NEWS & EVENTS
Practice Update – September 2024
Taxpayers can start lodging their tax returns
With millions of pieces of information now pre-filled (including information from most banks, employers, government agencies and private health insurers), the ATO is giving taxpayers with simple affairs the ‘green light’ to lodge their tax returns.
Taxpayers who plan to claim deductions this year should make sure they have the correct records, and, in most cases, “a bank or credit card statement (on its own) isn’t enough evidence to support a work-related deduction claim – you’ll need your receipts”.
The ATO reminds taxpayers that the rules regarding how and when they can claim a deduction can change, including in relation to car expenses and working from home costs. Therefore, they should not just ‘copy and paste’ their deductions from last year, and they may require assistance from their accountant in this regard.
The ATO notes that taxpayers using a registered tax agent normally have more time to lodge.
Editor: Feel free to contact us if you want to urgently lodge your return, or if you want to confirm that you (and your related entities) are on our deferred lodgment program.
Business self-review checklist: GST classification of products
…Practice Update – August 2024
ATO’s tips for correctly claiming deductions for rental properties
Taxpayers who have work done on their rental property should consider the following factors in determining claims for expenses.
Repairs and general maintenance are expenses for work done to remedy or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year the expense occurred.
Initial repairs include any work done to fix defects, damage or deterioration existing at the time of purchase. These are capital repair expenses and cannot be claimed as a deduction.
Capital works are structural improvements, alterations and extensions to the property, claimed at 2.5% over 40 years (with some exceptions). Deductions for capital works can only be claimed after the work has been completed.
Improvements or renovations that are structural are also capital works. Work going beyond remedying defects, damage or deterioration which improves the function of the property are improvements.
Repairs to an ‘entirety’ are also capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item (for example, a depreciating asset).
Depreciating assets must be claimed over time (as ‘capital allowances’) according to their ‘effective life’.
Notice of online selling data-matching program
…Practice Update – July 2024
ATO’s ‘main residence exemption tips’
The main residence exemption needs to be considered in a variety of situations when a taxpayer sells a property they have lived in. The ATO hopes that the following tips will help in this regard:
- Taxpayers should consider if they have started earning income from their home (in which case they may need to get a market valuation for CGT purposes).
- When renting out a property that was their main residence, taxpayers need to consider whether to use the 6-year absence rule when they sell their property.
- Taxpayers can only have one property as their main residence at a time. The only exception is the 6-month period when they move from one home to another.
- Has the taxpayer’s residency changed? If so, this may affect eligibility for the exemption.
Reminder of June 2024 Quarter Superannuation Guarantee (‘SG’)
Employers are reminded that employee superannuation contributions for the 1 April 2024 to 30 June 2024 quarter must be received by the relevant super funds by 28 July 2024 (which is a Sunday), in order to avoid being liable to pay the SG charge.
…Practice Update – June 2024
ATO’s three focus areas this tax time
The ATO will be taking a close look this ‘tax time’ at the following common errors made by taxpayers:
Work related expenses: Taxpayers using the ‘revised fixed rate method’ of calculating a working from home deduction must have comprehensive records to substantiate their claims, including records that show the actual number of hours they worked from home, and the additional running costs they incurred to claim a deduction.
Rental properties: Performing general repairs and maintenance on a rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (such as initial repairs on a newly purchased property) are not deductible as repairs or maintenance.
Failing to include all income in tax return: The ATO warns taxpayers against rushing to lodge their tax return on 1 July. If they have received income from multiple sources, they need to wait until this is pre-filled in their tax return before lodging.
End of financial year obligations for employers
…Practice Update – May 2024
Government warns of ‘malicious’ myGov scammers
The Government has urged Australians to be vigilant regarding scammers who target ATO log-in details to commit tax fraud.
The ATO has received a large number of reports of scammers using fake myGov sites to steal myGov sign-in details, which can be used to commit tax and refund fraud in other people’s names.
These criminals will often use text message or email to lure people into clicking a link using phrases such as ‘You are due to receive an ATO Direct refund’ or ‘You have a new message in your myGov inbox – click here to view’.
The Government says the ATO or myGov will never send an email or text message with a link to sign in to myGov.
