocurrency is stolen?

You may be able to claim a capital loss if you lose your cryptocurrency private key or your cryptocurrency is stolen. Generally, where an item can be replaced it is not lost. A lost private key can't be replaced. Therefore, to claim a capital loss you must be able to provide the following kinds of evidence:

When you acquired and lost the private key
The wallet address that the private key relates to
The cost you incurred to acquire the lost or stolen cryptocurrency
The amount of cryptocurrency in the wallet at the time of loss of private key
That the wallet was controlled by you (for example, transactions linked to your identity)
That you are in possession of the hardware that stores the wallet
Transactions to the wallet from a digital currency exchange for which you hold a verified account or is linked to your identity.

I mine cryptocurrency as a hobby so I should not have to pay tax on it?

Unfortunately, it’s unlikely mining for fun will allow you to avoid tax. The circumstances where you can generate cryptocurrency or transact it without paying tax are very limited.

Can I get a tax deduction for computer equipment purchased for mining?

If you are in the business of mining, then you can claim a deduction for the equipment you purchase to generate income. If you are not carrying on a business, then the crypto is held as an investment and the equipment is not deductible.

How is my NFT artwork taxed?

As with any other cryptocurrency, an NFT can be held for personal use. Personal use assets are CGT assets that you keep mainly for your personal use or enjoyment.

NFT is not a personal use asset if it is kept or used mainly:

As an investment
In a profit-making scheme, or
In the course of carrying on a business.

The relevant time for working out if an asset is a personal use asset is at the time of its disposal. During a period of ownership, the way that an NFT is kept or used may change (for example, NFTs may originally be acquired for personal use and enjoyment, but ultimately kept or used as an investment, to make a profit on ultimate disposal or as part of carrying on a business).

The longer an NFT is held, the less likely it is that it will be a personal use asset – even if you ultimately use it for personal use or consumption.

Capital gains you make from personal use assets acquired for less than $10,000 are disregarded for CGT purposes. However, all capital losses you make on personal use assets are disregarded. Collectables are not classed as personal use assets and may be subject to CGT.

Can my Self Managed Superannuation Fund invest in cryptocurrency?

The issue is not so much can you acquire cryptocurrency within an SMSF but should you? The June 2021 ATO statistical report shows that Australians held approximately $212m in cryptocurrency assets as at 30 June 2021- only 0.03% of total assets. The simple reason is that the volatility of cryptocurrency makes it harder to rationalise under Section 62 of the Superannuation Industry Supervision (SIS) Act, particularly if the asset allocation ratio of cryptocurrency assets in the SMSF is high. But, it’s not impossible if managed correctly at an investment and administrative level.

With Bitcoin as low as $14k on 13 September 2020, and $61k on 12 September 2021, it’s easy to see the appeal for investors with the appetite for risk (335% return across 12 months). In this same period, Ethereum grew 767%. But the world was in a different place in September 2020, not just in cryptocurrency.

Before investing in cryptocurrency there are a few things SMSF trustees need to be aware of:

Trust Deed - the trust deed of the fund must allow for cryptocurrency assets. Most SMSF trust deeds are drafted broadly to enable trustees to invest in assets permitted by the superannuation laws and leave the investment strategy to manage the choice of assets and their appropriateness. However, it is important to check.
Investment strategy - Your Investment Strategy is a major consideration with any investment within an SMSF but with cryptocurrency’s high volatility and risks, there must be clearly articulated information in the Investment Strategy. That is, it must articulate the trustees’ plan for making, holding and realising assets in a way that is consistent with the retirement goals of members being mindful of the member’s individual circumstances.
Separation of assets – it’s important that the cryptocurrency assets are held in a wallet in the name of the SMSF and the IP address is provided to the SMSF auditors to verify the transactions (against the fund bank account). Problems can often arise when a wallet (in the name of the SMSF) is connected to a personal credit card to acquire cryptocurrency. In these cases, the payment is seen as either a contribution or a loan to the SMSF.

The ATO also suggests you look at the diversity of the SMSF’s investments.

How tax applies to blockchain and the generation of income or assets is still a work in progress. Please contact your Aspen Corporate Advisor if we can assist.

Director Identification Numbers – apply from November

Thu, 07 Oct 2021 03:10:45 GMT

In May we advised of new legislation for company directors, who would be register for a unique identification number that they will keep for life.

We can now advise that if you are already a director, or want to become one, you can start applying for your director ID from 1 November 2021.

About the director ID

A director identification number (director ID) is a unique identifier you need to apply for once and will keep forever. It will help prevent the use of false or fraudulent director identities.

Your director ID will confirm your identity and trace your relationships to companies.

Directors have obligations under the law. You should only give your written consent to being appointed as a director if you will play an active role in overseeing the company’s business affairs.

Who needs a director ID?

You will need an ID number if you are an eligible officer of:

a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An eligible officer is a person who is appointed as:

a director
an alternate director who is acting in that capacity.

For more detailed information about who needs a director ID and who doesn’t, contact your Aspen Corporate Advisor, refer to our May 2021 article or the ABRS website .

When do you need to apply?

Applications for a director ID open from November 2021.

Potential directors are entitled to apply for an ID number prior to an appointment to a company director role.

Directors of Indigenous corporations that are governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) will be required to apply for the unique identifier by 30 November 2023.

To be a director under the Corporations Act, you must:

· be 18 years or older

· not be disqualified from managing corporations unless the appointment is permitted by ASIC or the Court.

For more information on the Corporations Act, visit the ASIC website

Applying for a DIN

1. Set up a myGovID

You will need a ‘standard’ or ‘strong’ identity strength myGovID to apply for your director ID online.

If you don’t have a myGovID, you can find information on how to download the app at how to set up myGovID .

2. Gather supporting documents

your tax file number (TFN)
your residential address as held by the ATO
information from two documents to verify your identity:
bank account details
an ATO notice of assessment
super account details
a dividend statement
a Centrelink payment summary
PAYG payment summary.

3. Complete your application

Note - Directors must apply for their director ID themselves because they need to verify their identity. No one can apply on their behalf.

If you have questions about submitting an application for a director ID or, would like assistance with your application, contact your Aspen Corporate Advisor .

A More Stapled Super

Wed, 06 Oct 2021 05:13:50 GMT

From 1 November working Australians' will be ‘stapled’ to their existing super fund. This means that you will be attached to a single super fund for life unless you nominate a new fund.

Why?

The new rules are designed to stop people collecting multiple super funds across their working life and prevent them from amazing in duplicate fee and insurance, wasting money and decreasing their super in retirement

What does stapling mean and what are the implications?

If you are an employee, this means when you change jobs your super fund will move with you from your last position, unless you actively change it. If you don’t have a stapled super, and don’t nominate one, your employer will create an account for you with their default fund.

This makes both choosing your fund, and then as your financial and work situation evolves, reviewing your fund (and linked insurance), incredibly important. Remember the insurance you choose through your super at 20 may not be relevant to you at 35 – it’s always worth reviewing it.

If you are an employer, new employees will be required to fill in an ATO Choice of Superannuation Fund choice form, if they make a super choice this needs to submit to your HR/ payroll team.

If they don’t choose a super fund, then you will need to check the ATO database to see if your new employee has a stapled super fund – details for how this can be done will be announced on the ATO website from 1 November, or contact your Aspen Corporate Advisor for assistance.

If they don’t have a fund, you can use your business’s default fund, or the fund named by your employees EBA.

Implications for employers

What if an employee has multiple accounts?

If an employee has multiple funds, then the ATO will automatically ‘staple’ them to the fund that has been most recently active (received a contribution). When there is more than one active fund the ATO has rules in place to determine the most appropriate fund, such as the fund with the biggest balance.

What if there are hundreds of new employees?

The ATO has developed a process to assistance businesses if they are onboarding over 100 new employees. Contact the ATO for their bulk request form from 1 November.

If you have questions about the changes to super, contact your Aspen Corporate Advisor .

Avoid fines of more than $66k - important changes to casual staff workplace rights

Wed, 06 Oct 2021 04:13:50 GMT

In our April newsletter we shared changes to the Fair Work Act regarding the conversation of staff from casual to permanent which came into effect on the 27 September. We promised to provide more details, which we now have.

What are the changes?

As of 27 September, with a few exceptions, once casual staff have been employed for more than 12 months, employers are required to offer them the opportunity to convert to permanent part-time or full-time. Employees are also entitled to request a conversion, which their employer is required to respond to.

What are employers required to do?

An employer has to offer their casual employees the option of converting to a permanent full-time or part-time basis if the employee:

has worked for their employer for 12 months
has worked a regular pattern of hours for at least the last 6 of those months on an ongoing basis
could continue working those hours as a permanent employee without significant changes.

The offer needs to be completed in writing, within 21 days from the employee's 12 month anniversary of employment.

The offer needs to be for the employee to convert to:

full-time employment - if the employee’s hours worked for at least the last 6 months have been the same as full-time hours, or
part-time employment - if the employee’s hours worked for at least the last 6 months have been less than full-time hours.

To determine whether an employee’s hours are full-time or part-time check their award or agreement, the hours of other full or part-time employees in similar positions, or go to the Fair Work website.

Are there any instances where businesses do not need to make the offer?

Yes - there are a few reasons a business does not need to make an offer:

the business is classified as a small employer*
the employee hasn’t worked a regular pattern of hours:
on an ongoing basis for at least the last 6 months
which they could continue working as a full-time or part-time employee without significant changes
the business has reasonable grounds for not making an offer:
the employee’s position won’t exist
the employee’s hours of work will significantly reduce
the employee’s days or times of work will significantly change, and that can’t be accommodated within the employee’s available days or times for work.

If an employer decides not to offer a casual to permanent conversion, the employer needs to write to the employee within 21 days following the employee's 12 month anniversary, telling them:

They aren't making an offer of casual conversation
the reasons for not making the offer

Note - the Act states that an employer cannot reduce or change an employee’s hours of work, or terminate their employment, to avoid having to offer or accept a request for casual conversion.

Employee response

To accept the offer to convert to permanency, employees need reply in writing within 21 days from getting the offer. If they don’t respond, their employer can assume that they’ve declined the offer.

Employees can request a change from casual to permanent

Existing casuals working for an employer (other than a small business*) can make a request to convert from 28 September 2021, if they are eligible.

The request must be made in writing for permanent full-time or part-time employment with the same details as above (at least six months working full or part-time, with a regular pattern of hours).

If the employer rejects a request because, for instance, the employee has only had a four month pattern of hours, but in two months’ time there is a six month pattern, the employee can make the request again.

Employers need to respond in writing to an employee’s request within 21 days and tell the employee if they have or haven’t accepted the request. If the employer refuses the request, they are required to tell their employee their reasons why in their written response.

Employers cannot refuse a request unless they have discussed the request with the employee and have reasonable grounds to refuse the request.

If you are unsure as to whether you need to transition casual employees to a permanent status or not, contact your Aspen Corporate Advisor today for support and assistance.

* A small business employer is defined as having 14 or less employees at any one time - including associated entities. Casual employees are not included unless engaged on a regular and systematic basis.

