Accounting, Financial Services, Taxation, Business Advisory, Lowe Lippmann Pty Ltd, Melbourne, VIC, Australia

Practice Update – March 2026

Mon, 02 Mar 2026 23:36:32 GMT

$20,000 instant asset write-off extended

The Government recently passed legislation to extend the $20,000 instant asset write-off for small businesses by 12 months to 30 June 2026.

Taxpayers should note that if their business has an aggregated annual turnover of less than $10 million, they may be able to use the instant asset write-off ( IAWO ) to immediately deduct the business portion of the cost of eligible assets which cost less than $20,000.

Eligible assets must basically have been first used (or installed ready for use) between 1 July 2025 and 30 June 2026. The $20,000 limit applies on a per asset basis, so taxpayers can instantly write-off multiple assets.

The IAWO can be used for both new and second-hand assets (but some exclusions and limits apply).

Businesses using cash to dodge obligations

The ATO is 'cracking down' on businesses that use cash to avoid meeting their tax, employer and business obligations. Businesses that do this may:

fail to report all sales transactions and fail to issue receipts;
avoid paying GST, income tax, PAYG withholding, super guarantee, insurance and work cover protection;
report their income below the $75,000 threshold to avoid registering for GST;
exploit workers by not meeting award conditions and work cover protections; or
undercut honest businesses by offering cheaper prices for cash.

The ATO warns that workers who are paid cash-in-hand or working 'off the books' are often disadvantaged. Apart from not receiving the entitlements they should be, if they are injured at work, they may not be protected.

Contractors omitting income

Through data matching, the ATO is seeing some contractors incorrectly reporting or omitting contractor income. Contractors need to report all their income in their tax return, including payments made by businesses for their contracting work.

Note that, as part of the taxable payments reporting system ( TPRS ), certain businesses must lodge a 'Taxable payments annual report' ( TPAR ) to report payments made to contractors for providing the following services:

building and construction;
courier;
cleaning;
information technology;
road freight; and
security, investigation or surveillance.

For taxpayers who work as a contractor and provide any of these services, the business they contract to should be reporting those payments to the ATO on their TPAR. Contractors obviously then need to include this income on their tax return.

If the ATO suspects a contractor may have omitted TPRS income on their tax return, it may contact them to request they amend their tax return. If the contractor does not take action, the ATO may conduct a review and audit of their business, and penalties and interest may apply.

Government payments programs

The ATO is reminding taxpayers that receive government payments for delivering services under a Commonwealth program, such as healthcare, disability support or child care, that they have an obligation to:

keep accurate records; and
report any such income they receive in their tax return.

The ATO recently advised that it would be contacting taxpayers and tax agents in February by email to ensure that income received from government agencies (such as the Aged Care Subsidy or under the National Disability Insurance Scheme) is reported correctly in their tax returns.

The ATO has updated its Government Payments Program data-matching program protocol to better detect non-compliance, and work more effectively with other government entities.

Check GST credit claims before lodging BASs

Taxpayers who are registered for GST can claim GST credits (or input tax credits) for the GST included in the price of goods and services they buy for their business.

However, if they buy something for both business and private use, they need to apportion their GST credit to only claim the business use.

For example, if they buy a car for ride-sourcing (ie. to use as an Uber driver), they should work out the percentage they use it for business purposes and only claim a GST credit on that amount.

When completing their next BAS, the ATO is asking taxpayers to remember that they cannot claim GST credits for purchases:

where they do not have a tax invoice;
that were cancelled or reversed; or
that do not have GST in the price (such as bank fees).

Taxpayers that have nothing to report still need to lodge a 'nil' BAS by the due date.

Work-related expense claims rejected by Administrative Review Tribunal

The Administrative Review Tribunal ( ART ) recently disallowed a taxpayer's claims for many different types of work-related expenses.

The taxpayer was employed full-time as an engineer, working from home two days a week. For the 2023 income year, he claimed deductions totalling over $61,000, in relation to (among other things) car expenses, travel expenses, clothing expenses, and home office expenses, all of which he claimed were work-related.

The ATO largely disallowed these deductions, and the ART affirmed the ATO's decision, primarily due to problems with substantiating these claims.

For example, in relation to the car expenses, the ART noted that none of the logbooks were contemporaneous, and the logbook entries were inconsistent with independent records (ie. car service records).

In relation to travel expenses (taxi and Uber fares), the ART noted that the taxpayer did not provide evidence clearly identifying which travel expenses had been reimbursed by his employer, and the ride share documentation did not include the date, time or destination of travel.

In relation to home office utility expenses, the ART noted that the taxpayer only provided calculations estimating the business use proportion of those expenses, without providing any documentary evidence to substantiate the expenses themselves. In any case, the ART was not satisfied that the taxpayer's apportionment of those expenses was fair and reasonable.

Ferrari not exempt from FBT

The ART has confirmed that a 2010 Ferrari California vehicle provided by a company to its director did not qualify for the car fringe benefit exemption, finding that the exemption applies only to commercial vehicles and that the Ferrari was designed to carry passengers.

The taxpayer company, which provided professional services in Perth, purchased the second-hand Ferrari in October 2013 under a hire-purchase arrangement. The vehicle was used by the sole director primarily for commuting, as well as for client visits, and was garaged at the director’s home. Following an audit, the Commissioner issued default FBT assessments for the years ending 31 March 2014 to 31 March 2022. The taxpayer objected to the assessments (but not the penalties), and the objections were disallowed.

Before the ART, the taxpayer contended that the Ferrari was an exempt car benefit on the basis that it was effectively a racing car and not a vehicle designed for the principal purpose of carrying passengers, relying on expert evidence that the model was a highly exclusive sports car “born to race”.

The Tribunal rejected this argument and held that, on its proper construction, the exempt car benefit applies only to commercial vehicles. The Ferrari was not a commercial vehicle and, despite being a sports car, it was designed for the purpose of carrying passengers.

The ART also rejected the taxpayer’s reliance on logbooks, describing them as complete fabrications and giving them no evidentiary weight. The Tribunal was not satisfied that any private use was minor, infrequent and irregular, noting evidence of private trips, including travel to Margaret River with his girlfriend.

Special Topic: ATO update on inherited homes & what it means for your family’s wealth

The ATO has issued a Draft Taxation Determination TD 2026/D1 which looks at how inherited family homes are treated for capital gains tax (CGT) purposes. Some industry commentators have dubbed it a “death tax by stealth”, but it is a bit more complex than this.

The draft guidance focuses on a specific aspect of the rules around applying the main residence exemption to inherited properties, potentially exposing deceased estates and beneficiaries to significant tax if not planned correctly.

Why does TD 2026/D1 matter?

Under current law, deceased estates or beneficiaries can potentially sell a deceased individual’s former family home without paying CGT if certain conditions can be met. This exemption is particularly valuable for properties owned long-term, where unrealised gains could be substantial.

In order to access a full exemption you normally need to ensure that:

the property is sold within 2 years of the date of death (but the ATO can potentially extend this deadline); or
that the property has been the main residence of certain qualifying individuals from the date of death until the property is sold. These qualifying individuals can include the surviving spouse of the deceased individual, the beneficiary selling an interest in the property or someone who has “a right to occupy the dwelling under the deceased’s will.”

The draft ATO guidance focuses on this second point, what does it mean for someone to have “a right to occupy the dwelling under the deceased’s will.” In summary, the ATO’s view is that:

The right to live in the home must be explicitly granted in the will to a named individual.
Broad discretionary powers given to trustees, separate agreements, or even testamentary trusts ( TTs ) are not sufficient in the ATO’s view.

For example:

A will giving an executor discretion to allow a family member to occupy the home does not meet this requirement.
A trustee of a TT who allows a beneficiary to live in the house is seen as separate from the will and may trigger CGT on sale.

Some legal and real estate experts warn this could force families to sell homes within two years of death to avoid CGT, especially in high-value areas.

Consider an example where you are inheriting a $2 million home with a capital gain of $1.5 million, this could expose the beneficiaries to $300,000–$600,000 in tax, depending on discounts and their marginal tax brackets.

However, it is important to remember that there are still other ways for the sale of the property to qualify for a full exemption.

What are some practical steps to protect your Estate?

While we wait for the ATO to finalise its guidance in this area, there are steps you can take to protect your family’s assets:

Review and update your will, especially if you are planning to provide certain individuals with the right to occupy a property. Does the will currently provide this right to specifically named beneficiaries?
Plan the timing of inherited property sales. The two-year exemption window remains, but if you inherit a property and intend to hold it longer than this, weigh any potential CGT exposure against future rental income or family needs. Partial CGT exemptions might still apply, but the rules and calculations can be complex.
Seek professional advice, especially if your estate plan uses TTs. You will normally need to work closely with tax and legal advisors to structure the plan appropriately.
Be market aware. Estate planning can intersect with market timing. Quick sales may preserve CGT exemptions, but this needs to be weighed up against non-tax factors.

The key takeaway from this draft ATO guidance is clear, estate planning is a complex area and needs to be navigated carefully to preserve family wealth and avoid unintended tax implications.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - 2026 FBT year end

Thu, 26 Feb 2026 03:59:13 GMT

2026 FBT Year End is Fast Approaching!

The end of the Fringe Benefits Tax ( FBT ) year is fast approaching on 31 March 2026, so we take this opportunity to revisit some hot FBT topics for both employers and employees, including:

FBT exemption for electric cars
Overlooking or misreporting FBT on private use of work vehicles
Does FBT apply to your contractors?
Reducing the FBT record keeping burden
Mismatched claims for entertainment
Employee contributions by journal entry in the accounts
Not lodging FBT returns
FBT housekeeping

FBT exemption for electric cars

Employers that provide employees with the use of eligible electric vehicles ( EVs ) can potentially qualify for an FBT exemption. This should normally be the case where:

The employer owns or leases the car and allows a current employee to use the car;
The car is a zero or low emission vehicle (battery electric, hydrogen fuel cell or plug-in hybrid electric);
The car is both first held and used on or after 1 July 2022; and
The value of the car is below the luxury car tax threshold for fuel efficient vehicles (which is $91,387 for 2025-26 financial year).

Plug-in hybrid vehicles no longer FBT exempt

From 1 April 2025, plug-in hybrid electric vehicles will no longer qualify for the FBT exemption unless :

The use of the vehicle was exempt before 1 April 2025, and
There is a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025.

If there is a break or change to that commitment on or after 1 April 2025 then the exemption will not normally be available anymore.

Overlooking or misreporting FBT on private use of work vehicles

The ATO is actively using sophisticated data analytics to target employers who fail to report or incorrectly report fringe benefits. ATO compliance teams are specifically looking for businesses that:

Fail to lodge FBT returns despite providing vehicles for private use.
Misunderstand exemptions, particularly the common misconception that dual-cab utes are automatically exempt from FBT.
Neglect record-keeping, such as failing to maintain valid logbooks or odometer readings to support their claims.
Incorrectly apportion usage, often treating private travel—including garaging a vehicle at an employee's home - as business use.

To ensure compliance, the ATO emphasises that a vehicle is considered "available for private use" if it is garaged at or near an employee's home, regardless of whether they have permission to use it.

Employers are expected to:

Correctly identify the vehicle type (which impacts on whether they are providing a car benefit or a residual benefit).
Maintain robust documentation, as invalid logbooks can lead the ATO to apply the "statutory formula method," often resulting in higher tax liabilities.

The ATO uses the case study of a Melbourne restaurant to illustrate the severity of non-compliance. In that instance, the lack of valid logbooks and failure to lodge returns resulted in a total liability of $938,000, which included the base tax, a 75% penalty for reckless behaviour, and significant interest charges. This highlights that the ATO is prepared to impose heavy financial penalties on businesses that deliberately avoid or carelessly manage their FBT obligations.

Does FBT apply to your contractors?

The FBT rules tend to apply when benefits are provided to employees and certain office holders, such as directors. FBT should not apply when benefits are provided to genuine independent contractors but determining whether a worker is an employee or contractor can be a complex process in some case.

Are your contractors really contractors?

The ATO’s tax ruling TR 2023/4 ( see here ) helps determine whether a worker is an employee or an independent contractor.

If the parties have entered into a written contract, then you need to focus on the terms of that contract to establish the nature of the relationship (rather than looking at the conduct of the parties). However, merely labelling a worker as an independent contractor does not necessarily mean that they won’t be treated as an employee if the terms of the contract suggest that the parties have entered into an employment relationship.

The ATO has also issued PCG 2023/2 ( see here ) that sets out four risk categories. While the ATO looks at a number of factors, arrangements will tend to be viewed in a more favourable light where:

There is evidence to show that you and the worker have agreed on the classification;
There is a comprehensive written agreement that governs the relationship;
There is evidence that you and the worker understand the consequences of the classification;
The performance of the arrangement hasn’t deviated significantly from the terms of the contract;
Specific advice has been sought confirming that the classification is correct; and
Tax, superannuation, and reporting obligations have been met when the worker is classified as an employee or independent contractor (whichever relevant).

If your business employs contractors, you should have a process in place to ensure the correct classification of the arrangements and to determine the ATO’s risk rating. These arrangements should also be reviewed over time.

Even when a worker is a genuine independent contractor, just remember that this doesn’t necessarily mean that the business won’t have at least some employment-like obligations to meet. For example, some contractors are deemed to be employees for superannuation guarantee and payroll tax purposes.

Reducing the FBT record keeping burden

Record keeping for FBT purposes can be onerous. However, due to some recent developments your business will have a choice to keep the existing FBT record keeping methods, use existing business records where those records meet the requirements set out by the legislative instrument, or a combination of both methods:

Travel diaries – see LI 2024/11
Living-away-from-home-allowance – FIFO/DIDO declarations – see LI 2024/4
Living-away-from-home – maintaining an Australian home declaration – See LI 2024/5
Otherwise deductible rule – expense payment, property or residual benefit declaration – See LI 2024/6
Otherwise deductible rule – private use of a vehicle other than a car declaration – See LI 2024/7
Car travel to an employment interview or selection test declaration – See LI 2024/14
Remote area holiday transport declaration – See LI 2024/10
Overseas employment holiday transport declaration – See LI 2024/13
Car travel to certain work-related activities declaration – See LI 2024/9
Relocation transport declaration – See LI 2024/12
Temporary accommodation relating to relocation declaration – See LI 2024/8

Mismatched claims for entertainment – claimed as a deduction but no FBT

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Let’s say you taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for FBT purposes, then there should not be any FBT implications. This is because benefits provided to client are not subject to FBT and minor benefits (ie. value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.

If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the business would be able to claim 50% of the GST credits.

Employee contributions by journal entry in the accounts

Many businesses use after-tax employee contributions to reduce the value of fringe benefits.

It is also reasonably common for these contributions to be made by journal entry through the accounting system only (rather than being paid in cash).

While this can be acceptable if managed correctly, the ATO has a number of concerns in this area, including whether journal entries made after the end of the FBT year are valid employee contributions.

For an employee contribution made by way of journal entry to be effective in reducing the taxable value of a benefit, all of the following conditions must be met:

The employee must have an obligation to make a contribution to the employer towards a fringe benefit (ie. under the employee’s remuneration agreement);
The employer has an obligation to make a payment to the employee. For example, the parties may agree that the employer will lend an amount to the employee or the employee might be entitled to a bonus that hasn’t been paid yet. If a loan is made by the employer then this could trigger further tax issues that need to be managed;
The employee and employer agree to set-off the employee’s obligation to the employer against the employer’s obligation to the employee; and
The journal entries are made no later than the time the financial accounts are prepared for the current year (ie. for income tax purposes).

Failing to ensure that arrangements involving fringe benefits and employee contributions are clearly documented can lead to problems. For example, the ATO may ask to see evidence of the fact that the employer is actually under an obligation to make contributions towards a fringe benefit. If there is no evidence of this then significant FBT liabilities could arise.

Also remember that if the arrangement involves the business providing a loan to an employee this can trigger a separate loan fringe benefit issue that needs to be managed.

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns when required to.

If your business employs staff (even closely held staff such as family members), and is not registered for FBT, it’s essential to ensure that the position is reviewed to check whether the business could potentially have an FBT liability.

If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing at least some fringe benefits.

There is a list of benefits that are considered exempt from FBT, such as portable electronic devices like laptops, protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you are unlikely to have to worry about FBT.

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.

If your business has cars and you need to record odometer readings at the first and last days of the FBT year (1 April 2025 and 31 March 2026), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Division 296 draft legislation introduced to Parliament

Mon, 16 Feb 2026 03:15:44 GMT

Division 296 draft legislation introduced to Parliament

Last week the revised Division 296 draft legislation was introduced into Parliament, and some technical amendments have been made after the exposure draft consultation phase. We will explain some particular areas of concern and re-consider some questions we had raised in earlier Tax Alerts on this topic.

This draft legislation has been progressing at a rapid pace, and it appears the Government wants to get this legislation finalised as soon as possible, with these Division 296 rules set to apply from 1 July 2026.

What are the technical amendments?

The draft legislation introduced into Parliament includes some technical amendments that need to be explained and considered further, in particular:

The CGT adjustment, providing a market value uplift to the cost base of certain CGT assets in certain circumstances.
The higher of the opening or closing total superannuation balance ( TSB ) will be used to test whether the $3 million threshold is exceeded to trigger the Division 296 rules after the first year.
The availability of the exemption for applying the Division 296 rules to deceased members has been restricted further.

We will consider each amendment separately below.

CGT adjustments to cost base of certain CGT assets

The transitional provisions of the draft legislation allow a member to make an election to reset the cost base of certain CGT assets held on 30 June 2026 to be equal to the market value of the asset on that date. The due date for making this election will be the due date for the 2027 fund income tax return.

We note this CGT adjustment will be for Division 296 purposes only. The CGT adjustment will not be applied for fund income tax purposes, where the current CGT cost base of the asset will be used for calculating any capital gains on the actual disposal of an asset.

The election must be made for all CGT assets and will not be applied on an asset-by-asset basis. This may cause some unintended consequences for any CGT assets that have dropped in value, where the market value is now less than the cost base as at 30 June 2026.

We hope this amendment will be re-considered further before the legislation is finalised and we believe this CGT adjustment may be better applied as “the greater of the CGT asset’s cost base or market value”.

What assets can the CGT adjustment be applied to?

The CGT adjustment (for Division 296 purposes) can only be applied to assets directly owned by the super fund (ie. real property, units in unit trusts or shares in a companies). The CGT adjustment cannot be applied to indirect assets (ie. real property held by unit trusts or companies).

Should the legislation remain unchanged, then consideration may need to be given as to the timing of any planned disposal of the underlying indirect assets of unit trusts and companies that are owned by the superfund, and may present other planning opportunities.

Higher of opening or closing TSB used to test $3 million threshold, after the first year

The draft legislation provides that a member will be subject to the Division 296 rules if their TSB is greater than $3 million at the end of the financial year or at the start of the financial year.

Consequently, a member who has an opening balance of $3 million or more at the start of a financial year could not avoid Division 296 in that year by reducing their TSB by the end of the year. This was possible under the previous draft version of Division 296 rules.

Furthermore, members with an account balance that declines during the income year, ending with a TSB below $3 million as at 30 June, could still receive a Division 296 tax liability even though they have less than $3 million in super. This appears to be an unfair outcome.

There is one exception to this amendment within the transitional provisions of the draft legislation for the 2026-27 year, where only the closing balance will be measured (not the opening balance).

This means that for members who do not want to trigger Division 296 tax will have until 30 June 2027 to reduce their TSB super balances below $3 million, giving all members more time to work out whether (and to what extent) they wish to withdraw super benefits before the first Division 296 tax assessments are issued. This may also have an impact on the timing of the disposal of underlying indirect assets owned by unit trusts and companies that do not benefit from the CGT adjustment (ie. market value reset) noted above.

Exemption for deceased members has been restricted

The draft legislation provides that Division 296 can be applied to a member in the year of their death.

Only their opening TSB will be considered in relation to testing the $3 million threshold for applying the Division 296 rules, as it was considered too onerous on the super fund to calculate the deceased member’s TSB at their date of death (to be used as a closing balance).

From 1 July 2027 onwards, deceased members will be subject to the Division 296 rules, even where their superannuation balance has been fully administered and distributed to their beneficiaries before an assessment is issued.

This amendment is particularly unfair applying a Division 296 liability on the executor of the deceased’s estate after their estate has been fully administered and estate assets distributed, imposing a detriment to the estate beneficiaries. In certain circumstances, the executor may even become personally liable to pay an outstanding Division 296 assessment.

Additionally, executors/administrators will be imposed a further administrative burden to consider possible Division 296 liabilities when they may not have access to the super fund information of the deceased member.

Furthermore, there may be circumstances where a married couple have managed their super balances to the exclusion of the Division 296 rules and following the death of a spouse, the surviving partner will be automatically drawn into the rules even if both were in the pension phase.

For example, consider a married couple with pensions of $2.5 million each (made possible under previously allowed caps and their balances experiencing growth for the last 10 years). At this stage both members would not need to consider the implications of the Division 296 rules. If one member dies during the 2027-28 income year, their pension will automatically revert to the surviving spouse. At the end of that year, the surviving spouse has a TSB of $5 million (or more) and they will subject to a Division 296 liability for the first time, with 40% (being the proportion = ($5M - $3M) / $5M) of any income or gains for the 2027-28 income year subject to tax at a 30% rate. This appears to be an unfair outcome for members who have been managing their super affairs in line with the rules.

We hope this amendment will be re-considered in detail before the legislation is finalised as super industry experts have already began voicing their concerns about the potential disproportionate tax burden that may be imposed on deceased estates and surviving spouses.

Reconsidering questions raised in earlier Tax Alerts

How will the new changes apply to capital gains on long-held shares and property?

The following example from the Explanatory Memorandum of the draft legislation provides a helpful illustrative answer to this question.

Example 1.12 Choosing the CGT adjustment for the CGT assets of a SMSF

Oscar is a member of an SMSF that holds a single CGT asset purchased in 2010 for $200,000. The asset’s market value on 30 June 2026 is $500,000.

Oscar has a TSB over the $3 million threshold and expects to incur a Division 296 liability.

The trustee elects to apply the CGT adjustment using the approved form. For Division 296 purposes, the asset’s cost base is adjusted to its market value of $500,000 on 30 June 2026.

In the 2027-28 income year, the SMSF sells the asset for $550,000. For fund income tax purposes, the capital gain is calculated using the original cost base of $200,000, resulting in a gain of $350,000. As the asset was held for more than 12 months, the fund applies the one-third CGT discount, reducing the taxable gain to $233,333 (two-thirds of $350,000).

For Division 296 purposes, the fund is required to calculate a modified net capital gain using the adjusted cost base of $500,000. As such, the fund includes capital gains of $50,000 in the modified net capital gain calculation. This would give the fund a modified net capital gain of $33,333 after the application of the relevant CGT discount.

Will capital gains accrued before Division 296 comes into effect on 1 July 2026 be subject to the announced higher rates (ie. 15% and/or $10%) when those CGT assets are sold in the future?

For Division 296 purposes, the CGT adjustment explained above will not include the accrued (or unrealised) gains before 1 July 2026 when calculating any Division 296 liability.

However, for fund income tax purposes, if a CGT asset is sold the normal cost base (ie. purchase price plus improvements etc.) will be used to calculate any capital gain before the one-third CGT discount is applied (to assets held for more than 12 months).

How will the new changes impact the current CGT general discount available to superannuation funds on the sale of CGT assets, will the effective tax rate on capital gains go from 10% (currently) up to 20% (based on combined 30% rate) or even 27% (based on combined 40% rate)?

We have not seen any specific commentary on this issue as part of the draft legislation being introduced, and we will watch this space to see if the draft regulations will provide an answer.

So where are we now?

The final details of the legislation will need to be included in tax regulations, which have yet to be drafted and released, and we wait with anticipation for the draft legislation to pass through both Houses of Parliament and draft regulations being released as soon as possible.

In other words, considering 30 June 2026 is only 4 ½ months away, there are numerous technical issues to be addressed before the Division 296 rules are finalised.

We will continue to watch this space and provide regular updates as new information becomes available.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters furthe r.

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Tax Alert - Transfer Balance Cap indexation & Superannuation changes

Thu, 05 Feb 2026 00:17:32 GMT

Transfer Balance Cap indexation & Superannuation changes

Following the recent release of the December 2025 quarterly CPI figures by the Australian Bureau of Statistics’, the general transfer balance cap ( TBC ) will increase from $2 million to $2.1 million from 1 July 2026.

This is applicable for superannuation fund members considering starting their first retirement phase income stream in 2026–27. This could provide tax effective retirement pension and non-concessional contribution opportunities for some members.

The Australian Taxation Office needs to formally confirm this increase.

What changes when the TBC increases?

Many total super balance ( TSB ) thresholds are linked to the general TBC. An increase in the general TBC from 1 July 2026 would allow members with a TSB of less than $2.1 million to make non-concessional contributions ( NCCs ) to super.

Currently members with a TSB of $2 million or more at 30 June of the previous year cannot make NCCs without breaching their cap.

TSB limits which determine eligibility to utilise the three year NCC bring-forward rule will also change.

Are contribution caps likely to rise?

The concessional contribution ( CC ) cap is based on “average weekly ordinary time earnings” ( AWOTE ) figures that have not yet been released (expected late February). Subject to the final AWOTE figures being confirmed at the end of February, it is very likely the CC cap will increase from $30,000 to $32,500 on 1 July 2026.

An increase in the CC cap will flow through to an increase in the NCC cap which is set at four times the CC cap. This would translate to the NCC cap rising to $130,000 and the three-year bring forward amount would rise to $390,000.

Retirement Income Streams

Individuals who commence a retirement phase income stream (ie. pension) for the first time after 1 July 2026 will have access to the full $2.1 million limit.

For some individuals there may be a benefit in deferring the commencement of a retirement income stream until on or after 1 July 2026, which may allow more assets to be moved into the tax-free retirement phase. In the interim before 1 July, members will continue paying accumulation phase tax at 15%.

Members who currently have a retirement income stream in place (or commence one before 1 July 2026) may also be entitled to a proportional increase in their TBC based on any unused amount of their TBC. This may allow additional assets to be moved into the tax-free retirement phase, after a complicated calculation has been performed.

If a member has already fully utilised their TBC, they will not be entitled to an increase.

This does not apply to “transition-to-retirement pensions”, unless they are moving into the retirement phase.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – January & February 2026

Mon, 02 Feb 2026 21:57:47 GMT

Mandating cash acceptance

The Government recently announced that it was delivering on its commitment "to mandate cash acceptance for essential purchases by finalising regulations that require fuel and grocery retailers to accept cash from 1 January 2026."

The changes mean that, from 1 January 2026 , most food and grocery retailers must accept cash for in-person transactions of $500 or less between 7am and 9pm.

Small businesses with aggregate annual turnover under $10 million are generally exempted from this mandate. However, this mandate still applies to small businesses that choose to share a trademark with a large retailer.

The Government noted that, in addition to the cash mandate for fuel and groceries, consumers also already have the option to pay their bills, including utilities, phone bills and council rates, in cash at their local Australia Post outlet through Post Billpay.

The Government will review this mandate after three years, to ensure it is functioning as intended.

We prepared a Special Topic article within our Practice Update - December 2025, if you want to read more on this topic – click here .

ATO child support data-matching program

The ATO has advised that it will acquire child support data from Services Australia for the 2025 to 2027 income years, including the following:

client identification details (names, addresses, phone numbers, and dates of birth); and
child support details (child support identification reference number, child support role type, and child support category).

The ATO estimates that records relating to up to 300,000 individuals will be obtained each financial year, which will be matched against Australian Taxation Office ( ATO ) records.

The objectives of this program are to (among other things):

allow Services Australia to more accurately assess child support obligations, and maximise opportunities to collect child support debts; and
identify and educate individuals who may be failing to meet their lodgment obligations and help them to finalise their lodgment obligations, or notify the ATO that an income tax return is not required.

Time limits on GST and fuel tax credit claims

Taxpayers should note that GST credits and fuel tax credits will expire if not claimed within the 4-year credit time limit (ie. generally four years from the due date of the original BAS in which the taxpayer could have claimed them).

Once credits expire, the ATO has no discretion or ability to amend the assessment to include those credits.

The 4-year credit time limit is different to the period of review and applies more strictly.

There may be situations where the ATO is able to amend for overpaid or underpaid GST or overclaimed credits, but additional credits cannot be included in an amendment assessment.

If credits are near expiry, instead of writing to request an amendment, taxpayers should consider:

claiming the credits in their next BAS that is still within the 4-year credit time limit;
requesting the amendment by lodging a revised BAS for the tax period to which the credits are attributable (these are generally processed faster than amendment requests in other forms); or
lodging a valid objection against their assessment for the period to which the GST credits are attributable before the end of the 4-year credit time limit.

If you identify any unclaimed input tax credits, we can assist with actioning the above options to try and ensure entitlements to the credits are not lost.

Taxpayer's dog breeding activities held to be an enterprise

The Administrative Review Tribunal ( ART ) recently held that a taxpayer had carried on an enterprise of dog breeding for GST purposes.

He had lodged activity statements for the quarters ended 30 September 2018 to 31 December 2021 inclusive, claiming input tax credits ( ITCs ) for the dog breeding activities he carried on from his home (among other activities).

The ATO disallowed the taxpayer's claims for the above periods, arguing that enterprises were not carried on, and that there was a lack of appropriate substantiation (among other reasons).

The ART however held that the taxpayer's dog breeding operation was an enterprise for GST purposes, noting that his activities had " the necessary commercial character. " Therefore, the taxpayer was entitled to ITCs for that enterprise.

However, the ART affirmed the ATO's decision to reduce the taxpayer's other ITC claims, such as in relation to stamp duty on the acquisition of a property and for café and grocery expenses.

The ART also admonished the taxpayer for apparently using artificial intelligence in the presentation of his case, as he appeared to rely on cases and principles that did not exist.

Paying super guarantee

The ATO is reminding employers that they must pay super guarantee ( SG ) contributions for eligible employees.

Employers need to pay a minimum of 12% (the current SG rate as from 1 July 2025) of each employee's ordinary time earnings into a complying super fund on a quarterly basis (the due date for the March 2026 quarter is 28 April 2026).

In most cases, employees can choose the super fund.

Employers who do not pay in full, on time or to the correct super fund will have to pay the SG charge, which is made up of the super they owe, nominal interest on those amounts (currently 10%), and an administration fee of $20 per employee, per quarter.

These payments must be made through SuperStream (where super payments and information move through the system electronically).

Employers who use the Small Business Superannuation Clearing House to make super contributions should note that this service will be permanently closed from 1 July 2026 . Existing users should switch to an alternative method to pay their employees' super guarantee.

Also, when new employees start, employers may have an extra step to take to comply with the 'choice of fund rules' if the new employee does not choose a super fund. Employers may now need to request the new employee's 'stapled super fund' details from the ATO.

Tax dodgers banned from leaving the country

The ATO is actively using departure prohibition orders ( DPOs ) as part of a broader shift towards strengthening payment performance and debt collection. A DPO is an enforcement action available to the ATO to prevent certain persons with tax liabilities from leaving Australia without paying their outstanding tax.

Since July 2025, the ATO has issued 21 DPOs, more than the total number issued in the entire financial year ended 30 June 2025.

The ATO notes that a taxpayer was recently prevented from boarding a flight in the early hours of the morning due to a DPO imposed because of deliberate non-payment of a significant debt.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Preparing your business for Payday Super changes starting 1 July 2026

Wed, 21 Jan 2026 00:30:06 GMT

Preparing your business for Payday Super changes starting 1 July 2026

From 1 July 2026, employers will have to pay their employees’ compulsory Superannuation Guarantee ( SG ) contributions at the same time as they pay their salary and wages (ie. ordinary time earnings, OTE ). This is a change in the frequency of the payment rather than its calculation.

With less than six months remaining, we believe it is very important to start preparing your business for these changes. We will outline some actionable steps that can be taken now to help manage the process to be compliant with the new changes leading up to 1 July 2026.

These changes will apply to all Employers, whether they have pay cycles weekly, fortnightly, monthly or irregularly. SG contributions must generally arrive in an employee’s chosen super fund within 7 business days of each payday .

Please note that in November 2025 we released a Tax Alert after the payday super rules received Royal Assent and became law summarising the changes employers need to be aware of - to read click here .

What actionable steps can Employers take (well) before 1 July 2026?

The following table provides some actionable steps which can be taken now to help with the transition toward making SG payments more frequently and being in the best position to be compliant with the new payday super rules before 1 July 2026.

The ATO webinars can be found – click here .

Are there circumstances when SG payments can me paid more than 7 business days after payday?

To allow for the additional time it may take an Employer to onboard new employees and obtain the details of their superannuation fund to which contributions need to be made, Employers will have additional time to make SG contributions where it is their first payday with that Employer.

Employers will have an additional 20 business days (called the ‘extended usual period’) to make eligible contributions for new employees. The fund must receive the contribution before the end of the 20th business day after their first payday.

The ‘extended usual period’ (ie. additional 20 days) can also be available in special circumstances where the Employer and employee may have an existing relationship, including:

Employee resigning from and rejoining the same employer under a new employment contract;
Employee commences a new employment relationship with former employer under a new employment arrangement;
An existing employee changes funds, rolling their balance from one fund to the other, where the employee provides a new choice of fund form; and
An existing employee’s fund becomes non-compliant and the employee/Employer have to go through the choice of fund process.

Transitional period for SG payments made between 1 July 2026 and 28 July 2026

The payday super rules allow for a necessary transitional ‘grace period’ between 1 July 2026 and 28 July 2026, as there will be a period of overlap between the old and new laws.

Under the old law, employers have until the 28th day after the end of the quarter (ie. 28 July 2026) to make contributions to reduce their SG shortfall. However, from 1 July 2026 under the new payday super laws, SG payments must be received by the relevant super fund within 7 business days.

This transitional period allows a SG payment which is made in the period from 1 July 2026 to 28 July 2026 and could be counted for both the purposes of the old law and the new payday super laws, to be first applied under the old law , with any remainder then applied under the new law.

What are the implications of non-compliance for making SG payments on-time?

The Superannuation Guarantee Charge ( SGC ) framework has been amended so that Employers may face SGC liabilities plus interest and administrative penalties if contributions are not received within the required 7 business day timeframe for existing employees (or 20 business day timeframe for new employees).

Thus, it is critical for Employers are prepared to pay compulsory SG payments on time and maintain compliance with the SG rules (along with withholding and paying PAYGW). The PAYGW is tax being paid to the ATO on behalf of the employee. Compulsory SG payments are also amounts being paid for the benefit of the employee.

If SG payments are paid late, the SGC will apply, which requires the missed super amount to be paid plus interest and penalties. After SGC has been assessed, additional interest and penalties may also apply if the SGC liability is not paid in full.

As you can see the SGC rules are significant and designed to incentivise Employers to pay all SG payments on time on behalf of their employees.

What penalties will the ATO impose for non-payment of the SGC amount?

When an SGC amount is unpaid 28 days after it becomes due and payable, the ATO is required to give the Employer a written notice to pay a specified amount of SGC that is unpaid at that time.

A general interest charge ( GIC ) rate will be applied on the unpaid SGC amount until it is paid in full, even after the notice to pay has been issued. This GIC will form part of the debt owed to the Commonwealth. The annual GIC rate is currently 10.61% (based on the Oct – Dec 2025 quarter).

The Employer may become liable for a ‘late payment penalty’ if they do not pay the amount in the notice in full within 28 days of the notice being issued. The penalty rate is equal to 25% of the outstanding amount (or 50% if an Employer has repeatedly made late SG payments within the previous 24 months).

The ATO must give written notice of the assessment of the ‘late payment penalty’ to the Employer, and the penalty cannot be remitted and does not accrue any GIC.

We note that these penalties are significant and substantial penalty amounts can accrue quickly if prompt action is not taken to rectify non-compliance.

Are late SG contributions, SGC amounts, GIC and ‘late payment penalties’ tax deductible?

When the payday super rules became law in November 2025, changes were made in relation to the tax deductibility of late contributions and any SGC amount to incentivise Employer’s to avoid instances of non-compliance.

Under the new framework, the following items will be tax deductible to the Employer:

On-time SG contributions;
Late SG contributions; and
SGC amounts (which includes the three components in the table above: the outstanding SG shortfall, notional earnings and administration uplift).

However, any GIC or ‘late payment penalties’ related to a SGC amount will not be tax deductible to the Employer.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Christmas Parties & Gifts 2025

Sun, 07 Dec 2025 23:04:59 GMT

Christmas Parties & Gifts 2025

With the well-earned 2025 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.

However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

FBT and 'entertainment'

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.

Using the actual method

Under the actual method, entertainment costs are normally split up between employees (and their family) and non-employees (eg. clients). Such expenditure on employees is deductible and liable to FBT. Expenditure on non-employees is not liable to FBT and not tax deductible.

Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible. However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;
the minor benefit exemption* cannot apply; and
the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (eg. family) on an infrequent and irregular basis.

The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold. However, entertainment expenditure that is FBT-exempt is also not deductible.

We note that a $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all. The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used:

For all 40 employees and their spouses – no FBT is payable (ie. if the minor benefit exemption is available), however, the party expenditure is not tax deductible .

If the 50/50 method is used:

The total expenditure is $10,000, so $5,000 (ie. 50%) is liable to FBT and tax deductible .

Christmas gifts

With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

Gifts that are not considered to be entertainment

These generally include a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers or a pen set, etc. Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible ; and
gifts to clients, suppliers, etc. – no FBT , and tax deductible .

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre. This can also include recreational activities (such as a golf day) which cost less than $300 per person and meets the other requirements of a minor benefit (ie. infrequent or irregular occurrence).

Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
gifts to clients, suppliers, etc. – no FBT and not tax deductible .

Non-entertainment gifts at functions

What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (ie. the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible .

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible; and
in relation to the gifts:
the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and
as the gifts are not entertainment, the cost is tax deductible .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – December 2025

Tue, 02 Dec 2025 02:14:52 GMT

Alternative providers to the Small Business Superannuation Clearing House

Employers should start preparing for the permanent closure of the Small Business Superannuation Clearing House ( SBSCH ) on 1 July 2026.

By acting now to find an alternative service, employers will:

have an established process in place to pay super guarantee ( SG ) for the March and June quarters (if they currently pay quarterly);
reduce the risk of late payment of SG for the June 2026 quarter due date (28 July), as the SBSCH will be already closed;
have more time to set up their business cash flow to enable frequent payments of SG; and
have finalised payments and downloaded any reports from the SBSCH before it closes permanently.

Employers that are still using the SBSCH should be aware of the following key dates.

10 December 2025 — Super payments, along with instructions, must be received by 5.30 pm AEDT on this date. The ATO says payments received after this time will be processed from 2 January 2026.
28 January 2026 — December 2025 SG quarterly payments due date.
February to March 2026 — Employers should move to an alternative option to the SBSCH.
28 April 2026 — March 2026 SG quarterly payments due date.
30 June 2026 — Final day for employers to use the service, make any final payments and download reports.
 1 July 2026 — SBSCH is no longer available.

Employers may already have other options readily available so they can exit from using the SBSCH ahead of time.

They should check their existing software and payroll packages, as they may already include super functions they can use to pay SG.

Otherwise, employers can look for options from super funds or digital service providers offering payroll services, software or commercial clearing houses.

Reminder of December 2025 Quarter Superannuation Guarantee

As noted in the above article, employee super contributions for the quarter ending 31 December 2025 must be received by the relevant super funds by 28 January 2026.

If the correct amount of Superannuation Guarantee ( SG ) is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

The SG rate is 12% for the 2026 income year (increased from 11.5% for the 2025 income year).

Dental expenses are private expenses

The ATO has been seeing a number of deduction claims for dental expenses this tax time. Dental expenses, including preventative and necessary dental treatment, medical expenses and other costs relating to client's personal appearance (such as teeth whitening, makeup, skin care, shaving products and haircuts) are not deductible.

These expenses are generally private expenses, even if an employer expects an employee to maintain a certain appearance, or pays them an allowance to cover grooming expenses.

Taxpayers should remember that they can only claim an expense that directly relates to earning their income. Private expenses cannot be claimed as a deduction.

Taxpayers should have written evidence of all their expenses, and be able to show a direct connection with those expenses to their employment income.

Australians call out tax dodgers in record numbers

The ATO has hit a major milestone of over 300,000 tip-offs from the community about tax avoidance and other dishonest behaviours since 1 July 2019. In the 2024/25 financial year alone, almost 50,000 red flags were raised by members of the community who spotted something suspicious.

Most of the tip-offs received related to shadow economy activity, coming from customers, employees, other businesses, and even family and friends.

This year, Australians reported businesses and individuals who:

did not declare their income;
demanded or paid for work in cash to avoid tax;
lived lifestyles that did not match their known income; and
failed to report all sales.

The top three industries seeing a surge in 'red flags' this financial year are:

building and construction;
cafes and restaurants; and
hairdressing and beauty services.

ATO's new approach to holiday home expenses

The ATO has announced that it will take a somewhat different approach in relation to expenses that are claimed in relation to holiday homes, and the ATO has released draft guidelines in Draft Taxation Ruling 2025/D1.

Broadly, the ATO now takes the view that, if a taxpayer's rental property is also their holiday home, certain deductions relating to holding it will be completely denied (rather than being apportioned).

Expenses relating to ownership and use of the holiday home (ie. interest, rates and maintenance) will not be deductible, unless the holiday home is 'mainly' used to produce assessable income.

Whether a holiday home is used 'mainly' to produce assessable income will be determined based on a consideration of a number of factors.

However, this will generally not apply to expenses incurred in relation to holiday homes that are rental properties before 1 July 2026, if those expenses are incurred under an arrangement entered into prior to 12 November 2025.

The draft ruling does not currently provide comprehensive advice for individuals who use rental properties in carrying on a business or entities that are not individuals.

We will continue to monitor the progress and finalisation of this draft ruling.

ATO warns about barter credit tax scheme

The ATO is warning the community to steer clear of an emerging tax scheme involving barter credits - a type of alternative currency used in some business networks.

A tax scheme that involves artificially inflating deductions for donations of barter credits to deductible gift recipients ( DGRs ) is on the rise. While it may seem enticing, promoters and taxpayers could face potentially significant consequences if they are involved.

The ATO is concerned that such schemes are being enabled by several barter exchanges that are allowing participants to access barter credits with a nominal face value that is much more than any payments actually made to the exchange. Participants then donate these barter credits to a DGR and claim a larger tax deduction than they are entitled to.

Those involved may have to repay the tax, plus face heavy penalties, interest and legal action.

Special Topic: Cash is making a comeback, is your business ready to take It?

For years, businesses have been moving away from cash – and for good reason. Digital payments are quick, traceable, and cut down on the risk of theft or counting errors. But that tap-and-go world might soon have to make room again for notes and coins.

The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel – even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash.

Who will need to accept cash, and who won’t?

The new rules are targeted and, importantly, practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials.

If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges.

The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice.

Why is this happening?

The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash – particularly older Australians and those in regional or remote areas.

There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential.

What does this mean for your business?

For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include:

Re-establishing cash floats and tills
Staff training to handle and verify cash
More frequent bank deposits and reconciliation procedures

For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that.

There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital – especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service.

How can you prepare for the change?

With final regulations expected soon, it is worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs.

If you are exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations.

Looking ahead

Cash is not going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - New financial crime regulations start from 1 July 2026 – is your business going to be regulated?

Thu, 20 Nov 2025 03:20:10 GMT

New financial crime regulations start from 1 July 2026 – is your business going to be regulated?

The Federal Government is introducing new financial crime regulation from 1 July 2026 .

The Anti-Money Laundering and Counter Terrorism Financing ( AML/CTF ) regime will expand its scope to include a new cohort of higher‑risk services and providers, commonly described as “Tranche 2 entities” .

For the last 30 years, the Australian Transaction Reports and Analysis Centre ( AUSTRAC ) has regulated businesses in the financial services and gambling sectors, like banks and casinos.

As money laundering methods becomes increasingly sophisticated and fast-moving, AUSTRAC is expanding their regulation to include services provided by high-risk sectors that work on the front line of high value transactions.