…Practice Update – April 2024
How to claim working from home expenses
Taxpayers who have been working from home this financial year, and who consequently incurred work-related expenses, have two ways to calculate their work from home deduction:
- the actual cost method; or
- the fixed rate method.
Using the fixed rate method, taxpayers can claim a rate of 67 cents per hour worked at home.
This amount covers additional running expenses, including electricity and gas, phone and internet usage, stationery, and computer consumables. A deduction for these costs cannot be claimed elsewhere in their tax return, although taxpayers can separately claim any depreciating assets, such as office furniture or technology.
Taxpayers need to have the right records, and the record-keeping requirements differ for the fixed rate method and the actual cost method.
…Practice Update – March 2024
Super contribution caps to rise
The big news story for those contributing to super is that the contribution caps are set to increase from the 2025 income year.
- The concessional contribution cap will increase from $27,500 to $30,000.
This ‘CC’ cap is broadly applicable to employer super guarantee contributions, personal deductible contributions and salary sacrificed contributions. - The non-concessional contribution cap will increase from $110,000 to $120,000.
This ‘NCC’ cap is generally applicable to personal non-deductible contributions.
The increase in the NCC cap also means that the maximum available under the three-year bring forward provisions will increase from $330,000 to $360,000. This is provided that the ‘bring forward’ is triggered on or after 1 July 2024.
The ‘total superannuation balance’ threshold for being able to make non-concessional contributions (and the pension general transfer balance cap) will remain at $1.9 million.
Small business concessions
The ATO has recently issued a reminder that small business owners may be eligible for concessions on the amount of tax they ultimately pay.
This depends on their business structure, their industry and their aggregated annual turnover.
For example, small business owners who have an aggregated annual turnover of less than:
…Practice Update – January/February 2024
Government announces changes to proposed ‘Stage 3’ tax cuts
Despite previous assurances, and after much speculation, the Government has announced tweaks to the ‘Stage 3’ tax cuts that will apply from 1 July 2024.
More particularly, the Government proposes to:
- reduce the 19% tax rate to 16%;
- reduce the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000 threshold;
- increase the threshold at which the 37% tax rate applies from $120,000 to $135,000; and
- increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.
The Medicare levy low-income thresholds for the 2024 income year will also be increased.
Read more: Practice Update – January/February 2024Changes in reporting requirements for sporting clubs
Not-for-profits (‘NFPs’), including sporting clubs, societies and associations with an active ABN, need to lodge an annual NFP self-review return to continue accessing their income tax exemption.
The main purpose of a sporting organisation must be the encouragement of a game, sport or animal racing. Any other purpose of the organisation must be incidental, ancillary or secondary.
The organisation’s governing documents will help identify the purpose for which it was set up, and the organisation’s activities in the year of income must then demonstrate that the main purpose is the encouragement of its game, sport or animal racing.
NFP organisations need to lodge their first NFP self-review return for the 2024 income year between 1 July and 31 October 2024.
NFP organisations with their own ABN need to complete their own NFP self-review return even if they are affiliated with a broader sporting group.
If an NFP organisation does not lodge the return, they may become ineligible for an income tax exemption and penalties may apply.
Editor: If you need more information about this recent development, please contact our office.
Deductions denied for work-related expenses
The Administrative Appeals Tribunal (‘AAT’) recently held that a taxpayer should not be allowed deductions for various work-related expenses, largely because the substantiation requirements had not been satisfied.
The taxpayer, a real estate salesperson, claimed tax deductions for the 2018 to 2020 income years, during which time he derived income from his employment with a real estate company.
However, the ATO disallowed the taxpayer’s claims for various work-related expenses, including car expenses, and gifts and donations.
The AAT agreed with the ATO, and held that the expenses claimed were not deductible and that the taxpayer had failed to substantiate his claims.
The taxpayer had claimed deductions for car expenses using the logbook method, but the AAT noted that the car was owned by a company and was not leased to the taxpayer. Therefore, the car was not ‘held’ by the taxpayer, as required by the logbook method. The taxpayer’s logbook also lacked “sufficient specificity” for this method.
