Another 30 June is fast approaching - our Year End newsletter has a few tips if you're looking for ideas before the Financial Year ends!
Our Individual Tax Tips for 2023 also contains many useful facts & figures.
For other Items of interest please visit our News page for regular updates.
For more information or assistance please get in touch with Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au
The Government announced that a lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system. This does not apply to privately owned groups, or individuals controlling over $5 million of net wealth.
The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.
Integrity measure to target unpaid tax and super
The Government will also provide funding from 1 July 2023 over 4 years to assist the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities.
The additional funding will facilitate ATO engagement with taxpayers who have high-value debts over $100,000 and aged debts older than 2 years where those taxpayers are either public and multinationalgroups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.
This measure is estimated to increase receipts by $718m and increase payments by $275.4m over 5 years from 2022-23. In addition to the $82.1m in funding for the ATO, the increase in payments also includes $12.3m in unpaid superannuation to be disbursed to employees, and $181m in GST payments to the States and Territories.
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
On 2 May 2023 the Australian Government announced that from 1 July 2026 employers will be required to pay their employees’ super at the same time as their salary and wages.
The start date will provide employers, super funds, payroll providers and other parts of the superannuation system with sufficient time to prepare for the change. This measure is not yet law.
Treasury and the ATO will consult closely with industry and stakeholders on these changes in the second half of 2023.
For more information, see the Hon Stephen Jones MP joint media release Introducing payday super of 2 May 2023.
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 has released a factsheet to assist employers determine their FBT obligations where employees are provided with an electric vehicle and associated items for their private use.
Key points identified by the ATO in its factsheet include the following:
An FBT exemption may apply to a car benefit arising if either:
– the employer allows their current employees, or their associates, to use a zero or low emissions vehicle (‘electric vehicle’) for their private use; or
– the electric vehicle is considered available for the employer’s current employees', or their associates', private use under FBT law.
From 1 April 2025, private use of a plug-in hybrid electric vehicle is no longer eligible for the exemption, unless both of the following apply:
– use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and
– the employer has a financially-binding commitment to continue providing private use of that vehicle on and after 1 April 2025.
If an employer or lessor provides an employee with the use of a car by means of a lease arrangement, the benefit provided is only a car benefit if the car lease arrangement is a bona fide car leasing arrangement.
- Associated benefits arising from the provision of certain car expenses provided with the electric vehicle are also exempt from FBT. These are not included when working out if an employee has a reportable fringe benefits amount.
- Providing an employee with a home charging station is a fringe benefit – the benefit is not an exempt associated benefit.
- If the use of the car and the associated car expenses are provided under a salary sacrifice arrangement, the exemption can still apply.
- Even if an exemption applies for the electric vehicle car benefit, the taxable value of the car benefit provided still needs to be worked out.
This is because the car benefit's value is used in working out if the employee has a reportable fringe benefits amount. This does not include the value of any associated car expense benefits.
- An employee's reportable fringe benefits amount is reported on their income statement or payment summary. Employees do not pay income tax on this amount, but it does impact their income tests and thresholds for family assistance, child support assessments and some other government benefits and obligations.
The Government will complete a review of this exemption by mid-2027 to consider electric vehicle take-up.
The factsheet also provides guidance on what employers need to do when they have provided an employee with the private use of an electric vehicle, provides further details on satisfying the requirements of the exemption and discusses when expenses will be exempt from FBT by virtue of being ‘car expense benefits’.
The factsheet also clarifies that the ATO will accept the value of exempt electric car benefits will not be included in the exemption caps that apply for certain non-profit employers (i.e., the $17,000 or $30,000 exemption cap) and rebatable employers (i.e., the $30,000 rebate cap).
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
Starting your own business can give you financial freedom and can provide for your future.
You put everything you can into the business, this includes financially. When the bank lends money so you can buy a house, the mortgage protects the banks from the borrower not being able to repay the loan.
When you invest your own money in a business, you should properly document this investment as a loan and take security over an asset in the business.
If your business suffers financial difficulties and possible insolvency, you give yourself the best chance to recover your loan and keep your business.
When a bank lends a money to an individual to buy a house, the bank takes a mortgage over the house. If the individual is unable to repay the loan, the bank can recover the unpaid portion from the sale of the house. When the bank lends money to a company, the bank takes security over the assets of the company, including businesses operated by the company. If the company is unable to repay the loan, the bank can recover the unpaid portion of the loan from the sale of the assets.
The bank doesn’t lose its money because it has security.
As a small business owner, you can put money you invest into your company in the form of a secured loan that is registered on the Personal Property Security Register (PPSR).