What industries are included within Tranche 2?

Tranche 2 entities will include those operating within the following industries:

real estate professionals – such as real estate agents, buyer's agents and property developers;
dealers in precious stones, metals and products;
lawyers;
conveyancers;
accountants; and
trust and company service providers.

In addition, virtual asset-related services (ie. cryptocurrencies exchanges) will also come under AML/CTF law from 31 March 2026.

The precise scope of the AML/CTF depends on which services provided in the above industries are “designated services” under the legislation with a geographical link to Australia. Common triggers include; handling client money, facilitating property transactions, establishing or administering legal entities and providing corporate trustee or nominee services.

Criminals often exploit businesses in these industries to hide or clean (money launder) their criminal proceeds, and it is now important that Tranche 2 entities are included to help disrupt these activities.

What should affected Tranche 2 entities do before 1 July 2026?

Check the AUSTRAC website ( click here ) to confirm if your business is affected.
Subscribe to updates from AUSTRAC ( click here ) for the latest information for the AML/CTF rules.
Enrol and register (if affected) with AUSTRAC ( click here ) and obtain reporting entity status; early enrolment reduces last‑minute pressure and allows staging of compliance activities.
If your business provides any of the newly regulated virtual asset services or intermediary transfer message services, these new laws start 31 March 2026 – enrolment would be required before 28 April 2026.
If you provide any other newly regulated designated services, the new laws start on 1 July 2026 – enrolment would be required before 29 July 2026.
Perform a risk assessment by mapping the business services, clients and delivery channels to identify where AML/CTF risks arise and what controls are proportionate. See AUSTRAC website here and also here .
Develop and maintain a tailored AML/CTF program which is a comprehensive, risk-based framework with components including; appointing a dedicated compliance officer, conducting regular risk assessments, training all staff, and meticulously maintaining records. See AUSTRAC website here and also here .
Conduct customer due diligence, upgrade client intake and know your customer ( KYC ) processes by implementing identity verification, beneficial ownership checks and changes to trust/account opening workflows. See AUSTRAC website here and also here .
Provide training for your staff so they understand their obligations, and conduct personnel due diligence (testing) to assess their knowledge for identifying suspicious matters. See AUSTRAC website here and also here .
Evaluate software for ongoing monitoring, screening and secure recordkeeping. If using external providers, ensure contractual obligations support compliance and data access for reporting.

After 1 July 2026 passes, many of these obligations will be a continual requirement to frequently review, and adapt where necessary if the services of your business change over time.

The extent of the impact, and associated regulatory burden caused by the AML/CTF regime, on your business will depend on the services you provide with your business. In other words, each business will have a bespoke obligation and there is no “one-size-fits-all” solution available.

If your business falls within the Tranche 2 industries, there is a significant amount of information to familiarise yourself with to prepare for the AML/CTF obligations before 1 July 2026.

In the short term, in addition to subscribing to updates from AUSTRAC, we recommend seeking out guidance from your industry body. Each industry will have its own special services and specific risks that may be impacted by these rules.

From our own experience, the accounting industry bodies we are associated with expect to provide us with some assistance and further guidance for preparing our AML/CTF program, which will be bespoke to our industry. We anticipate (and hope) your industry bodies will be providing similar guidance.

We will continue to monitor updates from AUSTRAC and will share any significant information.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Payday Super laws will start from 1 July 2026

Wed, 12 Nov 2025 00:08:52 GMT

Payday Super laws will start from 1 July 2026

Payday Super reforms have now received Royal Assent and is now law. The new legislation will require the payment of eligible superannuation guarantee ( SG ) contributions to be in line with the frequency of the employer’s pay cycle, effective from 1 July 2026 .

The payday super changes will require employers to remit SG contributions at the same time they pay employees’ salary and wages (known as ‘ordinary time earnings’ or OTE ). Currently SG contributions are required to be paid quarterly.

These changes will apply to all employers, whether have pay cycles weekly, fortnightly, monthly or irregularly. SG contributions must generally arrive in an employee’s chosen super fund within seven business days of each payday.

The motivation for these changes is to identify unpaid super much sooner, and reduce unpaid SG by aligning timing and increasing transparency.

What are the changes that Employers need to be aware of?

What steps can Employers take before 1 July 2026?

Although not yet law, there are steps which can be taken now by employers to prepare for the changes and be in the best position to be ready for 1 July 2026. This includes:

Consider starting to make superannuation payments more frequently.
Confirming that employees’ superannuation fund details are up to date.
Reviewing internal processes around superannuation reporting.
Starting to look for alternatives, if the employer currently using the ATO’s Small Business Super Clearing House ( SBSCH ), as this will close from 30 June 2026.
Reviewing cash flow to understand how moving to paying superannuation more frequently may impact the business.

Employers are urged to check if their existing payroll or accounting software already includes super payment functionality, otherwise they should look for options from super funds or digital service providers offering payroll services, software or commercial clearing houses (other than SBSCH). We note that both Xero and MYOB have automatic superannuation contribution functionality in their payroll software and do not need an external clearing house.

The ATO is working closely with tax professionals, digital service providers and superannuation funds to help prepare small business employers for the 1 July 2026 start date.

What are the benefits for Employees?

The motivation for these changes is to identify unpaid super much sooner, and reduce unpaid SG by aligning timing and increasing transparency.

Payday super will reduce the time between when income is earned and when it is invested into the employee’s superannuation fund, giving employees earlier exposure to compound returns and reducing the incidence of “super theft” where employer contributions are delayed or missed and harder to detect.

Overall, more frequently contributions are expected to increase retirement balances materially over decades for many, particularly for younger employees.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – November 2025

Sun, 02 Nov 2025 22:31:18 GMT

Treasury announced new changes to Division 296 from 1 July 2026

During October the Treasurer announced some key changes to the proposed Division 296 tax measure to deal with some of the more contentious features of this proposed new tax.

The Government is planning to make a number of significant changes to the way this tax will apply, including moving from a total superannuation balance change methodology to a fund-level realised-earnings approach and introducing a second threshold of $10 million, with CPI indexing applying to both thresholds.

The Government also announced that the start date for the new Division 296 tax will be deferred to 1 July 2026 to allow further consultation and implementation work.

For a full explanation of the announced new changes, see our Tax Alert ( click here ).

Dual cab utes and FBT

The ATO wishes to dispel the 'common myth' that dual cab utes are automatically exempt from fringe benefits tax ( FBT ). If an employer provides dual cab utes to staff to complete their duties and the vehicle is available for personal use, then the benefit may be subject to FBT.

By understanding how their employees use their dual cab utes, employers can work out if FBT applies and meet their FBT obligations.

To qualify for an exemption, the dual cab ute must be an 'eligible vehicle'. That is, it must be designed to carry a load of one tonne or more, or more than eight passengers (including the driver), or a load under one tonne and not primarily designed for carrying passengers.

The dual cab ute must also only be used for limited private use (ie. minor, infrequent and irregular), such as the occasional trip to the tip or helping a mate move house.

If an employee's personal use of the dual cab ute does not meet both of the above exemption conditions, then the employer will be liable for FBT.

ATO reminder: Business expenses that can (and cannot) be claimed

Taxpayers can claim a tax deduction for most business expenses, provided they meet the ATO's three 'golden rules':

The expense must be for business use, not for private use.
If the expense is for a mix of business and private use, they can only claim the portion that is used for business.
They must have records to prove their claim.

The ATO also wants business taxpayers to remember that there are some expenses that they cannot claim, including entertainment expenses, traffic fines, and expenses that relate to earning non-assessable income.

ATO's focus on small business

The ATO is 'detecting and addressing' recurring errors in specific industries when businesses have a turnover between $1 million and $10 million.

These industries include property and construction (including builders, contractors and tradies), and professional , scientific and technical services (including engineering, design, IT and consulting professionals).

In these industries, the ATO continues to see recurring issues, including:

omitted sales and income in BAS and tax returns, including income from related entities;
overclaimed expenses and GST credits;
private expenses incorrectly reported as business-related, or not properly apportioned between business and personal use;
failure to register for GST when required;
incorrect claims for the research and development ( R&D ) tax incentive offset, especially for activities that do not meet the eligibility criteria; and
not seeking independent advice from a registered tax agent, particularly in head contractor/subcontractor arrangements.

By sharing the issues that it is seeing, the ATO hopes to help taxpayers running a small business in one of these (or other) industries to avoid common errors and get it right from the start.

New ATO Data-Matching Programs

The ATO acquires and uses data for pre-filling, detecting dishonest or fraudulent behaviour, and identifying areas where it can educate taxpayers to help them understand their tax obligations.

When data does not match, the ATO may contact tax agents and their clients to find out why.

Rental Income Data-Matching

Over the coming months, the ATO will be sending letters where its data indicates:

tax returns including rental income may need to be lodged for specific years; or
rental income should be included in previously lodged tax returns.

Offshore Merchant Data-Matching Program

The ATO will acquire merchant data from the big four Australian banks (ANZ, Commonwealth Bank, National Australia Bank and Westpac) for the 2025 to 2027 income years.

The ATO estimates that records relating to approximately 9,000 offshore merchants will be obtained each financial year.

SMSF non-compliance with release authorities

Release authorities are documents issued by the ATO to super funds, authorising the release of money from a member's super account to pay specific liabilities, including in relation to excess concessional contributions, excess non-concessional contributions, and Division 293 tax assessments.

The ATO is seeing a rise in SMSFs that receive a release authority and are either:

not responding within 10 business days as required; or
responding incorrectly (i.e., either not releasing the requested amount, or failing to submit a release authority statement back to the ATO, or both).

Failure to meet these obligations may result in significant penalties for the fund. SMSF trustees should make sure they have effective processes in place to respond to release authorities promptly and accurately.

GST held to apply to sales of subdivided lots

The Administrative Review Tribunal ( ART ) recently held that some sales of subdivided farmland were subject to GST as they were made by the taxpayer in the course of carrying on an enterprise.

The taxpayer owned farmland near Adelaide. He entered into an agreement with a developer, under which the developer sought rezoning and development approvals, carried out development works, and marketed the subdivided lots.

The taxpayer progressively gave the developer access to the property as required and signed documents where necessary, including contracts for the sale of the subdivided lots. The taxpayer received 20% of the proceeds of sale progressively as sales of the subdivided lots were completed, with the developer receiving the remaining 80%.

The taxpayer argued that his role was passive, and that such rights as he had, and actions he took under the agreement with the developer, were of an administrative nature not amounting to a series of activities in the form of a business.

The ART disagreed, finding that the sales of the subdivided land were subject to GST as they were made in the course of carrying on an enterprise.

The ART noted that the taxpayer's activities " exhibited some of the well-known indicia of a business. "

Amongst other factors, the taxpayer's activities in facilitating the implementation of the development agreement " had a degree of regularity and repetition ", including allowing access to the land progressively as required, an ongoing obligation not to encumber or sell the land during the project, and the continuous signing of sales contracts and monitoring of sales returns.

Australia Post to discontinue SMSF Gateway Service

Australia Post will cease offering its SMSF Gateway Service to new subscribers, with the last day to purchase or renew a subscription being 29 November 2025. Existing subscribers can use the service until their current subscription expires.

To comply with SuperStream data standards, SMSF users should arrange an alternative messaging service before their subscription ends and obtain a new electronic service address ( ESA ) to share with the ATO and employers.

As discussed above the ATO Small Business Superannuation Clearing House ( SBSCH ) will also close on 1 July 2026 so would not be a viable long-term alternative.

It is important to ensure that taxpayers using the SMSF Gateway Service download and back up any data before their subscription expires.

The ATO has provided further details in an announcement ( click here ).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Further guidance on new proposed changes to Division 296 from 1 July 2026

Sun, 19 Oct 2025 23:22:32 GMT

Further guidance on proposed changes to Division 296 from 1 July 2026

Earlier this week, we released a Tax Alert ( click here ) after the Government announced some significant changes to the proposed superannuation rules to increase the concessional tax rate from 15% to an effective 30% rate on earnings on total superannuation balances ( TSB ) over $3 million – known as Division 296.

These proposed superannuation rules were set to commence on 1 July 2025, but the Government has now announced significant changes that will delay the start date until 1 July 2026 and apply to the 2026-27 financial year onwards.

What are the significant changes?

The government announced six significant changes to the proposed Division 296 tax:

The tax will only apply to future actual realised earnings , not unrealised gains as originally proposed.
The $3 million threshold will be indexed to the consumer price index ( CPI ) linked with the transfer balance cap ( TBC ) and updated in $150,000 increments.
A new second $10 million threshold will be introduced, with earnings above this level taxed at 40%. This will also be CPI-indexed but in $500,000 increments.
The start date has been delayed to 1 July 2026 , based on members’ total super balance ( TSB ) exceeding $3 million as at 30 June 2027.
The first assessments period is expected to be the 2027-28 financial year.
The tax will apply to defined benefit pensions, being a consistent treatment across super structures.

The two changes that are considered to be most welcomed by the accounting & superannuation industries, following more than a year of persistent consultation, include:

Indexation - Both thresholds (ie. $3 million & $10 million) will be indexed to the CPI. The $3 million threshold will be indexed in increments of $150,000 and the higher $10 million threshold will be indexed in increments of $500,000.
Realised earnings - Funds will need to calculate taxable/realised earnings and attribute this to fund members. Adjustments will be made for elements such as contributions and pension phase income. These calculations better align to existing tax concepts by not taxing unrealised gains.

How will the new two-tier tax rates be applied?

The new two-tier system of tax rates will operate in a cumulative method to the extent attributable TSBs exceed $3 million or $10 million.

How will super earnings be calculated?

Superannuation funds will continue to report member balances to the ATO, and the ATO will calculate each member’s TSB.

After the ATO notifies the superannuation fund it has a member(s) with a TSB that is within scope of Division 296 (ie. $3 million or more), the fund will be required to calculate the realised earnings attributable to those members within scope and report this back to ATO.

We note that the final methodology for calculating the tax liability will not be known until the consultation process is completed in early 2026.

It is anticipated that the methodology to calculate super earnings will follow the steps released (last year) in the original guidance for the proposed Division 296 rules, and should be as follows:

A . The ATO calculates the proportion of the TSB exceeding the $3 million threshold:

Proportion of TSB = TSB (Current year) - $3 million

(Component A ) TSB (Current year)

B. The ATO calculates the proportion of the TSB exceeding the $10 million threshold (if applicable):

Proportion of TSB = TSB (Current year) - $10 million

(Component B ) TSB (Current year)

C. The ATO calculates the total Div 296 tax liability for all that member’s interests:

Tax Liability = 15% x Realised Earnings x Proportion of TSB (Component A )

Plus 10% x Realised Earnings x Proportion of TSB (Component B )

This (anticipated) approach results in an additional 15% tax on a proportion of realised earnings between $3 to 10 million, plus an additional 25% (being 15% + 10%) tax on a proportion of realised earnings over $10 million.

To be clear, these rates (ie. 15% + 10%) are in addition to the standard 15% superannuation tax rate on income.

How will Division 296 tax be calculated?

To help understand how the Division 296 tax will be calculated, let’s consider some examples.

Example 1: The member has a TSB of $5,000,000 as at 30 June 2027 and has calculated attributable realised earnings of $200,000:

Example 2: The member has a TSB of $15,000,000 as at 30 June 2027 and has calculated attributable realised earnings of $930,000:

Where the ATO determines a Division 296 tax liability arises, they will issue a tax assessment notice and the member can pay it with funds from their superannuation account or with personal funds.

What happens next?

These changes are not yet law.

Some important questions have already been raised in relation to these announced changes, and these questions will require more clarification by the Government, including:

How will the new changes apply to capital gains on long-held shares and property?
Will capital gains accrued before Division 296 comes into effect on 1 July 2026 be subject to the announced higher rates (ie. 15% and/or $10%) when those CGT assets are sold in the future?
How will the new changes impact the current CGT general discount available to superannuation funds on the sale of CGT assets, will the effective tax rate on capital gains go from 10% (currently) up to 20% (based on combined 30% rate) or even 27% (based on combined 40% rate)?

Once the government releases updated draft legislation to implement these changes ahead of the 1 July 2026 start date, we expect there will be continued consultation with, and advocacy by, the accounting & superannuation industries during this period.

Then any updated legislation must pass both Houses of Parliament.

The proposed new start date is 1 July 2026, with the first possible assessment only possible against member balances exceeding the $3 million threshold on 30 June 2027, and the first Division 296 tax assessments only beginning during the income year ending 30 June 2028.

We will continue to watch this space and provide regular updates as new information becomes available.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Chalmers backs down on Superannuation reform

Mon, 13 Oct 2025 04:48:18 GMT

In response to continuing criticism and significant industry feedback, Treasurer Jim Chalmers has announced substantial revisions to the proposed Division 296 tax. The government has decided not to apply the tax to unrealised capital gains on members superannuation balances above $3 million.

The removal of the proposed unrealised capital gains tax is undoubtedly a welcome change. Division 296 was initially set to take effect from 1 July 2025.

The revised proposal, effective from 1 July 2026, still imposes an additional tax but now only on realised investment earnings on the portion of a super balance above $3 million at a 30 percent tax rate

To recover some of the lost tax revenue, the Treasurer announced a new 40 percent tax rate on earnings for balances exceeding $10 million.

It is also anticipated that both tax thresholds will be indexed in line with the Transfer Balance Cap.

We will provide more details and guidance on the new proposal as they become available.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – October 2025

Fri, 03 Oct 2025 00:32:10 GMT

ATO interest charges are no longer tax deductible – What you can do

As we explained in our Practice Update for September, general interest charge ( GIC ) and shortfall interest charge ( SIC ) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years.

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy.

Refinancing ATO debt

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities.

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as:

GST;
PAYG instalments;
PAYG withholding for employees; and
FBT.

However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not.

Individuals

If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity:

Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible.
Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

As an example, Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible.

However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible.

Companies and trusts

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business.

However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them.

Partnerships

The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts.

However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity.

Practical takeaway

Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible.

Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates.

The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction.

If you are unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Employees incorrectly treated as independent contractors

The Australian Taxation Office ( ATO ) is warning businesses that if they incorrectly treat an employee as an independent contractor, then they risk receiving penalties and charges, including:

PAYG withholding penalty for failing to deduct tax from worker payments and send it to the ATO;
Super guarantee charge ( SGC ), which is more than the super that would have been paid if the worker was classified correctly. SGC consists of a super guarantee shortfall amount, nominal interest, and an administration fee; and
Additional SG penalties , including a penalty amount of up to 200% of the SGC.

'Sham contracting' may also contravene the Fair Work Act 2009. Courts can impose penalties against a business or person that incorrectly informs an employee that they are an independent contractor.

Reminder of September Quarter Superannuation Guarantee (SG)

Employers are reminded that employee super contributions for the quarter ending 30 September 2025 must be received by the relevant super funds by Tuesday, 28 October 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which (as noted above) includes a penalty and interest component.

Correctly dealing with rental property repairs

Taxpayers who have had work done on their rental property should ensure the expense is categorised correctly to avoid errors when completing their tax return.

A deduction for 'repairs and maintenance' expenses can be claimed for work done to remedy, or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year they were incurred.

However, some 'capital' expenditure may not be immediately deductible, such as for 'initial repairs', 'capital works', 'improvements' and depreciating assets.

Initial repairs include fixing any pre-existing damage or deterioration that existed at the time of purchasing the property, even if the damage or deterioration was unknown to the taxpayer at the time of purchase.

Initial repairs are treated as part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are capital works or depreciating assets.

Capital works are structural improvements, alterations and extensions to the property, and can generally be claimed at 2.5% over 40 years.

Capital works deductions can only be claimed after the work has been completed, regardless of when the taxpayer pays the deposit and instalments.

Improvements or renovations that are structural are also capital works. Work that goes beyond remedying defects, damage or deterioration that improves the function of the property is regarded as an improvement.

Repairs to an 'entirety' are capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item.

Depreciating assets are treated as follows:

Deductions for 'new' assets must generally be claimed over time according to their effective life.
Second-hand depreciating assets generally cannot be deducted.

Tips to help sole trader clients

The ATO is seeing sole traders make mistakes in the following areas:

not reporting all income — this includes income earned outside their business (like a 'side hustle'), cash jobs, or payments in-kind/barter deals;
overclaiming expenses — this includes claiming the portion of an expense related to personal use, or overstating the cost of goods sold and other business expenses;
calculating business losses;
incorrectly claiming and offsetting losses from non-commercial business activities against other income sources;
misreporting personal services income ( PSI ) to gain tax benefits;
not registering for GST if they are in the taxi or ride-sourcing industry, or when they reach the GST threshold; and
not keeping accurate and complete records.

ATO warning regarding private use of work vehicles and FBT

Employers that supply work vehicles to their employees need to check how the work vehicles are used and whether any exemptions apply to determine if they attract fringe benefits tax ( FBT ).

FBT generally applies when a work vehicle is made available for private use, even if it is not actually used. Private use includes any travel not directly related to the employee's job.

Exemptions may apply depending on the vehicle's specifications and the nature of the private use.

The most common issues the ATO sees include the following:

incorrectly treating private use as business use;
assuming dual cab utes are exempt from FBT — exemptions only apply if the vehicle is eligible for the specific FBT exemption and private use is limited;
incorrectly classifying vehicles;
poor record keeping that does not support the claims or the FBT calculations made; and
not reporting or paying on time.

ART dismisses argument that medical expenses were deductible

In a recent decision, the Administrative Review Tribunal ( ART ) held that a taxpayer could not claim a tax deduction for medical expenses incurred by him in relation to his total and permanent disability pension.

The taxpayer had been terminated from his employment due to total and permanent disablement ( TPD ). For the 2024 income year, his only income was a TPD pension.

The taxpayer wanted to claim a deduction for medical expenses to be incurred, estimated to be approximately $100,000 in the 2024 income year.

The ART agreed with the ATO that the medical expenses were not deductible. The ART noted in this regard that the medical expenses were "incurred by (the taxpayer) to better live with his medical condition, not incurred 'in' gaining or producing the TPD pension." That is, "the occasion of the Medical Expenses is to assist (the taxpayer) with his medical condition, not to gain or maintain his eligibility to the TPD pension."

The ART also did not accept the taxpayer's argument that the medical expenses were not private or domestic in nature, as they were essentially personal in character.

Accessing superannuation funds for medical treatment or financial hardship

Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible.

Early access is generally available in two situations:

Financial hardship: Where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses.
Compassionate grounds: Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain.

Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information. If approved the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below.

When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account. It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance).

The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early .

Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations.

Should you have any questions or concerns relating to proposed access to your superannuation please contact us.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – Costs incurred in acquiring / forming a business

Tue, 09 Sep 2025 01:18:03 GMT

Costs incurred in acquiring / forming a business.

Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business.

Formation costs on establishing a business:

These costs would include:

Incorporation fees
ASIC registration fees
Legal fees
Business name registration
Pre-operating costs
Pre-opening costs.

The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist.

Business acquisition costs

These costs would include:

Legal and accounting fees
Due diligence and valuation costs
Stamp duty
Advisory or brokerage fees
Project management costs related to the acquisition
Internal costs allocated to the transaction

In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill.

Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – September 2025

Mon, 08 Sep 2025 00:19:55 GMT

ATO to include tax 'debts on hold' in taxpayer account balances

From August 2025, the Australian Taxation Office ( ATO ) is progressively including 'debts on hold' in relevant taxpayer ATO account balances.

A 'debt on hold' is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold where the ATO decides it is not cost effective to collect the debt at the time.

The ATO is currently required by law to offset such 'debts on hold' against any refunds or credits the taxpayer is entitled to. The difficulty with these debts is that the ATO has not traditionally recorded them on taxpayer's ATO account balances.

Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account).

Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance.

The ATO has advised it will remit the general interest charge ( GIC ) that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period.

The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.

Bill to reduce student debt now law

Legislation has recently been enacted which delivers on the 2025-26 Federal Budget announcement to reduce student debts.

Pursuant to this legislation:

There is a one-off 20% reduction which will be automatically applied to the following student loans that were incurred on or before 1 June 2025 :
HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP),
VET Student loans,
Australian Apprenticeship Support Loans,
Student Start-up Loans,
Student Financial Supplement Scheme;
The minimum repayment threshold is increased from $54,435 in the 2024-25 income year to $67,000 in the 2025-26 income year (to continue to increase each year with the growth in wages); and
A marginal repayment system is introduced where compulsory student loan repayments are calculated only on income above the new $67,000 threshold (rather than having it based on a percentage of the repayment income).

Bill for $20,000 Instant Asset Write Off introduced for year ending 30 June 2026

On 4 September 2025, the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 ( the Bill ) was introduced into the House of Representatives.

The Bill proposes to extend the $20,000 instant asset write-off ( IAWO ) by 12 months until 30 June 2026.

The measure proposes to allow small businesses with an aggregated annual turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose on or before 30 June 2026.

Without the amendments, the asset threshold would revert to the ongoing legislated threshold of $1,000 from 1 July 2025.

We will watch the progress of the Bill and confirm when it is passed into law.

Getting the CGT main residence exemption right

The ATO has the following tips for taxpayers in relation to the CGT main residence exemption.

They should consider if they have bought or disposed of property in the past income year. If they have sold property, were they using it solely as their primary place of residence, earning income from it (rental or business), or was it vacant land?
They should understand the applicable record keeping requirements in relation to property.
If they have disposed of vacant land, they are not eligible for the main residence exemption, even if they had intended to build their main residence on the land.
They are only eligible for the '6-year absence rule' if the property was their main residence before they rented it out.
Broadly, they can only have one property as their main residence at a time - the only exception is the 6-month period when they move from one home to another.

If you need assistance considering these CGT main residence exemption issues or planning for a future disposal of your main residence, please contact our office.

Small Business Superannuation Clearing House is closing

The Small Business Superannuation Clearing House ( SBSCH ) will close on 1 July 2026.

The SBSCH is a free online service provided by the Australian Government through the ATO webiste ( click here ).

The SBSCH can be used by employers to pay superannuation for all their employees through a single payment. The SBSCH will then distribute the money to each employee's superannuation fund according to the employer's instructions.

To support small businesses to transition to alternative services prior to this time, new users will be unable to register to use the service from 1 October 2025.

Existing users are encouraged to take steps now to transition to alternative options.

These include reviewing their existing software and payroll packages (which may already include super functions), or looking at options offered by super funds, commercial dealing houses, or other payroll software or providers.

Superannuation guarantee due dates and considerations for employees and employers

On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee ( SG ) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday.

To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO SBSCH.

The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers.

Employers

To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date.

Employers using commercial clearing houses should be mindful of turnaround times. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions.

If these deadlines are missed (even by one day), that will trigger a superannuation guarantee charge ( SGC ) requirement which will result in a loss of the tax deduction and other penalties.

Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages.

There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this.

Employees

It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips.

Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO.

ATO Australian Financial Crimes Exchange data-matching program

The ATO will acquire relevant account and transaction data from the Australian Financial Crimes Exchange ( AFCX ) for the 2025 to 2027 income years, including the following:

Client identification details (names, addresses, phone numbers, dates of birth, identity verification document details, IP addresses, etc); and
Bank account transaction details (bank account details, transaction date and amount, IP addresses, etc).

The ATO estimates that records relating to approximately 70,000 individuals will be obtained each financial year.

The data collected under this program will be used to (among other things) safeguard taxpayer accounts from identity crime by implementing protective controls to enable pre-lodgment detection and application of treatments to victims of fraud.

PAYGW reminders for activity statement lodgments

The ATO will be sending certain employers a reminder to lodge their activity statements.

The reminder will include the amounts the ATO has on record for them, such as:

PAYG withheld amounts reported through Single Touch Payroll; and
Any other pre-filled amounts, including GST instalments and PAYG instalments (instalment amount option).

The ATO's reminders are intended to provide a timeframe for employers to review (and if necessary correct) the amounts the ATO has on record for them and lodge their activity statements.

If these selected employers do not lodge by the specified date, the ATO will consider the amounts it has on record are correct and complete, and it will add these amounts to the employer's account, meaning they will be due and payable.

The ATO may also finalise the employer's activity statement and consider it lodged unless the employer has any other obligations such as GST to report.

If employers do not make any changes to correct the data or lodge by the due date and the activity statement has been finalised in ATO systems, they will need to adjust these amounts by lodging a revised activity statement.

If the information is correct, they will not need to take any further action.

ATO factsheet released for denying deductions for GIC & SIC interest

The ATO has issued a detailed fact sheet ( click here ) which provides guidance on the practical implications of recent changes to the tax legislation that deny deductions for general interest charge ( GIC ) and shortfall interest charge ( SIC ) from 1 July 2025.

The ATO clarifies that for most taxpayers, the changes basically prevent GIC or SIC from being deductible to the extent that the interest is incurred on or after 1 July 2025. GIC and SIC incurred before this date can still be deducted.

The key issue in many cases will be confirming when the GIC or SIC amounts have been incurred, which is based on when there is a presently existing liability to pay the amount. The ATO notes that the approach is a bit different depending on what the interest charge relates to, the nature of the interest charge and the circumstances in which it arose.

For example, when it comes to unpaid income tax debts, GIC isn’t incurred until a notice of assessment is served. If the ATO amends an assessment, the due date for payment is 21 days after the amended assessment is given, and GIC would only be incurred after this due date has passed.

SIC imposed on certain tax shortfalls is normally incurred on the same day the notice of assessment is given, even though the SIC might be calculated for a past period. The fact sheet provides a range of examples as well as guidance on taxpayers with substituted accounting periods and how to deal with remission of GIC or SIC amounts.

The ATO also provides some guidance on when a taxpayer might be able to claim a deduction for interest on borrowings that are used to pay tax liabilities. This is normally only possible where the taxpayer carries on a business in their own right and the tax liability relates to that business activity.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – How do we account for the costs incurred when acquiring an asset?

Tue, 26 Aug 2025 00:35:38 GMT

How do we account for the costs incurred when acquiring an asset?

When we acquire an asset such as property, plant and equipment, intangibles or inventory there are often significant other costs incurred as part of the purchase process, including delivery, stamp duty, installation fees.

Whether we capitalise these to the value of the asset or expense them as incurred can make a significant difference to an entity’s reported position or performance.

Since we have accounting standards for specific assets, the treatment can vary depending on the asset and the relevant standard.

A summary of some common expenses and their treatment under four accounting standards has been included below.

The four standards considered are:

AASB 102 Inventories
AASB 116 Property, Plant and Equipment
AASB 138 Intangible Assets
AASB 140 Investment Property.

It is important to consider the costs you incur when purchasing an asset and the accounting standard requirements as we continue to see many entities capitalising all costs which can often result in material errors in the financial statements.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – What are contract assets and contract liabilities that arise under the revenue accounting standards?

Tue, 12 Aug 2025 02:13:25 GMT

What are contract assets and contract liabilities that arise under the revenue accounting standards?

Deferred revenue, accrued revenue, revenue received in advance, contract assets, contract costs asset, contract liabilities and receivables are all line items we see in the balance sheet in relation to revenue. It can be confusing to understand what these terms mean and whether different words are being used for the same thing.

We have provided a guidance to these and similar terms to enable you to use them confidently and understand their meaning in a balance sheet.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – August 2025

Wed, 06 Aug 2025 02:13:14 GMT

Paid parental leave changes have now commenced

As from 1 July 2025, the amount of Paid Parental Leave available to families increased to 24 weeks, and the amount of Paid Parental Leave that parents can take off at the same time has also increased from two weeks to four weeks.

Superannuation will now also be paid on Government Paid Parental Leave from 1 July 2025, at the new super guarantee rate of 12%, paid as a contribution to their nominated superannuation fund.

Parents will also benefit from an increase in the weekly payment rate of Paid Parental Leave, increasing from $915.80 to $948.10 (in line with the increase to the National Minimum wage). This means a total increase of $775.20 over the 24-week entitlement.

ASIC warning about pushy sales tactics urging quick super switches

ASIC is warning Australians to be on 'red alert' for high-pressure sales tactics, click bait advertising and promises of unrealistic returns which encourage people to switch superannuation into risky investments.

The warning comes amid increasing concerns from ASIC that people are being enticed to invest their retirement savings in complex and risky schemes.

ASIC Deputy Chair Sarah Court said the start of a new financial year was often the trigger for people to check their super fund's performance, and urged consumers to be extra cautious.

"When it comes to sales calls about super switching, there are some big red flags people should be alert to — being asked to make a quick decision is one of the most obvious. Remember, a good deal won't vanish overnight."

She said that these calls "don't have the hallmarks of a typical scam. The caller will seemingly have your best interests at heart, and they say they want to help you find a better super product or locate lost super for free."

Consumers should always ask questions about salespeople's connections to funds, particularly in circumstances where a particular fund appears in the pitch, as there may be a commission arrangement.

"If you are unsure or are feeling pressured, just hang up."

ATO warns of common Division 7A errors

The Australian Taxation Office ( ATO ) reminds shareholders of private companies that understanding how Division 7A of the tax legislation applies is crucial to avoiding costly tax consequences when accessing the company's money or other benefits.

When Division 7A applies, the recipient of a payment, loan or other benefit can be deemed to have been paid an unfranked dividend that will be included in their assessable income.

While Division 7A can be complex, most errors the ATO sees that result in its application are simple in nature, including:

shareholders not recognising that a company's money is not their money, and they cannot access it for personal use without tax consequences;
loans being made without complying loan agreements; and
applying the wrong benchmark interest rate when calculating Division 7A loan repayments.

These errors are often the result of common myths about Division 7A and how it works.

To support taxpayers' understanding of their tax obligations when managing private company money, the ATO has launched new content: 'Division 7A Myths debunked' on its website ( see here ).

This page debunks common myths about Division 7A, breaking them into topics such as 'business structure', 'record keeping', and 'payments to other entities'.

Taxpayers who need to lodge a TPAR

Taxpayers may need to lodge a Taxable payments annual report ( TPAR ) online by 28 August if they have paid contractors to provide any of the following services on their behalf:

building and construction;
cleaning;
courier and road freight;
information technology; or
security, investigation or surveillance.

If the ATO is expecting a TPAR from a taxpayer who does not need to lodge one, they can complete a 'TPAR non-lodgment advice form' by 28 August.

We note that paper lodgments of TPARs will no longer be accepted by the ATO after 28 August 2025.

Taxpayers who no longer pay contractors can also use this form to tell the ATO they will not need to lodge a TPAR in the future (although if their circumstances change they may need to lodge a TPAR).

Please contact our office if you need assistance with completing and/or lodging a TPAR.

Changes to tax return amendment period for business

Businesses with an annual aggregated turnover of less than $50 million now have up to four years from the date of their tax return assessment to request amendments (increased from two years). This applies to assessments for the 2024/25 and later income years.

If businesses make a mistake on a tax return and need to request an amendment, they should lodge their requests well before the end of the amendment period to make sure the ATO can process it within the time limit.

They should keep accurate and complete records to support their amendment request.

Taxpayer's claim for travel expenses denied

In a recent decision, the Administrative Review Tribunal ( ART ) denied an offshore worker's claim for work-related travel expenses, although it did allow his claim for home office expenses.

During the relevant period, the taxpayer resided in Queensland with his family, while his employment as an engineer was primarily based at an offshore facility located off the coast of Western Australia.

In his tax return for the 2022 income year, the taxpayer claimed work-related expenses of over $30,000, relating to accommodation, meal and incidental expenses for stays in Perth, Darwin and Broome between rotations on the offshore facility.

The ART noted that the taxpayer's permanent work location was the offshore facility. It accordingly largely disallowed the work-related expenses on the basis that they were "either preliminary to the commencement of those (employment) duties, or occurred after employment duties had ceased, and the (taxpayer) was on leave."

The ART also did not accept the taxpayer's claim for travel-related expenses with reference to the substantiation exception, as the allowances he received were not 'travel allowances'.

However, the ART did accept the taxpayer's claim for home office expenses of $579, noting that "As an engineer, he is required to engage in continuing professional development and the Masters and other studies completed in the home office were for this purpose."

Claiming credits for foreign resident capital gains withholding

When Australian and foreign resident vendors have had an amount withheld for foreign resident capital gains withholding ( FRCGW ) from a property sale, they may be entitled to have it credited back. This can be done when they lodge their tax return for the year the sale contract was signed.

Australian residents may have had the amount withheld for not providing the purchaser with a vendor's clearance certificate at or before settlement . A common reason is that they did not allow sufficient time for the application to be processed and issued - this can take up to 28 days.

Foreign residents must have FRCGW withheld from the property sale, unless they have a variation notice reducing the rate to nil.

If taxpayers had an amount withheld, they must lodge a tax return to claim the credit that was withheld, even if their income was below the threshold to lodge.

They should have received a payment confirmation notice from the ATO. Otherwise, they can ask the purchaser for their copy of the payment confirmation notice.

When completing their tax return, they should:

declare assessable income, including any capital gain or loss from the disposal of the asset;
claim a Credit for foreign resident capital gains withholding amounts taken from the sale proceeds.

The FRCGW amount will be refunded in full if:

there are no tax debts;
there is no CGT payable on the sale of the property; and
for foreign residents, there is no tax payable on any other Australian sourced income.

We note that from 1 January 2025, the FRCGW rate is 15%, which applies to the value of all property (previously the rate was 12.5%, which applied to property valued at $750,000 or more).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Contracts often include price variations relating to bonuses / penalties / rebates – why do we need to consider these early?

Mon, 28 Jul 2025 23:43:01 GMT

Contracts often include price variations relating to bonuses / penalties / rebates – why do we need to consider these early?

Many revenue streams are covered by AASB 15 Revenue from Contracts with Customers. The core principle of this standard is ‘that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.’ [emphasis added].

To determine what we expect to receive, all elements of the contract that are not fixed need to be reviewed. We need to review contracts for:

Volume discounts
Rebates
Refunds
Performance bonuses
Penalties
Price concessions

Once we have identified variable consideration then we need to estimate the amount expected to be received using either:

the expected amount using a probability weighted average of the likely outcomes or
the most likely outcome.

The method chosen is the one deemed to be the best estimate of the expected consideration, and the amounts may be updated at each reporting date.

Once the consideration has been determined, the entity recognises only the revenue that is highly probable will occur – this is known as the constraint on revenue recognition.

Practically, the requirements discussed above for variable consideration are relevant only where an entity satisfies the requirements for revenue recognition over time and contract crosses a reporting date.

As the estimate of the variable consideration changes, there may need to be a catch-up adjustment on previous revenue recognition for that contract.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - New Tax Agent Obligations from 1 July 2025

Mon, 21 Jul 2025 00:46:07 GMT

New Tax Agent Obligations from 1 July 2025

From 1 July 2025, “small” firms of tax practitioners (with 100 or less employees) must ensure they are complying with the eight new Code of Professional Conduct obligations from the Tax Practitioners Board ( TPB ).

These new Code obligations were introduced by the Government under the Tax Agent Services (Code of Professional Conduct) Determination 2024.

The new Code obligations have already commenced for large tax practitioners (with over 100 employees) from 1 January 2025.

As tax agents, Lowe Lippmann Chartered Accountants are committed to upholding our professional and regulatory obligations, including with the Tax Agent Services Act 2009 which includes the Code of Professional Conduct as regulated by the TPB.

Our obligations

Lowe Lippmann Chartered Accountants is required to advise current and prospective tax clients of various prescribed matters.

TPB Public Register

The TPB maintains a searchable register of tax agents and BAS agents: search here .

This Register also includes details of past breaches of the Tax Agent Code of Professional Conduct and specific sanctions imposed on tax agents. The TPB has provided guidance on how to use and search the TPB Register: see TPB guidance here .

Making a Complaint

Where you have a complaint that concerns a tax agent service or BAS agent service that we have provided, you have the right to make a complaint to the Tax Practitioners Board in accordance with their complaints process described here: https://www.tpb.gov.au/complaints .

Our responsibilities

As tax agents, we must comply with the Tax Agents Code of Professional Conduct along with other legislative and professional standard obligations to our clients as well as the Australian Taxation Office ( ATO ) and TPB.

Our clients also have obligations to comply with taxation laws, as well as being truthful with information provided, keeping complete records, and if required, providing them on a timely basis, being co-operative with requests and meeting due dates as requested by tax agents.

Further information about tax agent and client obligations is available on the TPB website: see TPB factsheet “Information for Clients” .

Events affecting our Tax Agents

Tax practitioners are required to disclose and provide details of any of serious prescribed events that have occurred involving the practitioner since 1 July 2022.

Serious prescribed events for a tax agent include (but is not limited to):

having their registration suspended or terminated by the TPB;
being an undischarged bankrupt or went into external administration;
being convicted of a serious taxation offence;
being convicted of an offence involving fraud or dishonesty;
serving, or sentenced to, a term of imprisonment in Australia for 6 months or more; and
penalised for being a promoter of a tax exploitation scheme.

We are not aware of any such matters relevant to Lowe Lippmann Agent entities.

If a serious prescribed events occurs after 1 July 2025, we will be required to disclose the matter within 30 days of any such event.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Related parties – what should I consider in identifying them?

Wed, 16 Jul 2025 01:19:24 GMT

Related parties – what should I consider in identifying them?

Related party disclosures is an area that is receiving more scrutiny from stakeholders in both the for-profit and the not-for-profit space.

Disclosure of transactions that have occurred with related parties are important since the terms and conditions are often different from those with unrelated parties, in some instances the transactions may have occurred for much lower or even nil consideration.

Often one of the biggest challenges for compiling the disclosures is working out who is a related party of an entity.

The definition of related parties in AASB 124 Related Party Disclosures is detailed, however we have summarised the definition into various elements below.

a. Think about entities who might be related to the reporting entity i.e.:

i. through control or significant influence,

ii. by the existence of material transactions or

iii. dependence on technical information or personnel provided by them.

b. Think about people who might be related to the reporting entity, i.e.:

i. Key management personnel, including all directors.

ii. Close family members of key management personnel (e.g. spouse, child).

c. Think about entities that the people identified in b. might control or significant influence, i.e.:

i. Family businesses

ii. Businesses which a close family member controls (i.e. senior partner in a legal or accounting firm).

Once you have identified a complete list of who is potentially a related party, analysis can then be performed to confirm they meet the criteria in AASB 124 and then identify any transactions with these parties.

Remember that transactions should be included whether or not a price was charged or whether the transaction was formally documented or not.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – July 2025

Fri, 04 Jul 2025 02:27:29 GMT

Changes to car thresholds from 1 July

The car limit for the 2026 income year is $69,674. This is the highest value that a taxpayer can use to calculate depreciation on a car where they use the car for work or business purposes and they first use or lease the car in the 2026 income year.

If a taxpayer is buying a car and the price is more than the car limit, the highest input tax ( GST ) credit they can claim (except in certain circumstances) is one-eleventh of the car limit. For the 2026 income year, the highest input tax credit they can claim is $6,334 (i.e. one-eleventh of $69,674).

The luxury car tax ( LCT ) threshold for the 2026 income year is $91,387 for fuel-efficient vehicles, and $80,567 for all other luxury vehicles.

Input tax credits need to be claimed within the four-year time limit. A taxpayer cannot claim an input tax credit for luxury car tax when they buy a luxury car, even if they use it for business purposes.

Reminder of June 2025 Quarter Superannuation Guarantee

Employers are reminded that employee super contributions for the quarter ending 30 June 2025 must be received by the relevant super funds by Monday, 28 July 2025 . If the correct amount of superannuation guarantee ( SG ) is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

The SG rate has increased from 11.5% to 12.0% from 1 July 2025, and this is the last in a series of increases that have been made to the SG rate in recent years.

Taking charge of upcoming employer obligations

As the end of the financial year has just past, the ATO is reminding employers that they should check what they need to do and take note of the following upcoming key dates.

Pay as you go (PAYG) withholding

From 1 July 2025 , some withholding schedules and tax tables will be updated (but not all).

Employers should use the correct tax tables or the 'tax withheld calculator' on the ATO's website to work out how much to withhold from their employees' payments. They should update their payroll software to withhold, report and pay the correct amount of tax.

Single touch payroll (STP) reporting

Employers should complete an STP finalisation declaration by 14 July 2025 , and also lodge a finalisation declaration for all employees they have paid and reported through STP, so they have the right information to lodge their income tax returns.

