As digital tools continually evolve, it is more important than ever to make sure you understand your tax obligations and comply with them. The Australian Taxation Office has been expanding and improving its data matching programs. Data matching compares data from a range of private and government organisations with the information you have provided to the ATO.
Today there are some 26 different data matching programs covering a wealth of transactions including various insurances (health, landlord, income protection); electoral rolls, bank accounts and credit cards, real estate, online sales platforms, international travel and crypto assets. So, if you leave out income from your tax return or inflate deductions, your chances of getting caught are much higher.
We take a look at some of the key areas to be mindful of when preparing your tax return this year.
Investment properties
The ATO says that, while 87 per cent of taxpayers who own rental properties use a registered tax agent to lodge their return, a review has found that nine in ten rental property owners are getting their returns wrong. It is crucial that you provide us the right information to prepare your return correctly because you are responsible for what you include in your tax return, even when using an agent.i
For example, the new landlord insurance data-matching program provides information about any insurance payouts that might have been made during the year. These must be reported as income.
Along with the new landlord insurance data matching program, a review of investment loan data will also get underway. We can guide you to ensure we are capturing all the relevant information to submit a complete tax return.
Side hustles
The ATO is also looking into the income earned from side hustles or the sharing economy.
It is now requiring platforms that provide taxi services and short-term accommodation, such as Uber and Airbnb, to report their data. All other electronic distribution platforms will have to begin reporting their data to the ATO from 1 July 2024.
The ATO says the data will give it a clear picture of the people earning income on the platforms and will be matched against their tax returns and activity statements.
Small business obligations
Businesses are also under growing ATO scrutiny using a combination of sophisticated data matching and a requirement for further reporting.
The Single Touch Payroll (STP) program, first introduced five years ago, underwent some major changes last year, known as STP phase 2. Now, all businesses are required to use STP each time they pay their employees to report salaries, amounts withheld and superannuation guarantee liability information.
The ATO recommends you discuss your current payroll processes with your tax or payroll provider to make sure you are complying with Phase 2 reporting. “If you don’t have a tax or BAS agent, consider engaging one,” the ATO says.ii
And, in a move to ensure employees receive their super on time, the Federal Government will introduce what it calls ‘payday super’.
From 1 July 2024, all employers will be required to pay the superannuation guarantee amount to their workers’ super funds on each payday rather than quarterly as is currently the case.
Self managed super funds
When it comes to self managed superannuation funds, tax and regulatory performance is generally strong, according to the ATO.
Nonetheless it is a massive sector providing more than 1.1 million people with their retirement income. With an estimated total asset value of $868 billion, it is not far behind the industry funds sector, which holds just over $1 trillion in assets.
The SMSF sector’s importance and value to individuals brings it under close attention from the ATO, which is scaling up its compliance activities because it is seeing indicators of “heightened risk” that put retirement savings at risk or take unfair advantage of the favourable tax environment.iii
In particular, the ATO is chasing down fraud and investment scams, illegal early access to super funds by members and failure to lodge annual SMSF returns.
With increasing ATO focus on taxpayers and businesses to comply with their obligations, we are here to guide you through the changing rules and regulations and answer any questions.
Budget incentives and crackdowns on unpaid tax debts and rental deductions
Although this year’s Federal Budget was short on big changes when it came to tax, there still have still been some important developments in this area. Here are some of the latest developments in the world of tax.
Small business tax incentives and write-offs
The budget ushered in some valuable new tax incentives for small businesses, including halving the increase in quarterly tax instalments from 12 per cent to 6 per cent for both GST and income tax during 2023-24.
The government also introduced a bonus 20 per cent deduction for businesses with turnovers under $50 million when they spend on energy saving upgrades. Up to $100,000 of total expenditure will be eligible, with the maximum bonus tax deduction being $20,000 per business.
Although smaller than the previous year, the instant asset write-off continues in 2023-24 with up to $20,000 available for immediate deduction on eligible assets.
The planned third tranche of personal income tax cuts due to start next financial year also remained in place, while >the low and middle income tax offset was not extended.
Super changes for employers
Another significant tax change announced in the budget will affect employers. From 1 July 2026 employers will be required to pay their Super Guarantee (SG) obligations at the same time they pay employee salary and wages.
The ATO has received additional resources to help it detect unpaid super payments earlier.
Employers also need to remember the SG amount for employee super rises to 11 per cent from 1 July 2023.