If the company gets into financial difficulties and cannot pay back the loan, you would be in the best position to have the loan paid back to you before the other creditors of the business. This could mean even though the business fails, you can start again or avoid bankruptcy.
The loan must be in writing, preferably in a separate security agreement and more importantly registered with the PPSR. If the security is not registered on the PPSR, your loan would be regarded as unsecured creditor, meaning a significant difference in what is recovered.
It is preferable to get this security when the loan is first made. This would include when you’re putting money into your business from personal savings, redrawing on the mortgage, a personal loan from the bank or family and friends, credit cards or superannuation. Also, money you’ve put into a company since incorporation, over a number of years, can potentially be protected.
With all the current difficulties businesses face, including effects of COVID and supply-chain issues, owners are continuing to have to put in money to stay afloat, for expenses such as equipment or stock, marketing and payroll. These amounts are often substantial. It makes it all the more important to document the loans properly and get the correct registrations, to protect your position as much as possible.
Krodok have an easy to use product that enables this to be done yourself, in lieu of engaging a lawyer to prepare a document and register on the PPSR.
A link to their website is here https://krodok.com.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
Following the Government’s release of the 2022-23 Tax Expenditures and Insights Statement, a media release issued by ministers Jim Chalmers and Stephen Jones on Tuesday heralded the pending arrival of the highly anticipated cap on high superannuation balances.
While there are only limited details from which we can work off at this early stage, initial fears of a ‘hard cap’ targeting certain SMSFs with high balances appear to have been alleviated. These initial concerns primarily revolved around the potential for a ‘hard cap’ to force the removal of superannuation balances above a certain limit – as this risked a raft of seemingly unnecessary complexity and disruption.
Fortunately, it appears that the main issue the Government seemed to be grappling with was not necessarily the presence of large balances in the super system, but rather the tax concessions that these balances attracted.
To that end, the approach announced by Government seems to more appropriately deal with this issue – without forcing the removal of superannuation benefits or restricting the amount that an individual is permitted to save through the superannuation system.
This proposed ‘soft cap’, is instead designed to specifically target the level of tax concessions enjoyed on earnings derived by fund members with a superannuation balance over $3 million.
That is, it’s a measure that is broadly designed to double the current rate of tax paid by superannuation funds on the earnings derived by fund assets above this level – from 1 July 2025.
What we know so far
While there is some way to go before this measure is finalised and becomes law, following the release of a Treasury Fact Sheet titled “Better Targeted Superannuation Concessions” some of the details behind Tuesday’s initial announcement are starting to become a little clearer.
For example, currently, fund earnings derived by assets held in the accumulation phase are generally subject to tax at a maximum tax rate of 15% within a superannuation fund – regardless of the member’s fund balance. It appears that this will continue to be the case beyond 1 July 2025.
However, the Government’s announcement will broadly see ‘earnings’ derived by a member’s superannuation assets above $3 Million, subject to a new and additional 15% tax from 1 July 2025.
How will the tax be levied?
Treasury has indicated that affected individuals will be given a choice of either paying this tax out-of-pocket or having it deducted from their superannuation fund(s).
Further, individuals who hold multiple superannuation funds will be able to select the fund from which the tax is deducted.
What about pension assets?
It is anticipated that the tax on earnings derived by assets supporting retirement phase pensions will not be impacted by this change.
That is, we would expect that these earnings will continue to be treated as Exempt Current Pension Income (ECPI) – noting of course that the amount a member can place into retirement phase pensions is already limited by the Transfer Balance Cap (TBC).
How will this measure be implemented?
Individuals with a TSB over $3 million at the end of a financial year will be subject to this additional 15% tax on the relevant earnings (as discussed above) derived during that year.
As previously noted, this measure is proposed to commence from 1 July 2025, with application from the 2025-26 financial year onwards.
Because an individual’s TSB is measured at 30 June each financial year, this measure will first impact those individual’s whose TSB is over $3 Million at 30 June 2026.
As a result, the first tax liability notices are expected to be issued by the ATO in the 2026-27 financial year – i.e. these notices will relate to the additional tax liability incurred on earnings derived during the 2025-26 financial year.
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.
On 1 July 2023 indexation of the transfer balance cap (TBC) will occur. This indexation will increase the TBC by $200,000.
This TBC will not apply to all individuals. Individuals will have a TBC between $1.6 and $1.9m. If an individual has a TBC, they will only be able to view this on the ATO services provided through MyGov.
The ATO will calculate each persons’ TBC based on information reported to them. The ATO will be closely monitoring anyone reporting pre-1 July 2023 events after that date, and there will be consequences.
