Stay up to date with what’s happened in markets and the Australian economy over the past month.
While the anxiously awaited release of the latest inflation data at the end of July, showed an increase, it was in line with economists’ predictions.
Given the RBA wants inflation back within a 2-3% target range by the end of 2025, there were concerns about the inflation figures and the implications for the cash rate.
The ASX finished the month strongly with an increase of around 4%, riding out a mid-month plunge and surging to a record high for the ninth time this year.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
The Australian Taxation Office has provided a heads-up about the areas it will be focussing on when reviewing tax returns this year.
The ATO says there are three common errors made by taxpayers:
Incorrectly claiming work-related expenses
Inflating claims for rental properties
Failing to include all income
ATO Assistant Commissioner Rob Thomson says while the mistakes are often genuine, sometimes they are deliberate. “The ATO is focussed on supporting taxpayers to get their lodgement right the first time,” he says.
The ATO has also warned that its more lenient pandemic-era approach is over, and that debt collection and unpaid superannuation guarantee charges will be actively pursued.i
Check work-related expense claims
More than eight million people claimed work-related expenses last financial year, but the ATO says taxpayers are still claiming expenses they did not pay for themselves, or for which they have already been reimbursed.
If you claim expenses with no connection to your work, or those covered by a work allowance, your return is likely to face extra scrutiny. It’s also essential to have a record (usually a receipt) to prove the expense.
For those working from home, the ATO has made some changes to the fixed rate of calculating a working from home deduction to broaden what is included, increase the rate, and change the type of records you need to keep.
You now need comprehensive records to substantiate your claim including proof of the actual number of hours worked from home in a calendar, diary, or spreadsheet. You’ll also need proof of the extra running costs you have incurred such as a copy of your electricity or internet bill.ii
The ATO says that copying and pasting your working from home claim from last year may be tempting, but it will likely mean you’ll receive a ‘please explain’.
Another way to attract the ATO’s attention is to suddenly claim a large expense you haven’t claimed in previous years, or to claim a deduction unlike those made by other taxpayers in the same industry.
Take care with rental property deductions
Rental property owners are also coming under the ATO’s watchful eye after data showing that some 90 per cent of rental property owners make mistakes on their tax returns, most often by inflating expenses.
The ATO says that claims for repairs and maintenance are often incorrect. While general repairs and maintenance expenses can be claimed as immediate deductions, capital expenses (such as initial repairs on a newly purchased property or improvements) must be deducted over time as capital works.
An immediate general repair deduction might be the replacement cost for a damaged carpet or broken window. But replacing an old kitchen with a new and improved one is considered a capital improvement.iii
Include all income when lodging
Taxpayers who don’t include all of the income they receive in their returns are also under the microscope.
Failing to declare income (including rental income and any from online platforms like Airbnb, Uber or AirTasker) can result in significant penalties, with the ATO’s data-matching program making it easier to get caught.iv
The ATO is also warning taxpayers against rushing to lodge returns in early July because their interest information may not be available. Many taxpayers are forgetting to include interest from banks, dividend income and payments from government agencies and private health insurers when completing their returns.
Taxpayers are being urged to wait until the end of July before lodging to ensure their income information is pre-filled, making the return process smoother. According to the ATO, lodging in early July doubles the chances of having your tax return flagged as incorrect.
Checking your employer has marked your income statement as ‘tax ready’ and that your myTax information is pre-filled will avoid later amendments and unnecessary delays. Failing to lodge your return on time can also trigger an ATO audit, as can making mistakes in your return.
If you need help with preparation of your income tax return this financial year, contact our office today.
Stay up to date with what’s happened in markets and the Australian economy over the past month.
Despite some signs of a weakening economy with stalling growth and a softening labour market, persistently high inflation is acting as a roadblock to the RBA’s possible rate cuts.
Markets have now priced in a risk that the RBA could hike rates as soon as the next meeting in August.
Australian shares finished the month close to where they started, with investor sentiment influenced by news of higher inflation and fears of another interest rate hike.
Click the video below to view our update.
Please get in touch if you’d like assistance with your personal financial situation.
As the financial year draws to a close, it’s the perfect time to review your financial affairs and set the stage for a successful new financial year. By taking care of essential tasks and implementing strategic planning, you can position yourself for a smooth transition and a strong start for the year to come.
Topping up super
One important item for the To Do list is to top up your super with either concessional (pre-tax) or non-concessional (post-tax) contributions. For example, you could make a voluntary concessional contribution up to the limit allowed and then claim a tax deduction on your personal assessable income for it.