Employers should also 'finalise' all employees they have paid in the financial year, even those they have not paid for a while, such as terminated employees.

Finally, employers who change payroll software providers should finalise their records before they change, to ensure they and their employees have accurate information during tax time.

As noted above, employers also need to pay all SG contributions for the June 2025 quarter by 28 July 2025 .

Notice of data exchange for skilled visa program compliance

The Department of Home Affairs will obtain data from the ATO to identify whether business sponsors are complying with their sponsorship obligations (ie. paying visa holders correctly) and whether temporary skilled visa holders are complying with their visa conditions (ie. to work only for an approved employer).

The Department will provide to the ATO biographical details (including name, address and date of birth) of clients who are, or were in the three most recent financial years, holders of Skills in Demand or Temporary Skills Shortage (subclasses 457 and 482) primary visas.

These details will be electronically matched against ATO data holdings. Where there is an identity match, the ATO will return Single Touch Payroll employment data for the relevant individual(s) to the Department.

It is estimated that records will be shared relating to around 58,000 individuals.

TBAR for June quarter due 28 July

All SMSFs must report relevant transfer balance account ( TBA ) events using transfer balance account reporting ( TBAR ). All events must be reported regardless of the member's total superannuation balance. TBA events include starting or commuting a retirement phase pension.

TBARs for the June quarter are due by 28 July 2025 . If no TBA event occurred during the quarter, no lodgment is required.

SMSF trustees can refer to Super transfer balance account report instructions on the ATO's website ( see here ) when preparing their TBAR.

If an SMSF does not lodge a TBAR by the due date, it may result in compliance action and penalties and could also negatively impact a member's TBA.

Beware of tax advice from 'finfluencers'

The Tax Practitioners Board ( TPB ) warns that the number of 'finfluencers' is on the rise. These are influencers who offer financial advice, including tax advice, on various social media platforms such as Instagram and TikTok.

Unfortunately, they do not always have the necessary qualifications to give out this advice or provide all the information taxpayers need to make a fully informed decision. This can result in taxpayers suffering serious financial harm.

The main way 'finfluencers' make their money is by getting paid by companies that want to promote their financial products through the 'finfluencers' social media platform.

Therefore, taxpayers who are going to use someone to help them manage their tax affairs should make sure they are registered with the TPB by checking the TPB Register.

The TPB has the following 'important tips' for taxpayers in this regard, including:

The best place to get accurate tax information is (according to the TPB) ato.gov.au. Taxpayers should check this website to confirm any tax advice they receive.
If something seems too good to be true, it probably is. Taxpayers should think twice before acting on financial and tax advice from a 'finfluencer'.
Taxpayers should beware of anyone offering 'free expert' tax advice. They should always approach a registered tax practitioner instead.
Taxpayers should beware of websites that might be trying to harvest their personal information such as their tax file number, identity details or myGov login details.
Taxpayers who want to make a complaint about someone offering tax advice should submit a complaint to the TPB.

Taxpayer's claim for home office and car expenses successful

The Administrative Review Tribunal ( ART ) recently held that a taxpayer was entitled to claim deductions for home office and car expenses incurred during the COVID-19 pandemic.

The taxpayer was employed full time by the ABC producing the ABC Sport Digital Radio station ('Digital Role') and producing ABC live sports broadcasts, mainly NRL football ('Live Role').

During the 2021 income year, because of restrictions imposed in response to the COVID-19 pandemic, the taxpayer undertook all of his Digital Role from a second bedroom in his apartment (his home office) which he was renting with his wife, and he undertook most of his Live Role from the ABC's Southbank Studios in Melbourne.

The taxpayer claimed deductions for occupation expenses (being the proportion of rent for his apartment referable to the use of his home office in performing his Digital Role), and for car expenses incurred in driving between his home and the ABC studios at Southbank on days when he performed both roles.

The ART allowed the taxpayer's claims for occupation expenses in full, as the COVID-19 restrictions required him to earn most of his income at his home, and so a proportion of rent was incurred in gaining his assessable income.

The ART also allowed the car expenses in full on the basis that on the days when the taxpayer "closed his laptop at home, picked up his car keys and drove to the Southbank Studios . . . he was at work the entire time and his travel was therefore 'on work' . . ."

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Large proprietary limited – are you one? Tips and traps for your assessment

Tue, 01 Jul 2025 03:33:11 GMT

Large proprietary limited – are you one? Tips and traps for your assessment.

In Australia, being classified as a large proprietary limited company means that you have to prepare, and lodge audited financial statements with ASIC under the Corporations Act 2001 (the Act), however many companies are not necessarily applying the thresholds appropriately.

A proprietary company is large if it meets at least 2 of the following thresholds:

Consolidated revenue ≥ $50 million
Consolidated gross assets ≥ $25 million
100 or more employees.

These thresholds seem simple, however some points to note:

The calculations must be performed applying ALL accounting standards so even if you are preparing special purpose financial statements, then you will need to assess these thresholds as if you were applying all standards, including:
AASB 16 Leases – this standard would add a right of use asset to your balance sheet potentially significantly increasing your gross assets.
AASB 10 Consolidated Financial Statements – if you have controlled entities then the inclusion of their income statement and balance sheet may significantly increase each of the thresholds.
AASB 128 Investments in Associates and Joint Ventures / AASB 11 Joint Arrangements – if you have entities over which you have significant influence or joint control then applying equity accounting or including your share of assets and revenue would affect the thresholds.
In determining the number of employees, the Act is clear that it is all full-time and part-time employees (on a pro-rata basis), however casual employees need to be considered. For example, are they genuinely casual with varying hours / shifts each week or are they in substance a permanent member of your team but just employed on a casual basis.
The thresholds need to be met at the end of the financial year and therefore entities should track their performance during the year so they are aware if they will meet the definition of a large proprietary company at year end.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Incorrect presentation of your liabilities could significantly affect your balance sheet

Tue, 17 Jun 2025 00:06:04 GMT

In a previous blog, we discussed the changes to the accounting standards relating to classification of current / non-current liabilities on the balance sheet.

We have been receiving a number of questions on this topic and have provided some practical scenarios below as well as some actions for you as we approach 30 June reporting dates.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - High Court special leave application granted to appeal Bendel Case decision

Fri, 13 Jun 2025 02:05:47 GMT

High Court special leave application granted to appeal Bendel Case decision

The Australian Taxation Office has been granted special leave to appeal to the High Court from the Full Federal Court decision in FCT v Bendel [2025] FCAFC 15.

During March 2025 we released a Tax Alert ( see here ) explaining the current view of the ATO following the Full Federal Court decision that an unpaid present entitlement (or UPE) owed by a discretionary trust to a corporate beneficiary is not a “loan” for Division 7A purposes.

The ATO also issued an Interim Decision Impact Statement ( see here ) in response to the Full Federal Court decision, providing information for taxpayers and advisers in relation to the details of the case and issues decided by the court.

We expect this process to take some time to work its way through the High Court process. However, we all hope this matter can be heard quickly to reach a final decision on this Division 7A issue, to create certainty moving forward.

There continues to be an element of having to “wait and see” what happens next. We will continue to keep you updated on all future developments.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – June 2025

Tue, 10 Jun 2025 23:22:22 GMT

Year-end tax checklists for Individuals and Businesses

We have recently prepared two Year End Checklists which help explain some common strategies that may be considered for Individual and Businesses taxpayers.

Year End Checklist for Individuals – click here
Year End Checklist for Businesses – click here

ATO warns against attempting 'wild' tax deductions

The ATO has advised that this “tax time” it will be focused on areas it sees frequent errors, including work-related expenses, working from home deductions and where there are multiple income sources. It issued a reminder that work-related expenses must have a close connection to income earning activities, and that they should be backed up with records like a receipt or invoice.

The ATO recently revealed some of the 'wild' work related expense tax claims people have tried to “put past” the ATO, including the following:

A mechanic tried to claim an air fryer, microwave, two vacuum cleaners, a TV, gaming console and gaming accessories as work-related. The claim was denied as these expenses are personal in nature.
A truck driver tried to claim swimwear because it was hot when they stopped in transit and they wanted to go for a swim. The claim was denied as these expenses are personal in nature.
A manager in the fashion industry tried to claim well over $10,000 in luxury-branded clothing and accessories to be well presented at work, and to attend events, dinners and functions. The clothing was all conventional in nature and was not allowed.

These claims were deemed personal in nature and lacked a sufficient connection to income earning activities.

This tax time, the ATO will be focused on areas where it sees frequent errors, including work-related expenses, working from home deductions, and in respect to multiple income sources.

ATO areas of focus for 2025

The ATO is focusing on areas where frequent errors occur including:

Work related expenses: as above, claims must have a clear connection to income earning activities and be substantiated with records including receipts or invoices. Even if an expense seems to relate to income earning activities, it can’t normally be claimed if it is a private expense. There are a wide range of common expenses that normally do not qualify for a deduction.
Working from home deductions: taxpayers must prove they incurred additional expenses due to working from home. The ATO offers two methods for calculating these deductions:
Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate is not enough.
Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous.
Multiple income sources: all sources of income, including side hustles or gig economy work must be declared. Each source may have different deductions available.

Getting ready for business

The ATO advises new business owners that they need to understand their obligations to ensure they are “getting it right from the start.”

These are the 'top 7 things' taxpayers need to know when starting a business.

They should use digital tools and maintain accurate records to help them manage daily activities and cash flow.
There are some registrations they will need to complete when they start a business (for example, registering for an ABN or a business name).
They can claim a tax deduction for most business expenses if the expense is directly related to earning their income. Taxpayers should remember to keep records and only claim the business portion of mixed-use expenses.
The type of business structure they set up will affect their tax and registration requirements, so they need to choose the right business structure and understand their obligations.
If they are an employer, they should realise that they have extra responsibilities and obligations (ie. super guarantee and Single Touch Payroll).
They need to lodge and pay their taxes on time. They can prepay their estimated income tax liability through PAYG instalments.
Businesses that maintain accurate records, lodge and pay on time and avoid errors not only steer clear of penalties and general interest charge but also become more resilient when facing challenges.

If you need any assistance in relation to your trust distributions, please contact our office.

Getting trust distributions right

As trustees prepare for year-end distributions, they should consider the following:

review the relevant trust deed to ensure they are making decisions consistent with the terms of the deed;
consider who the intended beneficiaries are and their entitlement to income and capital under the trust deed;
notify beneficiaries of their entitlements, so that the beneficiaries can correctly report distributions in their tax returns;
consider whether the trust has any capital gains or franked distributions they would like to stream to beneficiaries; and
check any requirements under the trust deed governing the making of trustee resolutions (ie. that the resolution must be in writing). In any case, resolutions regarding distributions need to be made by the end of the income year.

If you need any assistance in relation to your trust distributions, please contact our office.

Taxi service and ride-sourcing providers must be registered

Taxpayers that provide taxi, limousine or ride-sourcing services must register for GST regardless of their turnover.

They must collect and pay GST and income tax on all their rides and all other business income.

The ATO is advising drivers in this industry who do not have a TFN, ABN or GST registration that they need to register now, and collect, report and pay GST on all their future rides.

They also need to report all their income from their rides in their next tax return.

Penalties and interest may apply for drivers who do not register for GST.

Drivers who have not declared all their income for ride-sourcing in prior years can amend a previous tax return.

Partial release from tax debt on serious hardship grounds

In a recent decision, the Administrative Review Tribunal ( ART ) held that a taxpayer should be released from payment of part of his tax debt on the grounds of serious hardship.

As at the 2022 income year, the taxpayer had an accumulated tax debt of approximately $528,000, comprising income tax, late lodgment penalties, PAYG instalments, and the general interest charge on the PAYG and unpaid income tax.

Much of the taxpayer's tax debt had arisen as a result of the taxpayer deriving income protection insurance payments from his insurer (which were assessable). These payments had been made since around 2002 and arose from a serious injury the taxpayer had suffered in a fire at his restaurant business.

The ART noted that there were a number of factors which weighed against the taxpayer, including his failure to make payments to meet the tax debt and his 'extremely poor' tax compliance history.

However, the ART decided that some relief was justified, given the extent of hardship, concerns about the taxpayer's health, and recoverability time for the tax debt.

The ART accordingly reduced the total tax debt (including penalties) to $250,000.

$20,000 instant asset write-off for 2024-25

Taxpayers who have purchased or are purchasing a business asset this financial year should remember that the instant asset write-off limit is $20,000 for the 2025 income year.

If a taxpayer's business has an aggregated annual turnover of less than $10 million and they use the simplified depreciation rules, they may be able to use the instant asset write-off to immediately deduct the business part of the cost of eligible assets, as follows:

The full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.
New and second-hand assets can qualify, although some exclusions and limits apply.
If the taxpayer claimed an immediate deduction for an asset's cost under the simplified depreciation rules in an earlier income year, they can also immediately claim a deduction the first time they incur a cost to make an improvement to that asset if it is incurred between 1 July 2024 and 30 June 2025 and less than $20,000.
The $20,000 limit applies on a per-asset basis, so taxpayers can instantly write off multiple assets as long as the cost of each asset is less than the limit.

The usual rules for claiming deductions still apply. Taxpayers can only claim the business part of the expense, and they must have records to prove it.

Beware websites sharing fake news on super preservation age

The ATO is warning the community about a “proliferation of dodgy websites sharing fake news about changes to the superannuation preservation rules and withdrawal rules starting on 1 June.”

ATO Deputy Commissioner Emma Rosenzweig confirmed the maximum preservation age (the age when an individual can access their superannuation savings on retirement) is 60 for anyone born from 1 July 1964.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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2024-2025 Business Year End Checklist

Tue, 10 Jun 2025 23:21:13 GMT

The Year End Checklist in the link below explains some common strategies that may be considered for all business taxpayers.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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2024-2025 Individuals Year End Checklist Tax Return

Tue, 10 Jun 2025 23:20:40 GMT

A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year. However, any individuals with potentially reduced income for the 2025 tax season may want to instead consider deferring any deductible expenditure (if possible).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Planning for Superannuation Contributions before 30 June 2025

Fri, 06 Jun 2025 01:27:15 GMT

Planning for Superannuation Contributions before 30 June 2025

As the end of the financial year is approaching, we take this opportunity to remind you of the various superannuation thresholds, opportunities, obligations and changes, including topics such as:

Concessional contributions
Non-concessional contributions
Superannuation guarantee
Impending proposed changes to superannuation from 1 July 2025

Concessional contributions

A concessional contribution is a payment made into your superannuation fund and is subject to tax (known as ‘before-tax contributions’) and includes employer’s compulsory super guarantee contributions, salary sacrificed contributions and personal contributions made by you which is from your after-tax dollars and claiming a tax deduction.

From 1 July 2024, concessional contributions are capped at $30,000 per year and are taxed at 15% upon receipt by the superannuation fund. However, individuals with income including concessional contributions exceeding $250,000 may be subject to an additional Division 293 tax on the excess of up to 15%, effectively increasing the tax up to 30%.

If you have more than one superannuation fund, all concessional contributions made to all of your funds are added together and counted towards the concessional contributions cap.

The payer (either the employer or the individual making a personal contribution) is generally entitled to a tax deduction for the amount of the contribution.

To see full details for making Concessional Contributions – click here

Non-concessional contributions

Non-concessional contributions are contributions made from after-tax dollars and the payer (the individual making the personal contribution) does not get a tax deduction for it.

Non-concessional contributions are capped at $0 or $120,000 per year (depending on your personal circumstances), subject to the bring-forward concession, which is the maximum amount of after-tax contributions you can contribute to your superannuation fund each year without contributions being subject to extra tax.

If you have more than one superannuation fund, all non-concessional contributions made to all of your funds are added together and counted towards the non-concessional contributions cap.

To see full details for making Non-Concessional Contributions – click here

Superannuation guarantee

It is compulsory for an employer to pay their eligible employees superannuation guarantee to their nominated superannuation fund, based on their ordinary time earnings and the relevant annual SG rate, by the quarterly due date.

To see full details about Superannuation Guarantee requirements – click here

Impending proposed change to superannuation from 1 July 2025

Additional tax on total superannuation balances over $3 million from 1 July 2025

Following the recent Federal election, the Labor Party is expected to reintroduce a tax Bill which proposes to increase the concessional tax rate applied by 15% on that proportion of future earnings relating to total superannuation balances above $3 million by 15%, rising up to 30%, with a proposed implementation date of 1 July 2025.

To see full details about this proposed change – click here

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – May 2025

Tue, 06 May 2025 01:43:54 GMT

How to manage business day-to-day transactions

The ATO has the following tips for small business owners "that can make your tax life easier":

They should keep an eye on upcoming expenses, and regularly update their books and reconcile their accounts.
They should set aside the GST they collect (ie. by transferring it into another bank account within the business to keep it separate from their cash flow).
They can also set their PAYG withholding and super aside, so they will have the funds available when payments are due.
They should plan ahead and schedule time in their calendar to prepare their business activity statement ( BAS ), and lodge and pay their BAS on time.

If you need assistance with any of these issues, please contact our office.

Minimum pension drawdown reminder

A self-managed superannuation fund ( SMSF ) must pay a minimum amount each year to a member who is receiving an account-based pension.

This minimum amount is calculated by applying the relevant percentage factor based on the member's age by the member's pension account balance calculated as of 1 July 2024, or on a pro-rata basis if the pension commenced part way through the 2025 financial year.

If the minimum payment is not made by 30 June, this could result in adverse taxation consequences for the member.

How to avoid common CGT errors

The ATO wants taxpayers to know that having a foreign resident capital gains withholding ( FRCGW ) clearance certificate does not mean they do not have any further CGT obligations.

If taxpayers have sold property, they still need to include capital gains, losses or an exemption or rollover code in their income tax return.

If an amount of FRCGW was withheld from the property sale, please advise our office and provide the 'FRCGW payment confirmation' from the purchaser. This is a necessary document when completing your income tax return.

Where you have lived in a property for any period during your ownership period you should provide us with the full details so we can determine the correct application of the main residence exemption.

Keeping not-for-profit records up to date

Taxpayers should remember that they are legally required to keep certain records for their not-for-profit ( NFP ).

All organisations including NFPs are required to keep accurate and complete records of all transactions relating to their tax and superannuation affairs.

Generally, for tax purposes, taxpayers must keep their records in an accessible form (either printed or electronic) for five years.

Records that NFP taxpayers are required to keep include:

governing documents;
financial reports;
documentation relating to grants; and
registrations and certificates.

A good record keeping system will help taxpayers run their NFP successfully and manage their tax and super obligations.

If a taxpayer's NFP is endorsed as a deductible gift recipient ( DGR ), they must keep records that explain all transactions and other acts relevant to their organisation's status as a DGR.

This requirement applies to both endorsed DGRs and listed by name DGRs.

Increase to rate for working from home running expenses

The ATO’s Practice Compliance Guide PCG 2023/1 outlines the new method ( the fixed-rate method ) for calculating additional running expenses while working from home, which has applied from 1 July 2022.

This PCG guideline was recently updated to increase the work from home fixed rate from 67 cents to 70 cents per hour from 1 July 2024.

The fixed-rate method allows taxpayers to claim at a rate of 70 cents per hour for the following additional running expenses for working from home:

energy expenses (electricity and gas) for lighting, heating, cooling, and electronic items used while working from home;
internet expenses;
mobile and home phone expenses; and
stationery and computer consumables.

However, PCG 2023/1 does not cover occupancy expenses relating to a home, such as rent, mortgage interest, property insurance and land tax.

Taxpayers are not required to use the above fixed-rate method — as from 1 July 2022, they can instead continue to claim the actual expenses they incurred as a result of working from home and keep all expense records (ie. invoices and receipts) necessary to substantiate their claim.

Truck driver entitled to claim meal expenses

In a recent decision, the Administrative Review Tribunal ( ART ) upheld a truck driver's claim for meal expenses, notwithstanding that those expenses had not been fully substantiated.

The taxpayer was employed as a long-haul truck driver in Western Australia. He was away from home for considerable periods each year.

The taxpayer sought a deduction for meal expenses of $32,782 in the 2021 income year, apparently calculated by multiplying the number of days he was away from home (310 days) by the maximum reasonable daily allowance under Taxation Determination TD 2020/5.

The ATO only allowed the taxpayer a deduction for meal expenses of $5,890 based on a review of his logbook, fatigue diary and bank statements. This was an average of $19 per day multiplied by 310 days.

The ART found on the balance of probabilities that the taxpayer incurred the claimed expenditure, and it found that the taxpayer had met his burden of proof.

In this regard, the ART determined that the taxpayer incurred the disputed expenses in gaining or producing his assessable income, and it did not agree with the ATO that there was an insufficient linkage between the expenditure on bank statements and the taxpayer's work.

The ART held that the exception to the substantiation provisions applied to the taxpayer, as:

a travel allowance was paid by the taxpayer's employer which covered the expenses;
the taxpayer incurred the expenditure in gaining or producing his assessable income; and
the expenditure fell within the ATO's reasonable travel amounts set out in TD 2020/5.

The ART accordingly allowed the taxpayer's claim for travel expenses in full.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – April 2025

Tue, 01 Apr 2025 04:38:48 GMT

ATO's new focus for small business

The ATO is currently focusing on the following 'specific risk areas', where it is concerned "small businesses are getting it wrong":

Contractors omitting income — with a focus on data matching to ensure all income is reported.
Quarterly to monthly BAS reporting for GST purposes — The ATO will move around 3,500 small businesses with a history of non-compliance to monthly reporting from 1 April 2025.
Small business boost claims — with a focus on encouraging self-amendments to correct errors and omissions.

The ATO will also continue its focus on non-commercial business losses, small business capital gains tax ( CGT ) concessions, business income that is not personal income, incorrect claims for 'small business boosts', GST registration and income of taxi, limousine and ride-sourcing services.

Reminder of March 2025 Quarter Superannuation Guarantee (SG)

Employers are reminded that employee super contributions for the quarter ending 31 March 2025 must be received by the relevant super funds by Monday, 28 April 2025.

If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

The SG rate is 11.5% for the 2025 income year.

FBT record keeping and plug-in hybrid exemption changes

With the 2025 fringe benefits tax ( FBT ) year having just ended (on 31 March), the ATO is reminding employers of some changes that might impact their FBT obligations.

Alternative record keeping changes

For the 2025 and succeeding FBT years, employers can use existing records instead of travel diaries and declarations for some fringe benefits.

If using existing corporate records, employers need to meet the minimum required information at the time of lodging the FBT return. Keeping the right records ensures employers can correctly calculate the taxable value of the benefit and support their FBT position.

Plug-in hybrid electric vehicle changes

The FBT exemption for plug-in hybrid electric vehicles ( PHEVs ) broadly ended on 31 March 2025, so the 2025 FBT year may be the last year that employers can claim the exemption.

However, an employer can continue to apply the exemption if that PHEV was used, or available for use, before 1 April 2025 (and that use was exempt), and they have a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025.

Please contact our office if your business provided fringe benefits to staff between 1 April 2024 and 31 March 2025 and you need any assistance (including in relation to keeping appropriate records).

Taxable payments annual report lodgment reminder

Businesses that pay contractors for 'Taxable payments reporting system services' may need to lodge a 'Taxable payments annual report' ( TPAR ) by 28 August each year.

We note that this includes businesses paying contractors in the following industries:

building and construction,
courier and road freight,
cleaning,
information technology, and
security, investigation or surveillance.

From 22 March, the ATO will apply penalties to businesses that have not lodged their TPAR from 2024 or previous years, and/or have been issued three reminder letters about their overdue TPAR.

Businesses that do not need to lodge a TPAR can submit a 'non-lodgment advice ( NLA ) form'. Businesses that no longer pay contractors can also use this form to indicate that they will not need to lodge a TPAR in the future.

Quarterly TBAR lodgment reminder

Self-managed super funds ( SMSFs ) must report certain events that affect a member's transfer balance account ( TBA ) quarterly using transfer balance account reporting ( TBAR ).

These events must be reported even if the member's total superannuation balance is less than $1 million. We note that TBA events include starting or commuting a retirement phase pension.

TBARs for the March quarter are due on 28 April 2025 and SMSFs that do not report on time may be subject to compliance action and penalties, and the member's TBA may be adversely affected.

Note that SMSFs are not required to lodge if there were no TBA events during the quarter.

General transfer balance cap will be indexed on 1 July 2025

Indexation of the general transfer balance cap ( TBC ) will occur on 1 July 2025. This cap will increase by $100,000 from $1.9 million to $2 million.

The general TBC amount is used for a number of purposes, including to determine the total capital amount that can be transferred to the retirement (pension) phase, and to determine eligibility for making non-concessional contributions.

This increase has flow through impacts for individuals who have started a retirement phase pension, as they will be entitled to an increase to their personal TBC if they have not previously been at, or exceeded, their cap.

Individuals starting a pension for the first time on or after 1 July 2025 will be entitled to a personal TBC of $2 million.

The ATO will calculate an individual's personal TBC based on the information reported to and processed by the ATO. To help individuals have a clear understanding of their position, the ATO encourages funds to report all 'TBC events' when they occur and as early as possible before the 1 July 2025 indexation start date.

Indexation of the general TBC also has flow through consequences for the Total Super Balance ( TSB ). The TSB influences an individual's non-concessional contributions cap, non-concessional bring forward arrangement, and eligibility for spouse tax offset and co-contributions.

Tribunal rejects taxpayer's claim for CGT small business relief

In a recent decision, the Administrative Review Tribunal ( ART ) held that a taxpayer was not entitled to the CGT small business concessions on the disposal of his interests in some farm land.

The taxpayer ran a beef cattle business (in partnership with his wife) on properties adjacent to the dairy farm that his parents owned. Following his father's death in 2007, the taxpayer acquired legal interests in the two properties on which that dairy farm was operated.

The ATO rejected the taxpayer's contention that he was entitled to concessional CGT small business relief on disposal of those interests in 2016, on the basis that the interests disposed of did not meet the 'active asset' test.

The ART upheld the ATO's decision, finding that the taxpayer did not use his interests in the

properties, nor were they held 'ready for use', in carrying on his cattle business. His claim that he intended to use the properties, but that he could not due to his strained relationship with his brother, was not sufficient.

Consequently, the interest in the properties was not an active asset and the taxpayer was not entitled to concessional CGT treatment.

Bill passes to deny deductions for GIC and SIC incurred after 1 July 2025

The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025 has now been passed through the Parliament, and it includes a provision to deny deductions for ATO interest charges, specifically the general interest charge ( GIC ) and shortfall interest charge ( SIC ), incurred in income years starting on or after 1 July 2025.

These interest charges are not deductible from 1 July 2025, based on when the GIC or SIC assessment is incurred (or raised), not when the primary tax assessment was raised. In other words, any GIC or SIC incurred in the 2025–26 or later income years, that relates to an income tax or GST assessment from an earlier income year, will not be tax deductible.

After the Bill has now been passed by both the House of Representatives and the Senate, it now simply waits to receive Royal assent.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Bill passed for Instant Asset Write-Off of $20,000 for 2024-25

Thu, 27 Mar 2025 22:41:19 GMT

Bill passed for Instant Asset Write-Off of $20,000 for 2024-25

There was no mention of the extension of the instant asset write-off ( IAWO ) within the Federal Budget delivered last Tuesday night, leaving many small business taxpayers frustrated and uncertain.

However, the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025 has now been passed through the Parliament, and it included the extension of the IAWO threshold of $20,000 for assets first used or installed ready for use between 1 July 2024 and 30 June 2025.

After the Bill has now been passed by both the House of Representatives and the Senate, it now simply waits to receive Royal assent.

Instant asset write-off threshold is $20,000

The IAWO threshold is $20,000, for assets first used or installed ready for use between 1 July 2024 and 30 June 2025.

It is important to note that the IAWO threshold of $20,000 applies only to small business entities , with aggregated turnover of less than $10 million.

This should give small business taxpayers some certainty now to purchase assets and use them (or have them installed ready for use) before 30 June 2025, to entitle them to an immediate tax deduction in their 2025 tax return.

We expect that the IAWO threshold for next year, ending 30 June 2026, will become an election issue for impending federal election, with the Coalition already indicating it has plans to make the IAWO permanent with a threshold of $30,000, if it forms government at the next election.

We would welcome either party to make the IAWO a permanent deduction and remove the annual uncertainty of waiting until the later stages of each tax year to have the requisite legislation passed.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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FEDERAL BUDGET 2025-26

Tue, 25 Mar 2025 22:40:59 GMT

SUMMARY AND FULL COMMENTARY UPDATES

The 2025-26 Federal Budget was handed down by Federal Treasurer, Dr Jim Chalmers on the evening of Tuesday 25 March 2025.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

This Federal Budget has been unique, compared to recent years, being very light on proposed tax changes. This is due to the impending Federal Election in the next few months, with substantial proposed tax changes likely being withheld for now to be used as election promises. For now, there are minimal tax changes that will have significant impact today, but we expect (and encourage) some significant tax reform be considered by the current Federal Government sooner rather than later.

For further clarification, contact your Relationship Partner at Lowe Lippmann.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - ATO appeals to High Court in the Bendel Case decision

Thu, 20 Mar 2025 23:04:25 GMT

ATO appeals to High Court in the Bendel Case decision

The Australian Taxation Office ( ATO ) has now applied to the High Court for special leave to appeal the Full Federal Court’s decision in FCT v Bendel [2025] FCAFC 15.

Last month, we released a Tax Alert ( see here ) after the Federal Court delivered their unanimous decision that an unpaid present entitlement (or UPE ) owed by a discretionary trust to a corporate beneficiary is not a “loan” for Division 7A purposes.

The ATO has also issued an Interim Decision Impact Statement ( DIS ) in response to the Full Federal Court decision. A DIS provides information for taxpayers and advisers, and includes: details of the case, a brief summary of facts, issues decided by the court or tribunal, and relevant legislation and case law.

What is the ATO’s current view?

The ATO view can be summarised as follows:

Will continue to administer the tax rules in their current form (ie. treating UPEs as loans for Division 7A purposes) until the outcome of the appeal process is known.
Will hold off processing amendments, private rulings and objections relating to this issue until the appeal process is finalised.
Regardless of the new interpretation by the Full Federal Court, the reimbursement agreement rules in section 100A will continue to be considered, and this decision does not change the potential for exposure to Subdivision EA (ie. a trust makes a UPE to corporate beneficiary, and then the trust makes a payment or loan, to the shareholders or associates of the corporate beneficiary).

What can we do now?

Unfortunately, the way forward in the short term is unclear until we see how the appeal process moves to, and through, the High Court.

Again, there is an element of having to “wait and see” what happens next. We will continue to keep you updated on all future developments.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – What Should You Look for in an External Auditor?

Mon, 17 Mar 2025 22:10:30 GMT

External audit is often considered to be ‘just a compliance exercise’, however while these financial statements audits are often required to meet legal obligations, they can provide significant value beyond ticking a regulatory box.

An important question is to consider why you are having an audit:

Is it required by legislation / constituting documents?
Have your suppliers / customers / funders requested one?
Board / Management has chosen to have an audit for good governance practices.

The reason for your audit can shape what you need from your auditor.

Look for an auditor with industry experience and if you are a not-for-profit or small business entity then experience in that sector is critical.

An external auditor should not only understand your organisation’s unique challenges but also bring insights in relation to financial risks in your industry and best practice improvements.

Remember an external auditor needs to be independent so be careful about using someone with a particular relationship with the entity even if they do offer to do the work for a cheap price.

An external doesn’t just identify material errors; they offer practical advice for improving financial management and help foster a culture of transparency and accountability. An effective audit can strengthen internal operations and bolster the confidence of donors, investors, and regulators in your organisation’s financial health.

If you don’t need a financial statement audit, then consider using an auditor to perform work on specific areas to provide detailed recommendations and provide an opinion on accuracy over key systems. This work is equivalent to an internal audit project where the auditor does not need to be independent and can agree the scope with management, this could cover financial and non-financial areas such as payroll, purchasing system, compliance with specific standards (e.g. child safety, health and safety, privacy).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – March 2025

Tue, 04 Mar 2025 03:03:31 GMT

How to master employer obligations in 2025

Taxpayers who employ staff should remember the following important dates and obligations:

Fringe benefits tax (FBT)

31 March 2025 marks the end of the 2024-25 FBT year. Employers should remember the following regarding their FBT tax time obligations.

They should identify if they have provided a fringe benefit. If they have, they should determine the taxable value to work out if they have an FBT liability.
They should lodge an FBT return and pay any FBT owed by 21 May 2025. If their registered tax agent lodges electronically for them, they have until 25 June 2025.
They should keep the right records to support their FBT position.

Pay as you go (PAYG) withholding

Taxpayers need to withhold the right amount of tax from payments they make to their employees and other payees, and pay those amounts to the ATO.

Single touch payroll (STP)

Employers should finalise their STP data by 14 July 2025 for the 2024/25 financial year (there may be a later due date for any closely held payees).

Super guarantee (SG)

28 January, 28 April, 28 July and 28 October are the quarterly due dates for making SG payments
The SG rate is currently 11.5% of an employee's ordinary time earnings. From 1 July 2025, it will increase to 12.0%.
Taxpayers should ensure SG for their eligible employees is paid in full, on time and to the right super fund, otherwise they will be liable for the SG charge.

ATO's tips to help taxpayers stay on top of their BAS

The ATO has the following tips to help taxpayers get their BAS right before they lodge:

They should make sure they enter the figures for their obligations at the correct label, and only complete applicable fields.
If lodging online, or through a registered tax or BAS agent, they may be able to get an extra 2 or 4 weeks to lodge and pay.
If they have nothing to report for the period, they can lodge a 'nil' BAS online by selecting 'Prepare' and then 'Prepare as nil', or they can call the ATO's automated service "any time of the day".
If they made a mistake on their last BAS, instead of lodging a revision, they may be able to use their current BAS to fix it. For example, they can use label 1A to adjust GST on sales, or label 1B to adjust GST on purchases.
They can also use their BAS to vary an instalment amount.

Claiming fuel tax credits when rates change

Fuel tax credits changed on 3 February, and taxpayers could receive more savings for fuel they have acquired on and from this date. Different rates apply based on the type of fuel, when it was acquired and what activity it is used for.

The ATO has the following tips for taxpayers to ensure they are claiming correctly.

They can use the ATO's 'eligibility tool' on its website to find out if they can claim fuel tax credits for fuel they have acquired and used.
They can use the ATO's online fuel tax credit calculator (which should automatically apply the right rate) to work out their claim.
They can lodge their BAS via Online services or a registered tax or BAS agent (lodging via an agent can allow them extra time to lodge and pay).

ATO "busts" Not-For-Profits myths

As the Not-for-profit ( NFP ) self-review return is due in March, the ATO has recently published a document 'busting' various NFP 'myths'.

Taxpayer's claim for input tax credits unsuccessful

In a recent decision, the Administrative Review Tribunal ( ART ) rejected a taxpayer's claim for input tax credits on the basis that all the relevant GST returns (ie. BASs) were lodged out of time.

For the GST periods from 1 October 2015 to 31 March 2017, the taxpayer filed each of her GST returns more than four years after they were due. The taxpayer still claimed input tax credits totalling over $10,000 for this period.

The ATO disallowed this claim, on the basis that none of the input tax credits were claimed within the four-year period, as required by the GST Act.

The ART upheld the ATO's decision, noting that, as the taxpayer did not file the GST returns within the four-year period "she did not have input tax credits taken into account . . . As a consequence, . . . (she) simply ceased to be entitled to those input tax credits."

ATO's appeal against decision that UPEs are not "loans" fails

The Full Federal Court recently dismissed the ATO's appeal against an AAT decision that unpaid present entitlements ( UPEs ) owing by a trust to a corporate beneficiary were not "loans" for Division 7A purposes.

A corporate beneficiary had become entitled to a share of the income of a trust for the 2013 to 2017 income years. Parts of these entitlements remained outstanding, resulting in UPEs. The ATO treated these UPEs as loans from the corporate beneficiary back to the trust (and, in consequence, as "deemed dividends" made to the trust).

The AAT held at first instance that a loan had not been made in this case.

The Full Federal Court upheld the AAT's decision, noting that a loan for Division 7A purposes requires an obligation to repay an amount, not merely the creation of an obligation to pay an amount (such as when a trust distributes income to a beneficiary).

We recently prepared a detailed Tax Alert on the Bendels Case decision, to read click here .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - 2025 FBT year end

Thu, 27 Feb 2025 22:12:50 GMT

2025 FBT Year End is Fast Approaching!

The end of the Fringe Benefits Tax ( FBT ) year is fast approaching on 31 March 2025, so we take this opportunity to revisit some hot FBT topics for both employers and employees, including:

FBT exemption for electric cars
Providing equipment to work from home
Does FBT apply to your contractors?
Reducing the FBT record keeping burden
Mismatched claims for entertainment
Employee contributions by journal entry
Not lodging FBT returns
FBT housekeeping

FBT exemption for electric cars

Employers that provide employees with the use of eligible electric vehicles ( EVs ) can potentially qualify for an FBT exemption. This should normally be the case where:

The car is a zero or low emission vehicle (battery electric, hydrogen fuel cell or plug-in hybrid electric);
The car is both first held and used on or after 1 July 2022; and
The value of the car is below the luxury car tax threshold for fuel efficient vehicles (which is $89,332 for 2024-25 financial year).

Plug-in hybrid vehicles no longer FBT exempt

From 1 April 2025, plug-in hybrid electric vehicles will no longer qualify for the FBT exemption unless:

The use of the vehicle was exempt before 1 April 2025, and
There is a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025.

If there is a break or change to that commitment on or after 1 April 2025 then the exemption might not continue to be available.

Working with the exemption

Even if the FBT exemption applies, your business will still need to work out the taxable value of the benefit as if the FBT exemption did not apply. This is because the value of the exempt benefit is still taken into account when calculating the reportable fringe benefits amount of the employee. While income tax is not paid on this amount, it can impact the employee in a range of areas (such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments).

This means the employee’s own home electricity costs incurred on charging the electric vehicle would often need to be worked out. This figure can generally be treated as an employee contribution to reduce the value of the benefit.

While this can be practically difficult to determine, the ATO has now finalised a guideline providing a 4.20 cent per km shortcut rate that can potentially help with the calculation. These guidelines do not apply to plug-in hybrid vehicles.

Many electric vehicles are also packaged together with electric charging stations. Just be aware that the FBT exemption for electric cars does not extend to charging stations provided at the employee’s home.

We must note that the FBT exemption for electric cars has a number of problem areas which should be considered:

The exemption only applies to employees - for the FBT exemption to apply, the vehicle needs to be supplied by the employer to an employee (including under a salary sacrifice agreement). Partners of a partnership and sole traders are not employees and cannot access the exemption personally.
If Luxury Car Tax applies to the car it will never qualify for the FBT exemption - for example, if the EV failed the eligibility criteria in 2023-24 when it was first purchased because it was above the luxury car limit of $89,332, the fact that it resold in 2024-25 for $50,000 does not make it eligible for the exemption on resale. Likewise, if the car was used by anyone (including a previous owner) before 1 July 2022 then it will probably never qualify for the FBT exemption.
Home charging stations are not included in the exemption - the FBT exemption includes associated benefits such as registration, insurance, repairs or maintenance, but it does not include a charging station at the employee’s home. If the employer instals a home charging station at the employee’s home or pays for the cost, then this is a separate fringe benefit.
The exemption does not apply if the employee directly purchases or leases the EV - if an employee purchases or leases the EV directly, and the employer reimburses them under a salary sacrifice arrangement, the FBT exemption does not apply because this is not a car fringe benefit. However, the exemption can potentially apply to novated lease arrangements if they are structured carefully.
Not all electric vehicles are cars - to qualify for the exemption, the EV needs to be a car – electric bikes and scooters do not count, nor do vehicles designed to carry a load of 1 tonne or more or that carry 9 passengers or more.

Providing equipment to work from home

Many businesses continue to offer flexible work from home arrangements. To assist, employees are often provided with work-related items to assist them to work from home. In general, where work related items are provided to employees and used primarily for work, FBT shouldn’t apply.

For example, portable electric devices such as laptops and mobile phones provided to employees shouldn’t trigger an FBT liability as long they are primarily used by your employees for work. Multiple similar items can also be provided during the FBT year where required – for example multiple laptops have been provided to the employee – but only of the business has an aggregated turnover of less than $50 million (previously, this threshold was less than $10 million).

If the employee is using equipment provided by the business for their own private use, normally FBT would apply to the private use. However, the FBT liability can be reduced based on the business use percentage.

Does FBT apply to your contractors?

The FBT rules tend to apply when benefits are provided to employees and certain office holders, such as directors. FBT should not apply when benefits are provided to genuine independent contractors, but you need to be sure that your contractors are in fact contractors.

Following two landmark decisions handed down by the High Court, the ATO has now finalised a ruling TR 2023/4 ( see here ) that helps determine whether a worker is an employee or an independent contractor.

The ATO has also finalised PCG 2023/2 ( see here ) that sets out four risk categories. While the ATO looks at a number of factors, arrangements will tend to be viewed in a more favourable light where:

There is evidence to show that you and the worker have agreed on the classification;
There is a comprehensive written agreement that governs the relationship;
There is evidence that you and the worker understand the consequences of the classification;
The performance of the arrangement hasn’t deviated significantly from the terms of the contract;
Specific advice has been sought confirming that the classification is correct; and
Tax, superannuation, and reporting obligations have been met when the worker is classified as an employee or independent contractor (whichever relevant).

Reducing the FBT record keeping burden

Record keeping for FBT purposes can be onerous. From 1 July 2024 however, your business will have a choice to keep the existing FBT record keeping methods, use existing business records where those records meet the requirements set out by the legislative instrument, or a combination of both methods:

Travel diaries – see LI 2024/11
Living-away-from-home-allowance – FIFO/DIDO declarations – see LI 2024/4
Living-away-from-home – maintaining an Australian home declaration – See LI 2024/5
Otherwise deductible rule – expense payment, property or residual benefit declaration – See LI 2024/6
Otherwise deductible rule – private use of a vehicle other than a car declaration – See LI 2024/7
Car travel to an employment interview or selection test declaration – See LI 2024/14
Remote area holiday transport declaration – See LI 2024/10
Overseas employment holiday transport declaration – See LI 2024/13
Car travel to certain work-related activities declaration – See LI 2024/9
Relocation transport declaration – See LI 2024/12
Temporary accommodation relating to relocation declaration – See LI 2024/8

Mismatched claims for entertainment – claimed as a deduction but no FBT

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Employee contributions by journal entry in the accounts

Many businesses use after-tax employee contributions to reduce the value of fringe benefits.

It is also reasonably common for these contributions to be made by journal entry through the accounting system only (rather than being paid in cash).

For an employee contribution made by way of journal entry to be effective in reducing the taxable value of a benefit, all of the following conditions must be met:

The employee must have an obligation to make a contribution to the employer towards a fringe benefit (ie. under the employee’s remuneration agreement);
The employer has an obligation to make a payment to the employee. For example, the parties may agree that the employer will lend an amount to the employee or the employee might be entitled to a bonus that hasn’t been paid yet. If a loan is made by the employer then this could trigger further tax issues that need to be managed;
The employee and employer agree to set-off the employee’s obligation to the employer against the employer’s obligation to the employee; and
The journal entries are made no later than the time the financial accounts are prepared for the current year (ie. for income tax purposes).

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns when required to.

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.

If your business has cars and you need to record odometer readings at the first and last days of the FBT year (1 April 2023 and 31 March 2024), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – IFRS 15 Post-Implementation Review (PIR): What Did We Learn?

Tue, 25 Feb 2025 02:49:50 GMT

The International Accounting Standards Board (IASB) recently concluded its Post-Implementation Review (PIR) of IFRS 15 Revenue from Contracts with Customers. This is relevant in Australia since we have adopted this standard as AASB 15.

The PIR overall conclusion is that the five-step model has improved comparability in financial reporting and is generally well understood by stakeholders.

However, the review highlighted some areas that still pose challenges for certain sectors, particularly with complex contracts, variable consideration, and the balance between principles-based guidance and specific application issues.

Regardless of these areas, there are no major amendments to IFRS 15 expected, but the IASB will continue to monitor areas where further clarification could help entities better apply the standard.

