Instant asset write-off extended

The $20,000 instant asset write-off limit (IAWO) extension for the 2024–25 income year is now law. Last May, as part of the 2024–25 Budget, the government announced it would continue to provide support for small businesses by extending the $20,000 instant asset write-off limit for a further 12 months until 30 June 2025. This means that your business may be able to deduct the full business portion of the cost of eligible assets which cost less than $20,000. 

How this measure applies to you 

If you’re a small business with an aggregated turnover of less than $10 million, this new measure will allow you to deduct: 

• the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2024 and 30 June 2025 

• an amount included in the second element (cost addition) of eligible depreciating asset's cost that they have incurred between 1 July 2024 and 30 June 2025, if they claimed an immediate deduction for the asset under the simplified depreciation rules in a prior income year where the amount is: 

• the first amount of second element cost incurred after the end of the income year in which the asset was written off; and  

• less than $20,000. 

The $20,000 limit under the measures applies on a per asset basis, so small businesses can instantly write off multiple assets.  

What the IAWR can be applied to 

You can use the instant asset write-off for: 

• multiple assets if the cost of each individual asset is less than the relevant limit 

• new and second-hand assets. 

Eligibility and limits  

Whether your business if eligible to claim the Instant Asset Write-Off and the year in which you may use it depends on: 

• your aggregated turnover (the annual turnover of your business and that of any business entities that are your affiliates or connected with you) 

• the date you purchased the asset 

• when it was first used or installed ready for use 

• the cost of the asset being less than the limit. 

Check the limits that apply to your eligible business here. 

 When the cost of an asset exceeds the limit 

If you have assets valued at $20,000 or more, they can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that. Additionally, you can write off pool balances under $20,000 at the end of 2024-25 income year.  

More information is available at the following link: 

Instant asset write-off for eligible businesses | Australian Taxation Office  

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au. 

ATO interest charge deductions now denied

The government’s announcement to deny income tax deductions for ATO interest charges has now been legislated. This means that taxpayers can no longer deduct General Interest Charges (GIC) or Shortfall Interest Charges (SIC) incurred on or after 1 July 2025. 

When are ATO interest charges incurred? 

You become liable for an ATO interest charge depending on the type of interest charge you incur:  

• GIC imposed on unpaid tax liabilities is incurred on a daily basis. 

• SIC imposed on an unpaid income tax shortfall is incurred in the year you are served a notice of amended assessment. 

ATO interest charges incurred on or after July 1 

If you have incurred any GIC or SIC on or after 1 July 2025, then you cannot deduct this from your income tax. This includes all GIC and SIC in respect of outstanding or late payments of tax for income years both before and after 1 July 2025. 

ATO interest charges incurred before July 1 

If you have a GIC or SIC incurred prior to 1 July 2025, then you won’t be impacted by the changes to the law. Your ATO interest charges will continue to be deductible for the 2024-25 and earlier income years. 

More information is available at the following link: 

Denying deductions for ATO interest charges | Australian Taxation Office  

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.  

Luxury car tax rate and thresholds

Luxury car tax rate  

If you are an individual or business that sells or imports a car that has a GST-inclusive value above the luxury car tax (LCT) threshold, you must pay luxury car tax.  

The current LCT rate is 33% and only applies to the amount that is over the threshold.  

Luxury car tax thresholds  

The threshold that applies to you will depend on the financial year your luxury car was imported, acquired or sold. In general, the LCT value of a car includes the value of any parts, accessories or attachments you supplied, or imported, at the same time as the car. 

LCT thresholds 

Up to date rates with the ATO are available here.  

The Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025 has seen the government make changes to the definition of a fuel-efficient vehicle. They will also align the indexation rates applying to the thresholds for fuel-efficient vehicles and other vehicles. These changes will be applied from 1 July 2025.  

The indexation factor for the 2024–25 financial year for: 

• fuel-efficient vehicles is 1.023 

• other vehicles is 1.047.  

Find out the current and revised definitions of a fuel-efficient vehicle here. 

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.  

Australia Federal Budget 2025 – Highlights and key measures

The Federal Government presented its 2025-26 budget on March 25, headlined by a range of tax related measures attempting to provide cost of living relief. Other notable measures include an extension of the energy bill rebate and a reduction in HELP debt for students.  