Tax debt warnings sent out
The ATO is continuing to write to directors of companies with tax debts warning if the company hasn’t paid the amount owing or contacted it to make other arrangements, a director penalty notice(DPN) may be issued.
DPNs are issued to current directors and anyone who was a director at the time the company failed to pay. They make directors personally liable for failure to meet pay-as-you-go withholding (PAYGW), GST and Super Guarantee Charge obligations.
Directors receiving these letters need to arrange payment of the overdue amount or enter into a payment plan.
Data will be obtained from financial institutions including all the major banks, regional banks and building societies.
The information is being collected following the ATO’s identification of a tax gap of $1 billion for individuals in the 2020-21 financial year due to incorrect reporting of rental property expenses.
Self-education expenses under spotlight
The ATO is currently developinga new draft taxation ruling covering the deductibility of self-education expenses incurred by an employee or an individual carrying on a business.
The draft ruling will reflect the current rules in this area following repeal of several sections of the Income Tax Assessment Act and some new legal decisions. The new ruling is expected to be completed in late June.
Taxpayers claiming self-education expenses recently had the existing requirement to exclude the first $250 of deductions removed.
GST fraud enforcement continues
Search warrants were executed in three states against individuals suspected of promoting the fraud. This follows previous compliance action against more than 53,000 people, with two individuals sentenced to jail time for their GST fraud activities.
Cyber safety checklist released
The ATO is again emphasising the importance of business cyber safety by releasing a new checklist for small businesses.
The tips include simple ideas for keeping business and client data safe from cybercriminals, such as turning on automatic updates and using multi-factor authentication when possible.
Resources for training staff on preventing, recognising, and reporting cyber incidents are available from the government’s Australian Cyber Security Centre.
In life, many of us are totally at ease and comfortable talking to our family and friends about many topics. However, for whatever reason, there are certain subjects that we’re either reluctant or feel uneasy to discuss openly – typically they are love and relationships, politics, religion and money … call them the “taboo topics”.
Add another taboo topic to the list. That is the topic of ageing. As we age and reach our elderly years, asking for some help to do things to make life easier can be really hard to bring up in conversation.
When families get together, there are things we just notice but we’re reluctant to say anything. We notice that Dad might be starting to forget things or Mum is having difficulty getting out of her chair and seems a bit uneasy on her feet. Any attempt to say something is usually met either in silence or the words “I’m okay, just getting older” are uttered.
And for many families that’s where things are left.
Then there’s a crisis…
Families are then drawn together when there’s been a crisis such as a fall or a hospital admission. Then discussions and decisions are usually being made under high stress and emotion in hospital hallways and carparks. This is not an optimal starting point.
Making decisions and what’s the trade-off…
Like other life decisions, when it comes to ageing decisions, some are relatively simple to make with minimal consequences, whilst others can be very difficult. When making decisions, there are usually “trade-offs” to be considered.
The impact of these trade-offs usually increases as the importance of the decision increases. Therefore, to make the best possible decision, it’s important to consider as many options as humanly possible.
So what needs to be thought about…
When it comes to ageing and getting some help there are usually many options to consider and everyone is different. For instance, when getting some help in the home, exactly what help is required and possible now and into the future, who will provide the help and at what cost? If moving into an aged care facility, what care will be required, where will the new home be, what to do with the family home, and how to pay for this are all decisions that need to be made and there are usually many options to consider.
So how do families identify these options and make appropriate decisions?
Where do you start? What questions do you ask and who to? Are the answers you get back in your best interest … or someone else’s? What needs to be done and when? What happens if there’s a problem?
How Family Aged Care Advocates fit in…
That’s where Family Aged Care Advocates step in. We provide guidance and support to help families identify the relevant options to help you make informed decisions to get the best care outcomes for the people you love and care for most. We’re independent aged care specialists only interested in the right outcomes for your family … that’s all that matters and there’s no trade-off with that.
Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).
Liability limited by a scheme approved under Professional Standards Legislation.
Interest rates are an important financial lever for world economies. They affect the cost of borrowing and the return on savings, and it makes them an integral part of the return on many investments. It can also affect the value of the currency, which has a further trickle-down effect on other investments.
So, when rates are low they can influence more business investment because it is cheaper to borrow. When rates are high or rising, economic activity slows. As a result, interest rate movements are also a useful tool to control inflation.
Rising steadily
For the past few years, interest rates have been close to zero or even in negative territory in some countries, but that all started to change in the last year or so.