The ATO is urging members to report all events which happened in the 2022-2023 income year as soon as possible, to give members a clear understanding of their position.
Indexation of the TBC will also lead to changes among other caps, such as the defined benefit cap which will be indexed to $118,750.
Source: ATO
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 cash rate has risen once again by 0.25% bringing the current cash rate to 3.35%. This decision was expected by most economists.
It is believed that the wording used by the RBA has become more aggressive towards stamping out inflation with continued interest rate rises.
State of the Economy and Interest Rate Forecasts
Despite a slowing in global inflation, the RBA has maintained their inflation forecasts originally outlined in the November meeting. Current inflation targets are 4.75% over 2023 and 3% by mid 2025.
Growth and unemployment forecasts also remain unchanged since the November meeting. Current growth forecasts indicate 1.5% growth in 2023 and 2024. While unemployment is forecast to rise to 3.75% by the end of 2023 and 4.5% by mid 2025.
The Reserve Bank Governor recently stated that “The recovery in spending on services following the lifting of COVID restrictions has largely run its course”. This statement indicates that the RBA expects the rapid increase in spending on services to level off in the near future.
The RBA is still trying to assess the effects of recent rate hikes on household spending. With interest payments doubling since May last year, this will inevitably cause a strain on many household budgets, particularly as fixed rate terms come to an end.
With underlying inflation running around 6.9%, the worry for the RBA is that high inflation will become entrenched in people’s minds. This will cause people to be more likely to spend now while prices are cheaper, and further drive-up prices.
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.
For the 2022-23 income year and onwards the record keeping requirements and methods for calculating work from home deductions have changed.
For the 2022-23 income year and onwards the methods for calculating work from home deductions include:
- revised fixed rate method
- actual cost method.
While there have been no changes to the actual cost method, the fixed rate method has been revised to better reflect current work from home arrangements.
The revised fixed rate method:
- has increased from 52 cents to 67 cents per hour worked from home
- removes the requirement to have a dedicated home office area
- works out the claim for
o phone and internet usage
o electricity and gas
o stationary
o computer and consumables
- allows for the work-related portion of the decline in value of depreciable assets to be claimed separately.
The revised fixed rate method can also be used by businesses that operate partially or fully from home to claim work from home deductions.
If you plan to use the revised fixed rate method in your 2022-23 tax return, you need to have:
- from 1 July to 28 February a record which can be representative of the hours you worked from home
- from 1 March 2023 to 30 June 2023 a record of the total number of hours you worked from home, as well as evidence you paid for each of the expenses incurred that are covered by the fixed rate method (such as a phone or electricity bill). Any equipment bought to enable you to work from home will also require records.
Source: ATO
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 NSW Government is introducing the ‘Shared Equity Home Buyer Helper’ initiative on 23 January 2023. This initiative will allow eligible homebuyers to purchase their home with a deposit as low as 2%.
How it works
The NSW Government will contribute funds towards the purchase price of the property and will retain an equivalent interest in the property. The maximum contribution is set out as a percentage of the purchase price and differs between new and existing homes.
- New home – up to 40%
- Existing home – up to 30%
While a participant remains eligible for the program, they will not be asked to make any repayments, rent payments or interest payments. However, participants can make voluntary repayments to increase their ownership in their property.
Eligibility
This initiative is open to:
- single parents of a dependent child or children
- single people 50 years or older, or
- first home buyer key workers who are nurses, midwives, paramedics, teachers, early childhood educators or police officers.
Participants must have gross income of less than $90,000 as an individual, or $120,000 as a couple.
The maximum purchase price for the property is determined by the home’s location:
- $950,000 in Sydney and major regional centres (Newcastle & Lake Macquarie, Illawarra, Central Coast and North Coast of NSW), or
- $600,000 in other regional areas of NSW.
Eligible participants must:
- be at least 18 years old
- be an Australian or New Zealand citizen, or be a permanent Australian resident
- have saved the minimum deposit of 2% of the purchase price
- live in the property as your principal place of residence
- not currently own any other property or land
- not be able to service a mortgage without the assistance of the government contribution, but be able to service the mortgage with the help of the government contribution
Upfront costs
All upfront costs are to be paid by the participant (no help from government). However, participants remain eligible to apply for other government grants, such as first homebuyer grants.
Ongoing obligations
Participants must remain eligible for the program. Ongoing obligations include:
- paying property taxes
- maintaining the property
- complying with periodic reviews of ongoing eligibility
Participants may be required to begin making repayments towards the governments share in the property should they no longer meet ongoing eligibility requirements.