IN BRIEF 

• The threat of global trade war and tariff tensions continue to create a volatile and unpredictable global economic outlook 

• Inflation is expected to hit 3% in 2025-26 but sustainably return to the RBA's target band of 2-3% around the middle of 2025, which is around 6 months earlier than anticipated 

• Unemployment is projected to peak lower at 4.25% 

The Government expects to record a budget deficit of $27.6bn for 2024-25. 

This is a $0.7bn deterioration compared with the December MYEFO projections which is a notable turnaround from a $15.8 billion surplus recorded in 2023–24. The Government projects deficits will continue, forecasting it to rise to $42.1bn (1.5% of GDP) in 2025–26. 

KEY POINTS  

Personal taxation 

1. Personal tax rates cut from 1 July 2026 and 2027 

   The Government has proposed to cut the personal income tax rate for the income threshold ($18,200 - $45,000) from 16% to 15% (from 1 July 2026) and 14% (from 1 July 2027). Under the proposed changes, every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, rising to $536 from 1 July 2027.

2. Medicare levy low-income thresholds  

   For the 2024-25 income year, the Medicare levy low-income threshold has been increased. To check how much it has increased for you, visit this link.   

Business taxation  

1. Taxpayer compliance 

   The ATO is to receive another significant increase in funding to enforce taxpayer compliance. The Government will provide $999.0 million over 4 years for the ATO "to extend and expand tax compliance activities". 

2. Extra funding and sanctions for the Tax Practitioners Board 

   The Government will provide extra funding to allow the Tax Practitioners Board to undertake additional compliance operations targeting high-risk tax practitioners. This will take place over 4 years from 1 July 2025.

3. MIT measures 

   The Government intends to "clarify" the tax arrangements for managed investment trusts.

4. Start dates deferred for Foreign resident Capital Gains Tax and Clean Building MITs 

   The Extending the clean building managed investment trust withholding tax concession has been changed from 1 July 2025 to the first 1 January, 1 April, 1 July or 1 October after the Act receives assent. 

   The Strengthening the foreign resident capital gains tax regime has been changed from 1 July 2025 to 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after the Act receives assent.

5. More additions to charities register 

   Tax law will be amended to list six more organisations as deductible gift recipients (DGRs).   

Superannuation 

The Government did not announce any new major super measures.  

 Other measures  

1. Extended Govt energy bill rebate: extra $150 for 2025 

   The Government will extend its energy bill rebate until the end of 2025 by providing a further 2 instalments of $75 for households and small businesses.

2. Help to Buy home scheme expanded 

   Equity investment in the Help to Buy scheme will be increased to $6.3bn (up $800m). The income and price caps will also be increased.

3. Early childhood education: child care subsidy 

   Services Australia will receive $4.5m over 4 years from 2025-26 to make system changes to implement the Child Care Subsidy Three Day Guarantee. This aims to ensure families are entitled to at least 3 days a week of subsidised early childhood education and care.

4. Extending subsidies for apprentices and fee-free TAFE 

   The Government will provide $722.8m over 4 years from 2025-26 to deliver increased support for apprentices. Funding will be used to expand the Key Apprenticeship Program, extend the current interim Australian Apprenticeship Incentive System program,  increase the Disability Australian Apprentice Wage Support subsidy and increase the Living Away From Home Allowance.

5. Beer excise indexation

   The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a 2-year period, from August 2025.

6. Alcohol producers: increase to remission cap and WET rebate cap 

   The Government will increase support available under the existing Excise remission scheme for manufacturers of alcoholic beverages (the Remission scheme) and Wine Equalisation Tax (WET) producer rebate (Producer rebate). 

7. More funding for ASIC to deter illegal phoenixing 

   The Australian Securities and Investments Commission will receive $3.0m over 4 years from 2025-26. This aims to improve its data analytics capability to deter illegal phoenixing activities, particularly in the construction sector.

8. Australian Business Registers: further funding

   The Government will provide $207m over 2 years from 2025-26 to continue the stabilisation of Australia's business registers and undertake targeted uplifts.

9. Foreign ownership of housing 

   The ATO will be provided $5.7 million over 4 years from 2025-26 to enforce the ban on foreign residents from purchasing established properties. 