STP Phase 2 – the ATO takes a flexible approach to the start date

Wed, 06 Oct 2021 04:05:04 GMT

Businesses now have an extra two months to implement STP Phase 2.

The ATO has announced that employers who start reporting additional payroll details for STP (Single Touch Payroll) Phase 2 by 1 March 2022 will be treated as if they have met its 1 January 2021 deadline.

What is STP Phase 2 – a reminder

STP Phase 2 is designed to streamline both employer and employee ATO reporting obligations and remove the need for manual reporting to other government agencies. STP Phase 2 reporting will require employers to provide additional information, such as a breakdown of gross amounts and income types, to the ATO each payday.

STP Phase 2 was announced in the 2019-20 Budget, and since then, the ATO has been working with accounting software providers to update their STP-enabled software.

Why the delay and how will it be implemented?

Acknowledging the current challenges for workloads and deadlines, they are allowing software providers to request more time to make the necessary changes to support Phase 2. This delay will be passed on to their customers. If your software provider has obtained a deferral, they will let you know.

If your software is STP Phase 2 ready before 1 March 2022, and you are not, then you will need to request a delayed transition application from the ATO.

If you are ready for 1 January

If your software is STP Phase 2 ready by 1 January 2022, then you should start reporting.
If your software is ready before 1 March and you start reporting, you will be considered to be reporting on time, and will not need to apply for an extension.

If you need more time

You can apply for more time beyond your software providers deferral if you are not ready for the transition to STP Phase 2.
Applications for delayed transition will open from December 2021. Detailed information about how to apply for one is not yet available but should be available soon.
The ATO has said there won't be penalties for genuine mistakes for the first year of STP Phase 2 reporting until 31 December 2022. This includes employers who have already started STP Phase 2 reporting.

For more information about Single Touch Payroll Phase 2, read our May article , or contact your Aspen Corporate Advisor . Aspen Corporate will advise you of further details about STP Phase 2 as they are released by the ATO.

Did your super fund receive a compensation payment?

Tue, 07 Sep 2021 03:53:28 GMT

Is a financial services compensation payment to your superannuation fund a contribution?

Of late, there have been several compensation payments made by financial services providers to customers that were inappropriately charged or overcharged for insurance premiums or services they did not receive, etc.

New guidance from the ATO helps decipher whether these compensation payments are treated as contributions to your fund. The problem for some people is that where these compensation payments are treated as a contribution to their superannuation fund, they may exceed their contribution cap or attract Division 293 tax (a 15% tax on super contributions imposed on those with combined income and super contributions of $250,000 or more).

In general, the treatment of the compensation depends on who engaged the financial services provider. In general:

Super fund engaged the financial services provider and compensation paid to the fund – compensation not treated as a contribution.
Individual engaged the financial services provider and compensation paid to the fund but not at member’s discretion – compensation is a concessional contribution in the financial year it is received.
Individual engaged the financial services provider and compensation paid to the fund at member’s discretion - compensation is a non-concessional contribution in the financial year it is received.

Where neither the member of the fund or the financial services provider had a right to seek compensation, the amount will be a concessional contribution in the financial year it is received by the fund.

If you have received a compensation payment from a financial services provider and the payment means you have exceeded your contribution cap, or are liable for Division 293 tax, there is a potential solution to avoid an adverse impact where you did not have control over the payment. In these cases, you can apply to the Tax Commissioner to exercise his discretion to disregard excess contributions or reallocate them to another year.

Every property investor needs a tax depreciation report.

Tue, 07 Sep 2021 03:53:11 GMT

If you are a property investor who is looking to pay less tax and increase your income streams, then you should make sure you have a tax depreciation report.

Up to 80% of investors do not take advantage of property depreciation by organising a tax depreciation report (also referred to as a tax depreciation schedule).

What is a property tax depreciation?

Depreciation doesn’t require an expense to claim. It is the natural process of wear and tear, reducing tax liabilities for investors with minimal outlay.

Depreciation for investment properties is divided into two categories:

Plant and equipment - to the value of all the fittings and fixtures within the house including carpet, curtains, dishwashers, hot water systems and lights.
Building allowance - the construction costs of the building itself. This includes bricks and concrete, general wear and tear and any renovations or extensions you, or previous owners, may have added.

According to the ATO, the average property investors depreciation claimed in the 2018/19 financial year was $3,885 – on average $2,571 capital works, and $1,314 in plant and equipment. Property owners who had organised a depreciation report in the FY 2018/19 claimed on average $8,260 - $4,300 more than the ATO average.

What does a depreciation report include?

A depreciation report is a detailed document that includes:

A breakdown of all building allowance costs.
A breakdown of all plant and equipment costs.
The rates at which you can claim different items and the effective lifespan estimate of each item.
A breakdown of how much you can claim per annum based on the financial year end.

A good report will break down your plant and equipment depreciation by two methods:

the diminishing value method and
the prime cost method

These give you different options for claiming depreciation on your assets depending on your needs, Aspen Corporate can work with you to decide which method will best suit your tax needs.

The good news - the cost of the depreciation report is 100% tax deductible.

If you think you need a depreciation report or would like to have your existing schedule reviewed, contact your Aspen Corporate advisor today.

Divorce, Superannuation and the Gender Divide

Tue, 07 Sep 2021 02:31:54 GMT

New legislation will help prevent superannuation assets from being hidden during divorce proceedings.

From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual’s superannuation information to a family law court.

The recently enacted laws are designed to ensure that there is procedural and economic fairness in divorce proceedings to prevent the under-reporting of superannuation assets. While a spouse’s superannuation information can be obtained now through legal action, if it is not provided willingly, it is often expensive and time consuming to obtain factual information through subpoenas or court orders.

From April 2022, when a couple have entered into divorce proceedings, if one of the parties believes the other is not being forthcoming about the value of assets held in superannuation, they can apply to a family law court registry to request their former partner’s superannuation information held by the ATO. They will then be able to seek up-to-date superannuation information from their former partner’s superannuation fund.

What happens to superannuation in a divorce?

In a divorce, superannuation is treated like any other asset and included in the division of assets in a property settlement or financial agreement. Depending on how the total assets of the couple are split, the superannuation balances of each individual may remain intact with each party taking their respective entitlement from the asset pool, or split between the couple.

For superannuation to be split, there must be:

An order from the Family Court or Federal Magistrate Court; or
A superannuation agreement (a financial agreement that deals with superannuation interests)

If a superannuation account is split, it does not convert into cash unless the receiving spouse is aged 65 or over, or has reached preservation age and has retired. In most cases, the superannuation is immediately rolled over into the receiving spouse’s superannuation account and remains there until they are legally able to access it.

The tax-free and taxable components of the super payment to a receiving spouse will be calculated immediately before the payment is made with the relevant payment retaining the tax components of the account the funds are being transferred from.

For self managed superannuation funds (SMSFs), generally an SMSF cannot acquire assets such as residential property from a related party but there is an exemption when the acquisition is a result of marriage breakdown. Where a property like a residential rental property is involved, the superannuation rules allow an in-specie rollover under a court order or financial agreement rather than forcing the former couple to sell the property. For example, where a couple have an SMSF together, it’s common for one member to step down when they divorce (until that point it’s important to remember that the trustees are legally obliged to act in the best interests of all members). This same member might then set up their own SMSF and utilise the exemption to receive the residential rental property as an in-species rollover.

Capital gains tax relief is also available where property is transferred to a spouse’s superannuation fund as a result of divorce proceedings so that any potential capital gains tax does not apply on transfer. Instead, the spouse or former spouse who receives the asset will effectively ‘inherit’ the transferor’s cost base of the asset for CGT purposes. That is, when the property is transferred, the tax implications are generally the same as if the receiving spouse or their superannuation fund owned the property from the time it was acquired.

If you and your spouse have an SMSF together and a divorce is imminent, it’s important to get advice on the decisions that need to be made about your SMSF and their implications.

The superannuation divide

On average, women earn 14.2% less than men based on full time earnings. If you take overtime into account, the gap is 16.8%. When part-time work is taken into account, this figure blows out to 31.3%. And, the COVID-19 pandemic has only worsened the pay gap.

Given that 93% of all primary carer leave is taken by women, it’s not surprising that there is a divide between the superannuation balances of men and women on retirement. While the gap is diminishing over time reflecting the positive shifts in work participation and the earning potential of women, it is currently estimated to be around 42%. That is, when a woman retires, she retires with around 42% less superannuation than a man.

While the situation is much better in SMSFs, a gap remains. Over the five years to June 2019, the average member balances of women increased by 28% to $654,000, however the average balance of a male was $784,000.

The Federal Budget proposal to remove the $450 threshold on superannuation guarantee payments (the minimum amount someone needs to earn in a month before an employer is required to pay superannuation guarantee) will help reduce the superannuation divide, but this is not intended to commence until 1 July 2022.

Superannuation equalisation

Where couples have significantly different superannuation account values but are of a similar age, there are practical reasons why they might look at evening out any gap.

Where one spouse is close to or likely to reach their transfer balance cap (between $1.6m and $1.7m), redirecting superannuation contributions to the spouse with the lower balance means that together, they maximise their tax-free income in retirement. Together, the couple can accumulate between $3.2 and $3.4 million tax-free.

You can make a contribution to your spouse’s superannuation fund up to their non-concessional cap (currently up to $110,000 depending on their superannuation balance). If they are under 67 years of age, you might also be able to use the bring-forward rule and contribute up to 3 years’ worth of non-concessional contributions in one year (up to $330,000 depending on their superannuation balance).

If your spouse is not working or a low income earner (assessable income less than $40,000), there is also a tax offset of up to $540 available on contributions you make on their behalf.

If your spouse is under 65 and not retired, you can split your superannuation with them. Up to 85% of your concessional superannuation contributions from your employer or salary sacrifice each year, can be directed to your spouse’s fund.

Actively addressing the value of each spouse’s superannuation account might also help to manage some of the issues that can occur when a spouse dies. While superannuation will pass to the beneficiary nominated in the death benefit nomination or estate, this does not always occur in the most practical or tax effective way.

The superannuation rules in this area are complex, particularly when there have been family breakdowns in the past. It’s important to seek advice to ensure your superannuation is managed in a way that delivers the best possible outcome for your beneficiaries. Contact your Aspen Corporate Advisor today if you would like assistance with your Superannuation contributions.

How to minimise your chance of being audited by the ATO - what attracts the ATO’s attention?

Tue, 10 Aug 2021 05:16:31 GMT

There aren’t many people or businesses that would relish the chance to be audited by the ATO. It’s a painful, and at times, costly process. Thankfully, the ATO has shared details of the behaviours, transactions and taxes they pay attention to when determining Audit prospects.

The following behaviours and characteristics may attract attention:

tax or economic performance not comparable to similar businesses
low transparency of your tax affairs
large, one-off or unusual transactions, including the transfer or shifting of wealth
aggressive tax planning
tax outcomes inconsistent with the intent of the tax law
choosing not to comply, or regularly taking controversial interpretations of the law, without engaging with us
lifestyle not supported by after-tax income
accessing business assets for tax-free private use
poor governance and risk-management systems.