For more information available on the NSW government website please click 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.
Inflation is currently too high, at 6.9% over the year to October. RBA forecasts predict inflation will reach 8% in the December quarter. The RBA has stated that “high inflation damages our economy and makes life more difficult for people. The Board’s priority is to re-establish low inflation and return inflation to the 2–3 per cent range over time.”
Fortunately, inflation forecasts show a decrease to slightly above 3% in 2024. The reduction in inflation over 2024 is due to the ongoing resolution of global supply chain issues, declines in certain commodity prices, and slower demand growth.
The Australian economy is still experiencing solid growth. Despite the slowing global growth, and the rising cash rate reducing household consumption, growth forecasts are still set at 1.5% for 2023 and 2024.
The labour market remains very tight with unemployment sitting at 3.4% in October, the lowest rate since 1974. The RBA is conscious of the inflationary nature of very low unemployment, and the possibility of a wage-price spiral.
The RBA has noted that the full effect of the rate hikes is yet to be felt in mortgage payments. Considered alongside the uncertainty present in the global economy the RBA has emphasised the importance of a ‘soft landing’.
Looking forwards the RBA will continue monitoring the global economy, household spending and wage prices. The incoming data will determine the size and frequency of future rate hikes, as the RBA has stressed, they will not be following a pre-set path.
To read the RBA statement click 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
This program is designed to provide first homebuyers with the option to pay an annual property tax, rather than paying stamp duty upfront. It effectively started from 11 November 2022.
How does it work?
For eligible homebuyers looking for a property up to $1.5million, this program will allow you to lower the upfront costs of buying a home. Estimates predict this program will reduce the time required to save a deposit by up to 2 years.
Stamp duty vs annual property tax
Stamp duty is calculated as a percentage of the property’s market value or purchase price (whichever is higher). Stamp duty is an upfront cost, which is paid at the time of purchasing the property.
Annual property tax is calculated on the land value of the property. For the 2023 and 2024 financial year property tax rates will be:
Owner occupiers - $400 plus 0.3% of land value
Investment properties - $1,500 plus 1.1% of land value
Who is eligible?
To be considered eligible for First Home Buyer Choice you must:
be an individual (not a company or trust)
be over 18 years old
be an Australian resident, or purchase with an Australian resident
not have previously owned a property, or received a First Home Buyer Grant
be purchasing a property worth less than $1.5million
move into the property within 12 months of purchase and live in it for a minimum period of 6 months
sign the contract to purchase the home on or after 11 November 2022.
More information is available via this link: 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
After 13 consecutive quarters of trade surplus’ Australia has recorded a current account deficit for the September quarter. The September quarter highlights include:
The current account balance has reduced from a $14.7bn surplus in the June quarter to a $2.3bn deficit in the September quarter. The decrease in the current account balance was primarily caused by an $11.1bn reduction in the trade surplus, and a $5.9bn increase in the income deficit.
The net income deficit has been slowly rising since 2020 and currently sits at $33.5bn or -4.4% of GDP. The net income deficit is much higher than average, mainly driven by international investors earning increased returns from the Australian mining boom.
The record high trade surplus of 5.8% in the June quarter has reduced to 5.4% in the September quarter.
Export earnings have remained high after only suffering a decrease of 0.2% over the quarter, despite the 36.8% increase over the year to June.
Terms of trade has decreased by 6.7% from the record highs seen in the June quarter. Terms of trade remains around 62% higher than the long-run average.
Imports have grown in the September quarter, represented by an 8.2% increase. This rise is composed of a 4.1% rise in the price of imports, and a 3.9% in the volume of imports over the quarter.
Imports are now 41.3% higher than a year ago. This increase was driven by the 73.8% increase in service imports over the year.
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
The Reserve Bank Board raised the cash rate by 25 basis points to 2.85% at its November meeting. The 0.25 percentage point lift is the sixth-rate hike in a row and brings the cash rate to 2.6 per cent.
The 2023 forecast increase is particularly troubling – a central bank which has a 2-3% inflation target and accepts that 4.75% inflation in the following policy year runs the risk of embedding inflationary psychology for both businesses and employees making it more difficult to avoid an even more extended period of high inflation.
Forecast growth rates have been lowered to 1.5% (from 1.8%) in 2023 and 1.5% (from 1.7%) in 2024
Risks of embedding inflation psychology in the system - “The Board will continue to pay close attention to the evolution of labour costs and the price-setting behaviour of firms.”
The forecast for the unemployment rate by year’s end is 3.5% (up from 3.4% in September) constrained by labour supply rather than demand, highlighting a risk to wage growth.