Consider making additional contributions to your own super account or your spouse’s account, to take advantage of tax concessions.
If you have unused concessional cap amounts from the previous five years and a super balance less than $500,000 on June 30 the previous year, you may be eligible to make a catch-up (or carry-forward) contribution greater than the annual limit.
Maximising contributions not only helps you build your retirement savings but can also provide valuable tax benefits. But it’s critical to be mindful of your caps and to ensure that you make any super contributions before the end of the financial year to meet the deadline.
Reviewing investments
Reviewing your investment portfolio is a valuable task at any time but particularly now.
For example, you could take a look for any capital gains or losses that could be used strategically to manage your tax liability.
Also, it is worth considering how your portfolio performed over the past 12 months against your goal of capital growth, income, or balance.
You may decide to readjust your goals or your investments to help steer performance in the right direction for the next 12 months.
Of course, if you’re planning any changes, it’s important to check in with us to ensure you’re making informed decisions about your investments.
Paying expenses early
Another useful strategy at tax time can be to bring forward any deductible expenses or interest payments before 30 June to reduce your taxable income.
That could include incurring expenses on an investment property, prepaying interest on investment loans, making charitable donations, or claiming eligible work-related expenses.
Make sure you keep detailed records and receipts to support your deductions.
The ATO’s myDeductions app is a great place to start for free record keeping and to assist you to be ready for tax time.
Setting up salary sacrifice
As you look ahead to the new financial year, consider whether a salary sacrifice arrangement might be right for you.
Salary sacrifice allows you to divert a portion of your pre-tax salary directly into your superannuation, which effectively reduces your taxable income and boosts your retirement savings.
You will need to think carefully about your living expenses to work out the amount you can afford to contribute to your super, ensuring you do not exceed your concessional (before-tax) contributions cap of $27,500 (which will increase to $30,000 from July 1 2024) to avoid paying any extra tax.
Your employer or payroll department can help you set up a salary sacrifice arrangement.
Checking your budget
This is a good time to revisit your financial goals and how you’re tracking, and then put together a strong budget for the new financial year that will help get you further along the track.
Take the time to review your income and expenses and identify any areas where you can cut back spending or improve your income.
This exercise not only helps you understand your financial habits but also allows you to reallocate funds towards your goals, such as paying down debt, building an emergency fund, or increasing your investment contributions.
Consult with professionals
Don’t forget to check in with your trusted advisers – financial advisers, accountants, or tax professionals – to make sure you are making the most of any opportunities for financial growth and maximising tax savings.
Taking advantage of our expert advice to review your current financial situation and goals, and check that you are making the best decisions for you can make a difference. It provides peace of mind, ensures that you are complying with any obligations and, importantly, puts you in the best position to achieve your financial goals.
Tax cuts ease the message of greater ATO oversight
Every taxpayer can look forward to a tax cut from 1 July thanks to the centrepiece of the Federal Budget delivered in May.
On average, taxpayers will save around $36 a week under the new rules, which were legislated in February.i
The lowest tax rate in 2024-25 reduces from 19 per cent to 16 per cent, and the 32.5 per cent marginal tax rate reduces to 30 per cent for those earning between $45,001 and $135,000.
The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000.
The Budget also included a commitment to reform current tax laws and give the ATO discretion to stop chasing on-hold historical tax debts of individuals and small businesses.
Boost for tax compliance
Other Budget tax measures include a $2.5 billion crackdown on the shadow economy, as well as other fraud and tax avoidance through upgrades to the ATO’s IT systems to enable real-time identification and blocking of suspicious activities.ii
A new compliance taskforce will also be formed to focus on recovering lost revenue and stopping fraudulent refunds.
Instant asset write-off retained
Small businesses will be pleased to know that the deadline for the popular $20,000 instant asset write-off has been extended to 30 June 2025.iii
Under the instant asset write-off rule, small businesses with an annual turnover of less than $10 million are permitted to immediately deduct eligible assets of less than $20,000, rather than depreciate them.
Key focus areas
The ATO has announced it will be taking a close look at three common errors taxpayers are making in returns lodged this financial year.
These include incorrectly claiming work-related expenses, inflating deduction claims for rental properties and failing to include all income when lodging a return.
Work-from-home expenses will need comprehensive substantiation and rental landlords will need to carefully check their repairs and maintenance deductions.
Meanwhile, existing CGT exemptions for foreign residents buying and selling assets will be tightened.