10. Reduction of HELP debts 

    The Government has promised to reduce Higher Education Loan Program (HELP) and other student debts for more than 3 million Australians by around $19bn. The measure will reduce outstanding student debts by 20% before indexation is applied on 1 June 2025 - subject to the passage of legislation - which will remove $16bn in debt. 

11. Employment contract non-compete clauses to be abolished 

    The Government will ban non-compete clauses for more than 3m Australian workers in industries including childcare, construction and hairdressing. This aims to rectify the misuse of non-compete clauses, including minimum wage workers being sued by former employers. 

12. Support for small business franchisees 

    The Australian Competition and Consumer Commission (ACCC) will receive $7.1m over 2 years from 2025-26 to strengthen regulatory oversight of the Franchising Code of Conduct and ensure a more transparent and effective regulatory framework for the franchising sector. 

The 2025-26 Budget Papers are available from the following website: 

Budget 2025-26 - https://budget.gov.au/  

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au 

Source : Chartered Accountants ANZ 

Study and Training Loan Refunds

The bill to change the annual indexation for study and training loans passed parliament.

Once the law is changed, indexation will be based on either the Consumer Price Index (CPI) or Wage Price Index (WPI) whichever is lower.

This change is backdated, taking effect from 1 June 2023.

The new indexation rates for the two previous years are:

3.2% for 1 June 2023 - reduced from 7.1%

4% for 1 June 2024 - reduced from 4.7%.

Most a study or training loan are currently being recrediting excess indexation amounts directly to the loan.

If your study or training loan account is in credit after the adjustment, this credit will be transferred to your Income Tax account. It will then be applied against other primary tax or Commonwealth debts (if applicable), and any remaining amount refunded to your nominated bank account.

Most people will see these credits on their accounts by the end of January 2025. Some credits will take a bit longer than others to show on their accounts depending on the complexity.

 More information is available on the following link:

Study and training loans what's new | Australian Taxation Office

 For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Staying Informed: A Guide to Recent ATO Impersonation Scams

In today's digital age, where technology plays a significant role in our daily lives, the prevalence of scams has unfortunately increased. One of the most alarming trends is the rise of impersonation scams involving the Australian Taxation Office (ATO). As the tax season approaches, it is crucial for individuals and businesses to remain vigilant and informed about the latest ATO impersonation scams that threaten tax and superannuation information.

Understanding ATO Impersonation Scams

ATO impersonation scams typically involve fraudsters masquerading as ATO officials to deceive individuals into providing personal and financial information. These scams can take various forms, including unsolicited emails, phone calls, SMS messages, and fake websites. The primary aim is usually to steal sensitive information, such as tax file numbers, bank account details, and other personal identifying information, which can lead to identity theft and financial loss.

Recent Examples of ATO Impersonation Scams\

1. Phishing Emails: Reports indicate a surge in phishing emails that appear to originate from the ATO, containing links to fake myGov websites. These emails often use alarming language, such as urging recipients to "update their details to allow tax returns to be processed" or claiming a refund is pending. Unsuspecting individuals clicking on these links may unknowingly provide their login credentials to scammers.

2.  SMS Notifications: Another common scam is through SMS text messages claiming to be from the ATO. These messages may include links or QR codes that redirect users to fraudulent sites designed to capture login information. Messages might use phrases like "You have a new message in your myGov inbox" or "Verify your tax deposit" to create a false sense of urgency.

3. Phone Scams: Scammers also engage in phone scams, where they impersonate ATO representatives and attempt to extract personal information over the phone. Callers may threaten legal action or involve fabricated scenarios to pressure individuals into compliance.

Protecting Yourself from ATO Scams

To safeguard personal and financial information, it's vital to adopt a proactive approach in identifying and reporting scams. Here are some important precautions:

•  Verify Communication: Always verify the legitimacy of communications by contacting the ATO directly using official contact information. Avoid replying to unsolicited messages or clicking on links within them.

• Access Services Directly: Rather than using links in emails or messages, access ATO services directly by typing the official website addresses into your browser—ato.gov.au or my.gov.au.

•  Stay Informed: Educate yourself and your community about different types of scams and the tactics commonly used by scammers. The ATO’s website and Scamwatch provide valuable resources and updates on the latest scams.