The Board decided to stick with the 25-basis point path despite a significant lift in the inflation forecast for 2023 from 4.3% to 4.75%. It now seems that the Board is prepared to await the impact of the series of hikes at the risk of embedding inflation psychology in the system which would eventually require a much more damaging policy response.
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
The Budget estimates an underlying cash deficit of $36.9 billion for 2022-23 (and $44bn for 2023-24). While the economy is expected to grow by 3.25% in 2022-23, it is predicted to slow to 1.5% for 2023-24, a full percentage point lower than forecast in March 2022. Inflation is expected to peak at 7.75% later in 2022, but is projected to moderate to 3.5% through 2023-24, and return to the Reserve Bank's target range in 2024-25.
While the Budget does not contain major tax changes it does seek to begin some "Budget repair work" via tax integrity measures, by making sure multinationals pay a fairer share of tax in Australia, by extending successful tax compliance programs, and by giving the ATO the resources they need to crack down on tax dodging.
Summary
· Digital currencies, not a foreign currency – the Budget Papers confirm that the Government is to introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.
· Intangible assets depreciation – reversal of previously announced option to self-assess effective life for certain intangible assets (e.g., intellectual property and in-house software). The effective lives of such assets will continue to be set by statute.
· Penalty unit increase – the Government will increase the amount of the Commonwealth penalty unit from $222 to $275 from 1 January 2023.
· Super downsizer contributions eligibility age reduction to 55 confirmed. The Government confirmed its election commitment that the minimum eligibility age for making superannuation downsizer contributions will be lowered to age 55 (from age 60).
· COVID grants treated as non-assessable non-exempt (NANE) income – the Budget Papers contain a listing of further State and Territory COVID-19 grant programs eligible for non-assessable, non-exempt treatment.
· Paid Parental Leave (PPL) scheme - to be expanded from 1 July 2023 so that either parent can claim the payment. From 1 July 2024, the scheme will be expanded by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
· Tax Practitioners Board funding – the TPB will get increased funding to investigate high-risk tax practitioners and unregistered preparers.
· Off-market share buy-backs – the Government intends to align the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs.
· Energy Efficiency Grants for small and medium-sized enterprises. The Government will provide funding to support small to medium enterprises to fund energy-efficient equipment upgrades
· Australia’s Foreign Investment Framework – Increase to fees and penalties Government has increased foreign investment fees and will increase financial penalties for breaches that relate to residential land.
· Multinational Tax Integrity Package. The Government has announced the following changes in relation to its Multinational Tax Integrity.
o Amending Australia’s interest limitation (thin capitalisation) rules
o Denying deductions for payments relating to intangibles held in low or no-tax Jurisdictions
o Improved tax transparency
Tax-related measures announced
1. Digital Currency – Clarifying that digital currencies are not taxed as foreign currency
The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.
This maintains the current tax treatment of digital currencies, including the capital gains tax
treatment where they are held as an investment. This measure removes uncertainty following the
decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated
to income years that include 1 July 2021.
The exclusion does not apply to digital currencies issued by, or under the authority of, a
government agency, which continue to be taxed as foreign currency.
2.Depreciation – Reverse the self-assessment of the effective life of intangible assets
The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, which was announced in the 2021/22 Budget.
The previous Government announced it would allow taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights and inhouse software. This measure was proposed to apply to assets acquired from 1 July 2023.
3.Increase in Commonwealth penalty unit
The Government will increase the amount of the Commonwealth penalty unit from $222 to $275,
from 1 January 2023. The amount will continue to be indexed every three years in line with the
CPI as per the pre-existing schedule, with the next indexation occurring on 1 July 2023.
Penalty units are used to describe the amount payable for fines under Commonwealth laws,
including in relation to tax offences. Fines are calculated by multiplying the value of one penalty
unit by the number of penalty units prescribed for the offence.
4. Superannuation – Expanding the eligibility for downsizer contributions
The Government will allow more people to make downsizer contributions to their superannuation,
by reducing the minimum eligibility age from 60 to 55 years of age. The measure will have effect
from the start of the first quarter after Royal Assent of the enabling legislation.
The downsizer contribution allows people to make a one-off post-tax contribution to their
superannuation of up to $300,000 per person from the proceeds of selling their home. Both
members of a couple can contribute and contributions do not count towards non-concessional
contribution caps.
Further to this announcement, the Government has also announced further (non-tax) measures to reduce the financial impact on pensioners looking to downsize their homes in an effort to minimise the burden on older Australians and free up housing stock for younger families, as follows:
• Extending the assets test exemption for principal home sale proceeds from 12 months to 24
months for income support recipients.