What transactions and taxes they are watching?

Bad debts

Deductions claimed for bad debts, as well as the correct application of the deduction rules

Capital gains tax

Capital gains tax (CGT) issues that attract their attention include:

Capital losses
Capital gains tax – disposal
Small business CGT concessions

Commercial debt forgiveness

Situations that attract the ATO’s attention include entities that have:

had a debt forgiven (whether formally or informally)
a commercial debt forgiven, but the gain it represents for the debtor has not been recorded correctly in the tax return
had a deemed forgiveness that takes place when a debt is assigned to a party related to the debtor
entered into a debt for equity swap and failed to adjust their loss claims.

Deductions

Situations that attract the ATO’s attention include:

incorrectly claiming deductions that decrease taxable income including from
failing to add back non-deductible expenses in the reconciliation statement
inappropriately valuing closing stock at below cost or replacement value

· undefined expenses

using the trading stock election rules to lower the valuation of closing stock.

Excise and excise equivalent goods

They have an ongoing focus on the risks associated with:

licence and permission obligations
record keeping
releasing goods without the proper authority to deal

Franking credits

In particular:

entities incorrectly claiming franking credits or not applying appropriate governance to their franking credit balance
a substantial increase in, or refund of, franking credits
arrangements to access franking credits through an entity with a concessional tax rate, such as a superannuation fund.

Fringe benefits tax

Some fringe benefits tax issues the ATO look out for are:

Motor vehicles
Employee contributions
Entertainment
Car parking valuation

Private assets or private pursuits in business

If an asset purchased by a business is used for a mix of business and private purposes, you can only claim a deduction for the portion of the expenses related to your business.

The ATO review arrangements where individuals may be using business assets for personal purposes without appropriately accounting for that use.

They also look at the use of assets or private pursuits that are not appropriately accounted for under the law, including Division 7A or fringe benefits tax.

Private company benefits

We focus on arrangements that enable the extraction of wealth from private companies while avoiding the appropriate amount of tax. These may include:

excessive or non-arm's length payments
potential application of anti-avoidance rules.

Revenue losses

Some revenue loss issues to pay attention to are:

Taxation of financial arrangements

The taxation of financial arrangements (TOFA) rules in Division 230 of the ITAA 1936 are often complex and errors can arise.

TOFA issues that attract the ATO’s attention include:

exceeding a TOFA threshold, but not applying the TOFA rules
not reporting TOFA gains and losses correctly on the tax return, which may lead to an incorrect PAYG instalment rate being issued
failing to bring to account accrued but unrealised gains on debt-like securities such as discounted bonds – this rule applies to all taxpayers and is not limited to those subject to the TOFA rules
failing to use market values for transfers of financial arrangements between related parties
improper characterisation of a financial benefit as sufficiently certain for the purposes of the TOFA accruals methods.

Remember, this is not an exhaustive list, we know that as data matching becomes more sophisticated so to do the ATO’s ability to spot discrepancies. We always advise keeping good records. If in doubt contact your Aspen Corporate Advisor for assistance. You may also want to consider taking up Audit Insurance to help cover the fees associated with an ATO Audit.

Afterpay’s $39bn pay day

Tue, 10 Aug 2021 05:06:19 GMT

Afterpay’s $39bn pay day

Business advisers will tell you that you need to begin a business with the end in mind; a phrase popularised by Michael Gerber in E-Myth. The announcement of the intended sale of Australian born fintech company Afterpay, pioneer of the 'buy now, pay later' platform, is a case in point.

Afterpay was founded in 2015 by Nick Molnar and Anthony Eisen, listing on the ASX for $1 per share in May 2016. In 2017, they hit 1 million customers and 7,200 merchants, launched into New Zealand, and merged with Touchcorp Limited. A year later in 2018, they entered the US market. In 2019, it was the UK under the brand name Clearpay. In 2020, Hong Kong listed Chinese tech giant Tecent paid $300m for a 5% equity stake. By then, Afterpay boasted 5 million active US customers, 1 million in the UK. In this same year they took the opportunity to launch into Canada. In 2021, Afterpay announced the purchase of tech group Pagantis by their UK subsidiary in preparation for their launch into Europe.

Afterpay was also exceptionally well placed for the dramatic COVID-19 shift in consumer behaviour that supercharged online retail. As at 30 June 2021, the company had 16.2 million active customers (63% growth on 2020) and over 98,000 merchants (77% growth on 2020). When COVID-19 struck, Afterpay’s share price dipped to a low of $12.44 on 20 March 202 but by 19 February 2021, hit a high of $151.92 ($96.99 at 30 June 2021). At 30 June, (unaudited) group revenue was $925m, growing 78% on the previous period (of which merchant revenue was $822m). However, growth comes at a cost with the 31 December 2020 half year results showing an after-tax loss of over $79m (joining a long list of unprofitable tech companies such as AirBnb, Pinterest, DropBox, Slack and Uber).

The rise of Afterpay has been extraordinary; a combination of a game changing concept delivering consumer flexibility and the ability for merchants to grow their customer base with the potential of increasing per transaction values, all backed by an aggressive expansion plan. They are a brand that became a verb.

On 2 August, the announcement was made that US financial services and digital payments giant Square, had agreed to acquire all of the issued shares in Afterpay for approximately US$29 billion (A$39 billion). The sale is expected to be all in stock and Nick Molnar and Anthony Eisen will join Afterpay as employees in first quarter of 2022.

For many innovative and fast growth companies, sale is the end game - generally to another company in the same or similar market with strong synergies that is willing to pay a premium for the opportunity. Afterpay has achieved that in spectacular style. And, you can see the appeal of a business model that is replicable, utilises unique systems and technology, is adaptable, and has proven its ability to grow and expand globally.

The model

For consumers, Afterpay offers a way of spreading the cost of purchases over four payments across six weeks. No fees are charged unless the payment is late. If a payment is late, an initial $10 late fee is charged, and a further $7 if the payment remains unpaid 7 days after the due date. For each order below $40, a maximum of one $10 late fee may apply per order. For each order of $40 or above, the total of the late fees that may be applied are capped at 25% of the original order value or $68, whichever is less.

While free to consumers (unless they pay late), Afterpay charges merchants a 30 cent fee, plus a commission ranging from 4% to 6% to the merchant. Payments transacted through Afterpay take 48 hours to be delivered in full to the merchant. Afterpay states that their service drives new sales and increases the average order by anything up to 40%.

The fee structure, and the fact that Afterpay makes spending easier for consumers to rationalise, has not been without controversy. A Senate committee and the Payments System Review explored whether more consumer protections, such as customer credit checks, were needed. However, neither review wanted to stifle the growth of financial competition or innovative fintechs, and believed that market forces would appropriately regulate the industry. At present, late fees represent less than 10% of the company’s revenue.

Afterpay store cards are available in the US and other markets. And, in July this year, Money by Afterpay launched in Australia and New Zealand with Afterpay staff trialling the product ahead of a full-scale launch anticipated in October 2021.

What if you have Afterpay shares?

The sale of Afterpay has a number of hurdle points including regulatory approval from the Foreign Investment Review Board and approval of the shareholders of both Afterpay and Square.

If the transaction proceeds then Afterpay shareholders will have two main options. They can either receive NYSE-listed Square shares or they could receive shares in Square that are listed on the ASX. This is because Square will establish a secondary listing on the ASX allowing Afterpay shareholders to trade Square shares via CHESS Depositary Interests (CDIs) on the ASX.

Afterpay state that the transaction is intended to be tax-free for Australian shareholders electing to receive NYSE-listed Square shares or CDIs. Among the conditions precedent is a ruling from the Australian Taxation Office (ATO) for Australian shareholders to apply scrip-for-scrip capital gains tax (CGT) rollover relief. If the rollover applies, then the cost base and acquisition date of the Square shares will basically remain the same as your Afterpay shares.

Growing your business value

Tue, 10 Aug 2021 03:48:22 GMT

Over the next decade, as the baby boomer bubble of small and medium sized business owners roll through the system, Australia will experience one of the largest transfers of business wealth in its history. Succession planning is more important than ever.

Not just because of the transfer of wealth, but because of the polarising impact of high supply and low demand on the saleable value of a business.

Australia is expected to see the retirement age of baby boomers peak over the coming decade. The basics of the law of supply and demand suggest that as supply increases, prices will be driven downwards. For SMEs however, there is a much greater probability we will see a dramatic polarisation in the price of SMEs for sale. High quality businesses command premium prices while low quality businesses will be highly price sensitive and, in some cases, unsaleable.

If your children are not offering you a retirement strategy, selling your business can be difficult if there are not obvious competitors or complimentary businesses knocking on your door for your market share or unique offering.

Forward planning for succession is a critical issue for SME owners who want to exit their business over the coming decade. This planning, with an adequate timeframe, allows you to actively enhance the value of your business.

Most business owners have a view on what their business might be worth and the factors that influence business value. The key question then is, what do you need to focus on to enhance business value for a potential buyer? There are four key areas: growth, capacity, profitability and risk.

Growth - buyers will generally pay a premium for a built-in level of growth. Growth, if well managed, will produce increased profits. So, a potential buyer knows that the revenue stream they are purchasing with the business, comes with a growth increment. Not only does this growth factor offer future profit increments it also insulates the business against the ‘what if’ factor. Any major change in a business causes a disconnect and these disconnect events can impact revenues and profits. Built in growth offers some protection against this.
Capacity – provides for both the present and capability to facilitate growth in the future. Areas where capacity needs to exist includes infrastructure, systems capability, and management capability. Systems and management are often the areas given the least amount of focus, yet they are the very areas where value can be leveraged and enhanced the most. One of the reasons why franchises command price premiums is because they offer a level of systems and management. These same factors can be built into any business.
Profitability – a history of profits and strong cashflows are normally the two greatest influences on SME business value. When assessing your profitability, you need to compare yourself at two levels. First compare your performance against the top quartile of your industry sector. Top quartile businesses always attract higher valuations. Then, look outside your own business sector. Measure your Return on Investment (ROI). Buyers of your business will not only be comparing you with your industry. They may be looking for investment return more than they are looking for a specific business. So, in a potential sale you may be competing with a business from another industry to secure your buyer. You should be looking for a ROI in excess of 25%.
Risk Management – business owners are becoming more sensitive to risk. Strong corporate governance and risk management policies will enhance business value. Buyers will be looking for a history of compliance and a risk management culture. Risk management can include the existence of current employment contracts, operating licences, customer and supplier agreements and OH&S procedures.

These four areas will normally be high on the business value hierarchy and the areas where change can most significantly impact on business value.

If business succession is on your agenda, you need to assess your business under these criteria. Where your performance or position is below what it needs to be, you can identify the issues that you need to focus on to change your business value.

This process may not simply mean the difference between an ordinary sale price and a good price. It may be the difference between a sale that releases your business capital or no sale at all.

New laws target sharing economy platforms

Tue, 27 Jul 2021 02:25:45 GMT

New laws target sharing economy platforms

In an attempt to reign in undeclared income, proposed new laws will require platform providers in the sharing economy to report all transactions through their platforms .