• Report Suspicious Activity: If you suspect a scam or have fallen victim to one, report it promptly. You can report suspicious contact claiming to be from the ATO via their designated email and contact scam reporting services.

Awareness and vigilance are key components in combating ATO impersonation scams. By staying informed about the latest tactics used by fraudsters and adopting proactive measures, individuals can help protect themselves and contribute to a safer online environment. Remember, when in doubt, always reach out directly to official sources for verification, and never share personal information through unsolicited communication.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Withholding changes when buying and selling property

The Foreign Resident Capital Gains Withholding (FRCGW) regulations are scheduled to undergo significant changes effective January 1, 2025.

Currently, Australian residents engaged in the sale of property are required to furnish a clearance certificate to the purchaser at or before the time of settlement. This certificate is essential in order to prevent the withholding of 12.5% from the sale proceeds, applicable to properties valued at $750,000 or higher.

Under the impending changes:

- The withholding rate will increase from 12.5% to 15%.

- The property value threshold of $750,000 will be eliminated, and the withholding requirements will extend to all property sales.

These modifications will apply to contracts entered into on or after January 1, 2025. The FRCGW framework is designed to facilitate the collection of tax liabilities owed by non-residents selling property in Australia.

It is imperative for all Australian resident sellers to obtain a clearance certificate from the Australian Taxation Office (ATO); failing to do so will result in withholding being applied to the transaction. Should an Australian resident vendor fail to provide a clearance certificate by the settlement date, 15% of the sale price will be withheld by the purchaser and remitted to the ATO.

In instances where an amount is withheld from the sale price, the vendor will only receive any due refund following the processing of their next income tax return during the tax season.

Most clearance certificates are typically issued within a few days; however, it is prudent to apply early, as certain requests may take up to 28 days to process. These certificates remain valid for a period of 12 months, allowing vendors to apply without waiting for a contract to be signed.

Foreign resident vendors may seek to apply for a variation in the withholding rate.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

The ATO are changing their approach to collecting unpaid tax and superannuation

The ATO are revising their approach to collecting unpaid taxes and superannuation contributions to create a fairer system for compliant businesses. They will now concentrate on entities that refuse to engage with them and disregard SMS and letter reminders.

The ATO are implementing different measures than those previously employed. This strategic and focused approach takes into account compliance history.

For both large and small businesses that fail to engage with the ATO or set up a payment plan for unpaid GST, pay-as-you-go (PAYG) withholding, or employee superannuation, the ATO will promptly take more robust actions such as issuing Director Penalty Notices (DPNs) and initiating garnishments.

Directors managing multiple enterprises who allow unpaid GST, PAYG withholding, and employee superannuation to accumulate without engagement can expect us to assess their debts comprehensively. These directors may receive DPNs reflecting the total outstanding amounts across all related entities. Should they fail to respond, we may recover these amounts directly from them, thereby jeopardizing their assets.

As the ATO modifies their approach to collecting unpaid taxes and superannuation contributions, they aim to create a fairer environment for those businesses that fulfill their tax obligations.

This new strategy may affect certain business clients who have not responded to prior engagement efforts by the ATO.

To prevent more stringent actions, businesses should take immediate steps to settle their debts in full or establish a payment plan.

For taxpayers unable to pay in full and on time, you can look at various available options, including payment plans. You may also set up a payment plan online if your debt is less than $200,000.

For those are experiencing genuine financial hardship, additional options are available, including deferring payment due dates and interest waivers.

The key message is: if you are able to pay, you should do so; if you require additional time, don’t ignore the issue—rather, t act promptly to determine if a payment plan can be established online or reach out for assistance.

For further information regarding the consequences of non-payment please visit

https://www.ato.gov.au/individuals-and-families/paying-the-ato/if-you-don-t-pay

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Australian resident foreign and worldwide income

Income from assets and investments

Individuals with assets or investments located outside of Australia, including offshore bank accounts, are required to declare the relevant returns as if they were earned within Australia. This may encompass the following types of income:

• Interest derived from bank deposits or bonds

• Dividends received from shares

• Royalties associated with intellectual property

• Rental income generated from real estate

• Pensions, annuities, and lump sum payments from managed funds

• Income streams from superannuation funds

• Attributed income from foreign entities

• Certain government pensions

Capital Gains on Overseas Assets

For those who own assets overseas, Australian capital gains tax may apply upon the sale of such assets. It is essential to maintain appropriate records for this purpose. If an overseas asset was acquired prior to becoming an Australian resident, it is treated as if it were acquired upon attaining residency. Similarly, if an individual ceases to be an Australian resident while owning an overseas asset, it will be treated as though it has been disposed of at that time. Accurate calculation of capital gains or losses requires thorough record-keeping of the asset's value at these critical points. Given the complexity of this area of tax law, exemptions may be applicable.