Australia lagged other world economies when it came to increasing rates but since the rises began here last year, the Reserve Bank of Australia (RBA) has introduced hikes on a fairly regular basis. Indeed, the base rate has risen 3.5 per cent since June last year.
The key reason for the rises is the need to dampen inflation. The RBA has long aimed to keep inflation between the 2 and 3 per cent mark. Clearly, that benchmark has been sharply breached and now the consumer price index is well over 7 per cent a year.
Winners and losers
There are two sides to rising interest rates. It hurts if you are a borrower, and it is generally welcomed if you are a saver.
But not all consequences of an interest rate rise are equal for investors and sometimes the extent of its impact may be more of a reflection of your approach to investment risk. If you are a conservative investor with cash making up a significant proportion of your portfolio, then rate rises may be welcome. On the other hand, if your portfolio is focussed on growth with most investments in say, shares and property, higher rates may start to erode the total value of your holdings.
Clearly this underlines the argument for diversity across your investments and an understanding of your goals in the short, medium, and long-term.
Shares take a hit
Higher interest rates tend to have a negative impact on sharemarkets. While it may take time for the effect of higher rates to filter through to the economy, the sharemarket often reacts instantly as investors downgrade their outlook for future company growth.
In addition, shares are viewed as a higher risk investment than more conservative fixed interest options. So, if low risk fixed interest investments are delivering better returns, investors may switch to bonds.
But that does not mean stock prices fall across the board. Traditionally, value stocks such as banks, insurance companies and resources have performed better than growth stocks in this environment.iAlso investors prefer stocks earning money today rather than those with a promise of future earnings.
But there are a lot of jitters in the sharemarket particularly in the wake of the failure of a number of mid-tier US banks. As a result, the traditional better performers are also struggling.
Fixed interest options
Fixed interest investments include government and semi-government bonds and corporate bonds. If you are invested in long-term bonds, then the outlook is not so rosy because the recent interest rates increases mean your current investments have lost value.
At the moment, fixed interest is experiencing an inverted yield curve, which means long term rates are lower than short term. Such a situation reflects investor uncertainty about potential economic growth and can be a key predictor of recession and deflation. Of course, this is not the only measure to determine the possibility of a recession and many commentators in Australia believe we may avoid this scenario.ii
What about housing?
House prices have fallen from their peak in 2022, which is not surprising given the slackening demand as a result of higher mortgage rates.
Australian Bureau of Statistics data showed an annual 35 per cent drop in new investment loans earlier this year.iii
The changing times in Australia’s economic fortunes can lead to concern about whether you have the right investment mix. If you are unsure about your portfolio, then give us a call to discuss.
After taking a softly, softly approach with taxpayers during the pandemic, the ATO has made it clear it will start chasing taxpayers for their outstanding tax related debts.
Starting with its aged debt book, the ATO is sending letters to taxpayers asking them to engage or face firmer action. An aged debt is an uneconomical debt the ATO has placed on hold and not taken any recent action to collect, but this is about to change.
Potential action includes offsetting tax refunds to pay tax debts and disclosing tax debts to credit reporting bureaus, a move that could affect your business’ credit rating and ability to raise funds.
Dealing with your tax debts
What are your options if you are having difficulty meeting your tax or employee super obligations?
The first thing to remember is not to panic. Ensure you lodge all your tax returns on time to avoid a late lodgment penalty and to show the ATO you are aware of your obligations and are doing your best to meet them.
Where you have a good payment history or are in serious hardship, the ATO will offer you support and you are likely to be treated more generously than if you have deliberately set out to avoid tax, or regularly fail to pay your tax.
If you can’t pay by the due date, you may be allowed to set up a payment plan. The ATO has a Payment Plan Estimator tool you can use to work out a suitable payment schedule. Daily interest on your unpaid debt will accrue, however, at an annual rate of 8.00 per cent in the July to September 2022 quarter.
Eligible small businesses owing activity statement amounts may also be able to make interest-free payments over 12 months.
What will the ATO do if I don’t pay?
Aside from charging interest, if you don’t pay, the ATO will begin offsetting future tax refunds to reduce your tax debt and debts to other government agencies, such as overdue child support.
The ATO may take stronger action with taxpayers unwilling to engage, repeatedly defaulting on payment plans, found to have deliberately avoided paying tax, or who are engaged in phoenix activities.