We continue to see clients who have not fully understood the requirements of AASB 15 and therefore we encourage regular reviews of sales contract against the requirements of the standard to ensure appropriate revenue recognition methodology is being applied.

For our not-for-profit clients, the Australian Accounting Standards Board (AASB) PIR of AASB 1058 Income of NFP Entities and the interaction with AASB 15 is still ongoing, however we are not expecting to see any significant amendments arising from this project.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert -Federal Court delivers a Division 7A win for taxpayers in Bendel Case decision

Mon, 24 Feb 2025 00:50:53 GMT

Federal Court delivers a Division 7A win for taxpayers in Bendel Case decision

Last week the Full Federal Court handed down a unanimous decision that an unpaid present entitlement (or UPE ) owed by a discretionary trust to a corporate beneficiary is not a “loan” for Division 7A purposes, which is a set of anti-avoidance provisions that could deem such a loan to be a deemed dividend.

This decision focuses on arrangements that will be familiar and common for many private groups across Australia that use discretionary trusts.

A brief history of the Bendel Case

The Bendel case involves two taxpayers, an individual and a private company, and both were beneficiaries of a discretionary trust. The individual was the director of both the corporate trustee of the discretionary trust and the corporate beneficiary.

For various income years, the trustee of the discretionary trust resolved to distribute income to the corporate beneficiary. The corporate beneficiary did not call for (or demand) payment of those entitlements. This is an unpaid present entitlement or UPE. This is a very common arrangement within private groups in Australia.

Since 2010, the Commissioner of Taxation has applied Division 7A on the basis that if a UPE owing by a discretionary trust to a corporate beneficiary is left unpaid, it could be a “financial accommodation” from the company to the trust and therefore be treated as a “loan”.

This loan is then deemed to be a dividend from the corporate beneficiary to the discretionary trust for the purposes of Division 7A.

In the Bendel case, the Commissioner decided that a deemed dividend would be included in the discretionary trust’s net income and assessed the taxpayers on their respective shares of that deemed dividend.

The taxpayers appealed to the Administrative Appeals Tribunal ( AAT ), which found for the taxpayers. Then the Commissioner appealed to AAT decision the Full Federal Court.

After waiting over a year, last week the Full Federal Court handed down a unanimous decision that a UPE owed by a discretionary trust to a corporate beneficiary is not a “loan” for Division 7A purposes.

Why is a UPE not treated as a “loan” now?

Broadly, a UPE arises where a trustee of a trust makes a beneficiary presently entitled to trust income, but the beneficiary does not receive payment for the entitlement.

The Full Federal Court’s decision clarified that for an arrangement to constitute a “loan,” there must be an obligation to repay an amount, rather than merely an obligation to pay an amount.

This critical finding distinguishes a UPE from a traditional loan, by reinforcing that a UPE does not inherently create a repayment obligation.

Beware Subdivision EA is still in play

While the decision provides a new interpretation regarding UPEs for Division 7A loan purposes, this decision does not change the potential for exposure to Subdivision EA.

Subdivision EA is a rule within Division 7A, which can be triggered if a trust makes a UPE to corporate beneficiary, and then the trust makes a payment or loan (for example) to the shareholders (or associates) of the corporate beneficiary.

Therefore we need to continue to monitor compliance with Subdivision EA, as it can still apply to deem the UPE to be a deemed dividend in certain circumstances.

What can the Commissioner do next?

While this decision represents a significant change in the interpretation of the Division 7A rules, it is unlikely to be the final word on the matter.

The Commissioner can still seek leave to appeal the Bendel decision to the High Court.

Another possibility for the Commissioner if he does not seek an appeal, is to approach the government to consider making amendments to the tax legislation and/or the Australian Taxation Office ( ATO ) guidance or administrative practices currently in place.

This decision is also likely to empower the accounting and taxation sector to continue to lobby the government to consider a broader review of the Division 7A rules, which we all agree is long overdue.

It is also worth noting that arrangements involving UPEs are still at risk of the ATO seeking to apply other taxation provisions such as Section 100A, which is an anti-avoidance provision that applies when a beneficiary’s entitlement to trust income results from a “reimbursement agreement”. Broadly, this is an arrangement where a beneficiary becomes presently entitled to trust income, and someone (other than the beneficiary) receives a ‘benefit’ in relation to the arrangement with one of the parties having the intent of reducing tax. If a company’s entitlement to income remains unpaid by the trust indefinitely with no commercial arrangements to address it, Section 100A could well be an issue.

What can we do now?

Unfortunately, there is an element of having to “wait and see” what the Commissioner does next. However, there are some actions we can take in preparation for what developments come next.

If a taxpayer has been subject to ATO review or audit based on the previous interpretation of UPEs as loans and been forced to pay penalties, it would be relevant to consider the process for lodging an objection or seeking an amendment to their previous tax assessments. This could potentially lead to the remission of primary tax, interest, and penalties.

It may also be relevant for any taxpayers currently being audited in this regard to discuss this new decision with their ATO audit case manager.

We will continue to stay updated on any new guidance or administrative practices issued by the ATO in response to the Full Federal Court's decision, as the ATO may provide further clarification or updates on how they may change their interpretation of UPEs going forward.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Will credit card surcharges be banned?

Wed, 19 Feb 2025 21:48:06 GMT

Will credit card surcharges be banned?

If credit card surcharges are banned in other countries, why not Australia? This alert looks at the surcharge debate and the payment system complexity that has brought us to this point.

In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned.

And in Australia, there is a push to follow suit. But is the issue as simple as it seems?

The push for change

The Reserve Bank of Australia ( RBA ) launched a review in October 2024 of Merchant Card Payment Costs and Surcharging . The review explores whether existing regulatory frameworks are still fit for purpose given the rate of technological change and complexity, and if there is a need for greater transparency – surcharges, transaction fees, and the way in which payments are regulated, are all up for review. Ultimately, the review is about reducing costs to merchants and consumers.

In general, customers dislike surcharges and would be happy to see them go – they represent a personal loss of value in much the same way a discount is seen as a personal gain. And, they have support for a ban from the large credit card providers and financial institutions with the Australian Banking Association’s ( ABA ) submission to the RBA review saying, “The current surcharging framework is clearly not working and requires targeted reform. Consumers should never be surcharged for bundled costs like POS systems, business software products or other business incentives.”

The reference to “business incentives” is where a higher fee is charged by the payment service provider to provide the merchant with reward points and other incentives.

The push for a ban accelerated when the government announced that it would ban debit card surcharges from 1 January 2026, subject to the outcome of the RBA review later this year.

If surcharges are banned for some or all payment methods, businesses currently charging surcharges will need to either absorb the cost of merchant fees or increase prices. The issue for many businesses is not whether to charge a fee, but the costs of accepting what is now the most common payment method – cash is free to transact, cards are a facility to transact legal tender, not legal tender in and of themselves.

Small business pays 3 times more

While the average card payment fee in Australia is lower than the United States (which is close to double Australia’s rates), we pay a higher rate than in some other jurisdictions such as Europe. The RBA have flagged there might be room to improve this by capping interchange fees and/or introducing competition into how debit card payments are routed (allowing systems to default to the ‘least cost’ option available).

In Australia, it is not a level playing field when it comes to card transaction fees with a large disparity between fees paid by small and large merchants – small merchants pay around three times the average per transaction fee than larger merchants (large merchants are able to secure wholesale fees or utilise ‘strategic’ interchange rates).

But even within the small business sector, fees vary dramatically with the cost of accepting card payments ranging from less than 1.0% to well over 2.0% of the transaction value.

How we use cards and digital transactions

The RBA are generally in favour of allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers.

This might be true for large purchases, but do we really notice when we’re tapping our phones or watches to grab that morning coffee?

Cards (including debit, prepaid, credit and charge cards) are the most frequently used payment method in Australia, accounting for three-quarters of all consumer payments in 2022.

According to the Australian Banking Association:

Contactless payments now account for 95% of in-person card transactions, compared to less than 8.0% in 2010.
Online payments, as a share of retail payments, have grown from 7.0% in 2010 to 18% in 2022.
Mobile wallet (Apple Pay, Google Pay, etc.,) usage has grown from 1.0% of point-of-sale payments in 2016 to 44% in October 2024.
Buy Now, Pay Later ( BNPL ) services, virtually unknown 8 years ago, are now used by nearly a third of Australians.

When are surcharges allowed

In the days before the RBA’s surcharge standard, it was not uncommon for businesses to apply a flat 3.0% surcharge.

The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”.

This means:

A business can only charge a surcharge for paying by card/digital wallet, but the surcharge must not be more than what it costs the business to use that payment type . These costs, measured over a 12-month period, can include gateway costs, terminal costs paid to a provider, and fraud prevention etc., if they relate directly to the card type being surcharged.
Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type.
If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated.
If the surcharge applies to all payment types regardless of type, it must not be more than the lowest surcharge set for a single payment type.
If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. That is, if your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge.

The RBA estimates that, on average, card fees cost:

Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit.

The Australian Competition and Consumer Commission ( ACCC ) reportedly stated that excessive surcharge complaints increased to close to 2,500 in the 18 months from the start of 2023.

Tax on surcharges

If your business charges goods and services tax ( GST ) on goods or services, then GST should also apply to any surcharge payments made.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Is there a problem paying your super when you die?

Mon, 17 Feb 2025 21:09:34 GMT

Is there a problem paying your super when you die?

The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits.

Do we have a problem with paying out super when a member dies?

The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made.

Complaints to the Australian Financial Complaints Authority ( AFCA ) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year. The super laws do not specify a time period only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member.

How to make sure your super goes to the right place

Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. If you don’t make a decision, or let your nomination lapse, then the fund has the discretion to pay your super to any of your dependants or your estate.

There are four types of death nominations:

Binding death benefit nomination

Directs your super to your nominated eligible beneficiary, the trustee is bound by law to pay your super to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.

Non-lapsing binding death benefit nomination

If permitted by your trust deed, a non-lapsing binding death benefit nomination will remain in place unless you cancel or replace it. When you die, your super is directed to the person you nominate.

Non-binding death nomination

A guide for trustees as to who should receive your super when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay your super to someone else or to your estate.

Reversionary beneficiary

If you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years.

Who is eligible to receive your super?

Your super can be paid to a dependant, your legal representative (ie. the executor of your will), or someone who has an interdependency relationship with you. A dependant for superannuation purposes is “the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship”.

An interdependency relationship is where someone depends on you for financial support or care.

What happens if you don’t make a nomination?

If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will be a superannuation dependant or the legal representative of your estate to then be distributed according to your Will.

Where can it go wrong?

There have been a number of court cases over the years that have successfully contested the validity of death nominations. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name. If your super is to be directed to your estate, ensure the wording uses the correct legal terminology.

One of the reasons for delays in paying death benefit nominations cited by the funds is where there is no nomination (or it is expired or invalid), there are multiple potential claimants, and the trustee needs to work through sometimes complex family scenarios.

The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place, and it is valid and correct. While there still might be a delay in getting your super where it needs to go if you die, the process will be a lot quicker and less onerous for your loved ones.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Why the ATO is targeting babyboomer wealth

Thu, 13 Feb 2025 02:21:12 GMT

Why the ATO is targeting babyboomer wealth

“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.”

ATO Private Wealth Deputy Commissioner Louise Clarke

The Australian Taxation Office ( ATO ) thinks that wealthy babyboomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations.

If you are within the ATO’s Top 500 (Australia's largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control.

A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets.

Generally, under tax law, you can legitimately structure assets if there is a good reason to do so - like for asset protection, but if you tip across the line and the only viable reason for a structure is to reduce tax, then you risk the ATO taking a very close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules in Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities.

“We’re seeing that succession planning behaviour is primarily done by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update.

Key areas of concern

Division 7A loans being settled. That is, a company has been paying money to a shareholder or an associate under a loan account. The ‘loan’ is quickly settled, often via a distribution, to remove it from the accounts.
Assets moving around the group (often the true value of an asset is not recognised raising the question, why the change if not to avoid capital gains tax on disposal or for some other benefit).
Family member interests being restructured .
Trust deeds being amended.
A restructure is cited as a reason for late lodgment.

Use of trusts

Trusts are also a key area of concern in 2025. Where a trust which has made a family trust election ( FTE ) or interposed entity election ( IEE ) makes a distribution outside of the family group, a 47% Family Trust Distribution Tax applies (ie. tax at the top marginal tax rate plus Medicare).

In addition, the ATO has recently tightened its approach to trust tax returns for closely held trusts to ensure that trustee beneficiary ( TB ) statements are being completed. These are required when a trust makes a distribution of income or assets to the trustee of another trust, unless an exclusion applies.

For example, a trust which has made an FTE or IEE does not need to make a TB statement. The TB statement will then be used to cross reference against what the beneficiary has declared in its tax return. Where a valid TB statement is not made on time this can trigger a hefty 47% Trustee Beneficiary Non-Disclosure Tax.

Reducing risk

Where you or your family have control over multiple entities, particularly where the value of these entities is significant, it is important that the connections between these - be it in Australia or overseas - are looked at closely to avoid any nasty surprises or lost opportunities.

Transferring control of your business may involve restructuring your business operations – changes to share structures, changes to the trustee and appointor of a trust, changes to partnership structures – or transferring assets to family members via the creation of trusts or other entities. All these events have legal and tax implications that need to be carefully considered.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – January/February 2025

Tue, 11 Feb 2025 02:41:32 GMT

CGT withholding measures now law

The Government recently passed legislation making changes to the foreign resident capital gains withholding laws (among other changes).

Foreign resident capital gains withholding is relevant for all vendors selling certain taxable real property (ie. Australian land).

Even Australian residents can be caught by these laws because, if they do not have a valid 'clearance certificate' issued by the Australian Taxation Office ( ATO ) at, or before settlement, tax must be withheld from the sale proceeds by the purchaser and paid to the ATO.

The new legislation increases the foreign resident capital gains withholding rate to 15% (from 12.5%), and completely removes the threshold (currently $750,000) before which withholding applies.

This means that all disposals of taxable real property are potentially subject to foreign residents' capital gains withholding requirements regardless of the market value of the CGT asset.

These amendments take effect from 1 January 2025.

ATO debunks Division 7A 'myths'

The ATO has recently published a document 'debunking' various Division 7A 'myths'.

Division 7A of the tax legislation is intended to prevent profits or assets being provided to shareholders or their associates tax free.

A payment or other benefit provided by a private company to a shareholder or their associate can be treated as a dividend for income tax purposes under Division 7A, even if the participants treat it as some other form of transaction (such as a loan, advance, gift or writing off a debt).

Division 7A can also apply if a trust has allocated income to a private company but has not actually paid it (ie. an unpaid present entitlement), and the trust has provided a payment or benefit to the company's shareholder or their associate (as well as in other circumstances).

ATO's notice of rental bond data-matching program

The ATO will acquire rental bond data from State and Territory rental bond regulators bi-annually (ie. twice a year) for the 2024 to 2026 income years, including details of the landlord and tenant, managing agent identification details, and rental bond transaction details.

The objectives of this program are to (among other things) identify and educate individuals and businesses who may be failing to meet their registration or lodgment obligations.

The ATO expects to collect data on approximately 2.2 million individuals each financial year.

Study/training loans — What's new?

The indexation rate for study and training loans is now based on the Consumer Price Index (CPI) or Wage Price Index — whichever is lower.

This change has been backdated to indexation applied from 1 June 2023 for all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other study or training support loan accounts.

Consequently, indexation rates for 2023 and 2024 have changed to:

3.2% for 1 June 2023 (reduced from 7.1%); and
4.0% for 1 June 2024 (reduced from 4.7%).

Individuals who had a study loan that was indexed on 1 June 2023 or 1 June 2024 do not need to do anything.

Individuals whose study loan is in credit after the adjustment may receive a refund for the excess amount to their nominated bank account, if they have no outstanding tax or Commonwealth debts.

When to lodge SMSF annual returns

All trustees of SMSFs with assets (including super contributions or any other investments) as at 30 June 2024 need to lodge an SMSF annual return ( SAR ) for the 2023/24 financial year.

The SAR is more than a tax return — it is required to report super regulatory information, member contributions, and pay the SMSF supervisory levy.

However, not all SMSFs have the same lodgment due date:

Newly registered SMSFs and SMSFs with overdue SARs for prior financial years (excluding deferrals) should have lodged their SAR by 31 October 2024.
All other self-preparing SMSFs need to lodge their SAR by 28 February 2025 (unless the ATO has asked them to lodge on a different date).
For SMSFs that lodge through a tax agent, the due date for lodgment of their SAR is generally 15 May or 6 June 2025 .

SMSFs that have engaged a new tax agent need to nominate them to confirm they are the authorised representative for the fund.

SMSF trustees must appoint an approved SMSF auditor no later than 45 days before they need to lodge their SAR. Before they lodge, they must ensure that their SMSF's audit has been finalised and the SAR contains the correct auditor details.

If you need assistance with these or any other SMSF issues, please contact our office.

Threshold for tax-free retirement super increases to $2m

The amount of money that can be transferred to a tax-free retirement account will increase to $2 million on 1 July 2025.

The transfer balance cap ( TBC ) - the amount that can be transferred to a tax-free retirement account – is indexed to the CPI released each December. If inflation goes up, the general TBC is indexed in increments of $100,000 at the start of the financial year.

In December 2024, the inflation rate triggered an increase in the cap from $1.9 million to $2 million.

Everyone has an individual transfer balance cap. If you have started a retirement income stream, when indexation occurs, any increase only applies to your unused TBC.

If you are considering retiring, either fully or partially, indexation of the TBC provides a one-off opportunity to increase the amount of money you can transfer to your tax-free retirement account. That is, if you start taking a retirement income stream for the first time in June 2025, your TBC will be $1.9 million but if you wait until July 2025 your transfer balance cap will be $2 million, an extra $100,000 tax-free.

If you are already taking a retirement income stream, indexation applies to your unused TBC - so, you might not benefit from the full $100,000 increase on 1 July 2025.

Where can I see what my TBC is?

Your superannuation fund reports the value of your superannuation interests to the ATO. You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov .

Does the TBC impact other superannuation caps?

The increase in TBC does flow through to other super caps and thresholds. Importantly, the total super balance ( TSB ) cap thresholds impacting the non concessional contribution ( NCC ) cap. The increase in the thresholds are summarised in this table:

The increased TSB thresholds will allow some clients to make larger non concessional contributions than they otherwise could under current thresholds, but this will not change the NCC cap of $120,000 per annum.

Federal Court judgement of $13.6m penalties for false R&D claims

A joint investigation involving the ATO found that, between 2014 and 2017, a Sydney business coach promoted unlawful tax schemes encouraging clients to lodge over-inflated, inaccurate or unsubstantiated research and development ( R&D ) tax incentive claims.

The Federal Court recently handed down judgment against the business coach, his company co-director (and former tax agent), and their related companies, ordering that the business coach pay a penalty of $4.5 million, in addition to $9 million in penalties for the related companies.

The company co-director was also ordered to pay $100,000 for their role in promoting the schemes.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – Current / non-current liability classification

Mon, 03 Feb 2025 23:02:33 GMT

In the previous blog, we discussed the new standards in place for 31 December 2024, however the current / non-current classification changes deserve a bit more attention.

The revised AASB 101 Presentation of Financial Statements introduces a slightly amended definition of current liabilities and additional guidance around matters such as breaches of covenants, waivers and periods of grace.

Entities should consider the timing of testing of bank covenants since if they are tested:

On or before the reporting date – compliance with the covenants is considered in presenting the liability as current or non-current
After the reporting date – they are not considered as part of the current / non-current classification.

For example, an entity has a covenant which is tested annually at 31 January 2025, but they do not consider the existence of any potential breach of this covenant when classifying the liability for their 31 December 2024 financials since the testing date is after the reporting period.

However, additional disclosures are now required where an entity is required to give information about the existence of covenants, including facts and circumstances that indicate the entity may have difficulty complying with the covenant.

In the example above, if the entity considered that they may breach the January covenants due to current trading results, then this information would be disclosed in the 31 December 2024 financial statements.

Further disclosures in this example would depend on whether an actual breach occurred:

If breach occurred but going concern basis was still appropriate, then this would be disclosed as a non-adjusting event after the reporting date
If breach occurred and going concern was no longer appropriate, then the financial statements for 31 December 2024 would be prepared on a non-going concern basis
If no breach occurred, then a disclosure would be useful to clarify if facts and circumstances about a potential breach were included.

If an entity receives a waiver or period of grace in relation to a breached covenant, then this should be received by the borrower prior to the reporting period for it to be useful for the financial statements.

Entities should carefully review their loan agreements and covenants, to ensure accurate classification of liabilities under the new guidance since action may need to be taken prior to the end of the reporting period.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – Greenwashing Crackdown: Recent Cases Against Mercer and Vanguard

Mon, 20 Jan 2025 22:39:00 GMT

Greenwashing is now a word that most of us are familiar with and although there are different definitions – the general theme is where an entity is making statements about their ‘greenness’ which are not matched by their actions.

ASIC have been actively pursuing a number of entities in their area and two of these actions have now been resolved through the court process.

In cases against two major investment companies, where ASIC alleged misleading claims about the sustainability of certain investment products, significant penalties have been imposed by the courts:

$11.3 million for Mercer Superannuation (Australia) Ltd who admitted making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
$12.9 million for Vanguard Investments Australia who admitted to misleading investors that certain funds would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case.

The lesson from these cases is clear: entities must have solid evidence to back up claims about their sustainability practices—whether related to carbon emissions, diversity, modern slavery, or other environmental and social commitments. Misleading statements on platforms such as websites, annual reports, and social media are being flagged, and enforcement actions are being taken to address these breaches, which can significantly erode consumer trust.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Big changes proposed for NFP financial reporting

Mon, 06 Jan 2025 21:19:31 GMT

Big changes proposed for NFP financial reporting

The AASB have just released their long anticipated exposure drafts relating to future financial reporting requirements for private sector NFP entities. These changes will mean that certain NFP entities are no longer able to prepare special purpose financial statements and will introduce a third tier of accounting standards which is able to be used by some NFP entities.

These proposals are still in exposure draft phase and therefore you have an opportunity to provide feedback – once the final standards are released it will be too late.

The comment period is open until 28 February 2025, and we encourage all our potentially affected clients to reach out to your Lowe Lippmann contact to discuss the impact on your financial statements as well as providing direct feedback to the AASB.

In summary, these proposals are:

NFP private sector entities to prepare general purpose financial statements if they meet one of the following:
Are required by legislation to prepare financial statements that comply with either Australian Accounting Standards or accounting standards or
Are required by their constituting or other document to prepare financial statements that comply with Australian Accounting Standards or
Choose to prepare general purpose financial statements. (ED 334 Limiting the Ability of Not-for-Profit Entities to Prepare Special Purpose Financial Statements).
To release a self-contained accounting standard which can be applied to certain NFP private sector entities and will be a general purpose framework (Tier 3).

Further information about getting involved and additional resources are available on the AASB website on https://www.aasb.gov.au/news/developing-a-simpler-reporting-framework-for-nfp-entities-in-australia-exposure-drafts-released-for-feedback/

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – New standards at 31 December 2024

Mon, 16 Dec 2024 22:00:42 GMT

New standards at 31 December 2024

There are three new accounting standards to be considered for the first time for 31 December 2024 reporters.

A summary of each of these standards has been considered below as well as potential impacts on our clients.

Revised AASB 101 Presentation of Financial Statements provides additional guidance regarding presentation of liabilities as current or non-current. In particular, the standard includes more clarity around the existence of covenants and waivers / periods of grace in the event of a breach. Additional disclosures are required where covenants are tested after the reporting date. This is likely to have impact for many of our clients and we recommend that bank agreements are reviewed as soon as possible as well as identification of potential covenant breaches.

AASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback clarifies how a seller-lessee should measure lease liabilities arising from a sale and leaseback transaction. It ensures that the leaseback does not lead to the recognition of gains that aren't aligned with the right-of-use asset retained. Expected to have little impact, generally if our clients enter sale and leaseback arrangements, there is a failed sale as control is not transferred from the selling entity.

AASB 2023-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements (2024-1 for Tier 2) introduces new disclosure requirements to enhance transparency about the nature, timing, and amount of liabilities financed by suppliers in relation to the effects of such arrangements on an entity’s liquidity risk and leverage. Little impact expected, however disclosure amendment only.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Audit Lowe Down – What Should Be on the Board/Management Committee Agenda for NFP and Smaller Entities?

Mon, 09 Dec 2024 22:08:26 GMT

What Should Be on the Board/Management Committee Agenda for NFP and Smaller Entities?

We are fast approaching the end of the calendar year – the second most common reporting date for entities in Australia. Board and Management committees (Boards) of not-for-profits (NFPs) and small entities will be considering their annual reports and the 2025 outlook and as part of this project, it will be time to ensure the Board attention areas are appropriate.

Boards should focus on current and emerging risks to ensure their organisations remain resilient and effective – the normal items of financial management, governance, and strategic planning remain relevant, however other key matters which should be included are:

Cybersecurity: Ensure your organisation is protected against increasing cyber threats and has robust data protection measures in place, including knowing what data is collected and retained by the organisation.
Climate Risk: Evaluate how environmental changes impact operations, funding, and long-term sustainability and whether there is impact from the mandatory climate-reporting risk regime on your suppliers which may impact you.
Diversity & Inclusion: Ensuring your governance and decision-making reflect the community your organisation serves, and the appropriate voice is being heard.
Digital Transformation: Discuss emerging technologies for operational efficiency and addressing any digital gaps. Ensure appropriate policies for the use of AI are in place.
Staffing and Succession Planning: Regularly review staffing levels, development opportunities, and establish succession plans for key roles, such as the Chair of the Board, CEO or General Manager.
Geopolitical situation: Consider any likely impacts from the current world uncertainty and overseas elections including supplier and beneficiary locations, changes in exchange rates and interest rates.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Christmas Parties & Gifts 2024

Sun, 08 Dec 2024 21:25:43 GMT

Christmas Parties & Gifts 2024

With the well-earned 2024 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.

However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

FBT and 'entertainment'

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.

Using the actual method

Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible. However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;
the minor benefit exemption* cannot apply; and
the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (eg. family) on an infrequent and irregular basis.

The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold. However, entertainment expenditure that is FBT-exempt is also not deductible.

We note that a $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all. The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used:

For all 40 employees and their spouses – no FBT is payable (ie. if the minor benefit exemption is available), however, the party expenditure is not tax deductible.

If the 50/50 method is used:

The total expenditure is $10,000, so $5,000 (ie. 50%) is liable to FBT and tax deductible.

Christmas gifts

With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

Gifts that are not considered to be entertainment

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible ; and
gifts to clients, suppliers, etc. – no FBT , and tax deductible .

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre. Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
gifts to clients, suppliers, etc. – no FBT and not tax deductible .

Non-entertainment gifts at functions

What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (ie. the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible .

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible; and
in relation to the gifts:
the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and
as the gifts are not entertainment, the cost is tax deductible .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – December 2024

Wed, 04 Dec 2024 21:57:06 GMT

Can staff celebrations attract FBT?

With the holiday season coming up, employers may be planning to celebrate with their employees.

Before they hire a restaurant or book an event, employers should make sure to work out if the benefits they provide their employees are considered entertainment-related, and therefore subject to fringe benefits tax ('FBT'). This will depend on:

the amount they spend on each employee;
when and where the celebration is held;
who attends — is it just employees, or are partners, clients or suppliers also invited?
the value and type of gifts they provide.

Employers who do provide entertainment-related fringe benefits should keep records detailing all of this information so they can calculate their taxable value.

We will be releasing a full Tax Alert on this topic next week.

Reminder of December 2024 Quarter Superannuation Guarantee (SG)

Employers are reminded that employee superannuation contributions for the quarter ending 31 December 2024 must be received by the relevant super funds by 28 January 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

The SG rate is 11.5% for the 2024-25 income year.

ATO's tips for small businesses to 'get it right'

While the ATO knows most small businesses try to report correctly, it understands that mistakes can happen. The ATO advises taxpayers that it is important to get the following 'basics' right:

using digital tools and business software to help track and streamline processes to increase the efficiency of their business;
keeping accurate and complete records, which will help taxpayers meet their tax and super obligations and make lodging easier; and
getting the right advice from trusted resources such as their registered tax professional or the ATO's website, which can help taxpayers navigate change and uncertainty at any stage of the business life cycle.

SMSFs cannot be used for Christmas presents!

There are very limited circumstances where taxpayers can legally access their super early, and the ATO is reminding taxpayers that "paying bills and buying Christmas presents doesn't make the list."

Generally, taxpayers can only access their super when they:

reach preservation age and 'retire'; or
turn 65 (even if they are still working).

To access their super legally before then, taxpayers must satisfy a 'condition of release'.

SMSF members who illegally access their benefits may be liable for additional income tax and administrative penalties, and they could be disqualified as a trustee.

For taxpayers who have illegally accessed their super, returning it to the fund may be considered a new contribution. Depending on their contribution caps, this may result in additional tax on excess contributions.

Taxpayers should beware of people promoting 'early access schemes' to withdraw their super early (other than by legal means). They can protect themselves from promoters of such schemes by:

stopping any involvement with the scheme, organisation or person who approached them;
not signing any documents, and not providing any of their personal details such as their tax file number; and
making a 'tip-off' to the ATO online or by phoning the ATO on 13 10 20 .

Taxpayer's claims for various 'home business' expenses rejected

In a recent decision, the AAT rejected in full a taxpayer's claims for " several classes or categories of deductions. "

For the relevant period of 1 July 2021 to 30 June 2022, the taxpayer was (according to his employer) a 'technical architect'.

However, the taxpayer also claimed he worked from home 6am to 11pm seven days a week, 365 days of the year (as he was ‘always on call’), and his income tax return for the 2022 financial year claimed a wide range of deductions, totalling approximately $40,000.

The AAT separately considered each category of deductions claimed, and rejected each in turn.

In relation to his home office 'occupancy expenses' (eg. for home insurance, council rates, waste disposal, water rates, and repairs), the AAT noted that the 'home office' rooms (comprising floorspace occupying 31% of the dwelling’s total floor area) were not physically separate from the remainder of the dwelling, which the taxpayer shared with four other members of his family.

Home office running expenses (eg. gas, power and internet) were disallowed on the grounds that the taxpayer had " not properly established an entitlement to such deductions or otherwise appropriately apportioned them between private or work-related activities ." The AAT found his 100% claim for the internet, on the basis that the other members of the household did not use the internet connection, " very difficult to accept ".

In relation to plant and equipment expenses, the evidence was "largely non-existent."

In relation to consumable expenses, the AAT noted that they appeared to be for goods or services of a private or domestic nature (including medications, toilet paper, milk, tea, sugar and insect spray).

The AAT also rejected the taxpayer's claim for " payments made to his spouse for tax management, office cleaning and document management/storage ", noting that the services provided were generally of a private or domestic nature, and that the rendering of invoices by the spouse " has a degree of artificiality to it ".

ATO reminder about family trust elections

Taxpayers may be considering whether they should make a family trust election (FTE) for a trust, or an interposed entity election (IEE) for a trust or other entity.

Making an FTE provides access to certain tax concessions (assuming the relevant tests and conditions are satisfied), although there are important things to consider.

In particular, once the election is in effect, family trust distribution tax (FTDT) is imposed when distributions are made outside the family group of the 'specified individual'. FTDT is a 47% tax, payable by a trustee, director, or partner, as the case may be (depending on the entity).

Taxpayers should review FTEs and IEEs annually to ensure they remain appropriate. Taxpayers can only revoke or vary FTEs and IEEs in limited circumstances and subject to certain conditions.

Before making a distribution or annual trust resolutions, trustees should identify the members of the specified individual's family group. This will help avoid FTDT liabilities.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Australian Tax Office – Scam Alert

Mon, 25 Nov 2024 23:20:14 GMT

We want to alert you to recent scams exploiting the myGovID name change. Scammers are using phishing emails, fake websites, and calls to steal your information.

The below is an extract of a recent newsletter received from the ATO.

November 2024 – myGovID and myID scams

We are seeing ATO impersonation scams relating to the upcoming name change of myGovID to myID, which is occurring in mid-November.
myID is a new name and will have a new look – but it will still be used the same way.

There is nothing the community needs to do to prepare for this change.

You don't need to set up a new myID or reconfirm your details as part of this change. If you are asked to do this, it's a scam.

We have been communicating about this change through activities (including email) to current myGovID users.

Scammers are trying to trick the community into thinking they need to reconfirm their details via a link. The link directs users to a fraudulent myGov sign in page designed to steal personal information, including myGov sign in credentials.
These details can be used later in identity theft or other fraudulent activity such as refund fraud.

The following image is one example of the format this scam can take.

To protect yourself we remind you:

We won't send you an SMS or email with a link or QR code to log on to online services. You should access them directly by typing ato.gov.au or my.gov.au into your browser.
We will never send an unsolicited message asking you to return personal identifying information through SMS or email.
Don’t click on links, open attachments or download any files from suspicious emails or SMS; we will never send an unsolicited SMS that contains a hyperlink.
Only download the myGovID (soon to be myID) app from the official app stores (Google Play and the App Store).
Never share your login code with anyone.
We are on FacebookExternal Link , InstagramExternal Link , X and LinkedInExternal Link , but we will never use these social media platforms to private message, discuss your personal information, documentation, or ask you to make payments.

The following images are examples of other myGovID scams

For more detailed current scam alerts, click here

Please do not hesitate to contact Lowe Lippmann IT Department if you wish to discuss any of these matters further.

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Audit Lowe Down – Australia's New Climate Reporting Laws: What Do They Mean for Small and Medium-Sized Entities?

Mon, 18 Nov 2024 21:26:41 GMT

Australia's New Climate Reporting Laws: What Do They Mean for Small and Medium-Sized Entities?

Australia's Senate has just passed a Bill introducing mandatory climate-related reporting for large entities, but what does this mean for small and medium-sized businesses? While you may not be directly required to comply, there is still a significant impact to consider.

One of the key areas affected is Scope 3 emissions reporting, which includes the emissions generated along the supply chain. This means that if your entity is part of the supply chain of a mandatory reporter, they will likely need detailed information for you to accurately report their own emissions.

This is where proactive preparation can benefit you. A first step is to identify which entities in your value chain may be affected and start the conversation with them. You can then consider your carbon footprint: including how much energy does your business consume and your main sources of emissions. By gathering and tracking this data now, you can provide the necessary information to your larger partners, helping them comply with the new requirements.

For example, if you are a small manufacturer supplying products to a large retailer, that retailer will need to report the emissions associated with the production, transportation, and even the disposal of your products. Being able to provide them with accurate emissions data not only strengthens your business relationship but also positions you as a responsible and forward-thinking partner.

Preparing now for these regulatory changes could give you a competitive edge. Climate-related reporting is gaining momentum globally, and staying ahead of the curve will ensure your business is ready to meet any new obligations.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Reminder of changes to Vacant Residential Land Tax rules in Victoria from 1 January 2025

Wed, 13 Nov 2024 23:27:38 GMT

Reminder of changes to Vacant Residential Land Tax rules in Victoria from 1 January 2025

Background

Vacant residential land tax ( VRLT ) may apply to residential land that is vacant for more than 6 months in the preceding calendar year (ie. from 1 January 2024 to 31 December 2024). Residential land can include:

land with a home on it;
land with a home which is being renovated or where a former home has been demolished and a new home is being constructed; or
land with a home on it that has been uninhabitable for 2 years or more.

Residential land does not include land without a home on it (sometimes called unimproved land), commercial residential premises, residential care facilities, supported residential services or retirement villages.

The scope of what types of residential property will be exposed to the VRLT rules is being expanded over time, as follows:

The State Revenue Office ( SRO ) will release more information about unimproved land and VRLT in the short term.

The 6 month period of vacancy does not need to be continuous to trigger the VRLT rules.

VRLT rates & timing

For the year ending 31 December 2024, the VRLT rate is 1.0% of the capital improved value ( CIV ) of taxable land, which is the value of the land, buildings and any other capital improvements made to the property. The CIV is displayed on the council rates notice for the property.

Unlike land tax, there is no taxable value threshold for VRLT, which means land with a vacant residential property may be liable for VRLT regardless of its CIV.

From 1 January 2025 , a progressive rate of VRLT will apply to non-exempt land with a vacant residential property and the rate is based on the number of consecutive calendar years the land has been liable for VRLT, as follows:

The use of the residential land in the calendar year ending 31 December 2024 will determine whether VRLT applies in 2025. For example, if land owned was vacant for more than 6 months during the calendar year ending 31 December 2024, the land owner must make a VRLT notification by 15 January 2025, and if any assessment is required it will be sent by the SRO during February 2025.

VRLT notifications

A land owner must lodge a VRLT notification via the SRO online portal ( click here ) by 15 January each year if:

residential land is vacant for more than 6 months during the calendar year;
the land is no longer vacant for more than 6 months during the calendar year;
an exemption applies (discussed below); or
an exemption ceases to apply /exemption changes.

If a land owner has made a VRLT notification in a previous year and circumstances have not changed, subsequent notification do not need to be made.

VRLT exemptions

If a property is exempt from land tax, it is also exempt from VRLT. In addition, there are four specific VRLT exemptions which apply to:

holiday homes;
apartments/homes/units used for work accommodation purposes;
property transfers during the preceding year; and
new residential land & newly developed properties where ownership is unchanged.

We will consider each exemption here and note any changes to the requirements from 1 January 2025 .

VRLT exemption 1: Holiday homes

* A close relative of the owner includes a spouse or domestic partner, (grand) parents, (grand) children of owner/vested beneficiary or partner; brother, sister, niece or nephew of owner/vested beneficiary and their respective partners.

We note that use of the holiday home by friends (and not close relatives) does not count towards the 4-week occupation requirement from 1 January 2025.

VRLT exemption 2: Work accommodation

The work accommodation exemption applies to circumstances where someone may live in regional Victoria or another state or territory and maintain an apartment/townhouse to stay in while they work away from their usual home.

VRLT exemption 3: Property transfers during the preceding year

Properties that change ownership during a calendar year are exempt from VRLT in the following year.

The change of ownership must occur during the calendar year. It is not sufficient that the property is available for sale or awaiting settlement as at 31 December of the year preceding the tax year. Importantly settlement must take place no later than 31 December.

This exemption remains unchanged after 1 January 2025.

VRLT exemptions 4: New residential land & newly developed properties where ownership is unchanged

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – November 2024

Wed, 06 Nov 2024 21:48:32 GMT

Hiring employees for the festive season

As the festive season approaches, employers that hire new employees to help with their business should remember the following when it comes to their employer tax and super obligations:

Employers should make sure they are withholding the right amount of tax from payments they make to their employees and other payees, especially as this will help their employees meet their end-of-year tax liabilities;
Employers must pay super guarantee (currently at 11.5%) to all eligible employee's super funds in full and on time to avoid paying the super guarantee charge; and
If employers are still not reporting through single touch payroll (STP) and they do not have an approved exemption, deferral or concession in place, they should start reporting now. If they have just started a business or recently employed staff, they will need to report through STP from their first payday.

Lodging and paying business activity statements (BASs)

The ATO is reminding taxpayers that it is important to lodge BASs and pay in full and on time to avoid penalties and interest charges.

The BAS for the first quarter of 2024-25 is generally due on 28 October, but taxpayers may receive an extra:

four weeks if they lodge through a registered tax or BAS agent; or
two weeks if they lodge online.

The cost of managing tax affairs is tax deductible for taxpayers, and a registered agent's help will allow them to focus on running their business.

Deductions for financial advice fees

The ATO has provided guidance about when an individual not carrying on an investment business may be entitled to a deduction for fees paid for financial advice.

An individual is entitled to a deduction for fees for financial advice to the extent that the loss or outgoing is incurred in gaining or producing assessable income, unless the loss or outgoing is of a capital, private or domestic nature.

Fees for financial advice an individual incurs may also be deductible to the extent that the advice relates to managing their “tax affairs” (ie. fees for advice in relation to salary sacrifice arrangements).

However, fees for financial advice on a proposed investment prior to the acquisition of an asset, or about how to invest additional funds to grow an investment portfolio, will not be deductible.

The individual must also have sufficient evidence of the expenditure to claim the expense as a deduction, such as a properly itemised invoice.

ATO's notice of government payments data-matching program

The ATO will acquire government payments data from government entities which administer government programs for the 2024 to 2026 income years, matching data on government payments made to service providers against ATO records, including service provider identification details and payment transaction details.

The ATO estimates that records relating to approximately 60,000 service providers will be obtained each financial year, including approximately 9,000 individuals, with the remainder consisting of companies, partnerships, trusts and government entities.

FBT on plug-in hybrid electric vehicles

From 1 April 2025, a plug-in hybrid electric vehicle ( PHEV ) will not be considered a zero or low emissions vehicle under fringe benefits tax ( FBT ) law and will not be eligible for the electric car FBT exemption. However, an employer can continue to apply the electric car exemption if:

use of the PHEV was exempt from FBT before 1 April 2025; and
they have a financially binding commitment to continue providing private use of the vehicle to an employee or their associate on and after 1 April 2025 (note that any optional extension of the agreement is not considered binding).

If there is a change to a pre-existing commitment on or after 1 April 2025, the FBT exemption for the PHEV will no longer apply from the date of that new commitment.

An employer is not entitled to an exemption from FBT after 1 April 2025 if there was no binding financial commitment to provide the car to a particular employee in place before then.

Eligibility for compassionate release of superannuation

The ATO has been responsible for the administration of the early release of superannuation on compassionate grounds since 1 July 2018.

It will only approve a release of superannuation on compassionate grounds if the applicant meets all the conditions set out in the regulations, including that the applicant has no other means to pay the expenses.

The five main grounds of eligibility are:

medical treatment or transport (ie. to treat a life-threatening illness or injury, or alleviate acute or chronic pain or mental illness) for the applicant or their dependant;
accommodating a disability for the applicant or their dependant;
palliative care for a terminal illness for the applicant or their dependant;
funeral expenses for a dependant of the applicant; or
preventing foreclosure or forced sale of the applicant's home.

AAT rejects taxpayer's claims for work-related expenses

In a recent decision, a taxpayer's claims for various work-related expenses were rejected by the AAT.

The taxpayer was employed as a traffic controller in the 2020 income year. In his income tax return for that year he claimed $9,800 in work-related deductions, including for car expenses (using the cents per km method), travel expenses, clothing expenses and self-education expenses, as well as supplemental deductions.

The ATO disallowed all of the deductions, and the taxpayer then appealed to the AAT.

The AAT agreed that all of the taxpayer's claims for work-related expenses should be disallowed, largely because the taxpayer failed to substantiate these expenses, whether by way of receipts/bank statements or any other form of evidence.

Also, in relation to the claim for car expenses, the AAT noted that the taxpayer had been using company vehicles at least some of the time.

The AAT also noted that there had generally been " no attempt to apportion work use against private use. . . Even if I could satisfy myself of some apportionment, the amount would likely be so insignificant that it would not result in any real deduction in taxable income. "

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Are Special Purpose Financial Statements Still Acceptable for Not-For-Profit (NFP) Entities?

Sun, 03 Nov 2024 23:03:39 GMT

Are Special Purpose Financial Statements Still Acceptable for Not-For-Profit (NFP) Entities?

Following on from our post 23rd October 2024 which addressed special purpose financial statements in relation to for-profit entities, we have received a number of questions regarding the same topic for not-for-profit entities.

Not-for-profit entities may continue to choose to prepare Special Purpose Financial Statements (SPFS) if they assess themselves as non-reporting entities. Per Statement of Accounting Concepts 1 (SAC 1), a non-reporting entity is one where users, such as donors, members, creditors, or regulators, are not reliant on general-purpose financial reports for making decisions. This assessment is not static; it must be revisited annually by the governing body to ensure it remains accurate.

Although NFPs self-assess their reporting status, it is crucial to remember that there may be legislation governing financial statements which can vary depending on the type of entity, the State of incorporation and ACNC registration. For instance, SPFS prepared under the ACNC Act must comply with either:

The full presentation and disclosure requirements in the compulsory standards for SPFS listed in section 60.30 of the ACNC Regulations (AASB 101, AASB 107, AASB 108, AASB 124, AASB 1048, AASB 1054) or
the relevant paragraphs from AASB 1054 and AASB 1060 being paragraphs 8, 11, 14-103, 106-110, 189-203 of AASB 1060 and paragraphs 1 to 6, 9, 9A, 9B and 17 of AASB 1054.