While the taxpayer produced credit card statements and telephone tax invoices (in relation to credit card interest and telephone expenses), it was not clear from these documents whether the costs claimed related to work expenses.
The taxpayer sought to rely on bank transaction statements in relation to other expenses, but they were considered to be insufficient, as it was unclear from these statements what the relevant expense was, how the expense was incurred in earning the taxpayer’s assessable income, and any apportionment between business and personal use.
There were also no receipts or tax invoices for any of the claimed donations.
Sale of land subject to GST
The AAT recently held that the sale of land by a taxpayer was subject to GST, as it was a supply made in the course of an enterprise being carried on by the taxpayer.
The taxpayer purchased a single parcel of land in 2013 for $1.6 million, and he subsequently took steps for the land to be subdivided and rezoned. He then sold the land in 2021 for $4.25 million before the subdivision was completed.
The ATO advised the taxpayer that the sale of the land was subject to GST as a taxable supply under the GST Act.
The taxpayer objected to the GST assessment on the following grounds:
- the sale of the property was not made by him in the course of his enterprise; and
- as the property was the taxpayer’s residential premises, it was an input taxed supply, so no GST should apply anyway.
However, the AAT agreed with the ATO that the sale of the property was subject to GST as a supply made in the course of the taxpayer’s enterprise.
The AAT first noted that the sale of the property was not an input taxed supply of residential premises because the buildings on the property were uninhabitable, and so the property did not meet the definition of ‘residential premises’ in the GST Act.
The AAT also held that the taxpayer’s development works were in “the form of a business”, even if he was not in the business of being a property developer. Relevant factors included the scale of the operations that the taxpayer was involved in (including rezoning and subdividing the property), as well as the amount of capital invested by him in the purchase of the property and development works.
The taxpayer’s “series of activities” throughout his ownership of the property therefore amounted to the carrying on of an enterprise, and the taxpayer was liable to pay GST on the sale of the property.
Melbourne man sentenced to jail for attempting to defraud the ATO
A Wheelers Hill man was recently sentenced to three years and six months imprisonment for defrauding the ATO of nearly $35,000 and attempting to defraud the ATO of a further $458,000, following a joint investigation by the Australian Federal Police (‘AFP’) and ATO’s serious financial crime taskforce.
The investigation began in June 2020, after the ATO linked the man to a number of suspicious claims, including 40 fraudulent applications for JobKeeper.
The sentence is “a warning to criminals who seek to exploit and steal from the Commonwealth and by extension, Australian taxpayers”.
New ATO guidance on “who is an employee?”
The ATO recently issued a ruling which explains when an individual is an ’employee’ of an entity for pay as you go (‘PAYG’) withholding purposes.
A useful approach for establishing whether or not a worker is an employee of an engaging entity is to consider whether the worker is working in the business of the engaging entity, based on the construction of the terms of the relevant contract. Importantly, the fact that a worker may be conducting their own business, including having an ABN, is not determinative.
Editor: If you need help with this important issue, please contact our office.
Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Practice Update – December 2023
ATO’s lodgment penalty amnesty is about to end
The ATO is remitting failure to lodge penalties for eligible small businesses. Businesses which have not yet taken advantage of the ATO’s lodgment penalty amnesty only have until 31 December 2023 to do so.
Businesses must meet the following criteria in order to be eligible for the amnesty:
- had an annual turnover under $10 million when the original lodgment was due;
- have overdue income tax returns, business activity statements or FBT returns that were due between 1 December 2019 and 28 February 2022; and
- lodge between 1 June and 31 December 2023.
When taxpayers lodge their eligible income tax returns, business activity statements and FBT returns, failure to lodge penalties will be remitted without the need to apply.
The amnesty does not apply to privately owned groups or individuals controlling over $5 million of net wealth.
Directors who bring their company lodgments up to date can also have penalties remitted and, if they are reliant on company lodgments to finalise their own tax affairs, any failure to lodge penalties will be remitted. This also applies to eligible lodgments made between 1 June and 31 December 2023.
Notice of officeholder data-matching program
The ATO will acquire officeholder data from ASIC, the Office of the Registrar of Indigenous Corporations and the Australian Charities and Not-for-profits Commission for the 2024 and 2025 income years, including details such as:
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