For Australian residents for tax purposes, the following key points apply:

• Individuals holding temporary resident visas are generally not subject to tax on most foreign income in Australia. However, income from actual work performed overseas while residing temporarily in Australia may be taxable.

• Foreign income may potentially be taxed in both Australia and the foreign country of origin. Taxes paid in another country may qualify for an Australian foreign income tax offset.

• If revenue is generated from a country with a tax treaty established with Australia, residents can present a certificate of residency along with an overseas tax relief form to the respective tax authorities. This could lead to reduced withholding taxes or exemptions from taxation in that country, contingent upon their taxing rights over the income.

Tax payments on overseas earnings must adhere to specific guidelines. Employees of Australian Government agencies (excluding those belonging to a disciplined force) are now liable for taxes on income derived from Australian Official Development Assistance (ODA). Members of the disciplined forces engaged in ODA may still qualify for exemptions.

Foreign Income Tax Offset Eligibility

For individuals who have already paid taxes in the country where the income was earned, it may be possible to claim a foreign income tax offset. To be eligible, it is necessary to have paid taxes on the foreign income and possess records substantiating the tax payment. The foreign country must also have established taxing rights over the income in question; otherwise, a refund request may be pursued. The offset amount eligible may not always correspond directly to the taxes paid overseas, and for claims exceeding AUD 1,000, it is essential to calculate the foreign income tax offset limit to determine the entitlement.

Exemptions for International Employment Income

In certain circumstances, employment income from international work may be exempt from Australian taxation. Such situations include:

• Specific types of foreign service

• Employment on approved overseas projects

• Work performed in Australia for particular international organizations

• Overseas deployment with the Australian Defence Force

• Participation in Australia–United States joint space or defense projects.

Further information regarding these circumstances, as well as the necessary conditions, can be found in the relevant documentation on tax-exempt income from foreign employment.

Conversion of Foreign Income

To report this information to the ATO when lodging your tax return, all foreign income, deductions, and tax offsets must be converted into Australian dollars. Depending on individual circumstances and types of income, one may utilize either the exchange rates applicable at specific times—guided by established translation rules—or an average exchange rate based on daily or monthly figures provided monthly.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Superannuation on Parental Leave Pay

New Legislation: Government to Pay Superannuation on Parental Leave Pay

Last updated: 15 October 2024

On Thursday, 7 March 2024, the government announced the introduction of a new measure alongside the release of the Working for Women strategy. Beginning on 1 July 2025, the government will pay superannuation guarantee equivalent payments on government-funded Parental Leave Pay. This new law will be administered by the Australian Taxation Office (ATO).

Under this legislation, eligible parents with babies born or adopted on or after 1 July 2025 will receive an additional superannuation contribution based on the Superannuation Guarantee rate of 12% of their Parental Leave Pay. The lump sum superannuation contribution, which will include an interest component, will be paid following the end of each financial year in which government-funded Parental Leave Pay was received.

The ATO is set to make the first payments in July 2026.

Eligible parents can continue to apply for Parental Leave Pay through Services Australia, which is responsible for assessing both their eligibility for the payment and the superannuation contribution.

For more information, see:

Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024 – Parliament of Australia

Parental Leave Pay for a child born or adopted from 1 July 2023 - Services Australia

Changes if you get family payments - Parental Leave Pay for a child born or adopted from 1 July 2023 - Services Australia

About the Paid Parental Leave scheme - Paid Parental Leave scheme for employers - Services Australia

Super boost for new parents | Ministers' media centre

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

PHEV Eligibility for FBT Exemption

From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify as zero or low emissions vehicles under fringe benefits tax (FBT) law and will not be eligible for the electric cars exemption. However, if you meet the criteria below, you may still be able to apply for the electric car exemption.