These harsher powers include issuing a garnishee notice or a DPN. Garnishee notices require an employer, bank or trade debtor to pay your money directly to the ATO to reduce your tax debt.
The ATO may also file a claim or summons, which can result in you receiving a bankruptcy notice, or a statutory demand and application to wind-up your company.
Missing super contributions
Failing to meet your obligation as an employer to pay Superannuation Guarantee (SG) contributions into your employees’ super accounts is also in the ATO’s sights.
If you don’t pay your required SG contributions by the quarterly payment deadlines, you must pay the SG Charge (SGC) and lodge an SGC Statement. The SGC consists of a shortfall amount, 10 per cent annual interest and an administration fee for each unpaid employee per quarter. You are also ineligible to claim a tax deduction for the SG contributions against your business income.
Penalties for SG non-payment
The ATO is prepared to support employers who engage and try to get things right with their SG payments but will take firmer action with businesses repeatedly failing to pay correct SG amounts or supply the necessary information.
With employers who pay and lodge their SGC Statement late, or who fail to provide information during an audit, the ATO can impose a Part 7 Penalty, which is up to 200 per cent of the SGC amount payable.
Company directors failing to meet their SGC liabilities risk having the business’ liability become their personal liability. The ATO may also start bankruptcy action or seek to wind-up your business.
Don’t ignore a tax debt
Communication with the ATO is essential when it comes to tax and super debts.
To get on top of the situation, contact the ATO or make an appointment with us to discuss your financial position and possible ways to pay your tax and super obligations. The sooner you act the better the outcome is likely to be.
Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).
Liability limited by a scheme approved under Professional Standards Legislation.
As we move towards the end of the 2022-2023 financial year, tax planning becomes a crucial part of any business’s success.
So, it’s never too early to start thinking about how to minimise your tax liability, and RGM is here to help you navigate the complexities of the Australian tax system.
Whether you’re an established business or a startup, there are strategies you should be discussing with your RGM advisor to ensure you’re taking advantage of all available tax planning opportunities.
For established businesses, tax planning is about maximising profits and minimising tax liability. Here are some strategies you should consider discussing with your RGM accountant:
CGT Concessions
As an established business, it’s important to consider the Capital Gains Tax (CGT) concessions available to you. These concessions can help reduce the tax you owe on the sale of certain assets, which can have a significant impact on your financial success.
Small businesses in Australia can access specific CGT concessions, including the 15-year exemption, 50% active asset reduction, retirement exemption, rollover, and restructure rollover. By applying these concessions, you may be able to reduce your capital gain and potentially eliminate some or all the tax owed on the sale of assets.
However, the rules around these concessions are complex and can be costly if you get them wrong. That’s why we recommend seeking professional advice before restructuring or disposing of assets and ensuring your business structure is designed to take advantage of the available concessions.
At RGM, our team of qualified tax professionals can help you navigate the complexities of CGT concessions and advise on the most effective strategy to minimise your tax liability while complying with Australian tax laws and regulations. We can review your business’s financials and provide tailored advice to help you maximise the benefits of CGT concessions and position your business for long-term financial success.
For established businesses, the Instant Asset Write-off can be a powerful tax planning strategy to help stay competitive in the market. This measure enables businesses to claim an immediate deduction for the full cost of newly acquired assets in the first year they are used or installed, rather than depreciating the cost over several years.
This can help free up cash flow, allowing you to invest in new equipment, technology, or other assets that can help grow your business and improve your bottom line.
It’s worth noting that this temporary full expensing measure is set to expire on June 30, 2023, so if you’re considering purchasing new assets, it’s important to act quickly to take advantage of this opportunity.
It’s also crucial to carefully assess your options and determine whether the Instant Asset Write-off is the right strategy for your business. Our team can help you identify whether this measure aligns with your business goals and needs, and ensure that you’re taking advantage of all the available tax planning opportunities.
Contact us today to discuss your business’s unique situation and how we can assist you in optimising your tax planning strategy.
The loss carry-back strategy is a tax planning tool that can provide relief to established businesses facing financial difficulties. It allows businesses to offset losses incurred in the current financial year against profits made in the previous financial years, potentially resulting in a refund of taxes paid in those years.
This strategy can help businesses to manage cash flow and remain financially stable during challenging times such as we are currently seeing, economic downturns or changes in the market.
However, it’s important to be aware that utilising this strategy can reduce a company’s franking account balance, which may impact the ability to pay fully franked dividends to shareholders and affect investor confidence.