Traditional employment models have shifted in favour of more flexible options including contracting, self-employment and use of labour hire. Consumers are increasingly paying to 'use' rather than 'own' assets, creating new income opportunities for the owners of assets – like AirBNB. And, the Government believes they are missing out on tax revenues from these payments – income tax from income earned, GST on ride sharing (because the ATO considers all ride sharing a taxi service and as a result GST applies), and capital gains tax on the sale of property used to earn income, etc.

While data matching programs have targeted sharing platforms previously, the proposed laws provide a structured and consistent framework to recognise all revenue earned in Australia through these platforms.

The laws target electronic platforms capturing those that act as intermediaries between buyers and sellers, to more complex arrangements where the platform operator assumes much of the inherent risk in the transaction between the buyer and the seller, play a quality assurance role, and ensure a seamless experience for the buyer and seller. The laws do not rely on the platform processing payments and will reach to those who use third party payment providers.

If implemented, the laws will apply to ride sharing and accommodation services from 1 July 2022, and all other services from 1 July 2023.

6 Member SMSFs - the issues and opportunities

Tue, 27 Jul 2021 02:19:42 GMT

6 MEMBER SMSFS – THE ISSUES AND OPPORTUNITIES

From 1 July 2021, the maximum number of members a Self Managed Super Fund can have increased from four to six. Why would you have a fund with six members and what are the implications?

Recently enacted laws increased the maximum number of allowable members in an SMSF and small APRA fund from four to six.

Currently, over 70% of SMSFs have just two members and those with four members represent only 4% of the SMSF population. The use of six member funds is likely to be small but adds additional choice and flexibility.

Family groups

Six member funds provide family groups with a vehicle for controlling superannuation savings and investment strategies. For families with more than four members, previously the only real option was to create two SMSFs (incurring extra costs) or place their superannuation in a large fund.

A larger fund also offers a level of protection if a fund member is travelling overseas for a prolonged period of time. The residency rules require, amongst other things, 50% of members measured by market value to be in Australia.

Estate planning

Estate planning is a benefit of the new laws particularly tax-effective intergenerational wealth transfer as the assets of a fund generally are not part of the estate. Take the example of a family business that holds the commercial property of the business in their family SMSF. If the parents die, the children might keep running the business and maintain the commercial property within the SMSF as an asset. Holding assets within the SMSF also provides a level of asst protection from creditors.

The problem areas

Investment decisions within a fund - Problems can occur when members have different investment needs, for example parents might be closer to retirement while the children are focussed on the longer term. The investment strategy of the fund may not meet everyone's requirements.
Disputes – the more members in a fund the greater the potential for disputes. For those with legal capacity to be a trustee (18 or over), the rules relating to the appointment and dismissal of trustees, voting rights and meetings need to be clear.
What happens when a member dies – steps need to be taken to ensure that when a member of the fund dies, their wishes are respected. For example, appointing a legal personal representative as trustee, reversionary pensions or binding death nominations.

Who cannot have a six member fund?

Not all SMSFs will have the option to allow six members because in some instances, the number of individual trustees that a trust can have is limited to less than five or six trustees by State legislation (Queensland for example). In these cases, fund members might opt to use a corporate trustee.

Administrative impact on an SMSF

The change from four to six members updates the definition of an SMSF, and as a result, has a practical impacts across other Acts and Regulations.

Sign-off requirements for an SMSF's accounts and financial statements will change. Currently, if an SMSF has more than one director member, its accounts and statements must be signed by at least two members in their capacity as individual trustee or as a director of a corporate trustee. As there cannot be more than four members of an SMSF under the current rules, these requirements ensure that all members sign the accounts and statements of SMSFs with one or two members. For SMSFs with three or four members, at least half of the members must sign its accounts and statements for an income year. Under the updated requirements, an SMSF with one or two directors or individual trustees must have its accounts and statements signed by all of those directors or trustees. For all other SMSFs (that is, those with between three and six directors or trustees), the accounts and statements of the SMSF must be signed by at least half of the directors or individual trustees.

Super Changes you need to be ready for

Tue, 20 Jul 2021 23:57:04 GMT

SUPER CHANGES

The recent Federal Budget made some significant changes to Superannuation all of which are designed to give people the opportunity to add more to the Superannuation fund.

These changes include:

'Work test' removed for those aged between 67 and 74 for superannuation contributions
Lower age threshold for super downsizer scheme
Removal of monthly income threshold of $450 for super contributions
Increase the withdrawal limit for First Home Super Saver Scheme (FHSSS)

Contributions

From 1 July 2022 you will no longer be required to be employed for at least 40 hours in a consecutive 30-day period within the financial year, before any super contributions can be accepted. This applies to both concessional and non-concessional contributions.

When we combine these with previously announced measures that came into effect from 1 July 2021 of:

Concessional (Deductible) contributions cap increased from $25,000 to $27,500.
Non-concessional (Non-deductible) contributions cap increased from $100,000 to $110,000.
General transfer balance cap increased from $1.6 million to $1.7 million.
People with balances over the transfer balance cap (which is $1.7 million from 1 July 2021) will be eligible to make a downsizer contribution. However, the downsizer amount will count towards that cap when savings are converted to the retirement phase.

It will enable members of superannuation funds to better plan for their retirement.

Downsizer Age Threshold Decreased

Further the government will now allow people from the age of 60, down from 65, to contribute up to $300,000 to their super on the sale of their family home.

There are other tests that will need to be satisfied such as owning the home for a period of 10 years.

Interestingly, the $300,000 contribution is $300,000 per person, which means a couple could contribute up to a total of $600,000. These are all initiatives that should enable people to plan for their future and save funds for their retirement. Should you wish to discuss how best to access these incentives further please contact your Aspen Corporate Advisor .

Rob Lo Presti

What changes on 1 July 2021?

Mon, 07 Jun 2021 20:38:09 GMT

WHAT CHANGES ON 1 JULY 2021?

Super guarantee rate increase to 10%

On 1 July 2021, the Superannuation Guarantee (SG) rate will rise from 9.5% to 10% - the first rise since 2014. It will then steadily increase each year until it reaches 12% on 1 July 2025.

The 0.5% increase does not mean that everyone gets an automatic pay increase, this will depend on your employment agreement. If your employment agreement states you are paid on a 'total remuneration' basis (base plus SG and any other allowances), then your take home pay might be reduced by 0.5%. That is, a greater percentage of your total remuneration will be directed to your superannuation fund. For those paid a rate plus superannuation, then your take home pay will remain the same, but your superannuation fund will benefit from the increase. If you are used to annual increases, the 0.5% increase might simply be absorbed into your remuneration review.

Employers will need to ensure that they pay the correct SG amount in the new financial year to avoid the superannuation guarantee charge. Where employee salaries are paid at a point other than the first day of the month, ensure the calculations are correct across the month (i.e., for staff paid on the 15 ^th of the month they are paid the correct SG rate for June and July in their pay and not just the June rate).

Superannuation salary packaging arrangements will also need to be reviewed – employers should ensure that the calculations are correct and the SG rate increase flows through.

Annual superannuation guarantee rate changes

New stapled superannuation employer obligations for new staff

Currently, when an employer hires a new staff member, the employee is provided with a Choice of Fund form to identify where they want their superannuation to be directed. If the employee does not identify a fund, the employer directs their superannuation into a default fund.

When someone has multiple funds, it often erodes their balance through unnecessary fees and often insurance. And, as at 30 June 2020, there was $13.8 billion of lost and unclaimed superannuation in accounts across Australia.

From 1 July 2021, where an employee does not identify a fund, legislation before Parliament will require the employer to link the employee to an existing superannuation fund. That is, an employee's superannuation fund will become 'stapled' to them. An employer will not simply be able to set up a default fund, but instead will be required to request that the ATO identify the employee's stapled fund. If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer's default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).

Legislation enabling this measure is currently before the Senate.

Indexation increases contribution caps and the transfer balance cap

Indexation ensures that the caps on superannuation that limit how much you can transfer into super and how much you hold in a tax-free retirement account, remain relevant by making pre-determined increases in line with inflation. To trigger indexation, the consumer price index (CPI) needed to reach 116.9. Australia reached 117.2 in December 2020 triggering increases to the contribution and transfer balance caps from 1 July 2021. The next increase will occur when a December quarter CPI reaches 123.75.

Concessional and non-concessional contribution caps

From 1 July 2021, the superannuation contribution caps will increase enabling you to contribute more to your superannuation fund (assuming you have not already reached your transfer balance cap).

The concessional contribution cap will increase from $25,000 to $27,500. Concessional contributions are contributions made into your super fund before tax such as superannuation guarantee or salary packaging.

The non-concessional cap will increase from $100,000 to $110,000. Non-concessional contributions are after tax contributions made into your super fund.

The bring forward rule enables those under the age of 65 to contribute three years' worth of non-concessional contributions to your super in one year. From 1 July 2021, you will be able to contribute up to $330,000 in one year. Total superannuation balance rules will continue to apply. However, if you have utilised the bring forward rule in 2018-19 or 2019-20, then your contribution cap will not increase until the three year period has passed.

Transfer balance cap – why you will have a personal cap

The transfer balance cap (TBC), as the name suggests, limits how much money you can transfer into a tax-free retirement account. From 1 July 2021, the general TBC will increase from $1.6m to $1.7m but not everyone will benefit from the increase.

From 1 July 2021, there will not be a single cap that applies to everyone. Instead, every individual will have their own personal TBC of between $1.6 and $1.7 million, depending on their circumstances.

If your superannuation is in accumulation phase before 1 July 2021, that is, you have not started taking an income stream (pension), then your cap will be the fully indexed amount of $1.7m.

However, if you have started taking an income stream - you have retired or are transitioning to retirement - then your indexed TBC will be calculated proportionately based on the highest ever balance of your account between 1 July 2017 and 30 June 2021. The closer your account is to the $1.6m cap, the less impact indexation will have. For anyone who reached the $1.6m cap at any time between 1 July 2017 and 30 June 2021, indexation will not apply and your cap will continue to be $1.6m. For example, if you are transitioning to retirement and drawing a pension, and your highest ever balance in your retirement account was $1.2m, then indexation only applies to $400,000 (the $1.6m cap less your highest very balance). In this case, your new personal TBC will be $1,625,000 after indexation.

The Australian Taxation Office (ATO) will calculate your personal TBC based on the information lodged with them (this will be available from your myGov account linked to the ATO). If your superannuation is in retirement phase, it will be very important to ensure that your Transfer Balance Account compliance obligations are up to date. For Self-Managed Superannuation Funds (SMSFs), it is essential that you let us know about any changes that impact on your transfer balance account, for example if a member of your fund retires.

The total super balance caps to utilise the spouse contribution offset and the government co-contribution will also be lifted to $1.7m in line with indexation.

Minimum superannuation drawdown rates

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year until 30 June 2022.