Continued Exemption Conditions

You can apply for the electric car exemption if:

• The use of the PHEV was exempt before 1 April 2025.

• You have a legally binding commitment for private use of the vehicle on and after 1 Apri1 2025. Optional extensions do not count as binding.

Loss of Exemption

The FBT exemption will end if any changes occur to a pre-existing commitment on or after 1 April 2025, including:

Optional Extensions: Agreements must be for a fixed duration.

- Breaks in Novation: If the vehicle is unavailable for private use.

- Financial Changes: Alterations to lease payments or residual values.

- Change of Employer: This creates a new commitment.

Examples

Optional Extensions: 

If Simon leases a PHEV for three years with an option to extend for two more years, his FBT exemption lasts until 31 March 2027. The extension is not binding, so the exemption stops then.

Break in Novation: 

Tony has a four-year novated lease but takes unpaid leave for three months. During this time, no car benefit is provided. The break alters the initial commitment, ending the FBT exemption from 1 May 2025.

If Tony prepays his lease and the novation continues, the FBT exemption remains valid.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Instant Asset Write-Off for Businesses

What is it?

The instant asset write-off allows businesses to claim an immediate tax deduction for the business portion of the cost of an asset in the year it was first installed or used.

The instant asset write-off can be used for multiple assets, assuming the cost of each asset is less than the applicable threshold. Both new and second-hand assets may be immediately claimed.

Eligibility

The following factors determine whether you may claim the immediate tax deduction via the instant asset write-off rules, and which year the deduction should be applied to:

-       Your aggregate turnover.

-       The date the asset was purchased.

-       When the asset was first used or installed ready for use.

-       The cost of the asset being less than the applicable threshold.

Thresholds

The instant asset write-off was suspended from 1 July 2021 to 30 June 2023, while temporary full expensing was available.

ATO page available here.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Small Business Energy Incentive

The purpose of the small business energy incentive is to help businesses improve energy efficiency and save on energy bills.

A bonus 20% tax deduction will be afforded to businesses with a turnover of less than $50million for the cost of eligible assets and improvements which increase energy efficiency. The bonus applies to eligible expenditures between 1 July 2023 and 30 June 2024.

A maximum of $100,000 in total expenditure is eligible as part of the incentive, meaning the maximum bonus tax deduction will be $20,000.

Eligibility requirements

To access the small business energy incentive:

-       Your business will need to have an aggregated annual turnover of less than $50million.

-       The expenditure must be an allowable deduction for your business under the provisions in existing taxation law.

-       For expenditure on eligible assets during the bonus period the asset must be both:

o   first used or installed ready for use for any purpose, and

o   used or installed ready for use for a taxable purpose.

-       This means that if you first use or install and asset for any purpose prior to 1 July 2023, the bonus deduction will no longer be available. Even if the asset begins being used for a taxable purpose during the bonus period, the bonus deduction will not be permitted.

-       Improvements to existing assets must be incurred during the bonus period.

Possible claims and requirements

-       Depreciating assets:

o   electrifying equipment (for example, installing a reverse cycle air conditioner in place of a gas heater)

o   upgrading to more energy efficient appliances and equipment (for example, energy efficient refrigeration systems)

o   installing time-shifting devices which allow electrical appliances to operate at off-peak times

o   replacing a diesel engine with an electric motor.

-       Improvements:

o   enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel

o   enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source

o   facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source (for example, a battery that stores electricity).

Further details from the ATO are available here.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Cost of Negative Gearing and Capital Gains Tax Discount

On 2 July 2024, the Parliamentary Budget Office released their analysis on the foregone revenue resulting from negative gearing and capital gains tax discounts on residential investment properties.

The report estimates the tax revenue foregone over the last ten years and provides projections for the tax revenue forgone up until the 2034-35 financial year. The analysis includes residential properties owned by individuals, trusts, and partnerships.

Key takeaways from the report

In the 2023-24 financial year, the estimated foregone tax revenue was $10.92bn, with $5.7bn relating to negative gearing deductions and $5.22bn relating to the capital gains tax discount. Interestingly, in the 2021-2022 financial year, the foregone revenue relating to the capital gains tax discount was significantly higher at $9.24bn, indicating many investors sold their investment properties at a profit during this time.