The Australian Accounting Standards Board (AASB) is also developing a new Tier 3 standard specifically for smaller not-for-profits, we are expecting an exposure draft of the proposals by the end of 2024. This upcoming standard and proposed changes to the Conceptual Framework aims to simplify reporting requirements while mandating general purpose financial statements for more NFPs.

In conclusion, while SPFS might still be permissible, not-for-profits should carefully assess their reporting obligations and the needs of their users to ensure that your financial reporting remains relevant, compliant, and transparent while serving the best interests of your organisation and its stakeholders.

Monitoring the proposed developments from the AASB will allow you time to prepare for changes that might be needed.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Are Special Purpose Financial Statements Still Acceptable for For-Profit Entities?

Wed, 23 Oct 2024 02:27:00 GMT

Are Special Purpose Financial Statements Still Acceptable for For-Profit Entities?

The financial reporting landscape in Australia has seen significant changes over the last few years, particularly in the acceptability of special purpose financial statements (SPFS) for for-profit entities. Historically, many for-profit entities prepared SPFS to meet specific needs without adopting the full suite recognition, measurement and disclosure requirements of accounting standards.

We continue to receive lots of questions about whether for-profit entities can continue to prepare special purpose financial statements.

The AASB introduced new requirements for assessing whether a for-profit, private sector entity needs to prepare general purpose financial statements through amendments released in AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For Profit Private Sector Entities.

In summary, from 30 June 2022, a for-profit private sector entity must prepare general purpose financial if one of the following criteria is met – the entity complies with:

A legislative requirement to prepare financial statements in accordance with Australian Accounting Standards or accounting standards – this would include, for example Companies required to financial statements under the Corporations Act, e.g. all large proprietary companies, small foreign owned companies, public companies greater than $250k revenue OR
A constituting or other document that requires the preparation of financial statements in accordance with Australian Accounting Standards. This might include documents such as constitution, trust deed, joint venture agreement, bank loan agreement. If this requirement exists and
the agreement was created / amended prior to 1 July 2021 then an entity can continue preparing special purpose financial statements with some extra disclosures
the document was created or amended after 1 July 2021 then then general purpose financial statements must be prepared.

While SPFS might still be permissible in specific cases, entities should evaluate whether their current financial statements are appropriate given the change in accounting standards.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Material Accounting Policies: Moving towards less cluttered and more readable financial statements

Wed, 09 Oct 2024 02:03:17 GMT

Material Accounting Policies: Moving towards less cluttered and more readable financial statements

Many entities preparing financial statements are required to comply with AASB 101 Presentation of Financial Statements. This standard requires disclosure of accounting policy information, however from 31 December 2023 the requirement has shifted from disclosing significant accounting policies to focusing on material accounting policy information.

This aims to enhance the relevance of financial statements by ensuring that only material information about accounting policies, i.e. information that is essential for understanding the entity’s financial performance and position, is disclosed.

Financial statements should no longer have pages of boilerplate words detailing accounting standard requirements included in the accounting policy section. The accounting policies disclosed should be specific to the entity covering:

Changes to accounting policies
Selection of options with accounting standards
Information relating to significant judgements and estimates
Development of an accounting policy for a specific transaction not explicitly covered by the accounting standards
Accounting treatment for a particularly complex transaction.

Instead of a checklist approach, the focus is now on whether the information is material to the users of the financial statements and will result in less pages, less clutter and more focussed information to users which must be a good thing. In addition, restructuring the accounting policy information into the relevant notes means that users have all the information on a particular topic in the one place.

During the last few months, we have been working with clients on implementing these changes and have seen reductions in accounting policies (and associated pages of the financials) of between 50 and 80% with positive user feedback on the new structure.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – October 2024

Tue, 01 Oct 2024 23:13:45 GMT

Avoid a tax time shock

Individual taxpayers can take the following steps right now to ensure the correct amount of tax is being put aside throughout the year:

let their employer know if they have a study or training support loan, such as a HECS or HELP debt;
check they are only claiming the tax-free threshold from one employer;
consider whether the Medicare Levy Surcharge may affect them this financial year (ie. whether they have the appropriate private health insurance);
check their income tier is correct for their private health insurance rebate; and
consider voluntarily entering PAYG instalments and pre-paying tax throughout the year to avoid a large tax bill at tax time for investment or business income.

If you would like to discuss or implement any of these steps and strategies in more detail, please feel free to contact our office.

Reminder of September Quarter Superannuation Guarantee (SG)

Employers are reminded that employee super contributions for the 1 July 2024 to 30 September 2024 quarter must be received by the relevant super funds by 28 October 2024 in order to avoid being liable to pay the SG charge.

myGovId changing its name to myID

The digital identity app 'myGovID' will soon be changing its name to 'myID'. While the name is changing, the login and security will not change.

Taxpayers who have already set up their myGovID and use it to access government online services will not need to do anything when the app changes to myID. They will still have:

the same details — there is no need to set up a new myID. Their login details (including email address) and identity strength remain the same;
continued use — once available their existing app should automatically update to myID or they can manually update it from the APP Store or Google Play; and
access to services — they can still use the app to securely access government online services.

The new name aims to reduce the confusion between myGovID and myGov.

ATO security safeguards for victims of fraud recently enhanced

Where a taxpayer has been the victim of identity, tax or super fraud, the ATO may apply security safeguards to their account to prevent further harm. This may require the impacted taxpayer to contact the ATO each time they need to access their information and cause inconvenience for the taxpayer as well as their tax agents.

The ATO has recently enhanced processes to improve ongoing access to ATO online services. Impacted taxpayers must contact the ATO for initial access and then set a Strong online access strength.

To set a Strong online access strength, taxpayers need to:

set up their myGovID to a Strong identity strength using their Australian passport;
connect their myGovID to their myGov account;
sign in to myGov with their myGovID; and
go to ATO online services.

Once set, taxpayers no longer need to contact the ATO every time they access their information.

Impacted taxpayers must continue to use their Strong myGovID whenever they access ATO online services, or account access will be restricted to maintain ongoing protection of client information.

As noted above, myGovID will soon be changing its name to myID.

Valuing fund assets for SMSFs

One of the many responsibilities SMSF trustees have every income year is valuing their fund's assets at market value.

The market value of an asset is the amount that a willing buyer and seller would agree to in an arm's-length transaction. These valuations will be used when preparing the fund's accounts, statements and SMSF annual return ( SAR ).

Asset valuations will be reviewed by an approved SMSF auditor as part of the annual audit prior to lodgment of the SAR. The auditor will check that assets have been valued correctly and assess and document whether the basis for the valuations is appropriate given the nature of the asset. The auditor is not responsible for valuing fund assets.

Taxpayers should ensure that they have their valuations done before going to the auditor.

It is the responsibility of the SMSF trustee to provide objective and supportable evidence to their auditor for the valuation of the fund's assets, including all relevant documents requested to prevent delays in auditing the fund. Failure to do so could result in a potential late lodgment of their annual return or a contravention if mistakes have been made.

SMSF trustees should start researching now to find what type of evidence they need to support the valuation as this can take time. For some asset types valuations must be undertaken by a qualified independent valuer.

ATO's notices of data-matching programs

The ATO will acquire officeholder data from ASIC and other bodies for the 2024 to 2027 income years, including name, address, date of birth, ABN, contact details, organisation details and officeholder details.

The ATO estimates that records relating to more than 11 million individuals will be obtained.

The ATO will acquire property management data from property management software companies for the 2019 to 2026 income years, including property owner identification details, property details, and property transaction details.

The ATO estimates that records relating to approximately 2.3 million individuals will be obtained each financial year.

The ATO will acquire lifestyle assets data from insurance providers for the 2024 to 2026 income years.

Insurance policy data will be collected for the following classes of assets, where the asset value is equal to or exceeds the nominated thresholds.

The data items include client identification details (names, addresses, contact details, dates of birth and ABN) and policy details (including total value insured, description and purchase price of the property insured).

The ATO estimates that the total number of policy records obtained will be approximately 650,000 to 800,000 each financial year, and that approximately 250,000 to 350,000 matched records will relate to individuals.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Australian Public Companies: Are You Ready for the Consolidated Entity Disclosure Statement?

Mon, 09 Sep 2024 23:04:29 GMT

Australian Public Companies: Are You Ready for the Consolidated Entity Disclosure Statement?

For years ending on or after 30 June 2024, Australian public company financial statements prepared under the Corporations Act are required to include a Consolidated Entity Disclosure Statement ( CEDS ). This includes not-for-profit companies limited by guarantee who are not ACNC registered.

The CEDS aims to provide transparency about entities within a company’s consolidated group through disclosure of information such as the name of each entity, incorporation details, type of entity and tax residency.

One crucial aspect of this new requirement is that materiality does not apply, every entity must be included, no matter how small. Directors must make a declaration that the information is true and correct, adding another layer of accountability. The auditors are required to provide their opinion on the CEDS.

The CEDS is generally located after the last note in the financial statements and before the auditor’s opinion.

This is a new addition to the Corporations Act (s295(3A) legislated with little notice and in collaborating with our clients, we have encountered complexities, particularly in determining the correct tax residency for some subsidiaries. This has often led to detailed discussions involving entities, their tax advisors, and auditors to ensure compliance.

We are in the middle of 30 June 2024 reporting season which means it is time to review your group structure and start gathering the necessary information and obtaining expert advice if necessary.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Audit Lowe Down – Do You Need an Audit? Practical Guidance for Australian Businesses

Mon, 02 Sep 2024 23:03:59 GMT

Do You Need an Audit? Practical Guidance for Australian Businesses

Navigating whether your business needs an audit can be tricky, but it is crucial to ensure compliance.

Determining whether your business needs an audit in Australia depends on a few key factors, including business size, structure, and industry.

For large proprietary companies, audits are mandatory if they meet at least two of the following thresholds: annual revenue of $50 million or more, assets of $25 million or more, or 100 or more employees. Public companies and some not-for-profits are also required to undergo audits to comply with regulatory requirements.

But what if your business is small or medium-sized? Even if an audit is not legally required, you might still need one. For example, your bank might request audited financial statements as part of loan conditions, or suppliers or governments may want assurance that your financials are accurate and reliable. Additionally, certain industries, such as those regulated by specific state or federal laws, may have audit requirements regardless of entity size.

Even if you have no requirement for an audit, many entities choose to have their financial statements audited as part of good governance since an audit isn’t just a compliance exercise to tick a box—an audit can also provide valuable insights into your business operations and financial health as well as improving credibility with stakeholders.

If you are uncertain about whether an audit is necessary or could benefit your business, consulting with a professional can clarify your obligations and help you make informed decisions about the potential value of an audit.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – September 2024

Mon, 02 Sep 2024 05:42:41 GMT

Taxpayers can start lodging their tax returns

With millions of pieces of information now pre-filled (including information from most banks, employers, government agencies and private health insurers), the ATO is giving taxpayers with simple affairs the 'green light' to lodge their tax returns.

Taxpayers who plan to claim deductions this year should make sure they have the correct records, and, in most cases, " a bank or credit card statement (on its own) isn’t enough evidence to support a work-related deduction claim – you’ll need your receipts ".

The ATO reminds taxpayers that the rules regarding how and when they can claim a deduction can change, including in relation to car expenses and working from home costs. Therefore, they should not just 'copy and paste' their deductions from last year, and they may require assistance from their accountant in this regard.

The ATO notes that taxpayers using a registered tax agent normally have more time to lodge..

Business self-review checklist: GST classification of products

GST classification errors can lead to significant under-reporting of GST for some taxpayers.

The ATO recently issued guidance for small to medium businesses on self-reviewing GST classification of food and health products (see ATO guide here ).

The use of this guide is not mandatory, although the ATO encourages small to medium businesses to regularly self-review the GST classification of supplies, and adopt better practice processes and controls as listed in the accompanying checklist.

The checklist provides practical, step-by-step guidance for entities to:

self-review the GST classification of their supplies (products they import, purchase as stock or produce for sale); and
assess the robustness of their business systems, processes and controls that directly impact their GST classification systems.

Small business food retailers with turnover of $2 million or less may use one of the 'GST simplified accounting methods' to account for GST instead.

Receiving payments or assets from foreign trusts

Additional tax liabilities may arise when money or assets of a foreign trust are paid to a taxpayer or applied for their benefit, and they are a beneficiary of the foreign trust. These can include:

loans to them by the trustee directly or indirectly through another entity;
amounts paid by the trustee to a third party on their behalf;
amounts that are described as gifts from family members, but are sourced from the trust; and
distributions paid to them or trust assets (such as shares) transferred to them by the trustee.

Taxpayers who receive money from a foreign trust may need to ask further questions to determine whether the amount must be included in their assessable income, including:

whether they are a beneficiary of the foreign trust;
where the foreign trust obtained the money; and
why the money was paid to them, for example, is it a payment for services, a gift, a distribution or a loan.

Storing correct records for work-related expenses

Taxpayers need to consider what work-related expenses they will be looking to claim in the new financial year, and what records they will need to substantiate those deductions.

Records can be kept as a paper version, an electronic copy, or a 'true and clear' photo of an original record.

Working from home deductions

Taxpayers can use two different methods to calculate their working from home deductions, and they each have different requirements:

With the fixed rate method , taxpayers will need a record of the actual number of hours they worked from home for the whole financial year, and at least one record for each of the additional running expenses they incurred that the rate includes (e.g., an electricity bill).
To use the actual cost method , taxpayers must also keep records for any additional running expenses they incurred, and the depreciating assets they bought and used while working from home, and show how they apportioned work-related use for their expenses and depreciating assets.

Tax incentives for early stage investors

The ATO is reminding investors who purchased new shares in a qualifying 'early stage innovation company' (ESIC) that they may be eligible for tax incentives.

These tax incentives provide eligible investors who purchase new shares in an ESIC with:

a non-refundable carry forward tax offset equal to 20% of the amount paid for their eligible investments – this is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year; and
modified capital gains tax ( CGT ) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than 10 years may be disregarded – capital losses on shares held less than 10 years must be disregarded.

The maximum tax offset cap of $200,000 does not limit the shares that qualify for the modified CGT treatment.

Penalties imposed on taxpayer who falsely amended tax returns

The Administrative Appeals Tribunal ( AAT ) recently affirmed the ATO's decision to impose shortfall penalties on a taxpayer who had lodged false amended income tax returns.

The taxpayer had lodged income tax returns for the 2020 and 2021 income years through her tax agent. The taxpayer subsequently lodged amended returns to claim deductions regarding a non-existent family trust for those years.

She did not consult her tax agent before doing so.

Following an audit, the ATO advised the taxpayer that she had no entitlement to the deductions claimed, and it imposed shortfall and administrative penalties.

The AAT concluded that the conduct of the taxpayer was reckless, and in lodging her amended tax returns without the knowledge of her tax agent, the taxpayer had not taken reasonable care. The AAT accordingly affirmed the ATO's decision to impose shortfall and administrative penalties on the taxpayer.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Vic Land Tax exemption for leasing land in primary production business

Wed, 07 Aug 2024 03:03:55 GMT

Vic Land Tax exemption for leasing land in primary production business

The Victorian Supreme Court has allowed a taxpayer’s successful appeal from a decision of the VCAT and found that it was entitled to an exemption from land tax under section 67 of the Land Tax Act 2005 (Vic) on the basis that the land was used by the taxpayer primarily production land.

Section 67 provides an exemption for land located wholly or partly in greater Melbourne, that is wholly or partly in an urban zone, where the Commissioner determines that land held by the trustee of a discretionary trust is used solely or primarily for a business of primary production.

The taxpayer, the corporate trustee of a discretionary family trust, was assessed in the 2018 and 2019 land tax years for land tax on the land, which it leased to a Partnership made up of some of the family members.

In determining the principal business of the taxpayer, at the Tribunal level (leading to the Supreme Court decision) there was a comparison of the gross income, labour employed, and capital employed in each respective business.

The Tribunal found that Mr. M (the key individual involved in the activities on the land, a director of the corporate trustee and one of the partners in the Partnership) undertook the majority of the taxpayer’s cattle farming activity himself and was ordinarily engaged in the business of breeding cattle for sale in a substantially full-time capacity.

The Supreme Court considered that the rental payments made to the taxpayer were simply the mechanism for allocating revenue from the sale of cattle to the taxpayer (including that the taxpayer was also engaged in the relevant activities).

As such, this resulted in the Supreme Court finding that the taxpayer was “carrying on one integrated primary production business” and the rent received by the taxpayer from the Partnership arose from the taxpayer’s primary production business. The fact that the taxpayer and the Partnership held separate identities did not take away from this conclusion.

The Supreme Court also noted that the lease arrangement “was merely instrument designed to allocate revenue from primary production cattle business on land to the taxpayer”.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – August 2024

Fri, 02 Aug 2024 00:30:12 GMT

ATO's tips for correctly claiming deductions for rental properties

Taxpayers who have work done on their rental property should consider the following factors in determining claims for expenses.

Repairs and general maintenance are expenses for work done to remedy or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year the expense occurred.
Initial repairs include any work done to fix defects, damage or deterioration existing at the time of purchase. These are capital repair expenses and cannot be claimed as a deduction.
Capital works are structural improvements, alterations and extensions to the property, claimed at 2.5% over 40 years (with some exceptions). Deductions for capital works can only be claimed after the work has been completed.
Improvements or renovations that are structural are also capital works. Work going beyond remedying defects, damage or deterioration which improves the function of the property are improvements.
Repairs to an 'entirety' are also capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item (for example, a depreciating asset).
Depreciating assets must be claimed over time (as 'capital allowances') according to their 'effective life'.

Notice of online selling data-matching program

The ATO will acquire Australian sales data from online selling platforms for the 2024 to 2026 income years, including full names, dates of birth, addresses, emails, business names, ABNs, contact phone numbers and account details.

The ATO estimates the total number of account records to be obtained will be between 20,000 and 30,000 each income year, with approximately 10,000 to 20,000 of these records relating to individuals.

The objectives of this program are to (among other things) promote voluntary compliance and increase community confidence in the integrity of the tax and superannuation systems.

Small business energy incentive available for the 2024 income year

Businesses with an aggregated annual turnover of less than $50 million that had upgraded or purchased a new asset that helps improve energy efficiency during the 2024 income year should consider the small business energy incentive.

This new measure gives them the opportunity to claim a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support more efficient use of energy.

This incentive applies to eligible assets that were first used or installed ready for use for a taxable purpose between 1 July 2023 and 30 June 2024.

Eligible improvement costs must have been incurred during this period to be eligible for the bonus deduction.

Up to $100,000 of total expenditure is eligible under this incentive, with the maximum bonus deduction being $20,000 per business.

This 20% bonus deduction is on top of other existing ones. Businesses can claim both the ordinary deduction for the expense as well as the bonus deduction.

Importance of good record keeping when claiming work-related expenses

The ATO is advising taxpayers that having records to substantiate claims is essential to prove deductions can be claimed, having regard to the following in particular:

A bank or credit card statement on its own will generally not be enough evidence to support a work-related expense claim. Taxpayers instead need detailed written evidence such as a receipt.
If a taxpayer's total claim for deductible work expenses is $300 or less, they can claim a deduction without written evidence, but they must still be able to show that they spent the money and how they calculated the amount being claimed.
While some deduction types do not require receipts (ie. laundry expenses), some kind of record may still be necessary. Taxpayers may also need a record that shows their private and work-related use (ie. a diary), and how the amount claimed as a deduction was calculated.

SMSFs acquiring assets from related parties

SMSFs cannot acquire an asset from a “related party” (such as a member or their spouse or relative) unless it is acquired at market value and is:

a listed security (e.g., shares, units or bonds listed on an approved stock exchange);
“business real property” (broadly, land and buildings used wholly and exclusively in a business);
an 'in-house asset' as defined, provided the market value of the SMSF's in-house assets does not exceed 5% of the total market value of the SMSF's assets; and/or
an asset specifically excluded from being an in-house asset.

If the asset is acquired at less than market value, the difference between the market value and the amount actually paid is not considered to be a contribution. Instead, income generated by the asset will be considered 'non-arm's length income' and will be taxed at the highest marginal rate.

Federal Court overturns AAT's tax resident decision

The Federal Court has recently overturned an Administrative Appeals Tribunal ( AAT ) decision that a taxpayer was a resident of Australia for tax purposes (even though he was mostly living and working overseas during the relevant period).

The taxpayer was a mechanical engineer who became an Australian citizen in 1978.

He lived and worked in Dubai, United Arab Emirates, from September 2015 until 2020, and he spent less than two months in Australia for each of the 2017 to 2020 income years visiting his family.

The AAT nevertheless held that he was a tax resident of Australia for each of the 2016 to 2020 income years, as he "maintained an intention to return to Australia and an attitude that Australia remained his home."

On appeal to the Federal Court, the taxpayer succeeded in having the AAT's decision overturned.

The Federal Court held, in considering whether the taxpayer was a resident of Australia according to 'ordinary concepts', that the AAT applied the wrong test, confusing it with the 'domicile test'.

Also, in relation to the 'domicile test', the Federal Court noted that the AAT further misunderstood how to establish that a person had a 'permanent place of abode' outside of Australia.

The Federal Court accordingly held that the taxpayer's appeal be allowed, and the matter be remitted to the AAT for determination according to law (i.e., the AAT needs to reconsider the matter).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – July 2024

Mon, 01 Jul 2024 23:37:57 GMT

ATO's main residence exemption tips

The main residence exemption needs to be considered in a variety of situations when a taxpayer sells a property they have lived in. The ATO hopes that the following tips will help in this regard:

Taxpayers should consider if they have started earning income from their home (in which case they may need to get a market valuation for CGT purposes).
When renting out a property that was their main residence, taxpayers need to consider whether to use the 6-year absence rule when they sell their property.
Taxpayers can only have one property as their main residence at a time. The only exception is the 6-month period when they move from one home to another.
Has the taxpayer's residency changed? If so, this may affect eligibility for the exemption.

Reminder of June 2024 Quarter Superannuation Guarantee (SG)

Employers are reminded that employee superannuation contributions for the 1 April 2024 to 30 June 2024 quarter must be received by the relevant super funds by 28 July 2024 (which is a Sunday), in order to avoid being liable to pay the SG charge.

Notice of Medicare levy exemption data-matching program

The ATO will acquire Medicare Exemption Statement data from Services Australia for the 2024 to 2026 income years, including individuals' full names, dates of birth, residential addresses, entitlement status, and approved entitlement details.

The objectives of this program are to (among other things) ensure individuals are correctly claiming an exemption from payment of the Medicare levy and Medicare levy surcharge.

Family trust elections and interposed entity elections

Family trust distribution tax ( FTDT ) is a special, 47%, tax sometimes payable by a trustee, director or partner. It applies when a trust has made a family trust election ( FTE ), or an entity has made an interposed entity election ( IEE ), and makes a distribution outside the 'family group' (as defined) of the specified individual in the election.

Where such an election has been made by a trustee or another entity, it is important that the original election is retained in the approved form. FTEs and IEEs can be lodged with the ATO.

Where elections are involved, taxpayers should consider the following on an annual basis:

if the election is needed and whether it can, and should be, revoked;
whether the specified individual remains the most suitable person and, if not, whether the specified individual can and should be varied; and
the timeframes to vary or revoke elections (noting these are limited and that, outside these periods, the elections and the specified individuals cannot be changed).

It is important to recognise who the members of the specified individual's family group are when making annual trustee resolutions, as distributions outside the family group will result in FTDT of 47%.

ATO may cancel inactive ABNs

The ATO regularly reviews, and sometimes cancels, inactive Australian Business Numbers ( ABNs ). The ATO may review a taxpayer's ABN if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information.

If the ATO thinks a taxpayer is no longer using their ABN, it will contact them by email, letter or SMS.

If the taxpayer is still running a business, the ATO will tell them what they need to do to keep their ABN. If they are no longer in business, they do not need to do anything -— the ATO will cancel their ABN.

Taxpayers who think they are still entitled to an ABN that has been cancelled need to reapply for it. If they restart their business activities, they should be able to reapply for the same ABN, provided that their business structure is not changing.

New lodgment obligation for income tax exempt organisations

Non-charitable not-for-profits ( NFPs ) with an active ABN, including community service organisations, need to lodge an annual NFP self-review return to notify their eligibility for income tax exemption.

To be eligible to self-assess as income tax exempt, the organisation's main purpose must be a community service purpose. Any other purpose must be incidental, ancillary or secondary.

Community service purposes are altruistic, which means the organisation must be established and operated for the wellbeing and benefit of others, and not for political or lobbying purposes.

For example, a club or association that has been set up principally to improve the welfare of the community would be regarded as a community service organisation. This would not be the case, however, if its main purpose was to advance the professional interests of its members.

Taxpayers able to apply CGT small business concessions

The Administrative Appeals Tribunal ( AAT ) recently held that a trust was entitled to apply the CGT small business concessions and, therefore, it could reduce a capital gain it made down to nil.

In March 2015, a family trust entered into an agreement for the sale of its shares in a company for $3,500,000. In June 2015, the trustees of the trust passed a resolution apportioning the trust's income for that year between the four taxpayers (two brothers and their wives), and also distributing the capital gain made on the sale equally between those four taxpayers.

The determination of the trust's net income for distribution to the beneficiaries took into account the 50% CGT discount and CGT small business concessions, relying on a valuation of the shares (and underlying business) being $3,500,000.

The ATO, however, deemed the shares sold by the trust to have been disposed of for a market value of $10,640,000, based on an updated valuation report. This also meant that the trust was not entitled to the CGT small business concessions, as this valuation meant that it did not satisfy the CGT maximum net asset value ( MNAV ).

The ATO relied on the 'market value substitution' rule to substitute the value of $10,640,000 in place of the sale price of the shares. This meant that each taxpayer's share of the 2015 trust distribution was increased from $321,989 to $1,194,174.

In relation to the MNAV test, the AAT needed to determine whether the net value of the CGT assets of the trust (and its connected entities) exceeded $6,000,000.

The AAT preferred the approach taken by the valuers for the taxpayers, partly because they had given "more attention and consideration to this particular business and the circumstances and location in which it operates."

The AAT accordingly concluded that the total net value of the CGT assets of the trust (and connected entities) was below $6,000,000, and so the MNAV test was satisfied, and the taxpayers' objections to the amended assessments should be allowed.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Bill for Instant Asset Write-Off for $20,000 and Small Business Energy Benefits finally passes

Wed, 26 Jun 2024 03:34:16 GMT

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 was finally passed by Parliament yesterday, with two key concessions, including:

The instant asset write-off threshold is $20,000, for assets first used or installed ready for use between 1 July 2023 and 30 June 2024.
The Small Business Energy Benefits bonus 20% deduction for eligible expenditure that supports electrification or more efficient energy use, incurred between 1 July 2023 and 30 June 2024.

Now that the Bill has been passed by both the House of Representatives and the Senate, it now simply waits to receive Royal assent.

Instant asset write-off threshold is $20,000

The instant asset write-off ( IAWO ) threshold is $20,000, for assets first used or installed ready for use between 1 July 2023 and 30 June 2024. This is down from the $30,000 threshold which was being debated in Parliament for the last three months.

It is important to note that the IAWO threshold of $20,000 applies only to small business entities (with aggregated turnover of less than $10 million).

There was a prolonged debate to include medium sized entities (with aggregated turnover of less than $50 million) ultimately not being agreed to or adopted.

Small Business Energy Benefits bonus 20% deduction

The Bill also included the Small Business Energy Benefits, which provide a bonus 20% deduction for eligible expenditure that supports electrification or more efficient energy use, incurred between 1 July 2023 and 30 June 2024. We note that this bonus 20% deduction is available for both small and medium businesses (with an aggregated annual turnover of less than $50 million).

Eligible depreciating assets (and improvements to depreciating assets) that support electrification or more efficient energy use will need to be first used or installed ready for use (or the improvement cost incurred) between 1 July 2023 and 30 June 2024.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. If the asset has a private use component, then a proportionate adjustment will need to be applied to claim the bonus 20% deduction.

Full details of this bonus 20% deduction has been explained in a previous Tax Alert – click here .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Recent changes to various Victorian state taxes

Thu, 13 Jun 2024 22:52:44 GMT

Recent updates for various Victorian state taxes

In recent weeks, we have seen some updates in relation to various Victorian state taxes, including:

Vacant Residential Land Tax – legislation received royal assent to extend the holiday home exemption to land owned by companies or trusts.
Payroll Tax – exemptions for certain general practitioners.
Commercial and Industrial Property Tax – legislation received royal assent and rules apply from 1 July 2024.

We will discuss the importance of each update in more detail.

Vacant Residential Land Tax holiday home exemption extended

The State Taxation Amendment Bill 2024 (Vic) has recently received royal assent and will amend the Land Tax Act 2005 (Vic) , to extend the holiday home exemption within the Vacant Residential Land Tax ( VRLT ) rules to land owned by companies or trusts from 1 January 2025.

What is VRLT?

The VRLT is an annual tax imposed on residential properties in Victoria that are vacant for more than six months in a calendar year. VRLT is assessed at rate of 1.0% of the capital improved value of the land for the first year (2.0% for the second and 3.0% for the third consecutive years) and is payable to the Victorian State Revenue Office.

The catchment zone for the VRLT rules was expanded late last year (see our previous Tax Alert here ) to include an owner of residential property anywhere in the State of Victoria that is vacant for more than six months between 1 January 2024 and 31 December 2024, unless an exemption applies.

An exemption applies where the owner (or a relative) has used and occupied the land as a holiday home for at least 4 weeks (whether continuous or aggregate) in the preceding land tax year ending 31 December.

What are the requirements of the holiday home exemption?

The Commissioner of State Revenue must be satisfied that the property was a genuine holiday home , having regard to its location and distance between the owner or vested beneficiary’s actual home and the holiday home, as well as the frequency and nature of its use.

An owner or a vested beneficiary will only be able to claim one holiday home exemption in a calendar year.

The scope of the VRLT exemptions have now been extended to include land owned by a corporation or a trustee of a trust (other than a trust with a vested beneficiary) when certain requirements have been satisfied, including:

the owner of the land has been the owner of the land continuously since 28 November 2023, or since a later date if the owner became the owner at that date under a contract for the purchase of the land entered into on or before 28 November 2023;
there has been no change in beneficial ownership of the land since 28 November 2023, except for a change involving persons who are relatives of one another;
the minimum landholder threshold and principal place of residence ( PPR ) requirement must be satisfied;
in the year preceding the land tax year (ie. ending 31 December), the land has been used and occupied as a holiday home for a period of at least 4 weeks (whether continuous or aggregate) by a specified person; and
the Commissioner of State Revenue is satisfied that the land was used and occupied as a holiday home in the year preceding the tax year.

There are some important concepts we need to consider in more detail as part of these requirements.

A “change in beneficial ownership” can include changes in; shareholdings (in the case of a company), unit holdings (in the case of a unit trust), beneficial interests (in the case of a fixed trust) or specified beneficiaries (in the case of a discretionary trust). Where there has been a change, the VRLT exemption for holiday homes will only apply where the change is between persons who are relatives of one another.

A “relative” within the meaning of the Land Tax Act 2005 (Vic) is rather narrowly defined and covers, among others, the spouse of the owner, as well as a sibling or child of either the owner or a spouse of a sibling and child.

The “minimum landholder threshold” requires a minimum ownership interest of 50.0% in the landowner (in the case of companies, unit trusts and fixed trusts) by one or more individual persons who must have used and occupied other land (ie. other than the holiday home in question) in Australia as a PPR. In other words, if a company/ unit trust/ fixed trust has a shareholder/ unitholder/ beneficiary that is a discretionary trust with a greater than 50.0% interest, then the “minimum landholder threshold” requirement can not be satisfied.

Specifically in the case of discretionary trust landholders, it requires a specified beneficiary of a discretionary trust who is a natural person or a relative of that person must have used and occupied other land in Australia as a PPR.

Does the holiday home exemption extend to contiguous land?

The exemption for holiday homes can also include separately titled residential land that is contiguous to a holiday home, in certain circumstances. To be exempt, the contiguous land must be owned by the owner of the holiday home land, it must enhance the holiday home land and must be used solely for the private benefit and enjoyment of the person who uses and occupies the holiday home land (ie. land used for a tennis court, swimming pool or garden).

Contiguous land can be separated from the holiday home land, but only by a road or railway or other similar area where movement across or around is reasonably possible.

Why is there a stipulation for trusts “other than a trust with a vested beneficiary”?

It is not common for the holiday home exemption to apply to a vested beneficiary of a trust. A vested beneficiary is a natural person who has a vested beneficial interest in possession in the land or is the principal beneficiary of a special disability trust.

The most common trusts that own holiday homes are likely to be discretionary or family trusts and these typically do not have property vested in a particular beneficiary. While vesting a property in a natural person beneficiary may be possible, careful consideration is needed to avoid any adverse implications for income tax (including capital gains tax) and stamp duty implications.

What are the implications for self-managed superannuation funds?

Self-managed superannuation funds ( SMSFs ) are precluded from providing residential premises to their members or associates of the members. Therefore, it is difficult to see how a SMSF could avail itself of the four weeks holiday home exemption. Indeed any such properties owned by a SMSF would need to be used for income producing purposes by letting out to unrelated parties on commercial terms and conditions.

Payroll Tax exemptions for certain general practitioners

The Victorian Government has announced that all Victorian general practitioner ( GP ) businesses will receive a retrospective exemption from any outstanding or future assessment issued for payroll tax on payments to contractor GPs for the period up to 30 June 2024.

A further 12-month exemption from payroll tax, through to 30 June 2025, will be available for any general practice business that has not already received advice and begun paying payroll tax on payments to their contractor GPs on this basis.

Also, a payroll tax exemption will be provided for payments to contractor GPs and to employee GPs for providing bulk-billed consultations from 1 July 2025.

These exemptions have been a welcomed reform to help reduce stress and pressure on Victorian clinics.

New South Wales, South Australia, Queensland, and the Australian Capital Territory have already announced amnesties or concessions, while Western Australia has confirmed it will not make payroll tax changes.

Commercial and Industrial Property Tax legislation received royal assent and rules apply from 1 July 2024

The Commercial and Industrial Property Tax Reform Bill 2024 (Vic) has now received royal assent and will establish a tax reform scheme for eligible Commercial and Industrial Property Tax ( CIPT ) from 1 July 2024.

Broadly, when land with a qualifying use is sold after 1 July 2024, it will transition into the new system with stamp duty payable one last time on that property. After a transition period of 10 years starting on the date the land entered the scheme, CIPT will begin to apply to the land.

We have explained the details of the new CIPT in a previous Tax Alert – click here .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – June 2024

Tue, 04 Jun 2024 23:37:48 GMT

Year-end tax checklists for Individuals and Businesses

We have recently prepared two Year End Checklists which help explain some common strategies that may be considered for Individual and Businesses taxpayers.

Year End Checklist for Individuals – click here
Year End Checklist for Businesses – click here

ATO's three focus areas this tax time

The ATO will be taking a close look this 'tax time' at the following common errors made by taxpayers:

Work related expenses: Taxpayers using the 'revised fixed rate method' of calculating a working from home deduction must have comprehensive records to substantiate their claims, including records that show the actual number of hours they worked from home, and the additional running costs they incurred to claim a deduction.

Rental properties: Performing general repairs and maintenance on a rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (such as initial repairs on a newly purchased property) are not deductible as repairs or maintenance.

Failing to include all income in tax return: The ATO warns taxpayers against rushing to lodge their tax return on 1 July. If they have received income from multiple sources, they need to wait until this is pre-filled in their tax return before lodging.

End of financial year obligations for employers

The ATO reminds employers they need to keep on top of their payroll governance. This includes:

using their tax and super software to record the amounts they pay;
withholding the right amount of tax; and
calculating superannuation guarantee ( SG ) correctly.

As 30 June gets closer, employers should check their reporting obligations, along with any upcoming key dates, including for:

PAYG withholding — From 1 July, the individual income tax rate thresholds and tax tables will change, which will impact their PAYG withholding for the 2025 tax year;
SG rate change — From 1 July, the SG rate will increase to 11.5%. Employers must pay their SG contributions by 28 July in full, on time and to the right fund; and
Single touch payroll ( STP ) reporting — Employers should remember to make STP finalisation declarations by 14 July for all employees the employer has paid during the financial year, and also check their employees' year-to-date amounts are correct.

Getting trust distributions right

As trustees prepare for year-end distributions, they should do the following:

review the relevant trust deed to ensure they are making decisions consistent with the terms of the deed;
consider who the intended beneficiaries are and their entitlement to income and capital under the trust deed;
notify beneficiaries of their entitlements, so that the beneficiaries can correctly report distributions in their tax returns;
consider whether the trust has any capital gains or franked distributions they would like to stream to beneficiaries; and
check any requirements under the trust deed governing the making of trustee resolutions (ie. that the resolution must be in writing). In any case, resolutions regarding distributions need to be made by the end of the income year.

If you need any assistance in relation to your trust distributions, please contact our office.

Support available for businesses experiencing difficulties

By paying their tax bill in full and on time, taxpayers can avoid paying the general interest charge ( GIC ), which is currently 11.34%, and which accrues daily for any overdue debts.

The ATO advises taxpayers that, if their business is dealing with financial difficulties, there are some options to help make their tax bill "less taxing".

Taxpayers who are struggling to pay in full or on time may be eligible to set up a payment plan. If they owe $200,000 or less, they may be able to do this themselves using online services. If they cannot do so, or they owe more than $200,000, they can contact the ATO to discuss their options.

Taxpayers can ask the ATO to remit their GIC. The ATO will then consider whether the tax bill was paid late because of circumstances that were:

beyond the taxpayer's control, and what steps the taxpayer took to relieve the effects of those circumstances; or
within the taxpayer's control, but led to results that the taxpayer could not foresee.

Minimum yearly repayments on Division 7A loans

To avoid an unfranked dividend under the Division 7A rules, loans from a private company to its shareholders or their associates must be either repaid in full or be covered by a 'Division 7A complying loan agreement' before the company's lodgment day.

Complying loan agreements require minimum yearly repayments ( MYRs ) comprising of interest and principal to be made each year, starting from the income year after the loan is made.

Taxpayers must ensure they can meet the required MYRs on complying loans.

If they miss the MYR or do not pay enough in an income year, the shortfall may be treated as an unfranked dividend.

Note also that borrowing additional amounts from the same company, directly or indirectly, to make repayments on complying loans may result in the repayment not being taken into account in working out if the MYR has been made.

When making MYRs, borrowers need to:

start repayments in the income year after the complying loan was made;
use the correct benchmark interest rate (8.27% for the 2024 income year) to calculate the MYR for the current year; and
make the required payments on the loan by the due date — the end of the income year (ie. usually by 30 June).

ATO issues notice of crypto assets data-matching program

The ATO has advised that it will acquire account identification and transaction data from crypto designated service providers for the 2024 to 2026 income years .

This data will include the following:

client identification details (names, addresses, dates of birth, phone numbers, social media accounts and email addresses); and
transaction details (bank account details, wallet addresses, transaction dates, transaction times, transaction types, deposits, withdrawals, transaction quantities and coin types).

The ATO estimates that records relating to approximately 700,000 to 1,200,000 individuals and entities will be obtained each financial year.

The data will be acquired and matched to ATO systems to identify and treat clients who failed to report a disposal of crypto assets in their income tax return.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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2023-2024 Individuals Year End Checklist Tax Return

Tue, 04 Jun 2024 23:06:23 GMT

A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year. However, any individuals with potentially reduced income for the 2024 tax season may want to instead consider deferring any deductible expenditure (if possible).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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2023-2024 Business Year End Checklist

Tue, 04 Jun 2024 23:05:52 GMT

The Year End Checklist in the link below explains some common strategies that may be considered for all business taxpayers.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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FEDERAL BUDGET 2024-25

Wed, 15 May 2024 00:54:16 GMT

SUMMARY AND FULL COMMENTARY UPDATES

The 2024-25 Federal Budget was handed down by Federal Treasurer, Dr Jim Chalmers on the evening of Tuesday 14 May 2024.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

For furthe r clarification, contact your Relationship Partner at Lowe Lippmann.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – April/May 2024

Mon, 06 May 2024 22:35:10 GMT

How to claim working from home expenses

Taxpayers who have been working from home this financial year, and who consequently incurred work-related expenses, have two ways to calculate their work from home deduction:

the actual cost method; or
the fixed rate method.

Using the fixed rate method, taxpayers can claim a rate of 67 cents per hour worked at home.

This amount covers additional running expenses, including electricity and gas, phone and internet usage, stationery, and computer consumables. A deduction for these costs cannot be claimed elsewhere in their tax return, although taxpayers can separately claim any depreciating assets, such as office furniture or technology.

Taxpayers need to have the right records, and the record-keeping requirements differ for the fixed rate method and the actual cost method.

We released a Tax Alert on this topic when the revised fixed method rate was introduced, to see full details click here .

Using the ATO’s small business benchmarks

The ATO has updated its small business benchmarks for 2021-22. These benchmarks help taxpayers compare their business turnover and expenses with other small businesses in the same industry.

Taxpayers can access the benchmarks on the ATO’s website ( click here ), and then calculate their benchmark using the ATO app ‘Business performance check’ tool ( download ATO app here ).

For example, consider Deb who runs a pizza shop as a sole trader. She would like to track her business against other pizza shop businesses, and see how she can improve.

Deb downloads the ATO app and opens the ‘Business performance check’ tool. She uses this tool to work out the cost of sales to turnover benchmark for her pizza shop. It is within the higher end of the range and above the average for pizza shop businesses.

Deb works out her main supply costs. She then negotiates a better deal to reduce her business expenses and improve profit.

Prepare for upcoming lodgments of SMSF annual returns

SMSFs need to appoint an auditor no later than 45 days before they lodge their SMSF annual return ( SAR ).

In preparation for lodgment of the SAR, SMSF trustees also need to:

complete a market valuation of all the SMSF’s assets;
prepare the SMSF’s financial statements; and
provide signed copies of documents to their auditor, so the auditor can determine the SMSF’s financial position and its compliance with superannuation laws.

If an SMSF’s SAR is more than two week’s overdue, and the SMSF trustee has not contacted the ATO, the ATO will change the status of the SMSF on Super Fund Lookup ( click here ) to ‘Regulation details removed’, and this status will remain until any overdue lodgments are brought up to date.

Earning income for personal effort

The ATO is reminding taxpayers that, if over half their income is from a contract for their personal effort or skills, then their income is classified as personal services income ( PSI ).

Taxpayers can receive PSI in almost any industry, trade or profession, for example, as a financial professional, IT consultant, construction worker or medical practitioner.

Taxpayers who earn PSI while running a business (and who are not employees, ie. a contractor) need to work out if they were a personal services business ( PSB ) in the year that they received the PSI, as this will affect the deductions they can claim.

Taxpayers can self-assess as being a PSB if they:

meet the “results test” for at least 75% of their PSI, or
meet one of the other PSB tests (ie. the unrelated clients test, the employment test, or the business premises test), and less than 80% of their PSI is from the same entity and its associates.

Taxpayers who self-assess as a PSB still need to report their PSI in their income tax return and keep certain records. If they are unable to self-assess as a PSB for a particular income year, they may be able to apply for a PSB determination in certain circumstances.

Other PSB tests taxpayers can use include:

the unrelated clients test;
the employment test; and
the business premises test.

It is important for taxpayers to report PSI correctly in their tax return, as it can affect the deductions they can claim.

Government warns of 'malicious' myGov scammers

The Government has urged Australians to be vigilant regarding scammers who target ATO log-in details to commit tax fraud.

The ATO has received a large number of reports of scammers using fake myGov sites to steal myGov sign-in details, which can be used to commit tax and refund fraud in other people's names.

These criminals will often use text message or email to lure people into clicking a link using phrases such as “You are due to receive an ATO Direct refund” or “You have a new message in your myGov inbox - click here to view” .

The Government says the ATO or myGov will never send an email or text message with a link to sign in to myGov.