Before deciding to implement the loss carry-back strategy, it’s important to carefully consider the potential benefits and drawbacks and seek professional advice to ensure it aligns with your business goals and overall tax planning strategy.
Our team at RGM can provide expert advice and guidance tailored to your business needs and we encourage you to discuss any tax planning opportunities with us.
Writing off bad debt is another tax planning strategy that can benefit established businesses in Australia.
When a business sells goods or services on credit and the customer fails to pay, the business may have to write off the debt as bad debt. By doing so, you can claim a tax deduction on the amount of the bad debt, which can reduce your taxable income and lower your tax liability.
For instance, let’s say that your business has a bad debt of $50,000 from a customer who failed to pay for goods or services delivered on credit. By writing off this bad debt, your business can claim a tax deduction of $50,000, which would reduce the taxable income and lower the tax liability for the financial year.
However, it’s important to note that there are strict rules and requirements around writing off bad debt for tax purposes, and businesses must ensure your meet these requirements to claim the tax deduction.
For example, the debt must be considered irrecoverable, and your business must have taken reasonable steps to recover the debt before writing it off.
At RGM, we can help established businesses navigate the complex rules and requirements around writing off bad debt for tax purposes. Our team can review your business’s financials and advise on the most effective way to write off bad debt and claim the tax deduction while ensuring compliance with Australian tax laws and regulations.
If you’re a startup business, tax planning is equally important. Our team can help you develop a comprehensive tax strategy that aligns with your unique needs and goals.
Some tax planning strategies that may be relevant for startups include:
Structuring your business:
Choosing the right business structure is one of the most important tax planning strategies for startup businesses. The structure you choose can have a significant impact on your tax liability, as well as your legal and financial obligations.
For example, setting up a businessas a sole trader may be the simplest and most cost-effective option, but it also means that you are personally liable for any debts the business incurs. Alternatively, incorporating your business as a company can provide more legal protection but may result in higher compliance costs.
Our team of experts can help you navigate the different business structures available and determine which one is the most tax-effective for your startup. This may involve assessing factors such as your business goals, the size and complexity of your business, your expected profits, and your personal financial situation.
Additionally, we can help you understand the ongoing tax obligations associated with your chosen structure, such as tax reporting requirements, compliance with regulations, and managing your tax liabilities. By having a clear understanding of your tax obligations, you can avoid costly penalties and ensure that your startup is positioned for success.
Contact our team today to discuss how we can help you choose the right business structure for your startup and minimise your tax liability.
In addition to choosing the right business structure, startups can also benefit from taking advantage of the Research and Development (R&D) Tax Incentive. This government program provides tax offsets for eligible R&D activities, which can be a crucial source of funding for startups looking to invest in innovation and growth.
To determine if your startup is eligible for the R&D Tax Incentive, our team can help you assess your R&D activities and expenses to ensure they meet the program’s eligibility criteria. We can also guide you through the application process to ensure you receive the maximum benefit available.
Our team can also provide ongoing support to ensure that you continue to meet the program’s requirements and maintain your eligibility over time. By taking advantage of the R&D Tax Incentive, your startup can potentially access significant funding to fuel your growth and innovation efforts.
As a startup business, you may have incurred significant expenses in setting up your business. These expenses can add up quickly and put a strain on cash flow, which is why it’s important to take advantage of any tax deductions available.
Our team of experts can help you identify which startup expenses are tax-deductible and how to claim them. This can include expenses associated with registering your business, such as ASIC fees, legal fees for setting up your business structure, and costs associated with obtaining any necessary licences or permits.
Other deductible startup expenses may include advertising and marketing costs, website development expenses, and expenses related to product development or research and development activities.
By properly claiming these startup expenses, you can potentially reduce your taxable income and minimise your tax liability.
Our team can work with you to ensure that you are taking advantage of all available deductions and claiming them correctly on your tax return. This can help to improve your cash flow and allow you to reinvest in your business.
Overall, tax planning is essential for businesses as it can significantly impact your financial success.
By taking a proactive approach and seeking professional guidance where necessary, you can ensure that you’re taking advantage of all available tax deductions and concessions. This can result in improved cash flow, reduced tax liability, and increased profitability.
Businesses need to prioritise tax planning and work with qualified tax professionals to develop a comprehensive strategy that aligns with their unique needs and goals. By doing so, you can position yourself for long-term financial success and stability.