Single touch payroll reporting

Single touch payroll will apply to most businesses from 1 July 2021, this will include small businesses (those with 19 or fewer staff) and businesses with closely held employees (e.g., directors of family companies, salary and wages for family employees of businesses). No further extensions will be granted.

For employers with closely held employees, there are some concessions on how reporting is managed with the option to report one of three ways: reporting actual payments in real time, reporting actual payments quarterly or reporting a reasonable estimate quarterly. These concessions allow a level of flexibility in relation to determining and making payments to closely-held payees. However, if your business is impacted, it will be important to plan throughout the year to prevent problems occurring at year end.

Am I taxed on insurance payouts?

Fri, 04 Jun 2021 23:07:21 GMT

AM I TAXED ON AN INSURANCE PAYOUT?

Australia has had its fair share of disasters over the last few years – drought, bushfires and floods – that have ramped up the volume of insurance claims. Most people would assume that if and when they need to claim on their insurance, the insurance payout covers the damage and is not income assessed for tax purposes - but this is not always the case.

Insurance payouts for damaged or destroyed personal items are generally not taxed. For example, any insurance payout you receive for your family home won't necessarily be taxed. But, the rules are different if you have used your home to produce an income, for example, you have used part of your home as a home business or you have rented out part of your home.

The rules are also different if the item is a personal asset costing more than $10,000 or if the asset is a collectible that cost more than $500. Where the insurance proceeds exceed the original cost of the asset, that is, the asset appreciated in value, then capital gains tax might apply.

And, if the asset damaged is related to a business or an income producing asset like a rental property, the rules are also different.

Business premises, trading stock and depreciating assets

For businesses that have had trading stock damaged or destroyed, any insurance payout is taxable. For example, the payouts on claims coming through from the enforced lockdowns for spoiled perishable stock would need to be included in the business's tax return. This is because the insurance premiums would have been claimed by the business as an expense. It is just a question of how the insurance is taxed.

If your business premises are damaged and the insurance covers repairs, then the amount you receive is generally taxed as income if you can claim a deduction for the repair costs. Where the premises are damaged or destroyed, then we'll need to work with you to identify if you have made a taxable gain or loss.

When it comes to depreciating assets like machinery, it starts becoming more complex. In general, if the insurance payout exceeds the written down value, then the payout is included in the business's assessable income, and if less, you can claim a deduction for the difference. However, there are also special rules for work cars, small businesses, and where a replacement item is purchased.

Rental properties

A rental property is an income producing asset and, in most cases, the cost of insurance policies relating to the property would have been claimed as an expense. For example, if you receive a payout for your rental property as a result of a disaster, generally, you will need to include at least part of this amount as income in your tax return. This could include insurance payouts for loss of rental income, repairs, replacements of destroyed assets, or money received from a relief fund.

The treatment of the insurance proceeds depends on what the payout is for, how the insurance is used, and whether the rental property was vacant or in use.

A recent case before the Administrative Appeals Tribunal (AAT) shows how tricky this area of the tax rules can be. In this case, the taxpayer initially received insurance proceeds of $24,000 for lost rental income after their property sustained storm and flood damage. The taxpayer had declared this amount as income. All good so far.

Then, the taxpayer received an additional $250,000 from the insurer with the payment described as "in consideration of the taxpayer releasing the insurer from all liability past, present and future under the insurance policy". The taxpayer did not believe this money was for him to repair his property so did not claim it in his tax return. But, he did claim a deduction for repair costs totalling $130,000 in two income years.

The ATO subsequently audited the taxpayer and issued an assessment for the full $250,000. The AAT agreed with the ATO even though the taxpayer had only claimed $130,000 in repairs. It's possible this case will go to appeal but it serves as a warning that any lump sum payouts need to be very carefully assessed and dealt with.

If you have been impacted by a disaster and are uncertain of how any insurance proceeds will be taxed, please talk to us and we can work with you to help you understand your position.

Work from home expenses under scrutiny & the perils of browsing Facebook

Tue, 01 Jun 2021 20:42:49 GMT

WORK FROM HOME EXPENSES UNDER SCRUTINY & THE PERILS OF BROWSING FACEBOOK

If you worked from home during lockdown and spent money on work related items that were not reimbursed by your business, you might be able to claim some of these expenses as a deduction – but not everything you purchase can be claimed.

The ATO has stated that it is looking very closely at work related deductions that are being claimed. If you are claiming your expenses, there are three methods you can use:

An 80 cents per hour short cut method (you will need to have evidence of hours worked like a timesheet or diary)
The 52 cents per hour method (which excludes phone, internet, or the decline in value of equipment which are all claimed separately), or
The actual expenses method.

The ATO is particularly interested in those using the 'actual expenses' method. To be able to claim a work related expense, it needs to be directly related to the work you do and how you earn your income. The ATO has highlighted four ineligible expenses that are being claimed:

Personal expenses such as coffee, tea and toilet paper
Expenses related to a child's education, such as online learning courses or laptops
Claiming large expenses up-front (instead of claiming depreciation for assets), and
Occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates, that cannot generally be claimed by employees working from home.

A recent case before the AAT shows how determined the ATO is to crackdown on work related deductions being claimed where there is not a satisfactory nexus between the expense being claimed and the taxpayer's work. In this case, the taxpayer had claimed car and clothing expenses, and home internet and mobile phone costs. The ATO conceded the car costs but on a reduced deduction. When it came to clothing expenses the ATO conceded that a deduction could be claimed for gloves and a beanie on the basis that the taxpayer worked in cold conditions and that these were protective clothing needed for the job. However, the AAT refused to allow a deduction for the cost of a pair of socks on the basis that they were not protective in nature in their own right – yes, it really does get this detailed.

The taxpayer had also claimed 100% of his home internet expenses but the ATO reviewed this claim and reduced the deductible amount to $50 - a record of the family's home internet usage demonstrated the internet was used to browse Facebook amongst other non-work related sites.

One of the other issues to come out of this case was the importance of record keeping. If you are going to claim work related expenses, then ensure you have the records to prove your claim.

If you would like assistance with your working from home deductions, contact our office today.

Single Touch Payroll Phase 2 is on it's way

Sun, 09 May 2021 22:42:58 GMT

SINGLE TOUCH PAYROLL PHASE 2 IS ON IT'S WAY

Single Touch Payroll (STP) phase 2 aims to streamline ATO reporting obligations for the payer and payee and remove the need for manual reporting to other government agencies.

When do the changes occur & and what do you need to do now?

STP Phase 2 reporting will become mandatory from 1 January 2022 .

The ATO have said they are working with accounting software providers (such as MYOB, XERO and Reckon) to update their STP-enabled software. Exactly what you need to do will be determined by the product you use .

What's staying the same?

There are a number of things that won't change with Phase 2. These include

How you submit your STP report
Due dates for the report - on or before pay date unless you are eligible for reporting concessions
The types of payments which are in-scope for STP reporting
Taxation and superannuation obligations
End of year finalisation requirements

What are the key changes?

Termination reason

You will need to provide the reason for cessation of employment (for example, voluntary, redundancy, illness) of an employee. This will reduce the need for you to provide them with separation certificates.

Employment conditions

With the extra information you will include in your STP report you no longer need to submit Tax File Number (TFN) Declaration. However you will still need to keep TFN Declarations with your employee records.

This extra information includes:

Employment basis – the work pattern or engagement relationship (for example, fulltime, part-time or casual).
Tax treatment –for example, where your employee has notified you that they have a Study Training Support Loan. This will help the ATO identify the factors that influenced how you calculated the pay as you go withholding.

Child support garnishee/ deduction amount

You can elect to include Child Support Garnishees and Child Support Deductions in your STP report. This will reduce the need for separate remittance advice reporting to the Child Support Registrar.

Income type and Country Code

The reporting of income types and country codes is being introduced to identify payments you make to your employees with specific tax consequences and to make it easier for them to complete their individual income tax return. It will also help the ATO identify where you are using a concessional reporting arrangement, such as for closely held payees.

Country codes will need to be report the home country of any employee who is either an inbound assignee or working holiday maker, or the host country of any employee who is an Australian resident working overseas.

Desegregation of gross income

Your STP report will separately itemise the components which make up the gross amount of [XXX] by the following payment types:

bonuses and commissions
director fees
paid leave
salary sacrifice
overtime
allowances
gross (other).

You will need to report all allowances separately, not just expense allowances that may have been deductible on your employee's individual income tax return.

Salary sacrifice

From 1 January 2020, salary sacrifice contributions can no longer be used to reduce ordinary time earnings or count towards your minimum superannuation obligations. You will need to report salary sacrificed amounts in your STP report.

Lump sums

Changes to how lump sum payments will be categorised include both of the following:

Lump sum E – a financial year indicator has been added, which will eliminate the need for you to provide lump sum E letters in most cases.
Lump sum W – the return-to-work payment that occurs in extremely limited circumstances and is taxed concessionally (formerly reported in STP under Payee Gross) is now separately itemised under this new label.

Reporting previous Business Management Software IDS and Payroll IDS

You will now be able to provide the ATO with previous Business Management Software IDs and Payroll IDs in your STP reports when there has been a change to one of these. This might occur when you have had a change of business structure or where you have changed software and do not have the ability to zero out or finalise the previous records. This should help reduce and fix issues with duplicate income statements for employees in ATO online.

What do you need to do?

As and when we have an update, we will let you know.

We are here to help

Contact your Aspen Corporate Advisor or our Senior Bookkeeping Manager, David Scott , today if you have questions or need any assistance.

Your SMSF: when expenses and investments are not at arm’s-length

Tue, 04 May 2021 02:22:31 GMT

Your SMSF: when expenses and investments are not at arm's-length

We often get questions from clients about what they can and cannot do in their SMSF. Often the questions relate to related party transactions – that is, interactions between the SMSF, its assets, and its members (or relatives of members). We've set out some of the common questions and answers.

In general, all interactions between your SMSF and its members should be at arm's length – that is, the terms of the transactions are the same as what would be entered into between independent parties, but there are circumstances where the interests of the fund and its members intersect. A transaction which is favourable to either party is deemed to be at non-arm's length terms, which could create some taxation issues.

Can I charge my SMSF for work that I do?

Let's say your SMSF owns a residential rental property and the property needs a fence. You're a builder and can build the fence. Can you charge the SMSF for the fence? The answer is maybe.

What you charge and how it is charged is critically important here.

If the fund acquires the fencing material, and is invoiced by the building business to construct the fence, and pays a market rate for the labour involved, then there is unlikely to be a problem as the charges are transparent and at market value. However, documentation is essential and you may also need to verify that the labour cost charged is the market rate.

However, if the business decides to install the fence for no charge, or alternatively charge an excessively high rate, then the transaction could be deemed to be non-arm's length.

If the building business acquires the fencing material and then installs the fence at arm's length rates for the SMSF, this could still cause in-house asset issues as the fund has acquired an asset from the member; the fencing material. It all gets very messy and it might just be easier to have someone else do it!