The estimate of $10.92bn over the last financial year contrasts with an estimate $6.75bn foregone in the 2014-15 financial year, and a projected $22.85bn foregone in the 2034-35 financial year.

Another interesting takeaway is that the revenue foregone due to negative gearing deductions and capital gains tax discounts has been fairly equivalent in the past. For example, the amounts foregone for negative gearing deductions and capital gains tax deduction were $3.6bn and $3.15bn respectively in the 2014-15 financial year, compared with $5.7bn and $5.22bn respectively in the 2023-24 financial year. However, the projections estimate that negative gearing deductions will cost $14.5bn, compared with $8.35bn for the capital gains tax discount in the 2034-35 financial year. Clearly, the Parliamentary Budget Office expects the cost of negative gearing deductions will outpace the cost of the capital gains tax discount from this point onwards.

Finally, the difference in who benefits from the negative gearing deductions versus the capital gains tax discount varies significantly based on income. The top 10% of income earners are expected to represent $4.31bn out of the $5.4bn in foregone revenue resulting from the capital gains tax discount in the 2024-25 financial year. The top 10% of income earners are expected to represent $2.94bn out of the $6.9bn in foregone revenue resulting from negative gearing throughout the 2024-25 financial year. This shows that the benefit of negative gearing is spread much more evenly throughout different levels of income.

The Parliamentary Budget Office report is available here.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Digital statutory declarations now available in myGov

People can now create a digital signature in a new process using myGov without a witness being required.

The new process uses the Australian Government’s digital ID to verify the identification of a person.

Australians can now complete a Commonwealth statutory declaration through three methods:

·       myGov platform and myGov Digital ID

·       digitially using electronic signatures and video-link witnessing

·       traditional, paper-based method

myGov steps people through the process of using your Digital ID to verify who a person is and electronically sign their digital statutory declaration. This declaration can be downloaded onto a phone or computer.

Digital declarations include a QR code, which can be scanned to check the authenticity of a document.

The Statutory Declaration Amendment Act 2023 prevents online platforms from retaining copies of statutory declarations, due to the sensitive personal information they hold.

https://my.gov.au/statdec

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Energy Efficiency Grants (EEG) for Small and Medium Enterprises

The Albanese Government is delivering a further $41 million in EEG for Small and Medium enterprises to help with energy bills and lower emissions.

This grants between $10,000 and $25,000 to be used to upgrade equipment that is more efficient. This includes replacing air conditioners high efficiency units or gas heating boilers with heat pumps.

These Grants are part of the Government’s commitment to ease pressure on Australian businesses.

This is the second round of investment from the $62 million program that will help business use less energy and improve competitiveness.

Grants will be awarded on a first come, first-served basis until each state or territorys proportion is exhausted.

Applications open across the country on the following dates:

Thursday 22 February 2024: VIC

Friday 23 February 2024: SA & NT

Monday 26 February 2024: NSW

Tuesday 27 February 2024: WA, TAS & ACT

Wednesday 28 February 2024: QLD

For more information about the Energy Efficiency Grants for SMEs program and how to apply, visit the business.gov.au website.

Increased Duty for Discretionary Trusts, SMSF and LRBA’s in NSW

The Duties Act 1997 (NSW) has been amended so that from 1 February 2024:

• Duty on the establishment of trusts over non-dutiable property in NSW increases from $500 to $750.

• Duty on the establishment of LRBAs in NSW increases from $500 to $750 (assuming additional conditions satisfied). 

• Duty on transfers of dutiable property from custodian trustees to SMSFs increases from $500 to $750 (assuming additional conditions satisfied). 

• Duty on transfers of dutiable property as a result of a change in trustee in discretionary trusts (assuming trustee excluded from being beneficiary) and SMSFs increases from $50 to $100.

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Tax cuts to help Australians with the cost of living

The Government has announced a tax cut for Australian taxpayers. From 1 July 2024, there will be changes to various tax rates, and brackets, resulting in reduced tax for all taxpayers.  

The tax cuts are designed to ease the cost-of-living pressures, while being cautious not to add to existing inflationary pressures.

 What are the tax cuts?

From 1 July 2024, the Government will:

-       Reduce the 19 per cent tax rate to 16 per cent (for incomes between $18,200 and $45,000).

-       Reduce the 32.5 per cent tax rate to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).