At RGM, we are committed to helping businesses of all sizes achieve their financial goals through effective tax planning strategies.
Whether you’re an established business or a startup, we have the expertise to help you navigate the complexities of the Australian tax system.
Start your tax planning today by booking a meeting with your RGM advisor.
The ATO is cracking down hard on GST frauds after finding a significant number of taxpayers falsely claiming GST refunds.
The Serious Financial Crime Taskforce and Australian Federal Police (AFP) have executed numerous warrants against suspects, with a GST fraudster recently jailed for three years.
The ATO has warned it has zero tolerance for these types of fraud and has put in place a strategy to identify and pursue individuals suspected of inventing fake businesses to claim false refunds.
Falsely claiming a GST refund
GST refund fraud involves claiming a tax refund or other benefit by providing false information to the tax office.
In the recent spate of GST frauds, individuals have invented fake businesses and lodged a fraudulent Australian Business Number (ABN) application. They then submit fictitious business activity statements (BAS) in an attempt to gain a false GST refund.
Detailed information about how to undertake these types of frauds has been circulating as online advertising and content, particularly on social media.
Rules for claiming GST credits
It’s important to understand the rules in this area. Registering for an ABN and applying for GST refunds when you do not own or operate a business – or are ineligible – is fraud.
You can only claim GST credits on the business portion of a purchase and cannot claim GST on private expenses (such as food or entertainment). Discounted prices must be used when claiming GST credits, even if the discount does not appear on an invoice.
GST credits can be claimed upfront for purchases under hire purchase agreements entered into after 1 July 2012 only if your business accounts for GST on a cash basis.
Warning signs for GST fraud
The ATO has made it clear if you are not operating a business, you do not need an ABN and should not be lodging a GST return. The tax regulator has significant data matching capabilities enabling it to detect patterns in taxpayer behaviour that highlight potential tax frauds.
Backdating your business registration so you can apply for a refund is another red flag and will highlight you as a potential high risk in the tax office’s systems.
If you are caught
The ATO is urging anyone involved in a GST fraud to come forward on a voluntary basis, rather than face tougher consequences later.
If you are involved in a fake GST arrangement, the first step is to contact the ATO or your accountant so they can assist you to work through various self-help options. You may be able to correct your situation by revising your BAS, cancelling your ABN and GST registration, and setting up an arrangement to repay the GST refund.
Taxpayers caught engaging in GST fraud are liable to repay the entire fraudulently-obtained refund, regardless of whether they paid someone to lodge a BAS on their behalf. Making false declarations can also impact your eligibility for other government payments.
Fraud and compromised IDs
Selling or sharing your myGov credentials may result in other people accessing your personal information and using it for their financial gain.
If you have become involved in a GST fraud because your identity was compromised, you should contact the ATO immediately so additional controls can be placed on your tax account.
Taxpayers who have given their myGov details to a criminal should contact the ATO so it can assist them to protect their identity from being used to commit further crimes, including future tax crimes undertaken in their name.
Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).
Liability limited by a scheme approved under Professional Standards Legislation.
Family trust rules and new guidance on contractors
The Australian Taxation Office (ATO) has confirmed its position on family trust distributions, while also providing employers with new information to simplify completion of Single Touch Payroll (STP) activity statements. Here are some of the latest developments in the world of tax.
Prefilling of PAYGW
Completion of PAYG withholding via STP will become easier for employers when the ATO begins prefilling some of the required activity statement data.
From the July 2023 statement, PAYG withholding labels W1 and W2 will be prefilled for all monthly PAYG employers. Quarterly withholders will find the information on their September 2023 statement.
The ATO is also piloting an employer reminder system for businesses with a late activity statement and STP-reported PAYG withholding. If you fail to lodge by the reminder date, the ATO will consider there are no corrections to report and the recorded amounts will be added to your client account.
Final rules on family trusts
Taxpayers with family trusts should check the implications of the ATO’s final guidance on the taxation of family trust payments, as the new rules may reduce the attractiveness of these tax structures.
Under the ATO’s new approach, common tax planning strategies relying on the section 100A exemption covering trust distributions to companies and family members may no longer be available in some situations.
Taxpayers with a discretionary trust should discuss the implications with us, particularly where there are parent controllers of the trust and adult-aged child beneficiaries. The ATO website provides a number of case studies outlining common situations.
Employees vs. independent contractors
The ATO is consulting on its new draft guidance covering both classification of employees and independent contractors, and its proposed compliance approach in this area.