Last year, the ATO introduced new fraud controls to help protect Australians from online identity theft. This included using myGovID to strengthen security during the sign-in processes on myGov accounts, making it more difficult for criminals to gain access.

What to know about disaster relief payments

Taxpayers should be aware that some natural disaster relief payments are not taxable.

Businesses that have received a government support payment because of a natural disaster (such as a major weather event) should check if they need to include this as assessable income in their tax return before they lodge (although they may not need to pay tax on the payment).

Provided that they meet the criteria, taxpayers can treat some support payments as 'non-assessable, non-exempt income', which means they do not need to include them in their tax return.

Taxpayers can refer to the ATO's website (or contact our office) for more information in this regard, including in relation to the criteria that needs to be satisfied.

Illegal early access to super

Faced with tough times, some people may be thinking about accessing their super early.

Taxpayers may have been approached by someone (a 'promoter') claiming that members of super funds can withdraw their super or use an SMSF to pay off debts, buy a car, or pay for a holiday.

The ATO warns taxpayers that this is illegal. Super funds should remind members that super is for retirement. Members need to meet very strict conditions to access their super early, and acccessing their super outside of these strict conditions is illegal.

Illegal early access to super can have a significant impact on members' retirement savings, result in additional tax, penalties and interest, and lead to members being disqualified from ever being able to be an SMSF trustee again. When a trustee is disqualified, their name is published and this can affect their personal and professional reputation.

If a promoter gets a member to provide them with enough personal information, they may also steal their identity and use it to access their super for themselves.

ATO issues warning about false invoicing arrangements

The Serious Financial Crime Taskforce ( SFCT ) is warning businesses about using illegal financial arrangements such as “false invoicing” to cheat the tax and super systems.

False invoicing arrangements may consist of the following:

an entity (the 'promoter') issues invoices to a legitimate business but no goods or services are provided;
the business pays the invoices, by cheque or direct transfer, and the promoter returns most of the amount paid to the owners of the business as cash;
the promoter keeps a small amount as a commission;
the business then illegally claims deductions and GST input tax credits from the false invoice; and
the owners of the business use the cash they have received for private purposes or to pay cash wages to workers, and do not properly report the amounts in their tax returns.

The SFCT is warning businesses against using these types of arrangements, and that they "will get caught and face the full force of the law."

NFPs need to get ready for new return

From 1 July 2024, non-charitable not-for-profits ( NFPs ) with an active Australian Business Number ( ABN ) will be required to lodge a new annual NFP self-review return with the ATO to confirm their income tax exemption status. This will include sporting, community and cultural clubs, among other organisations.

Non-charitable NFPs that have an active ABN can get ready now by:

conducting an early review of their eligibility by using the 'ATO's guide' on the ATO's website;
checking all their details are up to date, including authorised associates, contacts and their addresses;
reviewing their purpose and governing documents to understand the type of NFP they are; and
setting up myGovID and linking it to the organisation's ABN using 'Relationship Authorisation Manager'.

When it comes time to lodge, NFPs can use Online services for business which lets organisations manage their reporting at a time that is convenient for them. If an NFP has engaged a registered tax agent, their agent can also lodge on their behalf through Online services for agents.

The first return is for the 2023-24 tax year and NFPs will need to prepare and submit their annual self-review between July and October 2024.

As an interim arrangement for the 2023-24 transitional year, eligible NFPs unable to lodge online will be able to submit their NFP self-review return using an interactive voice response phone service.

Taxpayer unsuccessful in having excess contributions reallocated

The Administrative Appeals Tribunal ( AAT ) recently held that a taxpayer was liable to pay excess concessional contributions tax in relation to contributions made on his behalf by his employer.

In the 2021 income year, the taxpayer's employer made concessional super contributions to his super fund totalling $31,737, which resulted in the taxpayer exceeding his concessional contributions cap for the 2021 year by $6,737.

The AAT upheld the ATO's decision not to exercise its discretion to reallocate the excess contributions to another year, on the basis that there were no 'special circumstances' under the relevant legislation that would allow the ATO to do so.

The AAT noted that "The difficulty for the (taxpayer) is that he accepts that there was never any certainty around when his employer would pay contributions into his super fund and that there was no written agreement or even a verbal agreement that set out the timing of the payments into his super fund. As such it was not unusual for his employer to pay the (taxpayer's) concessional contributions into his super fund at differing times."

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Planning for Superannuation Contributions before 30 June 2024

Mon, 22 Apr 2024 02:57:37 GMT

Planning for Superannuation Contributions before 30 June 2024

As the end of the financial year is approaching, we take this opportunity to remind you of the superannuation obligations for each of the following three groups:

Self-employed & other taxpayers;
Employers with only related-party employees; and
Employers with unrelated employees.

Each group will be considered below under three separate headings and we recommend you consider the group most relevant to your circumstances.

1) SELF-EMPLOYED & OTHER TAXPAYERS

Self-employed persons, substantially self-employed persons and other persons aged less than 75, are entitled to a tax deduction for their personal superannuation contributions for the year ending 30 June 2024.

Individuals can claim a tax deduction for their personal contributions (even when they receive income as an employee).

Concessional tax treatment for contributions that are tax deductible to the self-employed person (and/or the employer) is generally limited to $27,500, per person .

Concessional contribution limits

The concessional contribution limits apply to the total concessional contributions from all sources. From 1 July 2024 the concessional contributions cap will increase to $30,000 for all individuals regardless of age.

In certain circumstances (ie. including where your total super balance as at 30 June of the previous year is less than $500,000), a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

From 1 July 2023, we note that where a member is under 75 years old and makes a non-concessional contribution, they are still not required to satisfy a work test (ie. gainfully employed on at least a part-time basis). We note, however, members over 67 years (and under 75 years) old must meet the work test to claim the Personal Superannuation Contributions as tax deductions.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) as additional assessable income. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

Also, the member (employee) may ‘elect’ to withdraw up to 85% of the ECC from their super fund to help pay the additional income tax on the assessed ECC amount. Any ECC amount not removed from the member’s super fund will count towards their non-concessional contributions cap (and we note that for some members this cap may be $Nil and can result in Excess Non-Concessional Contributions).

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

Self-employed persons can claim a full tax deduction for concessional contributions, subject to notifying their fund accordingly and receiving an acknowledgement letter from the fund.

In order to obtain a tax deduction for the year ending 30 June 2024, please ensure that contributions are paid into the fund to allow time for them to be cleared by 30 June 2024. We recommend making contributions prior to Friday 21 June 2024 .

Non-concessional contribution caps

From 1 July 2023, the non-concessional contributions cap remained at $110,000 for members up to 75 years old. Members under 75 years of age at any time during the income year may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year, subject to their personal contribution cap limit. We note that next year, between 1 July 2024 and 30 June 2025, the non-concessional contributions cap will increase to $120,000 for members up to 75 years old.

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years or if their Total Superannuation Balance ( TSB ) exceeds their general transfer balance cap (ie. $1.9 million for 2023-24 and 2024-25).

If you are considering making non-concessional contributions for the year ending 30 June 2024, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

Contributions in excess of the non-concessional contribution cap will trigger an excess non-concessional contribution ( ENCC ) determination for the member, and they will have two options available as to how their ENCCs will be taxed, as follows:

the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or
the member is liable to pay excess contributions tax on the ENCC.

To avoid paying the excess non-concessional contributions tax, a member can elect to withdraw ENCC plus 85% of the associated earnings on the excess contributions. The full amount of the associated earnings is taxed at the member's marginal tax rate, but the member is entitled to a non-refundable tax offset equal to 15% of the associated earnings that are included in their assessable income (given that they already paid superannuation contributions tax).

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

If you have any questions, please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2) EMPLOYERS WITH ONLY RELATED-PARTY EMPLOYEES

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500, per person .

Concessional contribution limits

The concessional contribution limits apply to the total concessional contributions from all sources, including employer superannuation guarantee contributions ( SGC ) and salary sacrificed amounts. From 1 July 2024 the concessional contributions cap will increase to $30,000 per person .

In certain circumstances, a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

From 1 July 2023, where a member is under 75 years old and makes a non-concessional contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis). We note, however, members over 67 years (and under 75 years) old must meet the work test to claim the Personal Superannuation Contributions as tax deductions.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions ( ECC ) as additional assessable income. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Superannuation Guarantee Scheme contributions

From 1 July 2023, employees remain eligible for Super Guarantee ( SG ) scheme, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid was removed.

To comply with the SG scheme, contributions must be received by the superannuation fund before 28 July 2024 in respect of the June 2024 quarter. Failure to do so can result in the imposition of significant penalties and interest charges and the requirement to lodge SG shortfall forms with the Australian Taxation Office ( ATO ) by 28 August 2024.

Under the SG scheme, an employer must make superannuation contributions of at least 11.0% of gross salary earned by each eligible employee (up to a maximum salary of $62,270 per quarter in 2024 and rising to $65,070 per quarter in 2025). Employees also include working directors.

Income tax deductions

Single Touch Payroll reporting

Employers are required to report on their employees' payslips, the amount of and the date on which, the employer makes the employees' superannuation contributions.

If you do not currently report employer superannuation contributions through Single Touch Payroll ( STP ), you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

For the 2023 year onwards, amounts paid to closely held payees must be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

It is compulsory for all employers to pay contributions to superannuation funds (including SMSFs) electronically. There is an exception to the rule where contributions are made to funds for ‘related parties’ of the employer.

Under these rules, superannuation funds are required to receive contributions using an e-commerce standard so that contributions can be received by direct credit or BPay and the contribution data message is received electronically via a nominated Electronic Service Address.

Non-concessional contribution caps

From 1 July 2023, where a member is under 75 years at the time when they make a contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions. We note, however, that you must still meet the work test if you wish to claim the Personal Superannuation Contributions as tax deductions.

If you are considering making non-concessional contributions for the year ending 30 June 2024, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

Contributions in excess of the non-concessional contribution cap will trigger an excess non-concessional contribution ( ENCC ) for the member, and they will have two options available as to how their ENCCs will be taxed, as follows:

the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or
the member is liable to pay excess contributions tax on the ENCC.

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Changes for next year 2024-25

The SG rate will also increase from 11.0% to 11.5% on 1 July 2024. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2024, even if some or all of the pay period is for work done before 1 July. The Federal Budget in May 2023 maintained the SG rate as legislated to increase to 12.0% by 1 July 2025.

We also note that an announcement was made last year that employers will be required to pay their employees’ super at the same time as their salary and wages (“payday super”) from 1 July 2026.

If you have any questions, please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

3) EMPLOYERS WITH UNRELATED EMPLOYEES

Superannuation Guarantee Scheme contributions

From 1 July 2023, employees remain eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid was removed.

Under the Superannuation Guarantee Charge ( SGC ) scheme, an employer must make superannuation contributions of at least 11.0% of gross salary earned by each eligible employee (up to a maximum salary of $62,270 per quarter in 2024 and rising to $65,070 per quarter in 2025). This means that employers will be required to contribute superannuation for all employees (include working directors), regardless of age.

To comply with the SGC scheme, contributions must be received by the superannuation fund before 28 July 2024 for the June 2024 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge SG shortfall forms with the Australian Taxation Office ( ATO ) by 28 August 2024.

Concessional contribution limits

The concessional contribution limits apply to the total concessional contributions from all sources, including employer contributions (including SG) and salary sacrificed amounts. Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500 per person . From 1 July 2024 the concessional contributions cap will increase to $30,000 for all individuals regardless of age.

In certain circumstances (ie. including where your total super balance at 30 June of the previous year is less than $500,000), a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions ( ECC ) as additional assessable income. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

Single Touch Payroll reporting

Employers are required to report on their employees' payslips, the amount of and the date on which, the employer makes the employees' superannuation contributions.

For the 2023 year onwards, amounts paid to closely held payees must be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

Non-concessional contribution caps

We also note that a member’s personal non-concessional cap can be $nil after they have used the bring-forward concession in prior years or if their Total Superannuation Balance ( TSB ) exceeds their general transfer balance cap (ie. $1.9 million for 2023-24 and 2024-25).

If you are considering making non-concessional contributions for the year ending 30 June 2023, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

Contributions in excess of the non-concessional contribution cap will trigger an excess non-concessional contribution (ENCC) for the member, and they will have two options available as to how their ENCCs will be taxed, as follows:

the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or
the member is liable to pay excess contributions tax on the ENCC.

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Changes for next year 2024-25

The super guarantee rate will also increase from 11.0% to 11.5% on 1 July 2024. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2024, even if some or all of the pay period is for work done before 1 July. The Federal Budget in May 2023 maintained the super guarantee rate is legislated to increase to 12.0% by 1 July 2025.

From 1 July 2025, the concessional tax rate applied to future earnings for total superannuation balances above $3 million will be 30%, increased up from 15%. This tax is in addition to any tax their superannuation funds pay on earnings in accumulation.

We also note that an announcement was made last year that employers will be required to pay their employees’ super at the same time as their salary and wages (“payday super”) from 1 July 2026.

If you have any questions, please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Commercial and Industrial Property Tax Reform

Mon, 15 Apr 2024 22:47:10 GMT

Commercial and Industrial Property Tax Reform

The Victorian Government announced in the 2023-24 State Budget it will be progressively abolishing stamp duty on commercial and industrial property and replacing it with an annual tax, based on unimproved land value, called the Commercial and Industrial Property Tax ( the CIP Tax ).

The CIP Tax regime will apply to commercial and industrial property transactions with both a contract and settlement date on or after 1 July 2024 .

CIP Tax regime explained

For eligible commercial and industrial properties, stamp duty will be paid one final time on the property if (and when) it is transacted, and the new annual CIP Tax will be payable 10 years after the final stamp duty payment, regardless of whether that property has transacted again.

If a property is sold again (even if it is sold multiple times) within the 10 year transition period, stamp duty will not apply if the property continues to be used for commercial and industrial purposes.

Eligible purchasers of commercial or industrial property will be given the choice to either:

pay the property’s final stamp duty liability as a lump sum in the ordinary course; or
finance stamp duty through a government facilitated transition loan, as an alternative to self-financing the upfront stamp duty amount, allowing the purchaser to make annual loan repayments (plus interest) over 10 years.

After the 10 year transition period ends, the property will become liable for the CIP Tax which will be set at 1.0% of the property’s unimproved land value , with no tax free threshold.

The CIP Tax will be separate from (and in addition to) the existing Victorian land tax regime. However, the existing land tax exemptions will apply to the CIP Tax.

Commercial and industrial property transactions that are currently exempt from stamp duty will not enter the CIP Tax regime. This includes transfers such as: deceased estates, certain transfers between spouse or partner; or purchases by charities and friendly societies.

The CIP Tax will not be available for properties primarily used for residential, primary production, community services, sport, or heritage and culture purposes, as coded by the Valuer-General.

Mixed use properties

Some properties may have a mixture of uses across different occupancies, for example a street level shop with a residence above. In this example, the property may have more than one property classification code, and they may have a mixture of qualifying (ie. commercial) and non-qualifying (ie. residential) uses.

For such properties, the sole or primary use test will be used to determine if the CIP Tax will apply.

The sole or primary use test can be in reference to factors such as the land or floor area of each use; the relative economic and financial significance of each use, and the length of time of each use, with “primary” use ultimately determined by the Commissioner of State Revenue.

If the sole or primary use test indicates that a property with several occupancies is qualifying (ie. commercial), the CIP Tax will apply to the entire mixed-use property.

If the primary use of the property is determined to be non-qualifying (ie. residential), then the CIP Tax will not apply to the property.

Change in use of property

A property with a commercial or industrial use may change to a different use over time, for example an industrial warehouse could be re-developed into residential apartments.

From 1 July 2024, a property owner who purchases a qualifying commercial or industrial property pays stamp duty and the property enters CIP Tax regime. If the property is converted to a non-qualifying use (ie. residential) and continues to be used for that use as at the liability date for CIP Tax for a given tax year, the owner will not be liable for the CIP Tax for that tax year.

If the owner sells the property whilst it has a non-qualifying use (ie. residential), stamp duty will be payable.

If a property that has CIP Tax regime is sold a second or subsequent time with a qualifying commercial or industrial use, stamp duty would not be payable on the transaction. However, if this property is subsequently converted to a non-qualifying use (e.g. residential) then change-of-use duty would apply.

Change-of-use duty is intended to apply where no stamp duty was paid on a recent property transaction, but the property is also no longer liable for the CIP Tax.

The change-of-use duty will be calculated based on the stamp duty that would have been payable when the property was transacted, including any relevant concessions, but reduced by 10% for every 31 December that has passed since that transaction, to a maximum of 100%.

For example, if change-of-use duty was payable seven years after the property was transacted, then the change-of-use duty payable would be equal to 30% of the duty that would have been payable at the time the property was transacted.

Property owners need to notify the Victorian State Revenue Office ( SRO ) within 30 days of any change of use of a property.

Importance of maintaining records

This new regime underlines how important it will be for taxpayers to maintain detailed records of all land dealings in Victoria including the type of use, timing of any disposals and acquisitions, and any different titles for subdivisions and land consolidations.

Comprehensive documentation will be very beneficial to respond to any enquiries by the Victorian SRO and to support any future due diligence enquiries.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Bill for Small Business Measures passes Senate with amendments and awaits Royal Assent

Mon, 08 Apr 2024 22:44:40 GMT

During September 2023, the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 ( the Bill ) was introduced to Parliament and has been thoroughly debated for the last six months.

Last week, the Bill passed the Senate with some minor amendments proposed which need to be ratified by the House of Representatives before the Bill receives Royal assent.

This Bill contains various small business tax measures, which include:

A temporarily increase the instant asset write-off threshold for small and medium businesses from $1,000 to $30,000;
Providing small and medium businesses with a bonus 20% deduction of the cost of eligible assets or improvements to existing assets that support electrification or more efficient energy use; and
Limiting the amount of non-arm’s length income that arises relating to a general non-arm’s length expense and to narrow the application of these rules.

We will discuss each of these small business tax measures in detail below.

Temporarily increase the instant asset write-off (IAWO) threshold for small and medium businesses

The Bill originally proposed to temporarily increase the IAWO threshold from $1,000 to $20,000 for “small businesses” (ie. those with an aggregated annual turnover of less than $10 million) from 1 July 2023 to 30 June 2024.

The proposed Senate amendments also extends access of the IAWO to “medium-sized businesses” (ie. those with an aggregated turnover of less than $50 million).

Importantly, another amendment has now been proposed by the Senate to increase the IAWO threshold from $20,000 to $30,000 from 1 July 2023 to 30 June 2024 , and this now needs to be ratified by the House of Representatives before the Bill receives Royal assent.

Providing small and medium businesses with a bonus 20% deduction of eligible costs that support electrification or more efficient energy use

This measure was first announced on 9 May 2023 by Treasurer Jim Chalmers when he handed down the 2023/24 Federal Budget.

The Bill contains a bonus 20% deduction for eligible expenditure that supports electrification or more efficient energy use, incurred between 1 July 2023 and 30 June 2024, for small and medium businesses (with an aggregated annual turnover of less than $50 million).

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business . If the asset has a private use component, then a proportionate adjustment will need to be applied to claim the bonus 20% deduction.

What assets are eligible depreciating assets?

An asset will be an eligible depreciating asset for the bonus 20% deduction if:

it uses electricity and:
there is a new reasonably comparable asset that uses a fossil fuel available in the market; or
is more energy efficient than the asset it is replacing; or
if it is not a replacement, it is more energy efficient than a new reasonably comparable asset available in the market; or
it is an energy storage, time-shifting or monitoring asset, or an asset that improves the energy efficiency of another asset.

The measure should help small and medium businesses (with an aggregated annual turnover of less than $50 million) make investments in asset used for a taxable purpose, such as: electrifying their heating and cooling systems; upgrading to more efficient fridges and induction cooktops; and/or installing batteries and heat pumps.

What assets are excluded depreciating assets?

Some types of assets and expenditure are ineligible for the bonus deduction even where they would otherwise meet the requirements, and they may include:

assets, and expenditure on assets, that can use a fossil fuel (ie. natural gas, oil and coal);
assets, and expenditure on assets, which have the sole or predominant purpose of generating electricity (such as solar photovoltaic panels);
capital works;
motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;
assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and
financing costs, including interest, payments in the nature of interest and expenses of borrowing.

How does the bonus 20% deduction work?

The amount of the bonus deduction is simply calculated as 20% of the total eligible cost (ie. GST exclusive amount), up to a maximum bonus deduction of $20,000 between 1 July 2023 and 30 June 2024. The bonus 20% deduction is a one-off bonus deduction that does not affect any other deductions in the taxation law.

Under the current taxation law, for depreciating assets, small and medium businesses (with an aggregated annual turnover of less than $50 million) that use the simplified depreciation rules generally either deduct the cost of a depreciating asset in one income year (ie. IAWO), or place the asset in the simplified depreciation pool and depreciated at fixed rates over time.

Small and medium businesses (with an aggregated annual turnover of less than $50 million) may be eligible to claim both the instant asset write-off and the bonus 20% deduction .

Entities must claim the bonus deduction in the income year in which the asset is first used or installed ready for use for a taxable purpose, which will need to be the income year ending 30 June 2024.

An entity cannot claim the bonus deduction if it sells the asset between 1 July 2023 and 30 June 2024.

Limiting the amount of non-arm’s length income (NALI) that arises relating to a general non-arm’s length expense (NALE) and to narrow the application of these rules

The Bill contains amendments relating to the NALE rules which apply to expenditure incurred by superannuation funds which will:

have application only to self-managed superannuation funds ( SMSFs ) and small APRA-regulated funds;
limit the income of SMSFs and small APRA-regulated funds that are taxable as NALI from a general expense breach to twice the difference between the amount actually charged and the arm’s length expense amount that would have been charged for a general expense ;
distinguish between specific and general expenses for the purposes of the rules, for both general and specific expenses of the fund; and
exempt expenses that were incurred or might have been expected to be incurred before the 2018–19 income year.

Basically, NALI will arise where a complying superannuation fund has a transaction with a third party and incurs a loss, outgoing or expenditure of an amount in gaining or producing the income, and the amount incurred is less than its actual market value.

What is the difference between a general or specific expense?

A general expense is an expense that is not related to gaining or producing income from a particular asset of the fund. These expenses usually relate to the operation or obligations of the fund as a whole such as accounting fees.

For a general expense breach the amount of income that is taxed as NALI is twice the difference between the amount of the expense that might have been expected to be incurred had the parties been dealing at arm’s length, and the amount the entity did incur.

Where the entity did not incur any expense, the amount of income that is taxed as NALI is twice the amount that might have been expected to be incurred had the parties been dealing at arm’s length.

A specific expense is any other expense (that is not a general expense). An expense incurred in relation to gaining or producing income as a beneficiary of a trust through holding or acquiring a fixed entitlement to the income of a trust will always be a specific expense.

For a specific expense breach the current treatment will continue to apply, and the amount of income that will be taxed as NALI will be the amount of income derived from the scheme in which the parties were not dealing at arm’s length and be taxed at the highest marginal tax rate of 45% . Examples include maintenance fees for a property and fees for investment advice for a specific pool of investments.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - 2024 FBT Year End is Fast Approaching!

Tue, 19 Mar 2024 02:46:41 GMT

2024 FBT Year End is Fast Approaching!

The end of the Fringe Benefits Tax (FBT) year is fast approaching on 31 March 2024, so we take this opportunity to revisit some hot FBT topics for both employers and employees, including:

FBT exemption for electric cars
Work from home arrangements
Contractor or employee
Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes
Employee contributions by journal entry
Not lodging FBT returns
Housekeeping essentials

FBT exemption for electric cars

To encourage the adoption of no or low emissions vehicles, the Government introduced a concession to make these vehicles fringe benefits tax ( FBT ) free when provided to employees.

Employers that provide employees with the use of electric cars, hydrogen fuel cell electric cars or plug-in hybrid electric cars can potentially qualify for an exemption from FBT. This should normally be the case where:

The value of the car is below the luxury car tax ( LCT ) threshold for fuel efficient vehicles ($89,332 for the 2023-24 financial year); and
The car is both first held and used on or after 1 July 2022.

We must note that the FBT exemption for electric cars has a number of problem areas which should be considered:

If your business is planning on acquiring an electric vehicle - be aware that from 31 March 2025, the FBT exemption will no longer apply to plug-in hybrid electric vehicles (EVs) unless the vehicle met the conditions for the exemption before this date and there is already a binding agreement to continue to use the vehicle privately after this date.
The exemption only applies to employees - for the FBT exemption to apply, the vehicle needs to be supplied by the employer to an employee (including under a salary sacrifice agreement). Partners of a partnership and sole traders are not employees and cannot access the exemption personally.
If LCT applies to the car it will never qualify for the FBT exemption - for example, if the EV failed the eligibility criteria in 2022-23 when it was first purchased because it was above the luxury car limit of $84,916, the fact that it resold in 2023-24 for $50,000 does not make it eligible for the exemption on resale. Likewise, if the car was used by anyone (including a previous owner) before 1 July 2022 then it will probably never qualify for the FBT exemption.
Home charging stations are not included in the exemption - the FBT exemption includes associated benefits such as registration, insurance, repairs or maintenance, but it does not include a charging station at the employee’s home. If the employer instals a home charging station at the employee’s home or pays for the cost, then this is a separate fringe benefit.
The exemption does not apply if the employee directly purchases or leases the EV - if an employee purchases or leases the EV directly, and the employer reimburses them under a salary sacrifice arrangement, the FBT exemption does not apply because this is not a car fringe benefit. However, the exemption can potentially apply to novated lease arrangements if they are structured carefully.
Not all electric vehicles are cars - to qualify for the exemption, the EV needs to be a car – electric bikes and scooters do not count, nor do vehicles designed to carry a load of 1 tonne or more or that carry 9 passengers or more.

FBT and work from home arrangements

Many businesses continue to offer flexible work from home arrangements with team members working from home either on a full-time basis or for at least part of the work week.

Some businesses may have provided their employees with work-related items to assist their employees when working from home.

Portable electric devices such as laptops and mobile phones are commonly used for work. Providing such devices to your employees should not trigger a FBT liability, as long they are primarily used by your employees for work.

Where multiple similar items have been provided during the FBT year, the situation becomes more complex unless your business has an aggregated turnover of less than $50m (previously, this threshold was less than $10m).

If an FBT exemption isn’t available, it is often worthwhile instead considering whether the FBT liability of such items could be reduced to the extent the employee could claim a once-only deduction in their personal return (ie. had they purchased the item themselves).

Contractor or employee

The FBT rules tend to apply when benefits are provided to employees and certain office holders, such as directors. FBT should not apply when benefits are provided to genuine independent contractors.

There is evidence to show that you and the worker have agreed on the classification;
There is a comprehensive written agreement that governs the relationship;
There is evidence that you and the worker understand the consequences of the classification;
The performance of the arrangement hasn’t deviated significantly from the terms of the contract;
Specific advice has been sought confirming that the classification is correct; and
Tax, superannuation, and reporting obligations have been met when the worker is classified as an employee or independent contractor (whichever relevant).

Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Let’s say you taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for FBT purposes then there should not be any FBT implications. This is because benefits provided to client are not subject to FBT and minor benefits (ie. value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.

Employee contributions by journal entry

Many businesses use after-tax employee contributions to reduce the value of fringe benefits.

It is also reasonably common for these contributions to be made by journal entry through the accounting system only (rather than being paid in cash).

For an employee contribution made by way of journal entry to be effective in reducing the taxable value of a benefit, all of the following conditions must be met:

The employee must have an obligation to make a contribution to the employer towards a fringe benefit (ie. under the employee’s remuneration agreement);
The employer has an obligation to make a payment to the employee. For example, the parties may agree that the employer will lend an amount to the employee or the employee might be entitled to a bonus that hasn’t been paid yet. If a loan is made by the employer then this could trigger further tax issues that need to be managed;
The employee and employer agree to set-off the employee’s obligation to the employer against the employer’s obligation to the employee; and
The journal entries are made no later than the time the financial accounts are prepared for the current year (ie. for income tax purposes).

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns when required to.

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – March 2024

Wed, 06 Mar 2024 00:17:23 GMT

Super contribution caps to rise

The big news story for those contributing to super is that the contribution caps are set to increase from 1 July 2024 .

The concessional contribution cap will increase from $27,500 to $30,000 .

This 'CC' cap is broadly applicable to employer super guarantee contributions, personal deductible contributions and salary sacrificed contributions.

The non-concessional contribution cap will increase from $110,000 to $120,000 .

This 'NCC' cap is generally applicable to personal non-deductible contributions.

The increase in the NCC cap also means that the maximum available under the three-year bring forward provisions will increase from $330,000 to $360,000 . This is provided that the 'bring forward' is triggered on or after 1 July 2024.

The 'total superannuation balance' threshold for being able to make non-concessional contributions (and the pension general transfer balance cap) will remain at $1.9 million .

We recently released a Tax Alert on this topic, to see full details click here .

Small business concessions

The ATO has recently issued a reminder that small business owners may be eligible for concessions on the amount of tax they ultimately pay. This depends on their business structure, their industry and their aggregated annual turnover.

For example, small business owners who have an aggregated annual turnover of less than:

$2 million can access the small business CGT concessions;
$5 million can access the small business income tax offset; and
$10 million can access the small business restructure roll-over.

The ATO expects small business owners to check their eligibility each year before they apply for any of these concessions.

Furthermore, taxpayers generally need to keep records for five years to prove any claims they make.

FBT time is fast approaching

The ATO has advised employers that 'FBT time' is just around the corner, and they need to stay on top of their fringe benefits tax ( FBT ) obligations.

Employers need to ensure they have attended to the following matters this FBT time:

Identify if they have an FBT liability regarding fringe benefits they have provided to their employees or their associates between 1 April 2023 and 31 March 2024.
Identify if they have an FBT liability as they will need to lodge an FBT return and pay the amount due by 21 May.
Identify if they are currently registered for FBT and let the ATO know if they do not need to lodge an FBT return (and your Lowe Lippmann Relationship contact can assist with lodging an ‘FBT non-lodgment notice’) to prevent the ATO seeking a return from them at a later date.
Employers should also remember that when the new FBT year starts on 1 April, they can choose to use existing records instead of travel diaries and declarations for some fringe benefits.

Furthermore, the ATO has released Practical Compliance Guideline PCG 2024/2 ( click here ) which provides a short cut method to help work out the cost of charging electric vehicles ( EV ) at an employee's home for FBT purposes. Eligible employers can choose to use either the EV home charging rate of 4.2 cents per kilometre or the actual cost.

Ultimately, all employers need to make sure they understand their FBT obligations and the records they need to keep to avoid an FBT liability.

Jail sentence for fraudulent developer

A developer who conspired to lodge fraudulent business activity statements has been convicted and sentenced to 10 years in jail with a non-parole period of six years and eight months.

The developer was involved with two companies that formed part of a group known as the 'Hightrade Group' which developed properties such as a hotel and golf course in the Hunter Valley, NSW.

The developer fraudulently obtained GST refunds by using three tiers of companies (developers, building companies and suppliers) to grossly inflate the construction costs of his developments.

The companies he was involved with also claimed to have purchased goods when no such purchases had occurred. In total, the developer intended to cause a loss to the Commonwealth of more than $15 million.

His sentencing has closed a complex case, known as Operation 4. The ATO noted that "Tax crime, like the fraud uncovered in Operation 4, affects the whole community” .

Penalties soon to apply for overdue TPARs

Businesses that pay contractors to provide certain services may need to lodge a Taxable Payments Annual Report ( TPAR ) by 28 August each year.

From 22 March, the ATO will apply penalties to businesses that:

have not lodged their TPAR from 2023 or previous income years;
have received three reminder letters about their overdue TPAR.

Taxpayers that do not need to lodge a TPAR can submit a 'non-lodgment advice form'. Taxpayers that no longer pay contractors can also use this form to indicate that they will not need to lodge a TPAR in the future.

Avoiding common Division 7A errors

Private company clients who receive payments, benefits or loans from their private companies need to ensure compliance with their additional tax obligations (which are often referred to as their 'Division 7A' obligations).

There are multiple ways in which business owners may access private company money, such as through salary and wages, dividends, or what are known as complying Division 7A loans.

Division 7A is an area where the ATO sees many errors and the ATO is currently focused on assisting taxpayers in managing their obligations when receiving payments and benefits from their private companies.

In this regard, the ATO has recommended that business owners do the following:

keep adequate records;
properly account for and report payments and use of company assets by shareholders and associates; and
comply with rules around Division 7A loans.

Understanding these Division 7A obligations is essential in order to:

make informed decisions when receiving private company money and using private company assets; and
avoid unexpected and undesirable tax consequences.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Superannuation contribution caps to increase from 1 July 2024

Fri, 23 Feb 2024 04:19:08 GMT

Superannuation contribution caps to increase from 1 July 2024

The Federal Government has announced some key changes to the superannuation system that will take effect from 1 July 2024 .

Key changes include an increase in the concessional and non-concessional contribution caps, the bring forward caps, and the total superannuation balance thresholds that apply to determine the maximum amount of bring forward non-concessional contributions available to members.

Concessional and non-concessional contribution caps

The announcement includes an increase in the standard concessional and non-concessional contribution caps, which determine how much money can be put into super each year with lower tax rates.

The concessional contribution cap, which applies to employer and salary-sacrificed contributions, as well as personal contributions claimed as a tax deduction, will increase from $27,500 to $30,000 . This can mean that superannuation fund members can reduce their taxable income by contributing more to their super.

The non-concessional contribution cap ( NCC ), which applies to after-tax contributions, will increase from $110,000 to $120,000 . This can mean that superannuation fund members can add more to their superannuation balance from their own savings or inheritances, without paying extra tax.

This is the first time the contribution caps have been increased in three years.

Non-concessional contribution cap and the bring forward rule

The increase to the NCC cap under the bring forward rules will not apply to clients who have already triggered the “bring forward rule” in either this income year (ending 30 June 2024) or last year (ended 30 June 2023). Both of these income years are still within their bring forward period.

From 1 July 2024, the maximum NCC cap under the bring forward rules will be increased from $330,000 to $360,000 (which is three times $120,000).

Members wanting to maximise their NCCs using the bring forward rule may want to consider keeping any NCCs this year (ending 30 June 2024) under the current $110,000 limit. Then after 1 July 2024, trigger the bring forward rule with the higher $360,000 limit, which could allow a member to get an additional $30,000 of NCC into their superannuation fund.

We note that the NCC bring forward rule is available to members that are under age 75 (67 prior to 1 July 2022), which means that individuals under age 75 in the income year in which they make a NCC can bring forward up to three times their annual NCC, provided that they meet the relevant conditions.

Total superannuation balance

Another change is the limit for total superannuation balance and transfer balance for members with no existing pension. The total superannuation balance is the amount of money a person has in all their super accounts, while the transfer balance is the amount of money a person can move from their super account to a retirement income stream, such as an account-based pension.

From 1 July 2024, the total superannuation balance ( TSB ) thresholds, used to determine the maximum amount of bring-forward NCCs available to an individual, will be adjusted as follows:

We note that the general transfer balance cap will remain at $1.9 million for income year ending 30 June 2025.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – January/February 2024

Mon, 05 Feb 2024 00:08:52 GMT

Government announces changes to proposed 'Stage 3' tax cuts

Despite previous assurances, and after much speculation, the Government has announced tweaks to the 'Stage 3' tax cuts that will apply from 1 July 2024.

More particularly, the Government proposes to:

reduce the 19% tax rate to 16%;
reduce the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000 threshold;
increase the threshold at which the 37% tax rate applies from $120,000 to $135,000; and
increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.

The Medicare levy low-income thresholds for the 2024 income year will also be increased.

We recently released a Tax Alert on this topic, to see full details click here .

Changes in reporting requirements for sporting clubs

Not-for-profits ( NFPs ), including sporting clubs, societies and associations with an active ABN, need to lodge an annual NFP self-review return to continue accessing their income tax exemption.

The main purpose of a sporting organisation must be the encouragement of a game, sport or animal racing. Any other purpose of the organisation must be incidental, ancillary or secondary.

The organisation's governing documents will help identify the purpose for which it was set up, and the organisation's activities in the year of income must then demonstrate that the main purpose is the encouragement of its game, sport or animal racing.

NFP organisations need to lodge their first NFP self-review return for the 2024 income year between 1 July and 31 October 2024.

NFP organisations with their own ABN need to complete their own NFP self-review return even if they are affiliated with a broader sporting group.

If an NFP organisation does not lodge the return, they may become ineligible for an income tax exemption and penalties may apply.

Deductions denied for work-related expenses

The Administrative Appeals Tribunal ( AAT ) recently held that a taxpayer should not be allowed deductions for various work-related expenses, largely because the substantiation requirements had not been satisfied.

The taxpayer, a real estate salesperson, claimed tax deductions for the 2018 to 2020 income years, during which time he derived income from his employment with a real estate company.

However, the ATO disallowed the taxpayer's claims for various work-related expenses, including car expenses, and gifts and donations.

The AAT agreed with the ATO, and held that the expenses claimed were not deductible and that the taxpayer had failed to substantiate his claims.

The taxpayer had claimed deductions for car expenses using the logbook method, but the AAT noted that the car was owned by a company and was not leased to the taxpayer. Therefore, the car was not 'held' by the taxpayer, as required by the logbook method. The taxpayer's logbook also lacked "sufficient specificity" for this method.

While the taxpayer produced credit card statements and telephone tax invoices (in relation to credit card interest and telephone expenses), it was not clear from these documents whether the costs claimed related to work expenses.

The taxpayer sought to rely on bank transaction statements in relation to other expenses, but they were considered to be insufficient, as it was unclear from these statements what the relevant expense was, how the expense was incurred in earning the taxpayer's assessable income, and any apportionment between business and personal use.

There were also no receipts or tax invoices for any of the claimed donations.

Sale of land subject to GST

The AAT recently held that the sale of land by a taxpayer was subject to GST, as it was a supply made in the course of an enterprise being carried on by the taxpayer.

The taxpayer purchased a single parcel of land in 2013 for $1.6 million, and he subsequently took steps for the land to be subdivided and rezoned. He then sold the land in 2021 for $4.25 million before the subdivision was completed.

The ATO advised the taxpayer that the sale of the land was subject to GST as a taxable supply under the GST Act.

The taxpayer objected to the GST assessment on the following grounds:

the sale of the property was not made by him in the course of his enterprise; and
as the property was the taxpayer's residential premises, it was an input taxed supply, so no GST should apply anyway.

However, the AAT agreed with the ATO that the sale of the property was subject to GST as a supply made in the course of the taxpayer's enterprise.

The AAT first noted that the sale of the property was not an input taxed supply of residential premises because the buildings on the property were uninhabitable, and so the property did not meet the definition of 'residential premises' in the GST Act.

The AAT also held that the taxpayer's development works were in " the form of a business ", even if he was not in the business of being a property developer. Relevant factors included the scale of the operations that the taxpayer was involved in (including rezoning and subdividing the property), as well as the amount of capital invested by him in the purchase of the property and development works.

The taxpayer's " series of activities " throughout his ownership of the property therefore amounted to the carrying on of an enterprise, and the taxpayer was liable to pay GST on the sale of the property.

Melbourne man sentenced to jail for attempting to defraud the ATO

A Wheelers Hill man was recently sentenced to three years and six months imprisonment for defrauding the ATO of nearly $35,000 and attempting to defraud the ATO of a further $458,000, following a joint investigation by the Australian Federal Police ( AFP ) and ATO's serious financial crime taskforce.

The investigation began in June 2020, after the ATO linked the man to a number of suspicious claims, including 40 fraudulent applications for JobKeeper.

The sentence is " a warning to criminals who seek to exploit and steal from the Commonwealth and by extension, Australian taxpayers ".

New ATO guidance on "who is an employee?"

The ATO recently issued a ruling which explains when an individual is an 'employee' of an entity for pay as you go ( PAYG ) withholding purposes.

A useful approach for establishing whether or not a worker is an employee of an engaging entity is to consider whether the worker is working in the business of the engaging entity, based on the construction of the terms of the relevant contract. Importantly, the fact that a worker may be conducting their own business, including having an ABN, is not determinative.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Government announces changes to planned Stage 3 tax cuts

Thu, 25 Jan 2024 04:08:28 GMT

Government announces changes to planned Stage 3 tax cuts

The Federal Government has now announced changes to the marginal tax rates (and income thresholds, or brackets) starting from 1 July 2024. The announcement is a move away from the planned “Stage 3 tax cuts”.

What were the planned Stage 3 tax cuts?

The previous Coalition Government announced a long-term plan to implement three stages of reduced marginal tax rates and brackets between the 2018-19 and 2024-25 income years, with the final Stage 3 tax cuts due to start from 1 July 2024.

The current Labor Government agreed in the last election to keep these changes.

What are the announced changes?

The changes to the Stage 3 tax cuts will now provide lower to middle income earners with greater tax relief and effectively halve the tax cuts for higher income earners.

The following two tables show the changes highlighted in bold text .

We note that the re-introduction of the 37% tax bracket (which was planned to be removed), along with the replacing the 19% tax rate with a 16% tax rate, will impact taxpayers earning more than approx. $150,000. While these taxpayers will still receive a tax benefit, they will now receive a smaller net tax benefit from the proposed changes, compared to the net tax benefit under the planned Stage 3 tax cuts.

All taxpayers earning less than approx. $150,000 will receive an additional net tax benefit from the announced changes.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Property developers should be aware of upcoming changes to Victorian state taxes

Sun, 14 Jan 2024 23:19:08 GMT

Property developers should be aware of upcoming changes to Victorian state taxes

During the 2023 calendar year, the Victorian Parliament passed some significant changes to various state taxes, including land tax, stamp duty and the Windfall Gains Tax.

The key detail to note is that not all of these changes have the same starting dates, so we will consider the changes in order, on a timeline basis.

Changes starting when legislation was passed on 27 June 2023

Changes starting 1 January 2024

Changes starting 1 January 2025

Changes starting 1 January 2026

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Christmas Parties & Gifts 2023

Wed, 13 Dec 2023 22:48:56 GMT

Christmas Parties & Gifts 2023

With the well-earned 2023 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.

However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

FBT and 'entertainment'

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.

Using the actual method

Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible. However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;
the minor benefit exemption* cannot apply; and
the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (eg. family) on an infrequent and irregular basis.

We note that a $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all. The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used:

· For all 40 employees and their spouses – no FBT is payable (ie. if the minor benefit exemption is available), however, the party expenditure is not tax deductible .

If the 50/50 method is used:

· The total expenditure is $10,000, so $5,000 (ie. 50%) is liable to FBT and tax deductible .

Christmas gifts

With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

Gifts that are not considered to be entertainment

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible ; and
gifts to clients, suppliers, etc. – no FBT , and tax deductible .

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre. Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
gifts to clients, suppliers, etc. – no FBT and not tax deductible .

Non-entertainment gifts at functions

What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (ie. the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible .

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible; and
in relation to the gifts:
the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and
as the gifts are not entertainment, the cost is tax deductible .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – December 2023

Wed, 13 Dec 2023 22:12:39 GMT

ATO's lodgment penalty amnesty is about to end

The ATO is remitting failure to lodge penalties for eligible small businesses. Businesses which have not yet taken advantage of the ATO's lodgment penalty amnesty only have until 31 December 2023 to do so.

Businesses must meet the following criteria in order to be eligible for the amnesty:

had an annual turnover under $10 million when the original lodgment was due;
have overdue income tax returns, business activity statements or FBT returns that were due between 1 December 2019 and 28 February 2022; and
lodge between 1 June and 31 December 2023.

When taxpayers lodge their eligible income tax returns, business activity statements and FBT returns, failure to lodge penalties will be remitted without the need to apply.

The amnesty does not apply to privately owned groups or individuals controlling over $5 million of net wealth.

Directors who bring their company lodgments up to date can also have penalties remitted and, if they are reliant on company lodgments to finalise their own tax affairs, any failure to lodge penalties will be remitted. This also applies to eligible lodgments made between 1 June and 31 December 2023.