Unpaid GST and income debts
The ATO has signalled it intends to increase its focus to ensure both individuals and businesses pay their tax and super obligations on time.
For example, there will be a crackdown on businesses failing to pass on $50 billion in undisputed debts for GST and PAYG from employee wages.
Around 65 per cent of this debt is owed by small businesses and the ATO has warned it is returning to its normal, pre-pandemic debt collection practices.iv
Changes for trust tax returns
Small business owners who are trustees or trust beneficiaries need to remember new income tax reporting changes commence on 1 July 2024.
Trustees will be required to provide additional information about capital gains tax on the trust’s tax return statement of distribution to provide beneficiaries with additional information when completing their trust income reporting obligations.
Trust income from managed funds will also be reported with the additional details.
SG payment reminder
With the new Super Guarantee (SG) payday rules due to start on 1 July 2026, the ATO is reminding employers they need to ensure timely payment of their quarterly SG obligations.
Payments for the fourth quarter (1 April to 30 June 2024) are due by 28 July at the latest, with more frequent payments being encouraged.
Check for unlawful tax schemes
The ATO has warned businesses again about the potential risks of becoming involved in unlawful tax schemes, including structured arrangements incorrectly classifying revenue as capital, exploiting concessional tax rates and obscuring the source of funds or party relationships.
Warning signs for these schemes include zero-risk guarantees, being asked to maintain secrecy and fees or commissions based on the tax saved.
We’d be happy to provide further information or clarification about any of the new tax measures or to provide advice if they affect you.
Major tax cuts were the centrepiece of the Albanese government’s third Federal Budget, even though the changes have already been announced and legislated.
Small businesses can breathe a sigh of relief, with the popular $20,000 instant asset write-off hanging on for another year and a valuable bill rebate on the way to help with the burden of high energy bills.
Tax cuts for everyone
From 1 July 2024, all 13.6 million Australian taxpayers will receive a tax cut, with the average taxpayer’s tax bill being $1,888 (or $36 a week) lower.
Under the new rules, the lowest tax rate reduces from 19 per cent to 16 per cent, with the 32.5 per cent marginal tax rate reducing to 30 per cent for individuals earning between $45,001 and $135,000.
The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000.
Low-income earners (under $45,000 p.a.) are the biggest winners from the changes. A single taxpayer with a taxable income of $40,000 who pays $4,367 in tax in 2023 24, would have received no benefit from the original Stage 3 tax plan, but now receives a tax cut of $654.
Boost for tax compliance
On the revenue side, the Budget includes savings of $2.5 billion in tax receipt measures through a crackdown on the shadow economy, fraud, and tax avoidance.
Taxpayers can expect the ATO to continue its recent tougher stance, with technology upgrades to enable better identification and blocking of suspicious activities in real-time and a new compliance taskforce focussed on recovering lost revenue and stopping fraudulent refunds.
Foreign residents will pay an additional $600 million over the next three years due to strengthening of the capital gains tax rules applying to this group.
Law change for old tax debts
However, one controversial measure, labelled ‘robotax’ by the media, may be abandoned, according to the Budget papers.
The ATO had been calling in historical tax debts, some accrued more than a decade ago, saying it had no choice under current laws. But the government now intends to change the tax law to give the ATO discretion about whether to collect the individual, small business, and not-for-profit debts.
Instant asset write-off retained
The deadline for the $20,000 instant asset write-off will be extended to 30 June 2025, allowing small businesses with annual turnovers of less than $10 million to immediately deduct eligible assets.
In addition, $23.3 million will be spent boosting adoption of eInvoicing to help improve small business’ cash flow and productivity.
Relieving energy bill pressure
Direct relief for small business energy bills will come in the form of a $325 rebate, while there will also be new funding for reforms to help businesses find their best electricity contract.
Assistance for smaller entities
With trading conditions remaining difficult, small business will receive $641.4 million in new targeted support. This includes $10.8 million to extend both the NewAccess for Small Business Owners program providing free mental health support and the free phone-based Small Business Debt Helpline.
An additional $25.3 million will be provided to expand the Payment Times Reporting Regulator and help improve payment times.
Nuisance tariffs abolished
From 1 July 2024, 457 nuisance tariffs will be abolished by the government to cut business compliance costs.
New funding to expand the government’s Digital ID system is designed to lower the administration burden for small businesses storing identification data on their customers and employees.