What happens if the building business either charges below market rates or does not charge the fund for labour cost? The rules have recently been extended to capture non-arm's length expenses where a related party is acting in a capacity other than as trustee and a non-arm's length expense was not charged. i.e., where the fund benefits from work performed by a member in a capacity other than trustee. The ATO sees these non-arm's length expenses as potentially artificially inflating an SMSFs earnings.

The market value of the work performed might be treated as a contribution, or all of the income from the asset could be deemed to be non-arm's length, which means the highest marginal tax rate will be charged on all income and capital gains derived from the asset.

This same scenario applies to any member of an SMSF (or relative of a member) who provides services to their SMSF – electricians, plumbers, accountants, real estate agents, etc.

The rule is, work that is done for the SMSF by a related party in their professional capacity must be equivalent to arm's length market value, with no acquisition of materials. Free, below market value, above market value, may breach the superannuation rules. And, where work is performed by a related party at market value, it must be documented and provable.

If you are not a qualified professional you cannot undertake work on behalf of your fund unless you are fulfilling your duties as trustee.

Can I charge for the work I do to administer my fund?

Trustees of an SMSF cannot be remunerated for the work that they do for the fund. The exception is where you are qualified to provide certain services to your fund and act in that professional capacity. For example, you are a real estate agent and are buying and selling property assets for the fund. In this case, you are not being paid for work you do in your capacity as trustee but as a professional providing a service at market value (see Can I charge my SMSF for work that I do? ).

Can my SMSF purchase a rental property that I own?

Your SMSF cannot acquire property from a related party of the fund unless the property (land and buildings) is used wholly and exclusively in a business (business real property).

Under these circumstances your SMSF could purchase the commercial premises used by a business you own and lease the property back on commercial terms.

If business real property is used in a primary production business such as a farm, it can still meet the test of being used wholly and exclusively in a business even if it contains a dwelling that is used for private or domestic purposes. But, the dwelling must be in an area of land no more than two hectares and the main use of the whole property can't be for domestic or private purposes.

Can I lend money to my SMSF?

Members of a fund can lend money to their SMSF in very limited circumstances, and usually to buy property, if the following conditions must be met:

Can my SMSF lend me money?

No. Your SMSF cannot lend you or any of your related parties money. The superannuation rules specifically prohibit the fund providing financial assistance to members. This includes where a member takes money out of the SMSFs account for a short amount of time and replaces it in full. Just don't do it.

If you are looking for advice regarding your SMSF or would like assistance setting up one, contact your Aspen Corporate advisor today.

The New Lifetime Director IDs

Mon, 03 May 2021 02:30:41 GMT

The New Lifetime Director IDs

Directors will be required to register for a unique identification number that they will keep for life, much like a tax file number under a rewrite of Australia's business registers.

ASIC does not currently verify the identity of directors and Elvis Presley and Bob Marley could "quite possibly" be registered. Or at least that was the view of former ASIC Commissioner John Price at a 2020 Parliamentary inquiry.

The introduction of the Director Identification Number (DIN) regime is part of the Government's Modernisation of Business Registers (MBR) Program creating greater transparency and tracking the movements of individuals over time. The MBR will unify the Australian Business Register and 31 ASIC business registers, including the register of companies. In effect, the system will create one source of truth across Government agencies for individuals and entities and will be managed by the Australian Taxation Office (ATO).

Why a director ID?

Under the new regime, all directors will need to have their identity confirmed when they consent to being a director, so no more Elvis Presley unless your name really is Elvis Presley. You will then keep this number permanently, even if you cease to be a director – the number will not be issued to another person. The result is an ID system that traces a director's relationships across companies, enabling better tracking of directors of failed companies and prevents the use of fictitious identities.

The target is illegal phoenixing. Phoenixing is when directors transfer the assets of an existing company to a new company without paying full value, leaving the debts with the old company. Once the assets have been transferred, the old company is liquidated leaving creditors out of pocket. Phoenixing has a ripple effect in the community and is estimated to cost between $2.9 billion and $5.1 billion annually. The real face of the impact is to the unpaid creditors – mostly customers and contractors, unpaid employee entitlements, and the broader cost through unpaid taxes.

Once the assets are transferred to a new company, the directors then continue to operate the business in a new entity. They just set aside the problems and start again with the benefit of the good parts of their old company as a foundation.

Who will need a director ID?

The DIN is very broad and introduces the concept of an 'eligible officer'. An eligible officer is a director who:

The definition picks up the concept of 'shadow directors' who act in the capacity of directors through influence and control but are not directors by title. That is, its feasible that someone who is not a director but is seen to be making decisions on behalf of the company can be held to account.

An eligible officer is a director of a:

When the system opens, directors will need to apply for an ID through the Australian Business Register system through their myGov account. If you do not have a myGov account , it would be a good idea to create an account and become familiar with how it works. Your myGov account creates your digital credentials to verify who you are.

When you register, you will need to declare that the information you have provided is true and correct, you are or will be an eligible officer within 12 months, and you do not have an existing ID (or applied for one).

Existing directors will have until 30 November 2022 to acquire a DIN (30 November 2023 for directors of corporations under CATSI). For the first year of the program, new directors will have 28 days to apply for a DIN from the time of their appointment. From the first year onwards, you will need to have a DIN prior to being appointed as a director.

Unlike the existing system that merely registers information, the new regime will verify a director's information and may utilise other sources of information such as your driver's license and/or link to your client record held by the ATO.

The problem of directors in name only

The new regime will not overcome one problem area – where naive participants are encouraged to become directors in name only such as elderly parents, or a spouse. That is, the identity of that person is legitimate but their role as a director is merely window dressing and they do not fulfil the role as active participants - a situation that is not uncommon in family groups.

It's important that anyone agreeing to be a director understands the implications. Being a director is not just a title; it is a responsibility. At a financial level, directors are responsible for ensuring that the company does not trade while insolvent. The by-product of this is that the directors may be held personally liable for the debt incurred. The director penalty regime has also been tightened up in recent years to ensure that directors are personally liable for PAYG withholding, net GST and superannuation guarantee charge liability if the company fails to meet its obligations by the due date. For many small businesses, the directors are also often personally responsible for company loans secured against property such as the family home.

Failing to perform your duties as a director is a criminal offence with fines of up to $200,000 and five years in prison.

Ignorance is not a legal defence. Don't sign anything unless you understand the consequences.

Better monitoring and bigger teeth for ASIC

The introduction of a structured director verification system comes with greater controls and influence by the regulators to enforce the law with civil penalties of up to $200,000 in situations which include:

The failure to register when required is a strict liability and the regulator does not have to prove fault, they will simply issue an infringement notice.

Tax exemption for 'granny flat' arrangements

Sun, 02 May 2021 02:43:22 GMT

Tax exemption for 'granny flat' arrangements

To protect older Australians, the Government has moved to formalise 'granny flat arrangements' by providing an incentive to protect all parties in the arrangement.

Typically, granny flat arrangements occur when an older person transfers some sort of consideration (often title to property or proceeds from the sale of property) to their adult child in exchange for the promise of ongoing care, support and housing. In some circumstances, it's a way for a parent to give their children access to their inheritance when it's needed not at a later point when the person dies.

However, a 2017 Australian Law Reform Commission report highlighted the potential for elder abuse where granny flat arrangements fall apart. If the relationship breaks down, or other unforeseen circumstances arise, the older person can be left homeless. A central problem is a lack of formality in these arrangements.

The tax system, in particular, the capital gains tax (CGT) system, acts as a disincentive to formalising a granny flat arrangement. Under the current rules if a granny flat arrangement if formalised, this can lead to an upfront tax liability for the home owners. Also, the children can potentially lose part of their main residence exemption when the parent pays for the right to live in the home depending on how the arrangement is structured. If the arrangement is left informal, and the money paid by the parent is merely a gift, the main residence exemption is generally unaffected.

Recently released exposure draft legislation seeks to overcome the disincentive to formalising a granny flat arrangement by providing a CGT exemption.

This does not mean that every separate dwelling built out the back of a house will have a CGT exemption. The legal meaning of granny flat is derived from social security law; it describes an arrangement rather than a type of accommodation and can arise whenever money or other consideration is given in exchange for a right to use accommodation for life.

The draft legislation provides that no CGT event will arise from a granny flat arrangement where certain conditions are met including where the individual with the granny flat arrangement has:

Say Goodbye to the ATO Business Portal - ATO turns on the 'Online services for business'

Sat, 01 May 2021 03:02:30 GMT

Say goodbye to the ATO Business Portal

The ATO has commenced its Online services for business, replacing the existing Business Portal as the default service for businesses interacting directly with the ATO online.

The new service provides a secure channel for businesses so you can manage your tax and super obligations. It can be accessed across multiple devices, including tablets or phones as well as laptops and desktops.

In addition to the services already available in the Business Portal, Online services for business new features include:

The new service includes a 'switch ABN' function, which allows you to switch between businesses you manage without needing to log out and back into a separate business. You will also be able to organise a payment plan online, rather that through a phone call.

Businesses can start using Online services for business by logging in your myGovID. New users to ATO online services will need to set up a myGovID and link it to your organisation through Relationship Authorisation Manager.

If you have any questions about the Online service contact your Aspen Corporate advisor today.

Important Casual Staff Changes

Tue, 13 Apr 2021 03:04:32 GMT

important changes to casual staff

If you employ casual staff, you need to be aware of recent changes to the Fair Work Act on workplace rights and your obligations to your casual employees.

On Friday 26 March 2021, the Fair Work Act 2009 (FW Act) was amended to change workplace rights and obligations for casual employees. The changes were made by the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Amendment Act).

These changes came into effect on Saturday 27 March 2021.

Fairwork is still in the process of providing detailed information about the changes to the Act, however we've set out the information we have to hand below. As further pertinent details emerge we will keep you updated.

What's Changing

CEIS

As new casual staff are engaged, you will be required to provide them with a Casual Employment Information Statement before they start their new job, or as soon as possible afterwards.

If you are a small business owner, you will need to provide the statement to casual staff as soon as possible from 27 March 2021. Other employers need to provide the statement to causal staff promptly from 27 September 2021.

Approved methods for supplying the statement are:

Casual Employee Definition

How is it changing?

Under the new Fair Work Act casual employee definition, a person is a casual employee if they accept a job offer from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work.

Once employed as a casual, an employee will continue to be a casual employee until they either:

How does this impact existing casual employees?

Casuals who were employed immediately before 27 March 2021 and whose initial employment offer meets the new definition continue to be casual employees under the Fair Work Act.

Fair Work are expected to provide detailed information will be available soon.

Transitioning to a permanent employee

The Amendment Act adds a new entitlement to the National Employment Standards (NES) giving casual employees a pathway to become a full-time or part-time (permanent) employee. This is also known as 'casual conversion'.

An employer (other than a small business employer) has to offer their casual employee to convert to full-time or part-time (permanent) when the employee:

Some exceptions apply, including:

If you are unsure as to whether you need to transition casual employees to a permanent status or not, contact your Aspen Corporate advisor today for support and assistance.

Making and responding to offers and requests

There are rules for how employers and employees need to make and respond to offers. There are also rules for offering casual conversion to existing casual employees.