The draft guidance outlines the regulator’s priority areas, which include situations where particular risk factors are present and where an unpaid superannuation query has been received from a worker.
The guidance also indicates employers must have specific advice from an appropriately qualified third-party confirming their classification of a worker as a contractor is correct.
Recordkeeping for self-education expenses eased
Taxpayers claiming self-education expenses will find things a little easier this tax time, as new legislation has removed the requirement to exclude the first $250 of deductions for education courses.
The new rules can be used when completing your 2022-23 tax return, while for employers, the change applies to the Fringe Benefits Tax year starting 1 April 2023.
Sharing economy reporting extended
Providers of ride-sourcing and short-term accommodation services will find themselves swept into the compulsory Taxable Payments Reporting System (TPRS) from 1 July 2023.
Electronic platform operators for these services (such as Uber and Airbnb) are required to report all transactions involving Australian purchasers under new legislation passed in December 2022.
Annual TPRS reporting is already compulsory in industries such as building and construction, cleaning, courier and security services.
Plug-in hybrid electric vehicles to face FBT
Under rules applying from 1 April 2025, plug-in hybrid electric vehicles will no longer be considered zero or low emissions vehicles and will not be eligible for the fringe benefits tax exemption applying to these vehicles.
You can apply for the exemption if the hybrid vehicle was exempt before 1 April 2025 and there is a financially binding commitment to continue providing private use of the vehicle after this date.
No business activity could mean no ABN
The ATO is again reminding small businesses their Australian Business Number (ABN) may be flagged for cancellation if there is no reported business activity in their tax return, or no signs of business activity in other lodgements or third-party information.
If an ABN is identified as inactive, the ATO will contact the holder by email, SMS or mail to check if the ABN is still required and explain the action required to keep it. Where the business is no longer operating, the ABN will be cancelled.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
This year’s Federal Budget was full of talk about one-off support for households in the form of tax offsets, but most people are a bit hazy on the difference between a tax offset and a tax deduction.
Both can help reduce the amount of tax you pay each year, but a tax offset generally results in a bigger dollar tax saving than a tax deduction of the same amount. The key difference is the point at which they are applied to your income when calculating the final amount of tax payable.
What is a tax deduction?
A tax deduction is one of the first things applied to your income when calculating your tax bill. It reduces your taxable income and hence the amount of tax you pay, potentially moving you into a lower tax bracket. Deductions are intended to ensure you only pay tax on income exceeding the costs associated with earning that income.
For a small business, deductions ensure it doesn’t pay tax if its running costs exceed its revenue. Common deductions include operating expenses such as stationery, and capital expenses such as equipment.
Employees can claim deductions in a similar way. Personal deductions include work-related expenses like the cost of a computer if you have a home office, or supplies purchased for classroom use by a teacher. Other deductions include the cost of managing your tax affairs, donations and income protection insurance.
Offsets are similar but different
Tax offsets on the other hand, are deducted at the end of the calculation process and directly reduce the tax you pay.
Offsets are used by the government to encourage specific outcomes, such as uptake of health insurance through the Private Health Offset, or adding money to your spouse’s super through a contribution offset. They are also used to provide tax relief or financial support to certain groups in the community.
Calculating tax using offsets and deductions
The easiest way to understand the difference between an offset and a deduction is to walk through an example.
In the table below, we have two taxpayers. One person has an income of $30,000 a year paying tax of 19c on every dollar above the tax-free threshold of $18,200. This results in tax of $2,242 before any deductions or offsets. The other earns $130,000 a year, paying the top marginal tax rate of 37c in every dollar above $120,000, resulting in tax of $33,167.
As you can see in the table below, the impact of a $1,000 tax deduction provides a bigger tax saving of $370 for the higher income earner, compared with $190 for the lower income earner.
However, not only does a $1,000 tax offset provide both taxpayers with a bigger tax saving of $1,000 each, but it’s worth relatively more to the lower income earner at 3.3 per cent of $30,000 compared with less than one per cent of $130,000.
Impact of a $1,000 tax deduction and tax offset on tax owed
Unlike tax deductions, the ATO automatically applies most offsets to your tax payable when you lodge your tax return.
In general, tax offsets can reduce your tax payable to zero, but they can’t be used to generate a tax refund if you don’t pay tax. If your taxable income is $18,200 or less, an offset won’t reduce the tax you pay as your tax payable is already zero. If you have paid any tax on this amount, you receive the tax back as a refund, but no offset is applied.