Anti-money laundering crackdown
The Budget includes $168 million over four years to pay for reforms to Australia’s anti-money laundering and counter-terrorism financing regime. Tighter rules are expected to result in lawyers, accountants and real estate agents being required to undertake due diligence on their customers and report any suspicious activities. Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents.
It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.
Many small business owners are feeling the pinch after the tough years of COVID and high inflation, but receiving a business grant could be the helping hand you need.
If you know where to look, some extra dollars from the federal or your state/territory government could make all the difference between merely getting by and a flourishing business.
What grants are available?
Grants for small businesses range from a few hundred dollars to around $10,000. Some also provide support with securing loans, business introductions, or mentoring services.
The best place to start searching for a business grant is GrantConnect, a free database listing all Australian Government grant opportunities currently open to applicants.
Another important resource is the business.gov.au Grants and Programs Finder tool, which can help you find grants, funding and support from Australian Government agencies.
The government’s Australian Small Business Advisory Services program delivers tailored advice on adopting digital tools to save time and money, and to help expand your business. Businesses with fewer than 20 full-time (or equivalent) employees, as well as sole traders are eligible.
Tech companies can check out the government’s Landing Pads program. This helps tech businesses expand into new markets by providing valuable market insights, expansion strategies, network introductions and venture capital contacts.
Each state and territory offers a range of grants to encourage local businesses. Grants vary between states, so check the online database listing the programs for your state/territory to see if any are suitable for your business.
The NSW Government for example, has a searchable Grants and Funding database highlighting financial incentives for businesses, such as payroll tax rebates for employing apprentices and trainees and the $1,000 SafeWork rebate.
For Victorian-based small businesses, check out the government’s Grants and Programs online database.
If you haven’t found a suitable grant or program, another potential source of information is Grants Hub. Although you need to register for access, you can try it out for 14 days for free.
Read the fine print
When ‘free’ money is up for grabs there is always fierce competition, so it’s important to put in a strong application.
The process will be different for each grant, making it essential to read all the information provided before getting started. Also, check that you meet the criteria, as applications will only be considered from businesses meeting the eligibility requirements.
It’s important to tailor your application to meet the grant requirements and check you prepare all the required documentation. This needs to be in the specified format.
Applying for a grant can be time-consuming, so start early and don’t leave it until the last minute to get your documentation together.
Where to start
There are private operators who offer to find business grants for a fee, but details of government grants are freely available on GrantConnect and Business.gov.au, or your state government’s website.
Small business and industry associations sometimes offer grants, so it may also be worth checking the relevant one for your business.
An easy way to find additional funding opportunities can also be to talk to us, as we can help you with government tax programs, such as the small business tax write‑off.
If the grant application process seems too time-consuming, consider hiring someone to help. While a consultant can write your application, grants are awarded on merit and using one will not give you any special access or consideration.
If you need help with finding or applying for a business grant, call our office today.
Businesses looking to attract and retain staff often provide employee benefits, on top of salary, as a way to sweeten the deal.
Many of these benefits (but not all) can have potential tax consequences – known as fringe benefits tax (FBT) – so it is important to weigh up the effect on your business.
FBT is separate to income tax and is calculated on the value of the benefit provided to the employee. Employers must work out the amount of FBT they owe each year and lodge a return.
It is worth noting that the FBT year is not the same as the financial year. It runs from 1 April to 31 March.
What to report
Most fringe benefits must be reported to the ATO. Some examples of benefits include: the use of a company car outside of work; free parking; gym membership; payment of school fees; tickets or vouchers for concerts, meals or movies; and living accommodation.
Some benefits do not need to be reported and do not incur FBT.i These include a number of benefits provided to employees working in remote areas, such as living assistance.
Other fringe benefits that are exempt from tax include work-related items such as portable electronic devices, computer software, protective clothing and tools of trade.
If the taxable value of an employee’s fringe benefits for the FBT year (1 April to 31 March) is less than $2,000, no reporting is required.
In adding up the fringe benefits, the ATO says you will need to make sure you include the employee’s part of any benefits they share with other employees as well as the value of any benefits provided to the employee’s associates, such as their partner.
Doing the numbers
For each employee, you’ll need to calculate their ‘reportable fringe benefits amount’ (RFBA) by multiplying the total taxable value of the benefits provided by an ATO ‘gross-up rate’.
The Type 1 gross-up rate is used where a GST credit entitlement is applicable to the benefit. The Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. (For the FBT year ending 31 March 2023, the Type 1 rate is 2.0802 and the Type 2 rate is 1.8868.)