Casual employees have a right to request to convert to full-time or part-time (permanent) employment in some circumstances. This applies:

More detailed guidance and information will be available soon, including help with fixing workplace problems. If you have any questions, we advise contacting your Aspen Corporate advisor today.

Director resignations: new laws apply from Feb 2021

Sun, 11 Apr 2021 03:17:43 GMT

Director resignations: new laws apply from 18 February 2021

From 18 February 2021, a company director will not be able to backdate their resignation more than 28 days or resign if it means the company would be left without a director.

Under the new laws, a resignation of a director takes effect:

if, within 28 days after the day the person stopped being a director of the company, ASIC is notified of that fact, the day the person stopped being a director of the company, or

in any other case – the day written notice is lodged with ASIC stating that the person has stopped being a director of the company.

The Director resignation laws have been created as part of anti-phoenixing measures, along with other measures such as Director Identification Number s. Illegal phoenix activity involves creating a new company to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements.

From 18 February 2021, the resigning director or the company will need to notify ASIC of a director resignation within 28 days. Where ASIC is not notified within 28 days, the effective resignation date will be the document lodgement date. For example, if a director resigns on 1 March 2021 and does not notify ASIC of their resignation until 1 August 2021, ASIC will record their resignation as 1 August 2021 on the corporate register. To fix an earlier date, the company or director must apply to ASIC or the court.

The laws also prohibit companies from removing the last remaining director on ASIC records, leaving a company with no directors.

According to ASIC, ' Backdating resignations was a common tactic used by directors to engage in illegal phoenix activity '.

The 1 July 2021 Superannuation changes

Fri, 09 Apr 2021 22:09:34 GMT

The 1 July 2021 superannuation changes

Changes from 1 July 2021 will impact on how much money you can contribute to superannuation and how much you can have in your retirement phase superannuation account.

In general, your superannuation is either in an accumulation account (when you are building your super), a retirement account (when you meet preservation age and certain conditions of release and can withdraw your super), or in between when you are transitioning to retirement (when you reach perseveration age, are working reduced hours and take some of your superannuation as a pension).

The amount of money you can transfer from your accumulation account into your tax-free retirement account is limited by a transfer balance cap (TBC). From 1 July 2021, the current $1.6m general TBC will be indexed to $1.7m and once indexed, no single cap will apply to all individuals (each person will have an individual TBC between $1.6m and $1.7m).

Indexation will also change other superannuation caps and limits including:

How will the transfer balance cap impact me?

You are accumulating super

If you are building your superannuation (accumulation phase) and not withdrawing it*, indexation of the TBC is a good thing because from 1 July 2021 you will be able to access more of your superannuation tax-free. If you start taking your superannuation after 1 July 2021, for example if you meet a condition of release and retire, your transfer balance cap will be $1.7m. Essentially, if you have never had a transfer balance account credit, then the full indexation is available to you.

For low and middle income earners claiming the government co-contribution, the limit will increase in line with indexation to $1.7m.

Similarly, if you are contributing superannuation to your spouse and claiming the tax offset, the limit will increase in line with indexation to $1.7m. That is, you can contribute to your spouse's superannuation and claim the tax offset as long as their TBC is not more than $1.7m.

You have started taking your super

If you started taking your superannuation before 1 July 2021 and have already had a credit added to your transfer balance account, then your TBC will be between $1.6m and $1.7m depending on the balance of your transfer balance account between 1 July 2017 and 30 June 2021. If your account reached $1.6m or more at any point during this time, your TBC after 1 July 2017 will remain at $1.6m. If the highest credit ever in your account was between $1 and $1.6m, then your TBC will be proportionally indexed based on the highest ever credit balance your transfer balance account reached. That is, the ATO will look at the highest amount your transfer balance account has ever been, then apply indexation to the unused cap amount. For example, if you started a retirement phase income stream valued at $1.2m on 1 October 2018 and this was the highest point of your account before 1 July 2021, then your unused cap is $400,000. This unused cap amount is used to work out your unused cap percentage (400k/1.6m=25%). The unused cap percentage is then applied to $100,000 ($100k*25%=$25k) to create your new TBC of $1,625,000.

Note that indexation only applies to the difference between the $1.6m TBC and the highest point of your account at any point between 1 July 2017 and 30 June 2021 , not the value of your account at 30 June 2021. That is, if you made additional contributions after 1 October 2018 that increased your account to say $1,440,000, then indexation would apply to your unused cap of $160,000 (instead of $400,000), creating a TBC on 1 July 2021 of $1,610,000.

Indexation does not impact existing child death benefit beneficiaries. Child death benefit income streams commencing after 1 July 2021 will be entitled to the increment if the parent never had a transfer balance account or a proportion if the parent had a transfer balance account.

If you receive income from a capped defined benefit income stream and you are 60 years of age or more, or the income stream is from a death benefit where the member was over 60 at the time of death, then the defined benefit income cap will increase to $106,250 for most individuals. This will mean that the money your fund withholds from your income stream may change.

The amount you can contribute to super will increase

Indexation will increase the concessional and non-concessional contribution caps from 1 July 2021. These caps are indexed by average weekly ordinary time earnings (AWOTE).

The bring forward rule

The bring forward rule enables you to contribute up to three years' worth of non-concessional contributions in the one year. That is, from 1 July 2021, you could contribute up to $330,000 to your superannuation in one year. You can use the bring forward rule if you are 64 or younger on 1 July of the relevant financial year of the contribution and the contribution will not increase your total super balance by more than your transfer balance account cap.

If you utilised the bring forward rule in previous years, your non-concessional cap will not change. You will need to wait until your three years has expired before utilising the new cap limit.

* excludes withdrawals made under the COVID 19 relief measures.

ATO targets profits of professional service firms

Mon, 05 Apr 2021 23:26:32 GMT

ATO targets profits of professional service firms

The Australian Taxation Office (ATO) has been concerned for some time about how many professional services firms are structured – specifically, professional practices such as lawyers, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.

New draft guidance (PCG 2021/D2) released last month from the ATO takes a strong stance on structures designed to divert income so the professional ends up receiving very little income directly for their work, reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Part IVA may apply to schemes designed to ensure that the professional is not appropriately rewarded for the services they provide to the business, or that they receive a reward which is substantially less than the value of those services.

The draft guidance for professional services

Set to apply from 1 July 2021, the draft guidance sets out a series of tests to create a risk score. This risk score is then used to classify the practitioner as falling within a Green, Amber or Red risk zone and determines if the ATO should take a closer look at you and your firm. Those in the green zone are at low risk of the ATO directing its compliance efforts to you. Those in the red zone, however, can expect a review to be initiated as a matter of priority with cases likely to proceed directly to audit.

The risk assessment framework will only apply if the firm first meets two gateway tests.

If the gateway tests are passed, then you can self-assess your risk level against the ATO's risk assessment factors. There are 3 factors to be considered:

The resulting 'score' from these factors determines your risk zone. Some arrangements that were previously considered low risk may now fall into a higher risk zone.

For further information about ATOs changes for professional services, have a look at other Aspen Corp blog posts

https://www.aspencorp.com.au/the-assault-on-professional-services

https://www.aspencorp.com.au/ato-contacts-at-risk-professional-services-firms

https://www.aspencorp.com.au/professional-services-firm-profits-guidance-finalised

National licence recognition for tradies

Thu, 01 Apr 2021 20:51:23 GMT

National licence recognition for tradies

Builders, electricians, plumbers, architects, real estate agents, security guards and other workers who hold an occupational licence in their home state or territory and who want to do the same work in another state or territory will soon be automatically deemed to have the necessary licence.

The Federal, State and Territory Governments have agreed to a mutual recognition regime that will be implemented by the Federal Government. Exposure draft legislation enabling the seamless mutual recognition scheme was released last month with the scheme expected to start from 1 July 2021.

Workers will not need to pay additional licence fees or apply for additional licences.

Workers working in another state or territory will need to comply with local laws and regulations (including vulnerable people character test) and in some cases will need to notify the regulator they intend to work in their State. The States have the capacity to refuse a registration or type of license from mutual recognition.

Those subject to disciplinary action or who have conditions on their registration as a result of disciplinary, civil or criminal action will be excluded from automatic mutual recognition. Information on cancelled or suspended registrations and disciplinary proceedings and to record cancellations and suspensions on registers, will be shared.

Can you afford an Audit?

Thu, 25 Mar 2021 20:49:38 GMT

Can you afford an Audit?

The ATO has recently indicated that it will be stepping up its Audit efforts following a hold on compliance activities during the height of Covid-19.

Being on the receiving end of tax audit takes can be a stressful, time-consuming process and end up costing a great deal of money.

Audit Shield, an independent insurance company, provides optional Tax Audit Insurance, which is designed to provide relief from the professional fees such as legal or accounting associated with government-initiated revenue audit activity.

Audit insurances can be fully tax deductible for individuals, businesses and SMSFs, and can cover the fees associated with an audit. Often these fees are greater than those your accountant may charge you for completing the return(s)/filing(s).

Data matching is becoming more sophisticated every year. This makes it simpler and far more likely for previously untargeted taxpayers to encounter audit activity, despite being compliant.

If you are interested in find out more about Audit Shield, or audit insurance in general, contact your Aspen Corporate advisor today.

Activity Statements – avoid ATO penalties

Sun, 21 Mar 2021 20:45:41 GMT

Activity Statements – avoid ATO penalties

Last November the ATO commenced sending out electronic activity statements (pay as you go (PAYG) or goods and services tax (GST)), as a replacement to paper versions of the statements, particularly if a business has made an electronic lodgement.

However, this has not gone well, as in some cases clients have not received notifications. Demand-for-payment letters have been sent in relation to non-payment of the November 2020 instalment.

Your December quarter activity statements may have been sent electronically, accessible via the ATO business Portal or myGov . If you are a self-lodger the ATO would have emailed you in February to let you know that the December 2020 PAYG and GST instalment notices are due for payment by 2 March 2021.

What do you need to do?

What is the ATO doing now?

The ATO has now acknowledged that issues have arisen because of these and has committed to reviewing the changes. They have advised that Paper PAYG and GST instalment notices had been temporarily reintroduced from March 2021 .

We appreciate that this has the potential to be incredibly confusing, so if you have any questions or need assistance, contact your Aspen Corporate Advisor.

How to sell your Business

Fri, 19 Mar 2021 20:39:14 GMT

how to sell your business

We're often asked the best way to sell a business. There are two key components at play in the sale of a business; structuring the transaction and positioning the business to the market. Both elements are important and can significantly impact your result.

Structuring the transaction covers things such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising vendor position.

Positioning the business for sale is all about ensuring that you achieve a sale and that maximises your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be.

To do this, you need to get an objective assessment of how the business compares in its market, its competitive position, and what, if any, impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer's market and will try to drive down price expectations. Whether or not you are in a buyer's market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business with similar businesses but also opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this so talk to us well in advance of putting your business on the market.

If you are thinking about selling your business, we recommend speaking to your Aspen Corporate Advisor today.