-       Increase the threshold at which the 37 per cent tax rate applies from $120,000 to $135,000.

-       Increase the threshold at which the 45 per cent tax rate applies from $180,000 to $190,000.

What is the effect of the tax cuts at various levels of income?

-       A person on an average income of around $73,000 will get a tax cut of $1,504.

-       A person earning $40,000 will get a tax cut of $654.

-       A person earning $100,000 will get a tax cut of $2,179.

-       A person earning $200,000 will still get a tax cut, which will be $4,529.

Generally, the tax cuts provided in this plan are larger than the tax cuts proposed by the previous Government. However, it provides lower tax cuts to those who are earning $150,000 and above per year.

Post 1 July 2024 tax table

Source: Prime Minister of Australia – 25/01/2024 Media Release

Federal Budget Outcome 2022-2023

The final budget outcome for the 2022/23 financial year has recently been released. The final budget outcome has beaten the official estimate provided in the May 2023 budget by $17.9bn, to print a surplus of $22.1bn.

 The improved budget outcome was driven by both lower than anticipated expenditure, and higher than anticipated revenues. Expenditure came short of the May Budget forecast by $4.0bn due to lower demand for some services/programs and delays in some payments (likely to be paid in the 2023/24 financial year). Revenues exceeded May Budget expectations by $13.9bn and the outperformance was driven almost entirely by a $12.7bn uptick in company taxes from estimates.

2023/2024 Outlook

The May 2023 Budget forecasts that the budget will revert to deficit in the 2023/24 financial year. However, Westpac economists (Bill Evans Andrew Hanlan) believe that the current government policies could potentially return a surplus in the 2023/24 financial year.

There appears to be consensus that the budget will be in deficit in the 2024/25 financial year.   

Significance of this Surplus

The last budget surplus delivered was in 2007/08 and was driven by the proceeds from the mining boom prior to the GFC. The 2007/08 surplus was 1.7% of GDP, while the 2022/23 surplus was half that, at 0.9% of GDP.

Revenue Share to GDP

While government revenue came in higher than expected, nominal GDP growth did not meet expectations for the period, coming in at 9.7% for 2022/23. These factors lead to a government revenue share of 25.7% over the period, which is the third highest recorded percentage in the last fifty years. Importantly, tax receipts equalled 23.8% of 2022/23 GDP, and represents the vast majority of revenue collections, with non-tax receipts equalling 1.9% of GDP.

Government Debt

Gross debt on 30 June 2023 was $2.8bn higher than expectations at $889.8bn. This figure represents 35.2% of GDP, which is down from 38.8% in 2021/22 and down from the peak in 2020/21 of 39.3%.

 Interest paid on the debt as a share of the economy continued its downward trend from 0.8% in 2021/22 to 0.7% in 2022/23. This figure represents the lowest share of the economy in the last 11 years, since 2011/12.

Source: Westpac

For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.

Notice of a landlord insurance data-matching program

The Australian Taxation Office (ATO) will acquire landlord insurance data from insurers for 2021–22 to 2025–26.

The data items include:

• client identification details (names, addresses, phone numbers, date of birth, etc.)

• insurance policy details (policy numbers, policy details, insured property details, insurance premiums paid, claims information including payouts received, etc.)

It estimates that records relating to approximately 1.6 million individuals will be obtained each financial year.

The data will be acquired and matched against ATO records to support the identification, assessment, and treatment of rental property income, expenses, and capital gains tax risks. The data may be used to:

• promote voluntary compliance and increase community confidence in the tax and superannuation systems

• help ensure that individuals and businesses are fulfilling their tax and super reporting obligations

• identify and educate individuals and businesses who may be failing to meet their reporting obligations and help them

–           lodge their income returns

–           correctly report income and expenses

–           meet their capital gains tax obligations for properties used to derive income 

• gain insights to help develop and implement treatment strategies to improve voluntary compliance. This may include targeted educational, behavioural or compliance activities for individuals and businesses that lease or let real property.

• This program follows the Office of the Australian Information Commissioner’s Guidelines on data matching in Australian Government administration (2014) (the guidelines). The guidelines include standards for the use of data matching as an administrative tool in a way that:

• complies with the Australian Privacy Principles (APPs) and the Privacy Act 1988 (Privacy Act)

• is consistent with good privacy practices.