This calculation grosses up the pre-tax income the employee would have had to earn to buy the benefits themselves.
FBT and salary sacrifice
Benefits provided to employees through salary sacrificing may also attract FBT.
Under a salary sacrificing arrangement, an employee agrees to forgo part of their salary in return for benefits of a similar value, such as more super or a car. As a result, the employee pays less income tax and the employer pays FBT on the benefits provided.
Extra super contributions made under a salary sacrificing arrangement are not subject to FBT and are treated differently. They are considered employer contributions and are taxed in the super fund.
Claiming deductions
Employers can claim income tax deductions for the FBT they are required to pay. You can also claim an income tax deduction and GST credits for the cost of providing the fringe benefits.
The ATO provides some suggestions for reducing FBT liability. For example, employers do not incur an FBT liability if you give an employee a benefit they would have been able to claim as an income tax deduction if they had paid for it. Your FBT liability can also be reduced if the employee contributes towards the cost.
Fringe benefits can be a valuable and strategic tool in your recruitment and retention toolbox. We can help you understand and comply with the reporting requirements and be clear about the impact of FBT on your business.
New controls for ATO Online and tax charges non-deductible
Following the use of stolen personal data to access ATO Online accounts, the federal government has tightened the access rules to online tax accounts as part of an increased focus on the vulnerability of small and medium businesses to cyber incidents.
ATO interest non-deductible
From 1 July 2025, taxpayers will no longer be able to claim tax deductions for ATO interest charges.i
Although not yet law, the government made the announcement in its 2023-24 Mid-Year Economic and Fiscal Outlook.
Since deductions for general interest charges (GIC) and shortfall interest charges (SIC) will not be permitted after July 2025, any GIC or SIC later remitted by the ATO need not be included in assessable income.
New fraud controls
Tighter controls for taxpayers’ ATO online accounts will make it more difficult for criminals to commit identity fraud using stolen personal information such as bank and ATO statements and tax file numbers.
The changes mean taxpayers who use their myGovID to log into the ATO will need to use myGovID for all future logins, leaving criminals unable to access the account without it.
The government is urging Australians to upgrade to myGovID when interacting with government agencies online and has released its new Cyber Security Strategy to support small and medium businesses vulnerable to cyber incidents.
Holiday home claims
The ATO is continuing its crackdown on tax deductions for holiday homes by encouraging tax professionals to check how clients are using their property and if they are correctly apportioning deductions in line with the time period the property is producing income.ii
Some holiday homeowners are not reducing deduction claims if they are reserving their property during peak periods or are placing unreasonable conditions restricting the likelihood the property will be rented.
We have been requested to check the number of days the property is blocked out for the owners, how and where the property is being advertised, whether family or friends used the property, and if any parts of the property are off-limits to tenants.
Checking R&D claims
Working in conjunction with the Department of Industry, Science and Resources, the ATO will be undertaking random reviews of companies taking advantage of the government’s R&D tax incentive.
The reviews will be assessing the eligibility of company’s R&D tax incentive activities and expenditure, with companies selected for review being contacted directly.
If common errors are identified during the review process, the ATO will share them with all program participants.
Tough times may mean a payment plan
With some small businesses facing difficult trading conditions, the ATO is reminding taxpayers in financial distress they may be eligible to set up a payment plan if they are unable to pay their tax bill in full and on time.
Eligible taxpayers who have a tax bill of up to $200,000, may be able to set up their own payment plan using the ATO online or self-help phone services.
Payment plan eligibility requires the business to be viable and able to make an up‑front payment with completion within the shortest possible timeframe to minimise accruing GIC (currently 11.15 per cent).
Medicare safety net thresholds increase
Thresholds for the Medicare safety nets rose from 1 January 2024, resulting in an increase taxpayers need to spend on out-of-hospital medical expenses before qualifying for a higher rebate.
The increase is in line with indexation based on inflation and rose to $560.40 on the original Medicare safety net for concessional and non-concessional individuals and families.
The extended Medicare safety net increased to $811.80 for concessional individuals and families and $2,544.30 for non-concessional.
Translated cybersecurity guides available
The government’s Australian Cyber Security Centre has released five popular cyber security guides in more than 20 languages to help business owners from non-English speaking backgrounds to improve their cyber security knowledge.
The five free guides include a small business cyber security guide, personal and top tips for cyber security, easy steps to securing devices and accounts, and a seniors guide to securely using the internet.