Also, most tax offsets don’t reduce the Medicare Levy and Medicare Levy Surcharge (if any) you are required to pay.
The amount of tax offset you receive also depends on the particular offset and your taxable income. For example, with the Low and Middle Income Tax Offset (LMITO) for 2021-22, if your taxable income is $37,0000 or less, you will receive a $675 offset on your tax payable when you lodge your tax return. If your income is $48,001 to $90,000, however, the offset is worth $1,500.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
Deciding on your retirement funding options in retirement comes down to what makes the most sense for you.
If you’re close to retirement, chances are you’ve already spent time thinking about how to tap into your superannuation when you retire.
Broadly speaking, you have a few options when you retire, as long as you’ve reached the minimum ‘preservation age’ when you’re allowed to access your super.
That’s a little bit complicated, because there’s currently a staggered range of preservation ages depending on when you were born. If you were born after 1 July 1964, your super access age is 60.
Deciding on your retirement funding options comes down to what makes the most sense for you.
Leaving your super alone
There’s actually no legislation that says you must start drawing out your super savings when you retire.
In fact, if you don’t need your super to fund your living expenses, you can simply leave it where it is.
You can keep investing your super, and even add money into your account if you pick up some work income, and make concessional contributions up to $27,500 per year (which are taxed at 15 per cent), or personal non-concessional contributions up to $110,000 per year using after-tax money.
You can contribute to your super at any time generally up until the age of 74 (excluding a home downsizer contribution), and by not starting a pension you’re not forced by the government to start withdrawing regular payments.
The government also allows people aged 60 and over to add up to $300,000 into their super account if they sell their principal place of residence, subject to a range of conditions. Legislation to lower the eligibility age to age 55 was passed in the Senate on 28 November.
Keep in mind that if you do leave your money in a super accumulation account, all investment earnings will continue to be taxed at the 15 per cent rate.
But that rate is still likely to be lower than what you would pay if you decided to withdraw your super and invest it into another asset, such as an investment property, where the rental income would be taxed at your full marginal tax rate.
Leaving all your money in super after you’ve retired means you can’t withdraw money as a regular pension income stream. To do that you generally need to roll at least some of it over into an account-based pension.
However most super funds will let you withdraw lumps sums whenever you like if you’ve met all release conditions and have the money transferred into your bank account. A minimum amount of $6,000 generally must be left in your account.
You should also be mindful that if you leave money in your super account or account-based pension and die that there may be tax consequences for non-dependant beneficiaries (see below).
Starting a pension stream
On the other hand, if you want to use all of your super to have a regular income stream once you retire, you’ll need to roll it over into a pension account.
You’ll need to contact your super fund manager to do this or, in the case of a self-managed super fund, ensure the trust deed allows for the payment of a pension income stream.
Your basic options are to either roll your super over into a pension product offered by your current super fund or to transfer it over to another pension product provider.
Most account-based pension products enable monthly, quarterly, half-yearly or annual payments, which will continue until your account balance runs out.
Be aware that once you start up a pension you’re required to withdraw a set percentage of your account balance every financial year, which increases as you age.
The minimum pension account withdrawal amounts have been temporarily reduced by 50 per cent for the 2022-23 income year. You can see them on the ATO’s website.
There are a range of advantages from setting up a pension income stream versus keeping your super money in accumulation mode.
Most importantly, if you’re aged over 60 and retired, your pension payments are tax-free and so are any investment earnings generated inside your pension account.
You can use your own pension income stream to supplement the government Age Pension if you’re eligible to receive it. And you’re also able to withdraw lump sums from your pension account at any time.
Upon your death, non-dependants who receive money left in a pension account will need to pay tax on the taxable component. The amount of tax payable may be reduced by tax offsets.
Doing both
If you’re wanting total financial flexibility in retirement, you could consider leaving part of your money in super, rolling over some of it into an account-based pension, and also withdrawing lump sums whenever you need to.
There are a range of benefits from adopting a combination of your options, although there may also be potential tax consequences for both you and your beneficiaries.
Managing the combination of a super accumulation account, an account-based pension, an Age Pension entitlement (if eligible), potential investment earnings outside of super, and irregular lump sum payments, can be highly complex.
Using the services of a licensed financial adviser is a worthwhile consideration as you weigh up all of your retirement options.
Call us today if you’d like more information about transitioning into retirement.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