• Changing the income test to apply only the lower deeming rate (0.25%) to principal home sale
proceeds when calculating deemed income for 24 months after the sale of the principal home.
5. COVID-19 business grants – Making COVID-19 business grants non-assessable non-exempt
In response to COVID-19, payments from certain state and territory business grants, made prior
to 30 June 2022, can be made non-assessable non-exempt (‘NANE’) for income tax purposes,
subject to eligibility. This tax treatment is only provided in exceptional circumstances, such as the
severe economic consequences facing businesses during the COVID-19 pandemic.
6. Energy Efficiency Grants for small and medium sized enterprises
The Government will provide funding to support small to medium enterprises to fund energy
efficient equipment upgrades. The funding will support studies, planning, equipment and facility
upgrade projects that will improve energy efficiency, reduce emissions or improve the management of power demand.
7. Boosting Paid Parental Leave
The Government has announced it will introduce reforms from 1 July 2023 to make the Paid
Parental Leave Scheme flexible for families so that either parent is able to claim the payment and
both birth parents and non-birth parents are allowed to receive the payment if they meet the
eligibility criteria.
Parents will also be able to claim weeks of the payment concurrently so they can take leave at the same time.
From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches a full 26 weeks from 1 July 2026.
Both parents will be able to share the leave entitlement, with a proportion maintained on a ‘use it
or lose it’ basis, to encourage and facilitate both parents to access the scheme and to share the
caring responsibilities more equally. Sole parents will be able to access the full 26 weeks.
8. Extending ATO Compliance Programs
The Government has announced it will extend the following ATO compliance programs:
(a) Personal Income Taxation Compliance Program
The Government will provide funding to the ATO to extend its Personal Income Taxation
Compliance Program for two years from 1 July 2023. This extension will enable the ATO to
continue to deliver a combination of proactive, preventative and corrective activities in key
areas of non-compliance, including overclaiming deductions and incorrect reporting of income.
(b) Shadow Economy Program
The Government will extend the existing ATO Shadow Economy Program for a further three
years from 1 July 2023. The extension of the Shadow Economy Program will enable the ATO
to continue a strong and co-ordinated response to target shadow economy activity, protect
revenue and level the playing field for those businesses that are following the rules.
(c) Tax Avoidance Taskforce
The Government has boosted funding for the ATO Tax Avoidance Taskforce by around $200
million per year over four years from 1 July 2022, in addition to extending this Taskforce for a
further year from 1 July 2025. The boosting and extension of the Tax Avoidance Taskforce
will support the ATO to pursue new priority areas of observed business tax risks,
complementing
9. Tax Practitioners Board – Compliance program to enhance tax system integrity
The Government will provide $30.4 million to the Tax Practitioners Board (‘TPB’) to increase
compliance investigations into high-risk tax practitioners and unregistered preparers over four
years from 1 July 2023.
The TPB will use new risk engines to better identify tax practitioners who engage in poor and
unlawful tax advice, to improve tax compliance and raise industry standards.
10. Supporting Small Business Owners
The Government will provide $15.1 million over two calendar years from 1 January 2023 until 31
December 2024 to extend the Small Business Debt Helpline and the NewAccess for Small
Business Owners programs to support the financial and mental wellbeing of small business
owners.
11. Off-market share buy-backs
The Government will improve the integrity of the tax system by aligning the tax treatment of offmarket share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs.
This measure is proposed to apply from 7:30pm AEDT, 25 October 2022 (i.e., Budget night).
12.Australia’s Foreign Investment Framework – Increase to fees and penalties
The Government has increased foreign investment fees and will increase financial penalties for
breaches that relate to residential land.
Fees doubled on 29 July 2022 for all applications made under the foreign investment framework.
The maximum financial penalties that can be applied for breaches in relation to residential land will also double on 1 January 2023.
Fees ensure Australians do not bear the cost of administering the foreign investment framework,
and penalties encourage compliance with these rules.
13. Multinational Tax Integrity Package
The Government has announced the following changes in relation to its Multinational Tax Integrity
Package:
(a) Amending Australia’s interest limitation (thin capitalisation) rules
The Government will strengthen Australia’s thin capitalisation rules to address risks to the
corporate tax base arising from the use of excessive debt deductions. This measure will apply
to income years commencing on or after 1 July 2023.
The current thin capitalisation regime limits debt deductions up to the maximum of three
different tests: a safe harbour (debt to asset ratio) test; an arm’s length debt test; and a
worldwide gearing (debt to equity ratio) test.