Notice of officeholder data-matching program

The ATO will acquire officeholder data from ASIC, the Office of the Registrar of Indigenous Corporations and the Australian Charities and Not-for-profits Commission for the 2024 and 2025 income years, including details such as:

their name, address and date of birth;
email address and contact phone number;
organisation class, type and status, and state of incorporation; and
officeholder type, role type, and officeholder role start and end dates.

The ATO estimates that records relating to approximately 11 million individuals will be obtained.

This program aims to (among other things) enable the Australian Business Registry Services to increase uptake of the director ID, and better utilise registry data to combat unlawful activity.

ATO warning regarding prohibited SMSF loans

Loans to members continue to be the highest reported contravention of the superannuation laws that the ATO sees in auditor contravention reports.

Self-managed superannuation fund ( SMSF ) trustees should remember that they cannot loan money or provide other forms of financial assistance to a member or relative, and if they do, they can incur a penalty of up to $18,780. They may also be disqualified as a trustee.

SMSF trustees also cannot loan money to a related party, such as a business, where the value of the loan exceeds 5% of the value of the fund's total assets, as this is a prohibited “in-house asset” investment.

If the SMSF's in-house assets exceed 5% of the total value of its assets at the end of the financial year, the trustee must prepare a plan to reduce their in-house assets to less than 5%, which must be implemented by the end of the following financial year.

If a trustee has made a prohibited loan from their SMSF, the loan must be repaid as soon as possible.

Foreign investors to pay higher investment fees for housing

The Federal Government has announced it will increase fees for the purchase of established homes, increasing penalties for vacant properties and strengthening compliance activity. The basis for these changes is to help boost the number of available homes for Australians.

The changes include:

a tripling of foreign investment fees for the purchase of established homes;
a doubling of vacancy fees for all foreign owned dwellings purchased since 9 May 2017 (which together mean a six-fold increase in vacancy fees for future purchases of established dwellings); and
enhancing the ATO’s compliance regime to ensure foreign investors comply with the rules, including selling their residence when required.

The Government intends to introduce legislation next year to implement these proposed increased fees.

At the same time, the Government will also cut application fees for foreign investment in Build-to-Rent projects to help delivery more homes across Australia.

Don't forget the two further “boosts”!

Although the 'Technology Investment Boost' has come to an end (it provided a bonus deduction for eligible expenditure incurred until 30 June 2023), it is important to remember that there are two further “boosts” providing bonus deductions for small businesses, and both apply to eligible expenditure incurred up until 30 June 2024 .

The Skills and Training Boost provides small or medium businesses with a bonus 20% deduction for eligible expenditure incurred on external training for employees, to support such businesses to train and upskill their employees.

This boost applies to eligible expenditure incurred from 29 March 2022 until 30 June 2024.

The Small Business Energy Incentive (Boost) is designed to support small business electrification and more efficient energy use, and will apply to eligible expenditure incurred between 1 July 2023 and 30 June 2024 (once the relevant legislation is passed).

This boost provides small or medium businesses with a bonus 20% deduction for the cost of:

eligible depreciating assets; and/or
eligible improvements incurred in relation to existing depreciating assets,

that support electrification or energy efficiency.

To be eligible for either of the two remaining “boosts” above, a business taxpayer must satisfy a number of conditions. We previously released a Tax Alert, during September 2022, explaining the details of the Skills and Training Boost which can be seen by – clicking here .

We will also release a Tax Alert on the Small Business Energy Incentive (Boost) when the relevant legislation passes through Parliament to receive royal assent.

Please contact our office if you need any further information regarding the above “boosts”.

Claiming deductions in relation to a holiday home

Taxpayers should remember that they can only claim deductions for holiday home expenses to the extent they are incurred for the purpose of gaining or producing rental income.

Holiday home owners need to consider the following in determining whether the deductions they wish to claim are valid rental deductions.

How many days during the income year did they use or block out the property for their own use? Taxpayers cannot claim deductions for the periods the property was used or blocked out by them.

How and where did they advertise the property for rent, and is the rent in line with market values? If they only used obscure means of advertising, or put unreasonable restrictions or conditions in the advertisement, they may not be entitled to claim deductions.

Will any restrictions, or the general condition of the property, reduce interest from potential holiday makers? If their property is not in a tenantable condition, they may not be entitled to claim deductions.

Has the taxpayer or their family or friends used the property? Taxpayers cannot claim for periods of private use or when the property is kept vacant for personal reasons.

Is any part of the property off limits to tenants? When taxpayers claim deductions, they should ensure they calculate and apportion deductions in relation to the part of the property that is available for rent.

Reminder of December 2023 Quarter Superannuation Guarantee (SG)

Employers are reminded that, in relation to their SG obligations for the quarter ending 31 December 2023, the due date is 28 January 2024 .

If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

The SG rate is 11.0% for the 2024 income year.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Expanding the net for Vacant Residential Land Tax in Victoria

Thu, 07 Dec 2023 23:43:48 GMT

Background

For the year ending 31 December 2024, VRLT only impacts properties in 16 of Melbourne’s inner and middle suburbs, which is imposed in addition to any other land tax or surcharge land tax that may apply.

A property is taken to be “vacant” if it has not been lived in for more than six months out of a calendar year, and this does not need to be a consecutive period of occupancy. Determining whether a property is “vacant” is done by considering the use of the land in the year that immediately precedes the relevant land tax year (ie. the use in the 2024 calendar year will determine whether VRLT applies in 2025).

VRLT is an annual tax for vacant land (subject to some exemptions), and for the year ending 31 December 2024, the VRLT rate is 1.0% of the capital improved value ( CIV ) of taxable land. The CIV of a property is a value of the land, buildings and any other capital improvements made to the property as determined by the general valuation process. It is displayed on the council rates notice for the property.

What are the new changes?

The State Taxation Acts and Other Acts Amendment Bill 2023 (Vic) ( the Bill ) has recently passed both houses of the Victorian Parliament to amend the Land Tax Act 2005 (Vic), and there will be four important changes to the VRLT rules from 1 January 2025 and 2026 .

1) Applying VRLT to all vacant residential land in Victoria

For the year ending 31 December 2024, the VRLT only applies to vacant residential land within 16 of Melbourne’s inner and middle suburbs - click here to see current list.

Firstly, these changes will expand the current inner and middle suburbs geographic area to the whole state of Victoria from 1 January 2025 .

2) Extending the VRLT to include certain “unimproved land” in Metropolitan Melbourne

For the year ending 31 December 2024, land is not considered vacant for up to two years from the date a building permit is issued for any significant renovation or reconstruction, and this two-year grace period will apply for the majority of Victoria.

Under these changes, land undergoing significant renovation or reconstruction within certain areas of metropolitan Melbourne will not be considered vacant for up to five years from 1 January 2026 .

We must note that the “unimproved land” classification is simply vacant land, even without a dwelling of any kind on it. The five-year period is considered to provide adequate time for an owner of residential land to commence construction of a residence before it is regarded as vacant residential land.

3) Applying VRLT to all vacant residential land in Victoria

For the year ending 31 December 2024, the VRLT rate is 1.0% of the CIV of taxable land (as explained above).

In the eleventh hour of the Bill passing through the Victorian Parliament, the Victorian Green Party members proposed a change to the rate of VRLT to increase each consecutive year the property remains vacant.

Under these changes, the single VRLT rate will be expanded as follows from 1 January 2025 :

In other words, if land was liable for VRLT in the preceding tax year (ie. 1 January to 31 December 2024) but not the tax year preceding that tax year (ie. 1 January to 31 December 2023), a VRLT rate of 2.0% will be applied to the land from 1 January 2025.

Furthermore, if land was liable for VRLT in the last 2 preceding tax years (ie. 1 January to 31 December 2023 and 2024), a VRLT rate of 3.0% will be applied to the land from 1 January 2025.

4) Launching a trial to enforce VRLT, rather than rely on self-reporting

The Victoria Government will also launch a trial for a new enforcement system across metropolitan Melbourne, rather than relying on self-reporting and landowners. The trial, to be led by the Victorian State Revenue Office ( SRO ), would use utility data (ie. electricity and water usage) to identify homes that are not being used.

This would mean landowners identified by the SRO with potentially vacant properties would be asked provide proof that people live at their residence during the relevant calendar year.

The trial is proposed to start in 2024 with apartment towers and expand in 2025 to include inner and middle suburbs of Melbourne.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Alignment of tax treatment for “on” and “off” market share buy-backs undertaken by listed public companies

Tue, 28 Nov 2023 21:29:51 GMT

Background

During February 2023, the Treasury Laws Amendment (2023 Measures No 1) Bill 2023 ( the Bill ) was introduced to improve the integrity of off-market share buy-backs undertaken by listed public companies. These measures were first announced in the October 2022–23 Federal Budget.

At that time, the difference between the total purchase price and that part of the purchase price debited against the company's share capital account (in relation to the off-market share buy-back ) was taken to be a dividend, which could be franked where imputation credits were available.

Conversely, at that time, in the case of an on-market buy-back (ie. on an exchange in the ordinary course of trading), no part of the buy-back price was treated as a dividend and the total amount received by the shareholder was treated as consideration for the sale of the shares.

The amendments put forward in the Bill proposed to ensure that where a listed public company undertakes an off-market share buy-back of a share, no part of the purchase price in response of the buy-back will be taken to be a dividend.

Changes now the Bill has received Royal Assent

The Bill passed through the Senate on 16 November 2023 and has now received Royal Assent. The tax treatment has now been aligned between off-market share buy-backs undertaken by listed public companies with on-market share buy-backs.

These changes apply retrospectively to buy-backs undertaken by listed public companies that were first announced to the market after 7:30pm (AEDT) on 25 October 2022.

Today, if a listed public company undertakes an off-market buy-back of a share, sellers will not be assessed on any part of the purchase price as a dividend, but assessed on the sale as a revenue or capital gain or loss.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – November 2023

Mon, 06 Nov 2023 03:01:49 GMT

Government releases draft legislation on total superannuation balances over $3 million

On 3 October 2023, the Government released draft legislation to impose tax on individuals with total superannuation balances ( TSB ) of $3 million or more at 30%, rather than 15%.

The higher 30% rate only applies to “taxable superannuation earnings” which represents the proportion of earnings corresponding to the part of the TSB that exceeds $3 million.

An individual’s TSB includes all of their superannuation interests and is not a separate figure for each interest, for example, the $3 million threshold will be applied on a “per-individual basis” and not on a “per-account or per-fund basis”.

Unfortunately, the way the tax is imposed is very unusual, and will (amongst other issues) result in such individuals paying tax on their super fund's unrealised capital gains.

The consultation process for this draft legislation has been completed and the submissions made by professional accounting and superannuation bodies are currently being considered. We note this is not law yet, however we continue to watch this space as the draft legislation moves towards the final release of the legislation.

Tax issues for businesses that have received a support payment

Taxpayers who have received a government support grant or payment recently to help their business recover from COVID-19 or a natural disaster should check if they need to include the payment in their assessable income.

Grants are generally treated as assessable income, and taxpayers may be able to claim deductions if they use these payments to:

purchase replacement trading stock or new assets;
repair their business premises and fit out; or
pay for other business expenses.

However, some grants are declared non-assessable, non-exempt (' NANE ') income. This means taxpayers don't need to include them in their tax return if they meet certain eligibility requirements.

NANE grants include but are not limited to:

COVID-19 business support payments;
natural disaster grants; and
water infrastructure payments.

Taxpayers can only claim deductions for expenses associated with NANE grants if they relate directly to earning their assessable income, including wages, dividends, interest and rent.

Taxpayers cannot claim expenses related to obtaining the grant, such as accountant's fees.

Care required in paying super benefits

Generally, before self-managed superannuation fund ( SMSF ) trustees pay a member's super benefits, they need to ensure that:

the member has reached their preservation age;
the member has met one of the conditions of release; and
the governing rules of the fund (e.g., the trust deed) allow it.

Benefit payments to members who have not met a condition of release are not treated as super benefits. Instead, they will be taxed as ordinary income at the member's marginal tax rate.

If a benefit is unlawfully released, the ATO may apply significant penalties to:

the SMSF trustee;
the SMSF; and
the recipient of the early release.

The ATO may also disqualify the trustee(s) involved.

Investment restrictions and other rules that apply to SMSFs in the accumulation phase continue to apply when members begin receiving a pension from the SMSF.

Where a member has met a condition of release, the trustee can either pay the benefit as a lump sum or super income stream (i.e., a pension). If a member has died, the trustee will generally pay a death benefit to a dependant or other beneficiary of the deceased, subject to the applicable rules.

Notice of visa data-matching program

The ATO will acquire visa data from the Department of Home Affairs for the 2024 to 2026 income years, including the following:

address history and contact history for visa applicants, sponsors, and migration agents;
active visas meeting the relevant criteria, and all visa grants;
visa grant status by point in time;
migration agents who assisted the processing of the visa;
all international travel movements undertaken by visa holders; and
sponsor details, and visa subclass name.

The ATO estimates that records relating to approximately nine million individuals will be obtained each financial year.

The objectives of this program are to (among other things) help ensure that individuals and businesses are fulfilling their tax and super reporting obligations, and identify potentially new or emergent approaches to fraud and those entities controlling or exploiting the visa framework.

ATO says: "Be cyber wise, don't compromise"

Throughout the 2022 income year, one cybercrime was reported every seven minutes. The ATO encourages taxpayers to implement the following four quick steps to protect themselves.

Step 1: Install updates for your devices and software

Regular updates ensure taxpayers have the latest security in place which can help prevent cyber criminals from hacking their devices. They should also make sure they are downloading authorised and legitimate programs.

Step 2: Implement multi-factor authentication

Multi-factor authentication ( MFA ) is a security measure that requires at least two proofs of identity to grant access. Businesses as well as individuals should implement MFA wherever possible. MFA options can include a physical token, authenticator app, email or SMS.

Step 3: Regularly back up your files

Backing up copies of files to an external device or the 'cloud' means taxpayers can restore their files if something goes wrong. It is a precautionary measure that can help avoid costly data recovery.

Step 4: Change your passwords to passphrases

By using passphrases, taxpayers can boost the security of their accounts and make it harder for cyber criminals to access their information.

Passphrases use four or more random words and can include symbols, capitals and numbers. A password manager can help generate or store passphrases.

Losses in crypto investments for SMSFs

Over the last few income years, the ATO has seen some instances of SMSF trustees losing their crypto asset investments.

These losses have been caused by:

crypto scams, where trustees were conned into investing their superannuation benefits in a fake crypto exchange;
theft, where fraudsters would hack into trustees' crypto accounts and steal all their crypto;
collapsed crypto trading platforms, many of which were based overseas; and
lost passwords, resulting in trustees being locked out of their crypto account and being unable to access their crypto.

Trustees thinking of investing in crypto need to be aware of the ways that crypto can be lost, including through scams, and how these scams can be avoided.

Many crypto assets are not commonly considered to be financial products, which means the platform where crypto is bought and sold may not be regulated by ASIC.

Therefore, trustees may not be protected if the platform fails or is hacked. When a crypto platform fails they will most likely lose all of their crypto.

Investing in crypto can be complex and risky, and so the ATO recommends that trustees seek financial advice before investing.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – October 2023

Sun, 01 Oct 2023 22:54:04 GMT

Taxpayers need to get their 'rental right'

The ATO reminds rental property owners and their tax agents to take care when lodging their tax returns this tax time. When preparing their tax returns, taxpayers should make sure all rental income is included, including income from short-term rental arrangements, renting part of a home, and other rental-related income.

Rental income must be reported in the year the tenant pays, rather than when the taxpayer’s agent transfers it to them, and it must be reported as the gross amount received (ie. before the property managers fees and other expenses they pay on the taxpayer’s behalf are taken out).

There are three categories of rental expenses, as follows:

Expenses where taxpayers cannot claim deductions – ie. expenses arising from a taxpayer’s personal use of their property and capital expenses;
Expenses where taxpayers can claim an immediate deduction in the income year they incur the expense – ie. interest on loans, council rates, general repairs and maintenance, and depreciating assets costing $300 or less; and
Expenses where taxpayers can claim deductions over a number of income years – ie. 'capital works' deductions and borrowing expenses incurred when setting up a loan.

The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes, or the loan was re-financed for some private purpose.

Taxpayers should ensure they have the records to demonstrate they incurred expenses for their rental property and the extent to which the expenses relate to producing rental income.

Choosing the right PAYG instalment method

The ATO advises that Pay as you go ( PAYG ) instalments are calculated using either the instalment amount method or the instalment rate method.

It recently provided the following two case studies to illustrate the two methods:

Case study 1: Kelly the DJ

Kelly is a DJ, working at festivals from November to January. She chooses to use the instalment rate method, as it suits her seasonal business income.
Using this method means she needs to work out her business income each period.
It helps her manage cash flow because the amounts she pays will vary in line with her income.
When Kelly receives her BAS or instalment notice, she calculates the instalment based on her income for that period, multiplied by the rate provided.

Case study 2: David the plumber

David is a plumber with regular monthly business income, so he chooses the instalment amount method. He won’t need to work out his business income each period to use this method.
David pays the instalment shown on his BAS. The amount is calculated from information in his last tax return.

We note that if Kelly or David think the instalments they pay will add up to be more or less than their tax liability for the year, they can vary their instalments.

Mildura man jailed for seven years for GST fraud

A Mildura man was recently sentenced in the County Court of Victoria to seven-and-a-half years in prison after obtaining more than $830,000 in fraudulent GST refunds.

The man had recently been released from custody when he lodged false business activity statements, dishonestly obtaining $834,437 in GST refunds.

Under Operation Protego , which was initiated in response to widespread GST fraud activity, the ATO has taken action against more than 56,000 individuals.

Remember the unused concessional contributions cap concession

As from 1 July 2018, individuals with a total superannuation balance of less than $500,000 as at 30 June of the previous income year may be entitled to contribute more than the general concessional contributions cap (ie. and make additional concessional contributions to utilise any unused cap amounts).

For example, an individual who did not make any concessional contributions in the 2019 income year (and whose total superannuation balance was less than $500,000) would have been able to make up to $50,000 of concessional contributions in the 2020 income year.

Unused concessional contributions are available on a rolling basis and can be carried forward for up to five years, after which they will expire. The 2024 income year is the first year in which unused caps from all five previous years are potentially available to carry forward.

Please contact our office if you require assistance in relation to the above measure.

Deduction for contributions denied due to notice requirement problems

The Administrative Appeals Tribunal ( AAT ) recently held that a claim for a deduction for personal super contributions should not be allowed, as the relevant 'notice requirements' were not satisfied.

In order to claim a deduction for personal super contributions, an individual must both notify the super fund of their intention to claim a deduction, and receive an acknowledgment from the fund that it received the notice.

During the 2021 income year, the taxpayer made a number of personal superannuation contributions to his super fund totalling $6,550, with the last of those contributions made on 30 June 2021.

Sometime before 9 June 2021, the taxpayer submitted to his fund a notice advising the fund that he intended to claim a personal contribution deduction for $6,550 for the 2021 income year.

However, on 9 June 2021, the fund advised that it was unable to accept the notice because the fund's records indicated that the amount of contributions listed in the notice was different to the amount of contributions received. This was because the fund received the notice before the taxpayer made his final contribution of $550 on 30 June 2021.

Sometime between 9 June 2021 and 16 July 2021 the taxpayer resubmitted a notice to the fund via post that he intended to claim a deduction for the amended amount of $6,000 (although the fund subsequently advised that it had not received this notice).

On 14 July 2021, the taxpayer lodged his 2021 income tax return, claiming a deduction for $6,000 of personal contributions.

On 22 August 2021, the ATO notified the taxpayer that his claim for a personal contribution deduction had been disallowed, on the basis that the fund had not reported an acknowledged notice that matched his claimed deduction.

The AAT held that, when the taxpayer completed the first notice, he had not made personal contributions of $6,550 (as referred to in the notice), but rather had made contributions of $6,000.

Therefore, the first notice could not be valid as it was not in respect of the contributions that the taxpayer had made.

The AAT also noted that the fund did not provide an acknowledgment of the taxpayer's second notice, as it had not received it.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – September 2023

Mon, 04 Sep 2023 05:37:18 GMT

Appointing an SMSF auditor

The ATO reminds self-managed superannuation funds ( SMSF ) trustees that they need to appoint an approved SMSF auditor for each income year, no later than 45 days before they need to lodge their SMSF annual return.

An SMSF’s audit must be finalised before the trustees lodge their SMSF annual return, as the trustees will need some information from the audit report to complete the annual return.

An SMSF’s auditor is to perform a financial and compliance audit of the SMSF’s operations before lodging. An audit is required even if no contributions or payments are made in the financial year.

An approved SMSF auditor must be independent, which means that an auditor should not audit a fund where they hold any financial interest in the fund, or have a close personal or business relationship with members or trustees.

If a fund doesn’t meet the rules for operating an SMSF, the auditor may be required to report any contraventions to the ATO.

ATO gives “green light” to lodge

The ATO is giving taxpayers with simple affairs the ‘green light’ to lodge their annual income tax returns.

ATO Assistant Commissioner Tim Loh said that most taxpayers with simple affairs will find the information they need to lodge has now been pre-filled in their tax return.

Mr Loh also reminded taxpayers that some income may need to be manually added – for example, income from rental properties, some government payments or income from “side hustles”.

As taxpayers prepare to lodge, they should keep “ Tim Loh’s tax time tips ” in mind:

Include all income : If a taxpayer picked up some extra work, e.g., through online activities, the sharing economy, interest from investments, etc, they will need to include this in their tax return;
Assess circumstances that occurred this year : If a taxpayer’s job or circumstances have changed this year, it is important they reflect this in their claims;
Records, records, records : To claim a deduction for a work-related expense, taxpayers must have a record to prove it.
Wait for notice of assessment : Taxpayers should wait for their notice of assessment before making plans for how they will use any expected tax refund this year;
Stay alert to scams : The ATO would never send taxpayers a link to log into the ATO’s online services or ask them to send personal information via social media, email or SMS.

We must note the ATO advises that, when taxpayers lodge their own return, the due date for payment is 21 November, regardless of when you lodge, but if you use a registered agent, your due date can be much later.

Different meanings of “dependant” for superannuation and tax purposes

On a person’s death, their superannuation benefits can only be paid directly to one or more “dependants” as defined for superannuation purposes , unless they are paid to the deceased’s legal personal representative to be distributed in accordance with the deceased’s Will.

Super death benefits can be tax-free to the extent that they are paid (either directly or indirectly) to persons who are “dependants” for tax purposes .

However, the meaning of “dependant” differs slightly for superannuation and tax purposes. For superannuation purposes, a “dependant” of the deceased comprises:

their spouse (including de facto spouse);
their child (of any age);
a person in an ‘interdependency relationship’ as defined with the deceased; and
a person who was financially dependent on the deceased.

However, for tax purposes , a “dependant” (or ‘death benefits dependant’) of the deceased includes their spouse or former spouse (including de facto spouse) and only children under the age of 18 .

Therefore, super death benefits generally cannot be paid directly to a former spouse, as they are not a dependant for super purposes.

Also, while a child of any age is a dependant for super purposes, only children under the age of 18 are dependants for tax purposes. This means that, while a child of any age may receive super death benefits directly, those benefits will generally only be tax-free if the child is under 18.

If you are thinking about estate planning with your superannuation, please contact your Lowe Lippmann Relationship Partner to discuss.

NALI provisions did not apply to loan structure

The Administrative Appeals Tribunal ( AAT ) has held that interest income derived by a SMSF as the sole beneficiary of a unit trust was not non-arm’s length income ( NALI ), and so this income could still be treated as exempt current pension income.

During the 2015, 2016 and 2017 financial years, the unit trust lent money through two related entities to independent third parties who undertook development activities, through a series of loan arrangements.

The interest income derived by the unit trust through these loan arrangements was distributed to the SMSF as sole unitholder and was treated as exempt current pension income.

Following an audit, the ATO determined that the income was NALI, and therefore should not have been included as exempt current pension income.

The ATO then issued amended assessments for the relevant financial years, along with penalties.

While the AAT found that the parties were not dealing with each other at arm’s length, it also concluded that the income that the unit trust derived was not more than the amount it might have been expected to derive if the parties had been dealing at arm’s length.

Accordingly, the relevant interest income received by the SMSF was not NALI, and so the taxpayer’s objections to the amended tax assessments and penalties were allowed.

Luxury car tax: determining a vehicle's principal purpose

The ATO recently explained how to determine the principal purpose of a car for “luxury car tax” ( LCT ) purposes (since LCT is not payable on the supply or importation of cars whose principal purpose is the carriage of goods rather than passengers).

Broadly, a luxury car (ie. a car subject to LCT) is a car whose LCT value exceeds the LCT threshold. However, a commercial vehicle that is not designed for the principal purpose of carrying passengers is specifically excluded as a luxury car.

The ATO’s new determination sets out various factors to be considered in determining the principal purpose of a car, as well as factors to consider when assessing a car’s modifications.

The determination states that commercial vehicles are unlikely to have the body types of station wagons, off-road passenger wagons, passenger sedans, people movers or sports utility vehicles, and the supply of these vehicles for an amount above the LCT threshold without LCT being paid may well attract the ATO’s scrutiny.

Special Topic: Recent announcements for the Sharing economy

Sharing economy reporting system now law

Amendments to the tax administration legislation that recently received royal assent, will require operators in the sharing economy to report income earned by sellers on their marketplace. This is based on the ATO’s determination that income earned on these platforms is a high-risk for non-compliance with tax obligations.

The taxpayers required to comply with this reporting regime will be operators of:

taxi travel (including ride-sourcing/ridesharing, such as Uber) - from 1 July 2023;
short-term accommodation (such as Airbnb) - from 1 July 2023; and
asset sharing, food delivery, task-based services and all other supplies - from 1 July 2024.

From these respective dates, any income you earn from these platforms will be reported directly to the ATO as assessable income to be include in your income tax return.

Based on other data reporting systems, information which is generally included in the reports is your name, Australian business number ( ABN ), address, gross income and any GST you should be reporting. If this information is currently incorrect with these platforms you operate within, we suggest that you update your information promptly.

Data matching for online accommodation platforms

A recent release from the Commissioner of Taxation has stated that a data matching program will commence between the ATO and online accommodation platforms (such as Airbnb).

Online accommodation platforms are websites where an individual can list their primary residence (or rental property) for short-term rental income. For example, listing your house when you are away on holidays.

The ATO will collect the data, including the bank details linked to the accommodation account, for the 2016-17 to 2019-20 income years. Through the bank details, the Commissioner will get a list of individuals who should have declared rental income during those years.

We note that it is important that if there is some rental income earned on your principal place of residence, there is potentially some capital gains tax which may be payable on your eventual sale.

If you have used these platforms in the past, you may be required to amend your tax returns to declare this income. We note that the ATO generally looks favourably on individuals who have made a genuine mistake and voluntary disclose their error.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - New payroll tax guidance for medical centre businesses and contractors

Tue, 15 Aug 2023 06:11:43 GMT

New payroll tax guidance for medical centre businesses and contractors

The Victorian State Revenue Office ( SRO ) has recently released new guidance explaining the application of the contractor provisions in the Payroll Tax Act 2007 on an entity operating a medical centre business ( the medical centre ) that contracts with medical and health practitioners ( the practitioners ) to provide services to patients.

The guidance intends to provide greater clarity for entities that operate the medical centre, including dental clinics, physiotherapy practices, radiology centres and similar healthcare providers who contract with medical, dental and other health practitioners (or their entities) to provide patients with access to the services of the practitioners.

This new guidance is to be applied retrospectively and prospectively. However, we note this new guidance does not have the force of law, and each decision made by the SRO must be done on the merits of each individual case.

What is a ‘relevant contract’?

When a contract between a principal and a contractor is a ‘relevant contract’, the following treatment applies:

the principal who engages the contractor is deemed to be an employer;
the contractor is deemed to be an employee; and
payments made under the contract for the performance of work are deemed to be wages.

These deemed wages are subject to payroll tax where the services performed have the necessary nexus with Victoria, and this needs to be determined on a case-by-case basis.

Application of ‘relevant contract’ provisions to the medical centre

A contract between an entity that conducts the medical centre and a practitioner is a ‘relevant contract’ if all of the following factors apply:

the practitioner carries on a business or practice of providing medical-related services to patients;
in the course of conducting its business, the medical centre:
provides members of the public with access to medical-related services;
engages a practitioner to supply services to the medical centre by serving patients on its behalf; and
an exemption (explained below) does not apply.

If a medical centre engages a practitioner to practise from its medical centre, or holds out to the public that it provides patients with access to medical services of a practitioner, it is likely the ‘relevant contract’ provisions will apply to the contract with the practitioner unless an exception applies.

What are the exemptions from the ‘relevant contract’ provisions?

Basically, if an exemption applies, no payroll tax liability under the ‘relevant contract’ provisions arises.

There are three exemptions which are more likely to apply to a contract between a medical centre and a practitioner, including:

The practitioner provides services to the public generally;
The practitioner performs work for no more than 90 days in a financial year; and
Services are performed by two or more persons.

When claiming an exemption, a medical centre must be able to substantiate the exemption with sufficient evidence.

Providing services to the public generally

A contract between a medical centre and a practitioner is not a ‘relevant contract’ in relation to a financial year if the Commissioner is satisfied the practitioner who provided the services under the contract ordinarily performs services of that kind to the public generally in that financial year.

To qualify for the first exemption, the practitioner must provide services of the same kind to other principals, such as other medical centres or hospitals.

If a practitioner practises at multiple medical centres but those centres are members of the same group for payroll tax purposes, the medical centre may not be entitled to the exemption.

To see example 3 from the guidance ( click here ).

Working for 90 days or less in a financial year

Under the second exemption, if a practitioner performs work under a contract for no more than 90 days during a financial year, the contract is exempt for that financial year. Each calendar day on which the practitioner performs work counts as 1 day, regardless of the time spent working on a particular day.

To see example 4 from the guidance ( click here ).

Services performed by two or more persons

This third exemption applies if the medical centre contracts with a practitioner, and the practitioner and at least one other person employed by or who provides services for the practitioner perform the work required under the contract.

The second person (ie. nurse, assistant) that provides services to or for the practitioner may be a company, but the work must be performed by a natural person.

The work performed by the second person must be work required to be performed under the contract between the medical centre and the practitioner.

This third exemption does not apply if:

the second person is engaged by the medical centre, not by the practitioner, to provide the services; or
the second person provides general business-related services that are not required to be provided to the medical centre under the relevant contract (ie. bookkeeping, accounting or business advisory services provided to the practitioner).

The guidance provides three basic examples to clarify that it is the practitioner (and not the medical centre) that must engage the ‘second person’.

To see examples 5, 6 and 7 from the guidance ( click here ).

Which payments are deemed to be wages?

Certain amounts paid or payable under a relevant contract by a medical centre are wages for payroll tax purposes if the payments are in relation to the performance of work (either directly or indirectly) relating to the ‘relevant contract’ by the medical centre.

Recent case law confirms that there will be an ‘indirect’ relationship where the contractual relationship included the following characteristics:

the doctors provided the services to patients;
the patients assigned their medical benefits to the doctors;
the medical centre, on behalf of the doctors, submitted the assigned claims for the medical benefits to Medicare;
Medicare paid those benefits to the medical centre; and
The medical centre retained 30% of the amounts received from Medicare and paid the remaining 70% to the doctors as the payments.

It does not matter that payments to a practitioner are paid from money received by the medical centre on behalf of practitioners, whether from patient fees or Medicare payments. When the practitioner’s entitlement is recognised and the money is paid or becomes payable, it constitutes wages for payroll tax purposes.

If a payment by a medical centre to a practitioner includes an amount that is not attributed to the performance of work, only the amount paid for the performance of work is subject to payroll tax.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – August 2023

Wed, 09 Aug 2023 01:27:07 GMT

Tax refunds expected by many Australians may be dramatically reduced this year, why?

There is a psychology to tax refunds that successive Governments have been reticent to tamper with. As a nation, Australia relies heavily on personal and corporate income tax, with personal income tax including taxes on capital gains representing 40% of revenue compared to the OECD average of 24%. And, for the amount of income tax we pay, we expect a reward.

The reward is in the form of tax deductions that reduce the amount of net income that is assessed for tax purposes and tax offsets that reduce the tax payable, generating a refund for some. Tax refunds have a positive impact on tax compliance.

As part of the previous Government’s efforts to flatten out the progressive individual income tax system, a time-limited “ low and middle income tax offset ” was introduced. The lifespan of the offset was extended twice, partly as a stimulus measure in response to COVID-19. The offset delivered up to $1,080 from 2018-19 to 2020-21, and up to $1,500 in 2021-22 for those earning up to $126,000.

This was a significant boost for many people each tax time and bolstered the tax returns of millions of Australians. For many, the end of the “low and middle income tax offset” means that their tax refund will be reduced dramatically for the 2023 income year, compared to previous income years.

Changes to deductions this tax time in the 2023 income year

Taxpayers who are small business owners operating from home, or who use a vehicle for business purposes, need to be aware of some changes when claiming deductions this tax time, including the following.

Cents-per-kilometre method – The cents-per-kilometre method for claiming car expenses increased from 72 cents to 78 cents per kilometre in the 2023 income year. For taxpayers using this method, the 78 cents per kilometre rate covers all their vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. Taxpayers using this method cannot claim these costs separately.

Car limit for business owners – The car limit has also increased to $64,741 for the 2023 income year. The car limit is the maximum value taxpayers can use to work out the depreciation of passenger vehicles (excluding motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers.

Work from home business expenses – For the 2023 income year, the “fixed rate method” (for taxpayers operating their business from home) increased from 52 cents to 67 cents per hour worked from home, and taxpayers are no longer required to have a dedicated home office space.

The fixed rate method covers electricity, gas, stationery, computer consumables, internet, and phone usage.

Taxpayers can also claim separate deductions for expenses not included in the hourly rate, such as the decline in value of depreciating assets (ie. laptops or office furniture).

Claiming GST credits for employee expense reimbursements

Employers may be entitled to claim GST input tax credits for payments they have made to reimburse employees for expenses that are directly related to their business activities.

A “reimbursement” is provided when a taxpayer pays their employee the amount, or part of the amount, of a particular work-related purchase they make.

Employers are not entitled to a GST input tax credit if they pay their employee an allowance, or make a payment based on a notional expense, such as a cents-per-kilometre payment, travel or meal allowance.

An “allowance” is provided when a taxpayer pays their employee an amount for an estimated expense without requiring them to repay any excess.

Taxpayers are expected to hold sufficient evidence to substantiate their claim, such as a tax invoice for the purchase that is being reimbursed.

Lodging of Taxable payments annual reports

The ATO reminds taxpayers that it is now time for them to check if their business needs to lodge a Taxable payments annual report ( TPAR ) for payments made to contractors providing the following services:

Building and construction;
Cleaning;
Courier and road freight;
Information technology; and
Security, investigation or surveillance.

TPARs are due on 28 August each year and penalties may apply if they are not lodged on time. Taxpayers can help prepare for their TPAR by keeping records of all contractor payments. Taxpayers that do not need to lodge a TPAR this year can submit a TPAR non-lodgment advice form to let the ATO know and avoid unnecessary follow-up.

Taxpayers can refer to the ATO’s website for more information about TPARs, including who needs to report and how to lodge.

Downsizer contribution measure eligibility has been extended

The downsizer contribution concession was introduced to allow older Australians selling an eligible dwelling to make additional contributions into their superannuation fund.

Broadly, the downsizer contribution concession allows eligible individuals to make non-deductible contributions of up to $300,000 (or up to $600,000 per couple) from the sale of an eligible dwelling that was used as their main residence.

The downsizer contribution concession is an attractive option for eligible individuals to boost their superannuation entitlements, as it is not counted towards an individual's standard contribution caps.

Also, the total superannuation balance restriction does not apply in respect of a downsizer contribution (so an eligible individual can make a downsizer contribution into their super fund, regardless of their total superannuation balance), and it is not included in the assessable income of the receiving fund.

However, there are various eligibility requirements that need to be satisfied in order for a downsizer contribution to be made, and professional advice should be sought in this regard as required.

Importantly, as from 1 January 2023 , the Government has broadened access to the downsizer contribution concession by reducing the minimum age requirement for accessing this concession from age 60 to age 55 . This means that individuals aged 55 to 59 years who were not previously eligible to make downsizer contributions due to their age are now eligible to make downsizer contributions if they satisfy all the eligibility requirements.

Reallocation of excess concessional contributions denied in recent tax case

The Administrative Appeals Tribunal ( AAT ) has held that there were no special circumstances in relation to a taxpayer who made excess concessional contributions in a financial year, such that the ATO could allocate some of those contributions to the previous financial year.

On Wednesday, 26 June 2019, the taxpayer arranged for contributions totalling just under $25,000 to be made to his superannuation fund, via a direct debit from his bank account to a clearing house used by his fund.

However, the relevant contribution was received by the superannuation fund on Monday 1 July 2019. The taxpayer then made further contributions totalling just under $25,000 to his superannuation fund on 5 August 2019, which meant that he had made excess concessional contributions for the 2020 financial year.

The AAT confirmed the ATO’s decision that the circumstances did not justify some or all of the contributions made by the taxpayer on 26 June 2019 being reallocated to the 2019 financial year. That is, there were no ‘special circumstances’ (as required by the relevant legislation) that would justify the exercise of the ATO’s discretion to allocate the contributions to the previous financial year.

While the AAT accepted that the taxpayer genuinely intended that his contribution would be received by his superannuation fund by 30 June 2019, he should not have waited until 26 June 2019 to make the contribution, as “there was nothing unusual about the time taken to process the ... payment made on 26 June 2019.”

Also, in relation to various events and actions of other parties that the taxpayer submitted constituted ‘special circumstances’, the AAT noted that “an error on the part of a third party will not on its own amount to special circumstances.”

Special Topic: Succession planning when transferring your business to the next generation

What is the end game for your business? Succession is not just a topic for a large businesses and wealthy families, it is about successfully transitioning your business and maximising its capital value for you, the owners.

When it comes to generational succession of a family business, there are a few important aspects:

Succession of the business;
Succession of the ownership of the business;
Succession planning/pathway; and
Moving from a business family to an investment family.

For generational succession to succeed, even if that succession is the sale of the business and the management of the sale proceeds for the benefit of the family, communication is essential. Where generational succession fails, it is often because succession has not been formalised until a catalyst event or retirement planning requires it.

Generational succession usually involves the transfer of an interest in a business to another generation of a family (usually younger). It is often a family in business rather than simply a family business.

The options for how a movement of an interest may occur are many and varied but usually focus on the transfer of some or all of the equity held in the business over a period or at a defined point in time and the payment of some form of consideration for the equity transferred. Alternatively, a part of the equity transfer may ultimately be dealt with through the estate.

Generational succession comes with its own set of issues that need to be dealt with, including:

Capability and willingness of the next generation

A realistic assessment of whether the business can continue successfully after the transition. In some cases, the older generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation.

While reasonable objectives, they only work where there is capability and willingness. Communication of expectations is essential.

Capital transfer

Consider the capital requirements of the exiting generation. To what extent do you need to extract capital from the business at the time of the transition? The higher the level of capital needed, the greater the pressure on the business and the equity stakeholders.

In many cases, the incoming generation will not have sufficient capital to buy-out the exiting generation. This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt. Either scenario needs to be assessed for its sustainability at a business and shareholder level. In some scenarios the exiting owners will transition their ownership on an agreed timeframe.

Managing remuneration

In many small and medium businesses, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little. Under generational succession, there should be an increased level of formality around compensation. Compensation should be matched to roles, and where performance incentives exist, these should be clearly structured.

Who has operational management and control?

Transition of control is often a sensitive area. It is essential to establish and agree in advance how operating and management control will be maintained and transitioned. This is important not only for the generational stakeholders but also for the business. Often the exiting business owners have a firm view on how the business should be run.

Uncertainty in the management and decision making of the business can lead to confusion or a vacuum - either may have an adverse impact on the continued success of the business. Tensions can arise because:

The incoming generation want freedom of decision making and the ability to put their imprint on the business.
Without operating control, they feel that they have management in name only.
The exiting generation believe that their experience is necessary to the business and entitles them to a continued say.
A perception that capital investment should equate to ultimate operating control.
An uncertainty by either or both generations about the extent of their ongoing roles.

Agreeing transition of control in advance, on an agreed timeframe, can significantly reduce the risk of any tensions arising.

Transition timeframes and expectations

Generational succession is often a process rather than an event. The extended timeframe for the transition requires active management to ensure that there are mutual expectations and to avoid the process being derailed by frustration.

The established generation may have identified that they want to scale down their business involvement and bring on other family members to succeed them. This does not necessarily mean that they want to withdraw completely, thus an extended transition period is not uncommon and can often assist the business in managing the change. This can also work well in managing income and capital withdrawal requirements.

The need for greater formality and management structure

A danger for many small and medium sized entities (SMEs) is the blurring of the boundaries between the role of the Board, shareholders, and management. With generational succession, this can become even more pronounced. Formality in these structures is important, with clear definitions of the roles and clarification of the expectations. For example, who should be a director and what are the responsibilities of their role?

For some, the role of the family is managed by a family constitution – an agreed set of rules. For others there will be an external advisory group that advises the family to ensure that the required independent expertise is brought to bear.

Successfully managing generational change is a process we can help you navigate. Talk to us about how we can help to structure an effective transition path.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – July 2023

Tue, 04 Jul 2023 01:40:00 GMT

What changed on 1 July 2023

Employers & business

Superannuation guarantee increases to 11% from 10.5%
National and Award minimum wage increases take effect.
The minimum salary that must be paid to a sponsored employee - the Temporary Skilled Migration Income Threshold - increased to $70,000 from $53,900.
Work restrictions for student visa holders reintroduced to 48 hours per fortnight.
The cap on claims via the small claims court procedures for workers to recover unpaid work entitlements increases from $20,000 to $100,000.
Energy Bill Relief Fund for small business kicks in – it will apply to your energy bills if you meet the criteria.
Sharing economy reporting to the ATO commences for electronic distribution platforms.

Superannuation

Superannuation guarantee increases to 11%
Indexation increases the general transfer balance cap to $1.9 million.
Minimum pension amounts for super income streams return to default rates.
SMSF transfer balance event reporting moves from annual to quarterly for all funds.

For you and your family

The new 67 cent fixed rate method for working from home deductions – make sure you have a record of when you work from home. The ATO won’t accept a simple “I work from home every Wednesday” x 8 hours calculation.
Access to the first home loan guarantee expands to “friends, siblings, and other family members.”
The Medicare low income threshold has increased for 2022-23.
The child care subsidy will increase from 10 July 2023 for families with household income under $530,000. See the Services Australia website for details.
New parents able to claim up to 20 weeks paid parental leave.
Access the age pension increased to 67 years of age.

In depth dive: 120% technology and skills ‘boost’ deduction

The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament. This in depth dive will help explain how to maximise your deductions.

Almost a full year after the 2022-23 Federal Budget announcement, the 120% tax deduction for expenditure by small and medium businesses ( SME ) on technology, or skills and training for their staff, is finally law. But there are a few complexities in the timing - to utilise the technology investment boost, you had to have purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023; that’s just seven days from the date the legislation passed Parliament.

Who can access the boosts?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

$20k technology investment boost

The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.

You ‘incur’ an expense when you are in debt for it; this might be a tax invoice or it might be a contract where you are legally liable for the cost.

For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use. For example, if you ordered 10 computers, you need to have received the computers and had them set up ready to use by at least 30 June 2023. Ordering them on 29 June won’t be enough to claim the boost if you did not receive them.

The types of expenses that might be eligible for the technology boost include:

Digital enabling items - computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
Digital media and marketing - audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
E-commerce - goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
Cyber security - cyber security systems, backup management and monitoring services.

The technology also must be “wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations”. That is, there must be a direct link to your business’s digital operations. For example, claiming the drone you bought at say Christmas 2022 won’t be deductible unless your business is, for example, a real estate agency that needed a drone to take aerial images of client homes to market on their website. The expense needs to relate to how the business earns its income, in particular its digital operations.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (ie. partly private), the bonus deduction applies to the proportion of the expenditure that is for business use.