The Pandemic Productivity Gap

Wed, 17 Mar 2021 20:37:34 GMT

The Pandemic Productivity Gap

A recent article published in the Harvard Business Review by Bain & Co suggests that the pandemic has widened the productivity gap between top performing companies and others stating, "Some have remained remarkably productive during the Covid-era, capitalizing on the latest technology to collaborate effectively and efficiently. Most, however, are less productive now than they were 12 months ago. The key difference between the best and the rest is how successful they were at managing the scarce time, talent, and energy of their workforces before Covid-19."

Atlassian data scientists also crunched the numbers on the intensity and length of work days of software users during the pandemic. The results found that workdays were longer with a general inability to separate work and home life, and workers were working longer hours (predominantly because during lockdowns, there is no set start and end of the workday routine). Interestingly, the average length of a day for Australian workers is shorter than our international peers by up to an hour pre pandemic. Australia's average working day is around 6.8 active hours whereas the US is close to 7.2.

However, working longer does not mean working more productively. Atlassian's research shows that while the length of the working day increased and the intensity of work increased earlier and later in the day, intensity during "normal" hours generally decreased.

So, how do we measure productivity? Bain & Co suggests:

The productivity gap was always there. The pandemic merely brought the gap into stark contrast.

Fuel Tax Credit Rates have changed

Mon, 01 Mar 2021 20:25:34 GMT

Fuel Tax Credit Rates have changed.

Fuel tax credit rates changed as of 1 February 2021

Business which use fuel in heavy vehicles or other machinery, may be eligible to claim credits from the ATO for the fuel tax (excise or customs duty).

This includes the tax in the price of fuel used in any of your business's:

The new rates can be found on the ATO website .

If you would like to find out if you are eligible to claim Fuel Tax Credits, or need assistance with lodging a claim, speak to your Aspen Corporate Advisor.

NSW Land Tax Assessments include a 2% Foreign Persons Surcharge for Family Trusts

Tue, 01 Dec 2020 22:20:30 GMT

Jobmaker client guide

JobMaker can be complex and clients wishing to access the hiring credit will need to be fully informed about eligibility, enrolment and ongoing compliance.

We have developed a guide to help our clients understand the benefits and requirements of JobMaker.

Download our JobMaker Guide

JobMaker is a credit available to eligible businesses and non-profit entities that create new jobs (not if you are merely replacing someone who left). The hiring credit is available for jobs created from 7 October 2020 until 6 October 2021 and provides:

$200 per week for new employees between 16 to 29 years of age; and
$100 per week for new employees between 30 to 35 years of age.

Administered by the ATO, JobMaker is a credit that is paid quarterly in arrears from the start date of the employee for 12 months, assuming the business and employee remains eligible.

The credit is an incentive for the employer to support wage costs and is not passed onto the employee.

Unlike JobKeeper, JobMaker can apply to new businesses and the business does not need to satisfy a decline in turnover test to receive payments.

A series of people are excluded from the JobMaker scheme including employers receiving JobKeeper, employees receiving an apprentice wage subsidy, and close associates of the business including some relatives of the business owners.

If you have any questions, please just contact your Aspen Corporate Advisor .

Tax deductions for investing in your business

Mon, 09 Nov 2020 22:14:04 GMT

Tax deductions for investing in your business

Stimulating investment is high on the Government's agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset's cost will be fully deductible in the year it's installed ready for use, rather than being claimed over the asset's life. And, there is no cap on the cost of the asset.

When it comes to second-hand assets the rules are a bit different depending on the size of the business. Businesses with an aggregated turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.

Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.

For small business entities that have assets in a general pool the changes seek to ensure that pool balances are completely written-off for tax purposes in the 2021 and 2022 income years.

These super-charged immediate deduction rules tie into the existing instant asset write-off for businesses with a turnover under $500 million (summarised below).

If your business will make a tax profit this year, this measure is likely to reduce the taxable income of the business for the year and it may be possible to vary upcoming PAYG instalments to improve cash flow. If your business operates through a company and will make a tax loss, you might be able to use the loss to offset tax paid in previous years (see Refunds for Tax Losses ). Alternatively, tax losses can generally be carried forward to a future year.

Refunds for Tax Losses

Thu, 05 Nov 2020 22:11:30 GMT

Refunds for Tax Losses

If your company has made a loss, you may be able to claim a tax refund for tax previously paid on profits.

In the 2020-21 Federal Budget, the Government announced that businesses with turnover under $5bn* will be able to offset any losses made between 2019-20 and 2021-22 against previously taxed profits between 2018-19 and 2020-21.

The loss carry-back rules enable a company to offset tax losses against profits taxed in a previous year, generating a refundable tax offset. The amount carried back can be no more than the earlier taxed profits, limiting the refund to the company's tax liabilities in the profitable years. The company can choose to carry-back a loss or carry it forward. That is, tax losses for the 2019-20, 2020-21 or 2021-22 income years can either be:

Previously, tax losses could only be carried forward and deducted against income in later income years.

This is not the first time that carry-back losses have been allowed. The loss carry-back rules were introduced some years ago by the Gillard government for the 2012-13 year, then repealed.

The loss carry-back rules also interact with the Government's Budget measure allowing immediate expensing of investments in capital assets (See Tax deductions for investing in your business ). The new investment will generate significant tax losses in some cases which can then be carried back to generate cash refunds for eligible companies.

What entities are eligible to carry-back losses?

Corporate tax entities are eligible to carry-back losses - a company, a corporate limited partnership, or a public trading trust - BUT only if the entity has lodged an income tax return for the current year and each of the five years immediately preceding it. If your company has not kept up to date with its reporting obligations, it might not be able to use the new rules.

Claiming the refundable tax offset

Businesses will need to elect to utilise their carry-back losses when they lodge their 2020-21 and 2021-22 tax returns. That is, even if the company made a loss in the 2019-20 year, it cannot claim that loss until the 2020-21 tax return is lodged.

For the 2020-21 income year, a loss carry-back tax offset may be available to a company if:

The carry-back cannot generate a franking account deficit. That is, the refund is further limited by the company's franking account balance.

The 2020-21 Budget delivered a range of incentives for business to invest. If you would like us to review your position and the tax impact of any investments you are contemplating, please call us and we can assist you to get the best possible outcome.

Important information about accruing paid sick and carer's leave

Tue, 01 Sep 2020 02:26:24 GMT

Important information about accruing paid sick and carer's leave

On 13 August 2020, the High Court of Australia handed down a decision clarifying how paid personal/carer's leave is accrued and taken under the National Employment Standards (NES).

The High Court's decision overturns a decision made by the Full Federal Court of Australia in August 2019. In that decision, the Full Federal Court held that personal/carer's leave accrues in working days, not hours.

Use the updated Fair Work Leave Calculator to calculate personal/carer's leave entitlements for you or your employees.

Fair Work has also updated the information on their Paid sick and carer's leave and Payment for sick and carer's leave pages, as well as the Fair Work Information Statement .

For more information:

For more information on the High Court decision, go to High Court decision: accrual of personal/carer's leave .

Have casual workers been granted annual leave?

Tue, 14 Jul 2020 20:27:59 GMT

Have casual workers been granted annual leave?

News headlines recently stated that casual workers have won the right to paid leave following a decision in the Federal Court. As usual, the devil is in the detail.

At present, there is no global change granting Australian casual workers paid leave. The case however, highlights the long running problem of determining over time, who is a permanent staff member and entitled to paid leave and other benefits, and who is a casual worker entitled to a casual loading.

In the WorkPac v Rossato case, WorkPac, a specialist mining and engineering labour hire company, employed Mr Rossato as a casual worker across six consecutive employment contracts for a continuous period of approximately three and a half years. Over that time, Mr Rossato was paid a casual loading of 25% of the minimum rate of pay payable under the Enterprise Agreement, which was in part, paid in lieu of leave.

Mr Rossato worked every shift he was rostered for except where he was given approval to take rest and recreation, and when his partner was airlifted to hospital.

In its decision, the Federal Court found that Mr Rossato was a permanent full-time employee across each of his contracts and entitled to his accrued leave entitlements and payment for the public holidays where he was rostered off work. WorkPac was unable to reduce the liability owing to Mr Rossato by the casual loading paid to him over the course of his contracts, with the court noting, "There is a superficial attraction to the notion that something given in substitution of an entitlement has an equivalent value to the entitlement itself and is therefore of the same character."

Each of the contracts signed by Mr Rossato contained a declaration headed "Casual or Maximum Term Employee." However, the court reiterated the observation that, "agreements by which people are engaged to work are typically partly written, partly oral and "partly left to evolve by conduct" as time goes on." That is, what the employee signs up to does not necessarily define what the employment relationship becomes.

The WorkPac v Rossato case does not generally award casual employees paid leave entitlements but it does highlight the problem that can occur over time where the nature of the employment arrangement changes from casual to a more permanent arrangement.

Recognition of this pathway from casual to permanent employment is now a part of many Modern Awards. The Fair Work Commission's updates to Modern Awards rolled out across this year include a Right to request casual conversion clause that enables a long-term casual worker to request permanent employment. The employer can refuse that request but only on "…reasonable grounds and after there has been consultation with the employee."

The pathway also has political impetus with the Prime Minister's recent 'JobMaker' speech at the National Press Club nominating the issue as one of the five working groups for negotiation.

In brief: types of employment

Refer to the Fair Work Ombudsman for clarification of your specific scenario.

Director Identification Numbers Regime

Sun, 05 Jul 2020 01:47:35 GMT

Director Identification Number (DIN) regime

The Treasury Laws Amendment Bill 2019 has passed parliament, which means that a new Director Identification Number (DIN) regime will go into effect.

All existing and new directors of registered bodies will now be required to link their identity to a unique Director Identification Number. The DIN has been created as part of anti-phoenixing measures. It should help reduce time and cost for administrators and liquidators during the insolvency process and can be used to trace and track a director's relationship across companies, with the purpose of monitoring directors of failed companies. The DIN will also help prevent the use of fake identities, such as Elvis Presley or Bob Marley , and should end the practice of innocent people being signed up as directors without their knowledge.

Individuals will keep their unique DIN permanently, even if they are no longer directors. The number will never be issued to another person.

The law requires director's details to be lodged with the ASIC, however the regulator is currently not required to verify the identity of the directors.

The law is due to take effect in June 2022. New directors will need to apply for their DIN before they can be appointed a director of a registered body, unless the period is extended by the regulations or unless they are provided an exemption or extension by the registrar. Those appointed as a director within the first 12 months of the new regime's operation will also be granted an additional 28 days to apply for a DIN. A transitional period for existing directors will be specified by a legislative instrument made by the minister.

A "registered body" is a company, registered foreign company, a body registered under the Corporations Act or an Aboriginal and Torres Strait Islander corporation.

There are civil and criminal penalties for directors who fail to apply for a DIN within the applicable time frame, and also for misrepresenting a DIN.

Increased flexibility for Parental Leave Pay

Wed, 01 Jul 2020 00:28:46 GMT

EOFY Single Touch Payroll finalisation

Sun, 28 Jun 2020 04:32:08 GMT

End of Financial Year Single Touch Payroll Finalisation