The Government will replace the safe harbour and worldwide gearing tests with earnings based
tests to limit debt deductions in line with an entity’s activities (profits).
The changes will apply to multinational entities operating in Australia and any inward or
outward investor, in line with the existing thin capitalisation regime. Financial entities will
continue to be subject to the existing thin capitalisation rules.
(b) Denying deductions for payments relating to intangibles held in low or no tax
jurisdictions
The Government will introduce an anti-avoidance rule to prevent significant global entities
(entities with global revenue of at least $1 billion) from claiming tax deductions for payments
made directly or indirectly to related parties in relation to intangibles held in ‘low-or no-tax’
jurisdictions. The measure will apply to payments made on or after 1 July 2023.
(c) Improved tax transparency
The Government will introduce reporting requirements for relevant companies to enhance the
tax information they disclose to the public, for income years commencing from 1 July 2023.
The Government will require:
• large multinationals to prepare for public release of tax information on a country-by-country
basis and a statement on their approach to taxation, for disclosure by the ATO;
• Australian public companies (listed and unlisted) to disclose information on the number of
subsidiaries and their country of tax domicile; and
• tenderers for Australian Government contracts worth more than $200,000 to disclose their
country of tax domicile.
The full suite of Budget Papers can be accessed at the Federal Budget mini site here
https://budget.gov.au/2022-23-october/content/documents.htm
Source: Chartered Accountants ANZ 28 October 2022
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 mandatory start date for STP Phase 2 reporting was on 1 January 2022. Additional information is required to be reported in STP Phase 2. However, for employers who need to report information to multiple government agencies, Phase 2 should reduce that reporting burden.
Due dates and late transition
Many Digital Service Providers (DSP) were unable to get their platforms ready for STP Phase 2 reporting by 1 January 2022. In this case, the DSP will apply for a deferral on behalf of their customers (you would have been informed by your DSP if a deferral applied to you).
If your DSP is ready on 1 January 2022, you should:
- Start Phase 2 reporting on 1 January 2022.
- Start by 31 March 2022, otherwise you must apply for more time.
As these dates are well in the past now, what should be done? If you need more time:
- You can apply for more time to make the transition beyond whatever your DSP’s deferral date was. A registered tax agent can also apply on your behalf.
- There won’t be any penalties until 31 December 2022 for genuine mistakes in the setup of Phase 2 reporting.
To summarise this, you should apply for more time to transition, and aim to transition by 31 December 2022 to avoid penalties.
Benefits of Phase 2 reporting
For employers:
- You will no longer need to provide your employees’ tax file number (TFN) declarations.
- You will be able to convey more information by simply selecting an income type. For example, closely held payees.
- You will not need to provide lump sum E letters to your employees.
Benefits for employees include:
- A better ability for the ATO to pre-fill more of your tax return. This is possible because the ATO will have better visibility of the types of income you have earned.
- The ATO will be able to inform the employer if the employee has missed information that may lead to them receiving a tax bill. An example of this is an employee forgetting to disclose any student loans they may have.
Integration with other government agencies will:
- Allow for more information on applications (such as through Services Australia) to be pre-filled.
- Reduce how often government agencies will need to contact customers (as they are receiving more information through STP).
- Reduce the number of documents required on applications.
- Be more accurate with any payments made to customers.
What is remaining the same?
- How you lodge
- Due dates will not change
- Tax obligations
- End of financial year requirements
Source: ATO
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
Summary of budget outcome
The Federal budget position for 2021/2022 exceeded expectations. The budget deficit was -$32.0bn (-1.4% of GDP). This deficit was better than expectations as:
- Receipts were $27.7bn higher than expected
- Payments were $20.1bn lower than forecasted.
Net debt declined $76.6bn in 2021/2022, from $592.2bn in 2020/2021.
Revenue outcome
Revenue for the 2021/2022 financial year was $584.4bn, equal to 25.4% of GDP. Taxation revenue made up $536.6bn of this amount, with company and individual tax revenue both beating expectations.
Income tax from individuals was $264.6bn, including a gain of $28.9bn from the previous year.
Company profits were up $26.8bn to $125.9bn, a dramatic rise sparked by the reopening of the economy.
With both companies and individuals beating expectations, revenue received of $536.6bn was $24.1bn above predictions.
Expense outcome
Payments were $20.1bn lower than expected at $616.3bn (26.8% of GDP). Many government programs experienced lower than expected costs for the following reasons:
- COVID-19 program delays and lower than expected demand
- Health programs experienced lower than expected demand
- Many programs experienced supply chain issues leading to lower or delayed payments.
Due to the strength of the labour market (unemployment at 3.75% in June), social welfare payments were much lower than expected. Besides the COVID-19 related factors above, this is the next largest factor.
Economic overview
Nominal GDP growth was 11.0% in the 2021/2022 year. Economists were only slightly off in their GDP growth predictions, however, the Government payments and receipts surprised them.
GDP growth of 11% is well above average. GDP growth was assisted by the following factors:
- Terms of trade at record highs, up 12.1% for the year. This led to mining profits rising 46% in the year
- Employment grew by 3.3% (above expectations) and total employee compensation grew by 5.6% over the year.
Relatively high inflation has also made a difference to the GDP numbers.
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
As of the RBA meeting on October 4th, the Board has decided to increase the cash rate to 2.60 percent, representing a 25 basis point rise in the cash rate.
Why is the cash rate still rising?
The RBA Board has once again stressed the importance of returning the inflation rate to the 2-3% target over a period of time. For this reason the Board believes further rate rises will be necessary.
However, the most recent rate rise was 25 basis points, down from the 50 basis point rises we have seen recently. The RBA has done this to allow time to ‘assess the outlook for inflation and economic growth in Australia’.
RBA Board’s Opinion on Economic Outlook
The current inflation rate in Australia is much too high. While global factors play a major role and this is evident in global inflation rates, domestic demand relative to supply is also an important factor.
Economists believe that inflation will continue to increase in the short-term (next couple of months), before inflation begins to recede towards the 2-3 percent range. The RBA has forecasted inflation to be 7.75% over 2022, 4% over 2023, and 3% in 2024.
The Australian economy is still growing quickly boosted by a record level of terms of trade. The tightness in the labour market has led to an unemployment rate of 3.5%, and a difficulty for firms to find employees.
Wages growth is beginning to increase, although it is still lower than in other advanced economies with higher inflation. Due to the tight labour market, it is still expected that wages will begin to increase.
The RBA Board has noted the pressure on household budgets. This pressure is caused by higher inflation and higher interest rates. House prices have begun to decrease and worryingly the full effect of higher interest rates has not yet been felt by many borrowers.
Link to RBA Statement: Here
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What were the changes?
From 1 July 2022, the following changes occurred to the Superannuation Guarantee (SG):
- SG rate increased from 10% to 10.5% (and will eventually reach 12%)
- The $450 per month eligibility threshold has been removed.
These new changes must be applied to all salaries and wages from 1 July 2022.
Please note: Although the $450 per month threshold has been removed, employees aged under 18 must still work more than 30 hours a week to be eligible for super.
What should you do?
Following the changes above, you should:
- Ensure your payroll and accounting software have been updated to include the recent changes to SG. Most software should automatically update to the 10.5% SG rate
- Calculate and pay the right amount of SG to all employees entitled to it
- Pay SG liabilities by the due date. The due date is always the 28th day of the month following the end of a quarter. Meaning for the April-June quarter, super must be paid by July 28th.
If SG is not received by your employees superfunds by the due date, Superannuation Guarantee Charge (SGC) will apply.
What happens if you do not pay?
If you do not meet your SG obligations, you will need to lodge an SGC statement and pay SGC to the ATO.
This will always cost you more than paying the SG on time, and the SGC is a non-deductible penalty.
Source: ATO
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
As we know by now, the Governor has estimated the neutral rate to be at least 2.5%. With the September rate hike of 50 basis point, we now have a cash rate of 2.35%. As of the most recent RBA statement they have removed the ‘normalisation’ phrase, meaning that the Board now believes they are nearing the neutral rate.
Outcome of Nearing Neutral Rate
Monetary Policy has moved very quickly to neutral. The cash rate is expected to increase further due to the tightness of the labour market, rising wages growth, and high inflation. These issues mean that the RBA will now want to move the cash rate from a neutral position to a contractionary position. However, it is unlikely that the urgency will be as high in this phase of the cycle.
It is widely believed amongst economists that the pace of rate hikes will decrease after the September hike. The RBA has meetings more frequently compared with other countries such as New Zealand (who meet 7 times per year), this leads to a very swift increase in interest rates.
What is the Final Result?
Economists now believe that with the current market conditions, the RBA will look to a cash rate of 3.35%. However, economists expect this target be reached early next year (meaning slower rate hikes).
Outlined in the recent RBA statement ‘the Board expects to increase interest rates further over the coming months’. Therefore, we do expect interest rates to continue rising at a slower pace until the beginning of next year. However, the good news for homeowners is that the bulk of the rate hikes are now behind us.
For more information feel free to read the RBA Statement, on their reasoning behind the rate hikes, and their outlook on the economy.
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
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