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

Assets that you purchased but then sold within the relevant period (ie. on or prior to 30 June 2023).
Capital works costs (ie. improvements to a building used as business premises).
Financing costs such as interest expenses.
Salary or wage costs.
Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost below).
Trading stock or the cost of trading stock.

Let’s look at the example of A Co Pty Ltd ( A Co ) that purchased multiple laptops on 15 July 2022 to help its employees to work from home. The total cost was $100,000. The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use.

As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the cost of the laptops ($100,000) as a deduction under the temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

The Skills and Training Boost

The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.

Sole traders, partners in a partnership, independent contractors and other non-employees do not qualify for the boost as they are not employees . Similarly, associates such as spouses or partners, or trustees of a trust, also do not qualify.

As always, there are a few important conditions to consider, including:

Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024. If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.
The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.
A registered training provider needs to charge your business (either directly or indirectly) for the training (see What organisations can provide training for the boost).
The training must be for employees of your business and delivered in-person in Australia or online.
The training provider cannot be your business or an associate of your business.

Training expenditure can include costs incidental to the training, for example, the cost of books or equipment necessary for the training course but only if the training provider charges the business for these costs.

Let’s look at an example where Animals 4U Pty Ltd is a small entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 for the employee to undertake external training in veterinary nursing. The training meets the requirements of a GST-free supply of education. The training is delivered by a registered training provider, registered to deliver veterinary nursing education.

The bonus deduction is calculated as 20% of the amount of expenditure the business could typically deduct. In this case, the full $3,500 is deductible as a business operating expense. Assuming the other eligibility criteria for the boost are satisfied, the bonus deduction is calculated as 20% of $3,500 - that is $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

What organisations can provide training for the boost?

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by:

Tertiary Education Quality and Standards Agency (search the register – includes States and Territories)
Australian Skills Quality Authority ( ASQA )
Victorian Registration and Qualifications Authority (search the register)
Training Accreditation Council of Western Australia

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.

Important: 1 July 2023 wage increases

For employers, incorrectly calculating wages is not portrayed as a mistake, it’s “wage theft.” Beyond the reputational issues of getting it wrong, the Fair Work Commission backs it up with fines of $9,390 per breach for a corporation. In 2021-22 alone, the Fair Work Ombudsman recovered $532 million in unpaid wages recovered for over 384,000 workers.

On 1 July 2023, award rates of pay and the National Minimum Wage increased by 5.75%.

It is critically important that all employers review their payroll systems and ensure they are applying the correct rates and Awards.

The National Minimum Wage applies to workers not covered by an Award or registered agreement. From 1 July 2023, the National Minimum wage has increased to $23.23 per hour ($882.80 per week for a full-time employee working a standard 38 hours week).

For casuals, the minimum wage including the 25% casual loading is a minimum of $29.04 per hour.

For workers under an Award, adult minimum award wages increase by 5.75% applied from the first full pay period on or after 1 July 2023. Proportionate increases apply to junior workers, apprentice and supported wages.

In addition, the superannuation guarantee increased from 10.5% to 11% on 1 July 2023.

If the employment agreement with your workers states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

Minimum annual payments for super income streams

The ATO reminds taxpayers that an SMSF must pay a minimum amount each year to a member who is receiving a pension that commenced on or after 20 September 2007 (ie. account based pensions). If the minimum payment is not made by 30 June, this can result in adverse taxation consequences for the member.

In response to COVID-19, the government temporarily reduced superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2020, 2021, 2022 and 2023 financial years.

However, for the 2024 financial year, the 50% reduction in the minimum pension drawdown rate will no longer apply.

This means that, from 1 July 2023, when taxpayers calculate the minimum annual payment for their pension, the 50% reduction will not apply to the calculated minimum annual payment.

Know your private company loan arrangements before you lodge

The ATO advises taxpayers that, if they or an associate take a loan from their private company, they should not forget the requirements of repaying a private company loan for income tax purposes. Otherwise, they could find the loan treated as a Division 7A deemed dividend and included in their, or their associates', assessable income.

Taxpayers should consider the following in particular before lodging their private company tax return:

ensure their loan is a Division 7A complying loan and make minimum yearly repayments; and
they can’t borrow further money or assets from the same company, directly or indirectly, to make minimum yearly repayments or repay the loan – if they do, these payments may not be taken into account and could result in an assessable deemed dividend.

The ATO encourages taxpayers to check their loan repayments and, if they are concerned a payment will not be taken into account, they should speak to their registered tax adviser or contact the ATO.

Proportional indexation of transfer balance caps from 1 July 2023

The ATO reminds taxpayers that, on 1 July 2023, the general transfer balance cap will be indexed. Individuals will have a personal transfer balance cap between $1.6 and $1.9 million, based on the highest ever balance of their transfer balance account between 1 July 2017 and 30 June 2023.

While indexation will occur on 1 July 2023, the ATO won't be displaying member’s updated personal transfer balance caps until 11 July 2023.

The ATO encourages all SMSFs to report any events that occurred prior to 1 July 2023 by 30 June 2023, to ensure member’s personal transfer balance cap calculations are based on correct and up to date information.

From 11 July, both members and their agents will be able to view the member’s personal transfer balance cap on the ATO’s website.

After 11 July 2023, a member's personal transfer balance cap will be recalculated if the ATO receives reporting of events effective prior to 1 July 2023.

Individuals can continue to report transfer balance cap information to the ATO between 1 July 2023 and 11 July 2023, however these will not be processed until after this period.

This means the ATO won't be able to issue or revoke excess transfer balance determinations it has sent to a member, or commutation authorities it has sent to a fund.

Processing of any reported events will continue as normal after 11 July 2023.

Masters course fees not deductible as self-education expenses

The Administrative Appeals Tribunal (AAT) has held that tuition fees for a public policy Masters course were not deductible, on the basis that the course did not relate to the taxpayer's work as a music teacher.

The taxpayer was a qualified teacher who specialised in teaching music. He had commenced a Masters Course at the University of Melbourne ( the Masters course ), and subsequently claimed a deduction for work-related education expenses in relation to the subject tuition fees. The taxpayer submitted that the Masters course would expand the breadth of subjects he could teach and therefore help him secure management positions.

However, the ATO disallowed the deduction as it was not satisfied that a real and direct connection existed between the study and the taxpayer's work.

The AAT confirmed the ATO’s decision that the fees were not deductible as self-education expenses, as the tuition fees were not incurred in gaining or producing the taxpayer's assessable income. The subjects undertaken by the taxpayer in the 2021 year, for which he was seeking to claim a deduction, "did not maintain or improve his skills or knowledge as either a music teacher or relief teacher".

The AAT also noted that, in incurring the claimed self-education expenses, the taxpayer’s intention “of being able to expand his ability to teach in subjects outside of music and to gain leadership positions relate to new employment or new income-earning activities and as such is not sufficient basis for those expenses to be deductible” .

Court penalises AMP $24 million for charging deceased customers

The Federal Court has found that four companies that are or were part of the AMP Group breached the law when charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers.

The Federal Court ordered two of these AMP companies to pay a combined penalty of $24 million for the breaches.

Both AMP Life Limited and AMP Financial Planning admitted that they engaged in unconscionable conduct by deducting and/or failing to properly refund insurance premiums and advice fees respectively from superannuation members after being notified of their deaths. Both companies also admitted that they accepted insurance premiums and advice fees despite there being reasonable grounds for believing that they would not be able to supply the insurance or advice.

The Court also found all four AMP companies contravened their overarching obligations as Australian financial services licensees to act efficiently, honestly and fairly.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – June 2023

Fri, 09 Jun 2023 05:29:36 GMT

Year-end tax checklists for Individuals and Businesses

We have recently prepared two Year End Checklists which help explain some common strategies that may be considered for Individual and Businesses taxpayers.

Year End Checklist for Individuals – click here
Year End Checklist for Businesses – click here

2023/24 Budget Update

On 9 May 2023, Treasurer Jim Chalmers handed down the 2023/24 Federal Budget.

Some of the measures announced by the Government (including some which were actually announced prior to the Budget), include:

from 1 July 2026, employers will be required to pay their employees’ superannuation at the same time as their salary and wages;
providing businesses with annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy (the 'Small Business Energy Incentive'); and
increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year.

In addition to these, one of the most important aspects of this Budget was that the Government has provided some further depreciation relief for small businesses once temporary full expensing comes to an end on 30 June 2023.

Specifically, from 1 July 2023 until 30 June 2024, the Government will temporarily increase the instant asset write-off threshold for small businesses (with an aggregated annual turnover of less than $10 million) from $1,000 to $20,000. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool.

Also, the provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.

Other important measures the Government announced include:

amending (and limiting) the non-arm’s length income (‘NALI’) provisions which apply to expenditure incurred by superannuation funds;
reducing the tax concessions available to individuals with a total superannuation balance exceeding $3 million; and
exempting lump sum payments in arrears from the Medicare levy.

In the ATO's sights this Tax Time

The ATO has announced its three key focus areas for this Tax Time:

rental property deductions;
work-related expenses; and
capital gains tax.

ATO Assistant Commissioner Tim Loh said the ATO is continuing to prioritise areas where they often see mistakes being made:

"Within these areas, we have identified common mistakes, and are particularly focused on addressing these and supporting taxpayers and registered tax agents to get their claims right this year."

However, the ATO also recognises that many people are "doing it tough" this year, and expects fewer people will receive a refund, or they may receive smaller refunds than they were expecting, and more may have tax debts to manage.

ATO advice regarding year-end trustee resolutions

The ATO has advised that, in the lead up to 30 June, trustee clients who wish to make beneficiaries presently entitled to trust income for the 2023 income year should ensure their trustee resolutions are effective.

This includes where trustees may want to make beneficiaries 'specifically entitled' to franked dividends and capital gains included in that income (i.e., where trustees want to 'stream' those classes of income to certain beneficiaries).

It is important that trustee clients:

check their trust deed to ensure that the intended beneficiaries are within the class of persons entitled to trust income (or of trust capital, if they intend to stream a capital gain that is not income of their trust) and are not excluded from being beneficiaries;
comply with any requirements in the trust deed that concern how to validly 'appoint' (or distribute) trust income to beneficiaries;
recognise that, for tax law purposes, beneficiaries need to be made presently entitled to trust income by 30 June of the relevant year;
are aware that, if they fail to do what is required in a trust deed, or fail to appoint income by 30 June, this may cause outcomes to arise that differ to what they intended. This could include other beneficiaries being assessed on the relevant share of the trust's net (taxable) income (or the trustee being assessed at the top rate of tax); and
ensure that resolutions are unambiguous.

'Side hustles' in the ATO's sights

‘Side hustles’ have really grown over the past few years — everything from the gig economy and drop shippers, to content creators and influencers.

The ATO recognises that it can be hard to know how to treat income when earning money from side hustles, especially when an individual has several, so the ATO has prepared some tips.

First, the individual needs to know if they are 'in business'. If so, they may need to think about registration and tax obligations. If they are not in business, but are looking to start one, they should know how to "set themselves up for success" .

Also, if a side hustle means the individual is now a director of a company, they must make sure they apply for a director ID (which is free).

Please contact our office if you require any assistance in relation to your 'side hustles'.

ATO ride sourcing data-matching program

The ATO will acquire ride sourcing data relating to approximately 200,000 individuals to identify individuals that may be engaged in providing ride sourcing services during the 2022-23 financial year.

The data items include:

identification details (driver identifier, ABN, driver name, birth date, mobile phone number, email address and address); and
transaction details (bank account details, aggregated payment details, gross fares, net amount paid to driver, and all other income to which GST may or may not apply) of all payments received in the relevant period.

The data will be used to identify and inform ride sourcing providers of their tax obligations as part of information and education campaigns.

The intelligence obtained will increase the ATO’s understanding of the behaviours and compliance profiles of individuals and businesses that provide ride sourcing services, and may also be used as part of the methodologies by which the ATO selects taxpayers for compliance activities.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

2022-2023 Business Year End Checklist

Fri, 09 Jun 2023 04:13:39 GMT

The Year End Checklist in the link below explains some common strategies that may be considered for all business taxpayers.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

2022-2023 Individuals Year End Checklist Tax Return

Fri, 09 Jun 2023 04:12:59 GMT

A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year. However, any individuals with potentially reduced income for the 2023 tax season may want to instead consider deferring any deductible expenditure (if possible).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Tax Alert - Reminder of changes to Victorian land tax exemption for principal place of residence

Thu, 08 Jun 2023 03:48:14 GMT

Reminder of changes to Victorian land tax exemption for principal place of residence

It is always important to carefully consider if changing the use of your principal place of residence ( PPR ) may impact your eligibility to the exemption from land tax in Victoria.

In Victoria, a PPR exemption from land tax may continue or be granted where the individual owner (or vested beneficiary) is temporarily absent from their PPR. This may include examples such as working interstate or overseas.

For this exemption to apply for a (land tax) assessment year, the owner (or vested beneficiary) must have either obtained a PPR exemption or used the property as their PPR for at least six consecutive months immediately before the absence and satisfy the Victorian State Revenue Office (SRO) that:

the absence is only temporary;
the individual owner (or vested beneficiary) intends to resume occupation of the PPR after their temporary absence;
no other land in Australia is being treated as their exempt PPR during their temporary absence; and
the no income requirement is satisfied.

The no income requirement

The no income requirement means the PPR exemption does not apply to a tax year if any income was derived from the land in the year preceding the tax year .

For the 2021 tax year, there was a transitional arrangement whereby the owner or trustee could still qualify for the temporary absence PPR exemption if they rented the land for six months or less in 2020.

The rental requirement

Prior to the 2021 tax year, a rental requirement preceded the no income requirement .

The rental requirement was satisfied if the owner (or trustee) did not rent out the land for six months or more in the year before the assessment year during the period of absence.

We note that land tax is assessed on a calendar year basis at midnight on 31 December before your assessment is issued. For example, the land you own at midnight on 31 December 2022 is used to calculate land tax in 2023 (ie. between 1 January and 31 December 2023).

Clearly the rental requirement is not satisfied, and the PPR exemption is not available if the individual owner (or trustee) rents out the land for six months or more in the year before the tax year.

With easy access to platforms such as AirBNB, making a PPR available for rent during times when the property is temporarily vacant can be a consideration for some owners, in particular when they are overseas for a period of time for work or holidays.

However, it is important to remind ourselves that deriving any income from your PPR after 1 January 2022 can fail the no income requirement and your PPR exemption from land tax in Victoria could be lost.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert – Victorian Budget 2023–24

Wed, 24 May 2023 03:53:58 GMT

Victorian Budget 2023–24

Yesterday the Victorian Treasurer released the state’s Budget for 2023–24, which included a number of proposed tax changes.

We have considered each announcement in detail.

COVID-19 Debt Levy

As part of the Covid Debt Repayment Plan, a temporary and targeted levy will be introduced for 10 years, from 1 July 2023 until 30 June 2033. The COVID-19 Debt Levy has two distinct components: a payroll component and a landholdings component.

From 1 July 2023, the payroll component will temporarily levy an additional payroll tax on large businesses based on the size of their annual national payrolls, as follows:

National payrolls above $10 million - additional payroll tax of 0.5%; and
National payrolls above $100 million –additional payroll tax of 1.0%.

The additional payroll tax rates will be imposed on the Victorian share of wages which exceeds the thresholds above. Payroll tax exemptions will continue to apply for hospitals, local councils, and charities.

From 1 January 2024, the landholdings component will reduce the tax-free threshold for general land tax rates from $300,000 to $50,000.

For general taxpayers , a temporary fixed charge will be levied at different rates based on the value of the taxpayer’s landholdings, as follows:

Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $300,000 - a temporary flat surcharge of $975; and
Landholdings above $300,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $300,000.

For trusts that hold land , a temporary fixed charge will be levied at different rates based on the value of the trust’s landholdings, as follows:

Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $250,000 - a temporary flat surcharge of $975; and
Landholdings above $250,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $250,000.

Existing land tax exemptions will continue to apply, including for primary places of residence, land used by charities and farm land. This means the value of exempt property is not included in the total landholding value.

A move from stamp duty to property tax on commercial properties

From 1 July 2024, the current stamp duty system for commercial and industrial properties will move to an annual property tax. A transition period will be provided to landholders on the first purchaser of a commercial or industrial property after 1 July 2024, giving landholders a choice between either:

Paying the property’s final stamp duty liability as an upfront lump-sum; or
Paying fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated transition loan.

These proposed new arrangements will not apply to the current owner of any commercial or industrial property purchased before 1 July 2024. Importantly, once a property does enter the new system after 1 July 2024, the annual property tax will apply and stamp duty will never again be imposed.

Moving forward, the annual property tax for commercial and industrial property will be set at 1.0% of the property’s unimproved land value.

The final details of the transition will be confirmed by the end of 2023 after a consultation with business and industry groups during the next few coming months.

To be clear, this reform does not apply to residential properties.

Increasing the payroll tax-free threshold

The payroll tax-free threshold will increased as follows:

From 1 July 2024 - from $700,000 to $900,000; and
From 1 July 2025 - a further increase from $900,000 to $1 million.

‘Phase out’ the benefit of tax-free threshold for larger businesses

From 1 July 2024, a “phase out” of the tax-free threshold will be implemented, as follows:

Reducing the tax-free amount for each dollar a business pays in wages over $3 million; and
There will be no tax-free threshold for businesses with wages over $5 million.

Removing payroll tax exemption for high-fee non-government schools

From 1 July 2024, the payroll tax exemption for high-fee non-government schools will be removed, in line with the payroll tax treatment of government schools.

The Minister for Education and the Treasurer will make an announcement to confirm the non-government schools that will remain exempt from payroll tax.

Increasing the absentee owner surcharge rate

From 1 January 2024, the absentee owner surcharge rate will increase from 2.0% to 4.0% and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000.

In other words, if the total taxable value of Victorian land held by a non-trust absentee owner is equal to or exceeds $50,000 the surcharge will be payable. There will be no change to the minimum threshold of $25,000 for trust taxpayers.

Land tax exemption extended when construction or renovation of a principal place of residence is delayed due to builder insolvency

From 1 January 2024, where additional time is required to complete construction on a principal places of residence due to builder insolvency, the State Revenue Office will have the discretion to extend the land tax exemption for (up to) 2 additional years.

In line with the current exemption, the owner must not be entitled to apply the principal place of residence exemption to a second property.

Land transfer duty and land tax relief when providing a home for a relative with a disability

From 1 July 2023, in circumstances where the occupant is eligible to be a beneficiary of a Special Disability Trust, the land transfer duty deduction threshold will be increased from $500,000 to $1.5 million for principal place of residence transfers.

Also from 1 July 2023, eligibility for the Special Disability Trust land transfer concession will be expanded to include those transferring a home valued up to $1.5 million to an individual eligible to be a beneficiary of a Special Disability Trust, even where no trust has been established.

From 1 January 2024, a new land tax exemption will be introduced for land owned by an immediate family member and used as the home of an individual eligible to be a beneficiary of a Special Disability Trust (where no consideration/rent is provided), even where no trust has been established.

Land tax transfer duty concessions expanded for pensioners

For contracts entered into from 1 July 2023, the land transfer duty pensioner exemption and concession thresholds will be aligned with the thresholds for first home buyers, at $600,000 and $750,000 respectively.

In addition, eligibility will be assessed on the total value of the purchase.

Abolish business insurance duties

Business insurance duty will be abolished over a 10-year period, by reducing the current 10% rate by 1.0% per year.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert – Final Planning for Superannuation Contributions before 30 June 2023

Tue, 23 May 2023 01:36:42 GMT

Planning for Superannuation Contributions before 30 June 2023

As the end of the financial year is approaching, we take this opportunity to remind you of the superannuation obligations for each of the following three groups:

Self-employed & other taxpayers;
Employers with only related-party employees; and
Employers with unrelated employees.

Each group will be considered below under three separate headings and we recommend you consider the group most relevant to your circumstances.

1) SELF-EMPLOYED & OTHER TAXPAYERS

Individuals can claim a tax deduction for their personal contributions (even when they receive income as an employee).

Concessional tax treatment for contributions that are tax deductible to the self-employed person (and/or the employer) is generally limited to $27,500, per person .

Concessional contribution limits

The concessional contribution limits apply to the total concessional contributions from all sources. We note that from 1 July 2022, the general concessional contributions cap remains at $27,500 for all individuals regardless of age. Previously, between 1 July 2017 and 30 June 2021 the concessional cap was $25,000 each year.

From 1 July 2022, we note that where a member is under 75 years when they make a contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions. We note, however, members over 67 years (and under 75 years) old must meet the work test to claim the Personal Superannuation Contributions as tax deductions.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

Self-employed persons can claim a full tax deduction for concessional contributions, subject to notifying their fund accordingly and receiving an acknowledgement letter from the fund.

In order to obtain a tax deduction for the year ending 30 June 2023, please ensure that contributions are paid into the fund to allow time for them to be cleared by 30 June 2023.

Non-concessional contribution caps

From 1 July 2022, the non-concessional contributions cap remained at $110,000 for members up to 75 years old. Members under 75 years of age at any time during the income year may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year, subject to their personal contribution cap limit.

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years or if their Total Superannuation Balance (TSB) exceeds their general transfer balance cap (ie. $1.7 million from 2021-22).

If you are considering making non-concessional contributions for the year ending 30 June 2023, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

Contributions in excess of the non-concessional contribution cap will trigger an excess non-concessional contribution (ENCC) determination for the member, and they will have two options available as to how their ENCCs will be taxed, as follows:

the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or
the member is liable to pay excess contributions tax on the ENCC.

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2) EMPLOYERS WITH ONLY RELATED-PARTY EMPLOYEES

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500, per person .

Concessional contribution limits

From 1 July 2022, where a member is under 75 years at the time when they make a contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions. We note, however, members over 67 years (and under 75 years) old must meet the work test to claim the Personal Superannuation Contributions as tax deductions.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Superannuation Guarantee Scheme contributions

To comply with the Superannuation Guarantee (SG) scheme, contributions must be made by 28 July 2023 in respect of the June 2023 quarter. Failure to do so can result in the imposition of significant penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office (ATO) by 28 August 2023.

Under the SG scheme, an employer must make superannuation contributions of at least 10.5% of gross salary earned by each eligible employee (up to a maximum salary of $60,220 per quarter in 2023 and rising to $62,270 per quarter in 2024). Employees also include working directors.

Income tax deductions

In order to obtain a tax deduction for the year ending 30 June 2023, please ensure that contributions are paid into the fund to allow time for them to be cleared by 30 June 2023.

Single Touch Payroll reporting

Employers are required to report on their employees' payslips, the amount of and the date on which, the employer expects to make the employees' superannuation contributions.

If you do not currently report employer superannuation contributions through Single Touch Payroll (STP), you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

We note that the exemption has now ended for small employers (with 19 or fewer payees) who were exempt from reporting amounts paid to closely held payees through STP until 30 June 2021. For the 2023 year, amounts paid to closely held payees needed to be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

Non-concessional contribution caps

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years or if their Total Superannuation Balance (TSB) exceeds their general transfer balance cap (ie. $1.7 million from 2021-22).

From 1 July 2022, where a member is under 75 years at the time when they make a contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions. We note, however, that you must still meet the work test if you wish to claim the Personal Superannuation Contributions as tax deductions.

If you are considering making non-concessional contributions for the year ending 30 June 2023, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

· the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or

· the member is liable to pay excess contributions tax on the ENCC.

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Changes for next year 2023-24

From 1 July 2023, employees remain eligible for Super Guarantee (SG) scheme, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid has now been removed.

The SG rate will also increase from 10.5% to 11% on 1 July 2023. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2023, even if some or all of the pay period is for work done before 1 July. The Federal Budget in May 2023 maintained the SG rate as legislated to increase to 12% by 1 July 2025.

On 1 July 2023, the temporary reduction in minimum drawdown rates will end. This measure was first introduced during 2019-20 as part of the previous Government's response to COVID-19 and meant retirees only needed to withdraw 50 % of age-based minimums, should they choose, to help them through the pandemic.

We also note that a recent announcement was made that employers will be required to pay their employees’ super at the same time as their salary and wages (“payday super”) from 1 July 2026.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

3) EMPLOYERS WITH UNRELATED EMPLOYEES

Superannuation Guarantee Scheme contributions

Under the Superannuation Guarantee Charge (SGC) scheme, an employer must make superannuation contributions of at least 10.5% of gross salary earned by each eligible employee (up to a maximum salary of $60,220 per quarter in 2023 and rising to $62,270 per quarter in 2024). This means that employers will be required to contribute superannuation for all employees (include working directors), regardless of age.

To comply with the SGC scheme, contributions must be made by 28 July 2023 for the June 2023 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office ( ATO ).

Concessional contribution limits

The concessional contribution limits apply to the total concessional contributions from all sources, including employer contributions (including SG) and salary sacrificed amounts. Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500 per person . Previously between 1 July 2017 and 30 June 2021 the concessional cap was $25,000 each year.

If you are 75 years or older your concessional contributions are limited to mandated employer contributions only.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

In order to obtain a tax deduction for the year ending 30 June 2023, please ensure that contributions are paid into the fund to allow time for them to be cleared by 30 June 2023 .

Single Touch Payroll reporting

Employers are required to report on their employees' payslips, the amount of and the date on which, the employer expects to make the employees' superannuation contributions.

If you do not currently report employer superannuation contributions through Single Touch Payroll (STP), you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

Paying contributions electronically

Non-concessional contribution caps

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years or if their Total Superannuation Balance (TSB) exceeds their general transfer balance cap (ie. $1.7 million from 2021-22).

From 1 July 2022, where a member is under 75 years at the time when they make a contribution, they no longer need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions. We note, however, that you must still meet the work test if you wish to claim the Personal Superannuation Contributions as tax deductions.

If you are considering making non-concessional contributions for the year ending 30 June 2023, please talk to us first about your specific cap limit and eligibility.

Excess non-concessional contributions

the member can elect to withdraw ENCC plus 85% of the associated earnings on the ENCC, and tax is payable on the associated earnings; or
the member is liable to pay excess contributions tax on the ENCC.

Excess non-concessional contributions tax is not imposed on ENCCs if they are withdrawn from the superannuation fund.

Again, we note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Changes for next year 2023-24

From 1 July 2023, employees remain eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid has now been removed.

The super guarantee rate will also increase from 10.5% to 11% on 1 July 2023. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2023, even if some or all of the pay period is for work done before 1 July. The Federal Budget in May 2023 maintained the super guarantee rate is legislated to increase to 12% by 1 July 2025.

We also note that a recent announcement was made that employers will be required to pay their employees’ super at the same time as their salary and wages (“payday super”) from 1 July 2026.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

FEDERAL BUDGET 2024

Wed, 10 May 2023 00:00:09 GMT

SUMMARY AND FULL COMMENTARY UPDATES

The 2023-24 Federal Budget was handed down by Federal Treasurer, Dr Jim Chalmers on the evening of Tuesday 9 ^th May 2023.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

For furthe r clarification, contact your Relationship Partner at Lowe Lippmann.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – May 2023

Fri, 05 May 2023 01:49:56 GMT

Last chance to claim deductions under temporary full expensing concession

Deductions under ‘temporary full expensing’ are only available in the 2021, 2022 and 2023 income years, and are expected to come to an end on 30 June 2023.

Under the temporary full expensing concession, businesses with an aggregated turnover of less than $5 billion can generally claim a deduction for the full cost of eligible new assets first held, used or installed ready for use between 6 October 2020 and 30 June 2023, as well as (in some circumstances) costs of improvements to those assets and also the cost of eligible second-hand assets.

Taxpayers can choose to opt out of temporary full expensing for an income year for some or all of their assets, and claim a deduction using other depreciation rules, by notifying the Australian Taxation Office ( ATO ) in their tax return that they have chosen not to apply temporary full expensing to those assets.

Pre-Budget Announcement: $20,000 Small Business Energy Incentive

In a pre-Budget announcement, the Government has committed to a Small Business Energy Incentive Scheme that offers a bonus tax deduction of up to $20,000.

The Small Business Energy Incentive encourages small and medium businesses with an aggregated turnover of less than $50 million to invest in spending that supports “electrification” and more efficient use of energy.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction of $20,000 per business. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus deduction.

If your business is contemplating upgrading to improve energy efficiency, it is worth waiting to see the detail of the proposal. We will bring you more details of the scheme and how your business might benefit as soon as they are released.

Proposal for employers to pay superannuation on same day as ‘payday’

The Government has recently announced that it intends to amend superannuation laws to require employers to pay superannuation contributions on ‘payday’, at the same time salary and wages are paid.

The proposed changes are announced to start from 1 July 2026.

The Government states that by switching to making superannuation payments on ‘payday’, for example, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5% better off at retirement.

We will continue to monitor further announcements on this proposal.

Residential investment property loan data-matching program

The ATO has advised that it will acquire residential investment property loan data from authorised financial institutions for the 2021-22 through to 2025-26 financial years, including:

client identification details (names, addresses, phone numbers, dates of birth, etc);
account details (account numbers, BSBs, balances, commencement and end dates, etc);
transaction details (transaction date, transaction amount, etc); and
property details (addresses, etc).

The ATO estimates that records relating to approximately 1.7 million individuals will be obtained each financial year.

The principal uses of the data include “education and online services” and “data analytics and insights”, as well as to help the ATO “identify relevant cases for administrative action, including compliance activities”.

The ATO has a dedicated webpage ( click here ) dealing with its data-matching protocols, and there are currently 24 in total. It states on this webpage that: “Matching external data with our own helps us to ensure that people and businesses comply with their tax and super obligations. It also helps us to detect fraud against the Commonwealth.”

Banks are not the only source of data, as the ATO is targeting rental property management software. Over the last decade, much of the financial management of residential rental property has moved online, facilitated by various platform providers. The ATO will require these rental property software providers to provide details of property owners including their bank details, income, expenses and the amount of those expenses, and details of their associated rental properties and agents. Data collection of the estimated 1.6 million individuals in this data program will cover the period from 2018-19 to 2022-23.

What are the perceived common problem areas?

Claiming interest and redrawing on the loan - The interest component of your investment property loan is generally deductible. However, if you redraw on your invest loan for personal purposes, interest on this portion of the loan will not be deductible.
Borrowing costs - You can claim a deduction for borrowing costs (typically over five years) such as application fees, mortgage registration and filing, mortgage broker fees, stamp duty on mortgage, title search fee, valuation fee, mortgage insurance and legals on the loan. Life insurance to pay the loan on death is not deductible even if taking out the insurance was a requirement to get finance.
Repairs or maintenance - While repairs and maintenance can be claimed immediately, the deduction for capital works is generally spread over a number of years. Repairs must relate directly to the wear and tear resulting from the property being rented out.

Electric vehicle home charging rates: cents per km

The ATO recently released draft guidelines setting out a methodology for calculating the cost of electricity when an electric vehicle ( EV ) is charged at an employee's or individual's home.

The draft guidelines may be relied on by employers and individuals who satisfy the required criteria for FBT and income tax purposes respectively, as set out in the draft guidelines.

The employer or individual can choose if they want to use the methodology outlined in the draft guidelines, or if they would like to determine the cost of the electricity by determining its actual cost.

The choice is per vehicle and applies for the whole income or FBT year. However, it can be changed by the employer or individual from year to year.

Cents-per-kilometre rate

The rate for the FBT tax year or income year commencing on or after 1 April 2022 is 4.2 cents per km (the EV home charging rate ), which is multiplied by the total number of relevant kilometres travelled by the electric vehicle in the relevant income year or FBT year.

However, if electric vehicle charging costs are incurred at a commercial charging station, a choice has to be made:

The EV home charging rate can be used, but only if the commercial charging station cost is disregarded.
If the commercial charging station cost is used, the EV home charging methodology cannot be applied.

Further, all necessary records (such as receipts) must be kept to substantiate the claim, as per normal record-keeping rules.

Record keeping

If a taxpayer wishes to rely on the EV home charging rate to calculate their electricity charging expenses, they will need to keep a record of the distance travelled by the car (i.e., generally odometer records) in either the applicable FBT year to 31 March or the income year to 30 June.

Also, if an employer chooses to apply the draft guidelines and the EV home charging rate for FBT purposes , a valid logbook must be maintained if the operating cost method is used.

If an individual chooses to apply the draft guidelines and the EV home charging rate for income tax purposes , to satisfy the record-keeping requirements, they must have:

a valid logbook to use the logbook method of calculating work-related car expenses (and it is recommended that a logbook is maintained to demonstrate work-related use of vehicles, regardless); and
one electricity bill for the residential premises in the applicable income year to show that electricity costs have been incurred.

Application

It should be noted that the draft guidelines can only be relied on in relation to zero emissions vehicles.

The draft guidelines cannot be relied on, and the EV home charging rate cannot be used, if, for example, the vehicle is a plug-in hybrid which has an internal combustion engine.

Once finalised, the draft guidelines will apply from:

1 April 2022 for FBT purposes; or
1 July 2022 for income tax purposes.

Taxpayers not carrying on an agistment business

The Administrative Appeals Tribunal (AAT) has held that two taxpayers were not carrying on a business of providing services to a company (which they owned) and consequently were not entitled to various deductions.

The taxpayers had claimed those deductions on the basis that they were carrying on a business of providing agistment and full care animal husbandry and veterinary services to their company.

The AAT concluded that, on balance, the agistment arrangements did not constitute a ‘business’.

The AAT noted in this regard that there was a degree of systematic, business-like behaviour. However, the AAT was of the view that the absence of a profit-making purpose, the uncommercial nature of the transactions and similar considerations nevertheless led to the conclusion that a business was not being carried on.

Know the rules for accessing superannuation

The ATO has reminded self-managed superannuation fund ( SMSF ) trustees that their SMSF must be operated for the sole purpose of providing retirement benefits for its members. This means SMSF trustees can’t use funds from their SMSF to pay for personal or business expenses. This is known as 'illegal early access' of superannuation, and severe penalties apply.

The ATO also reminds SMSF trustees that there are rules regarding what they can invest in when dealing with a related party.

The ATO has recently released a factsheet ( click here ) to help SMSF trustees understand the rules on accessing their superannuation, and make sure they (and their business, if any) comply with the rules surrounding SMSFs.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

Practice Update – March/April 2023

Tue, 02 May 2023 05:58:08 GMT

New 15% super tax to apply from 1 July 2025

The Government recently announced it will be imposing a 15% additional tax on individuals that have more than $3 million in superannuation. The new measure is expected to commence from 1 July 2025 (ie. the start of the 2026 income year).

The main takeaways from the information provided thus far include the following:

The additional 15% tax will broadly apply to the annual movement in the value of an individual’s superannuation balance, adjusted for withdrawals and contributions. These ‘earnings’ are further adjusted to ensure only the proportion corresponding to the balance above $3 million will be subject to the new tax.
There will be no limit imposed on the size of superannuation account balances.
Individuals will have the choice of paying the tax liability personally or from their super fund.

In current terms, the Government expects that the new tax will apply to 0.5% of people with money in superannuation (around 80,000 people). However, the proposal does not currently allow for indexation of the $3 million threshold, so more individuals may be impacted in the future.

We have also released a detailed Tax Alert ( click here ) explaining some additional guidance released by the Government.

We will continue to keep you informed of any major developments as they occur.

Significant change to claiming working from home expenses

Before 1 July 2022, an individual taxpayer that incurred additional deductible expenses as a result of working from home, had a choice of three methods to claim these expenses.

These choices were:

The shortcut method – which was available from 1 March 2020 to 30 June 2022;
The fixed-rate method – which was available from 1 July 1998 to 30 June 2022; or
Actual expenses, that is calculating the actual expenses incurred as a result of working from home (and we note that this method can be burdensome to apply in practice).

From 1 July 2022, as a result of the release of Practical Compliance Guideline PCG 2023/1 by the ATO, the shortcut method and the fixed-rate method have been abolished.

A replacement method that can be used instead of the actual expenses method (which has not been abolished) is the revised fixed-rate method .

Under the revised fixed-rate method, a deduction can be claimed of 67 cents per hour for energy expenses (ie. electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables.

Other expenses associated with working from home, such as depreciation of home office furniture and a personally owned computer used at home for work purposes, will need to be calculated on an actual basis when using the revised fixed-rate method.

To claim a deduction under the new fixed-rate method , an individual needs to meet three criteria, which are:

The individual is working from home while carrying out their employment duties or carrying on their business on or after 1 July 2022;
They are incurring additional running expenses of the kind outlined in the above discussion as to what the 67 cents per hour amount reflects, as a result of working from home; and
They keep and retain relevant records in respect of the time they spend working from home and for the additional running expenses (covered by the rate per hour) they are incurring.

There are strict record keeping requirements associated with this new method.

For the year ending 30 June 2023, a taxpayer using this new method will need to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023 .

The taxpayer will also need to keep a record of the total number of actual hours they worked from home for the period 1 March 2023 to 30 June 2023 .

The record of the actual hours worked from home could be maintained by timesheets, rosters, time-tracking apps, logs of time spent accessing employer systems or online business systems, or a diary kept contemporaneously.

For the year ending 30 June 2024 and later income years, a taxpayer using this method must also keep a record of actual hours worked from home for the entire year.

Under both the short-cut method and the previous fixed-rate method, there was no need for detailed record keeping of the actual hours worked from home. Estimates were acceptable. This is a significant change and increases the record keeping burden on taxpayers.

Another significant change, which results in an increase in record keeping obligations under the revised fixed-rate method , is that in relation to running costs such as energy costs, phone and internet costs, a taxpayer needs to maintain at least one monthly or quarterly bill.

This is because the ATO now requires proof that the individual has incurred the running costs represented by the 67 cents per hour deduction.

Transfer balance cap indexation

An individual’s transfer balance cap ( TBC ) determines the maximum amount they can commit to a retirement phase interest in their super fund, such as an account-based pension, without being subject to penal taxation.

When the TBC concept was introduced with effect from 1 July 2017, it was initially $1,600,000. It was increased by $100,000 as of 1 July 2021 to $1,700,000.

The TBC increases in $100,000 increments (or multiples of $100,000) in line with the Consumer Price Index ( CPI ).

As a result of a substantial increase in the CPI, the TBC is due to increase on 1 July 2023 by $200,000 .

Accordingly, an increase in the TBC is seen as a good thing, as it potentially means an individual can have more of their superannuation interest supporting a tax-free pension.

Individuals who start their first retirement phase income stream (otherwise known as a pension) on or after 1 July 2023 will have a TBC of $1.9 million.

From 1 July 2023 individuals will have a TBC between $1.6 million and $1.9 million .

An individual who already had a transfer balance account and at any time met or exceeded their personal TBC will not be entitled to indexation, and their personal TBC will remain the same.

For example, an individual who started their first retirement phase income stream, an account based pension, on 1 January 2022 with a value of $1,700,000 at the time of commencement, would have fully utilised their then TBC of $1,700,000.

Such an individual, having already fully utilised their TBC, will not gain any benefit from the increase in the TBC due to indexation.

Where an individual has partially utilised their TBC before 1 July 2023, instead of benefiting from the full $200,000 increase in the TBC, they will have access to a proportional indexation of their TBC based on the unused cap percentage of their transfer balance account.

Tips to reduce study and training loan balances

If you have a study and training loan balance (ie. a HELP debt), it may be worthwhile to consider methods of reducing the balance to ensure you are not left with a large tax bill when your 2023 income tax return is lodged.

While there is no interest charged on study and training loans, indexation is added to these debts on 1 June each year, based upon the consumer price index (CPI). Given the current rate of inflation, individuals with study and training loan balances should expect a larger than normal adjustment this year.

If you have a study and training loan balance, it is worth checking your loan balance and considering the following tips:

Let your employer know if you have started studying or have a study loan.
Check the amount your employer is withholding. If there has not been enough withheld to cover your compulsory repayment, you can ask your employer to increase the withholding amount.
Make a voluntary repayment to reduce your total loan amount. Indexation on the loan is applied on 1 June, so a voluntary repayment prior to this date will reduce the balance that indexation is applied to. Note that it may take a few business days for the ATO to receive and process the payment.

Indexation will not apply to a study and training loan on 1 June if the balance is nil. Any loan debt over 11 months old will be subject to indexation.

We note the compulsory repayment threshold for the 2023 financial year is $48,361. If you earn over this amount, the compulsory repayment is worked out when your tax return is lodged, and it will be included on your notice of assessment.

ATO and Australian Federal Police crackdown on GST-fraud promoters

A raft of enforcement activity has been undertaken across the country by the ATO-led Serious Financial Crime Taskforce, including the execution of search warrants and issuing of warning letters.

At 31 December 2022, the ATO took compliance action on more than 53,000 clients and stopped approximately $2.5 billion in fraudulent GST refunds from being paid to individuals seeking to defraud the system.

Two individuals have been sentenced to jail time for their crimes so far, following their arrest in 2022.

This follows 87 earlier arrests across the country, with many more to come. The ATO has commenced writing to more than 20,000 individuals involved in the fraud, warning them of the serious consequences coming their way unless they come forward and repay the money they have defrauded.

The fraud was first detected in early 2022 and involved offenders inventing fake businesses and Australian business number ( ABN ) applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.

Promoters of the fraud use social media and other channels to recruit participants.

The ATO has been issuing warnings to the community to be on the lookout for fraud schemes that are being promoted through social media and other channels.

For those who may be tempted by the promise of big gains, the ATO has sophisticated risk models and works with banks, law enforcement agencies, and other organisations to share information and detect fraud. It also has access to intelligence through community tip offs, social media platforms, and other information sources.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - 2023 FBT year end

Tue, 14 Mar 2023 01:22:42 GMT

2023 FBT Year End is Fast Approaching!

The end of the Fringe Benefits Tax ( FBT ) year is fast approaching on 31 March 2023, so we take this opportunity to revisit some hot FBT topics for both employers and employees, including:

FBT exemption for electric cars
Work from home arrangements
Car parking changes
Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes
Business assets personally used by owners and staff
Employee contributions for FBT purposes and salary sacrifice
Not lodging FBT returns
Travelling or living away from home
Housekeeping essentials

FBT exemption for electric cars

Electric cars represent a small but growing proportion of the new car market in Australia. To encourage Australians to make the shift, the Government has passed legislation that provides an FBT exemption for certain no or low emissions vehicles from 1 July 2022.

This means that providing your team members with the use of electric cars, hydrogen fuel cell electric cars or plug-in hybrid electric cars can now potentially qualify for an FBT exemption. The FBT exemption should normally apply where:

The value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for the 2022-23 financial year); and
The car is both first held and used on or after 1 July 2022.

If your business provides these benefits to employees your business will still need to work out the taxable value of the car benefit as if the FBT exemption didn’t apply. This is because the value of this exempt car benefit is still taken into account in the reportable fringe benefits amount of the employee.

While income tax is not paid on this amount, it can impact the employee in a range of areas (such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments).

FBT and work from home arrangements

Post the pandemic, many workplaces have shifted from fully remote, to a combination of remote and in-office work. To keep everyone productive, many employers have provided employees with work-related items such as laptops and mobile phones.

Providing these devices shouldn’t trigger an FBT liability as long they are primarily used for work purposes. Where multiple similar items have been provided during the FBT year, the situation becomes more complex unless your business is a small business (has an aggregated turnover of less than $50 million).

If an FBT exemption isn’t available, it is often worth considering whether the FBT liability on these items could be reduced by the employee purchasing the item themselves and claiming a once-only deduction in their personal return.

More workplaces caught by car parking changes

A controversial ruling from the ATO has expanded the scope of the FBT rules dealing with car parking benefits meaning that more employers will be considered to be providing car parking benefits to staff.

The ruling expands the definition of what constitutes a commercial parking station. It can now include parking stations that charge penalty rates for all-day parking to the public, such as those normally located in shopping centres.

Where an employer provides:

Car parking facilities for employees within 1km of a commercial parking station, and
That commercial car park charges more than the car parking threshold ($9.72 for the year ended 31 March 2023)

a taxable car parking fringe benefit will normally arise unless the employer is a small business and able to access the car parking exemption.

This new expanded definition of a commercial parking station applies from 1 April 2022. If you provide car parking facilities to team members, it is important that you either:

Have certainty that you are able to access the small business exemption (which has a more generous business turnover threshold of less than $50m from 1 April 2021 onwards); or
Understand the implications of the ruling to the car park facilities you provide.

Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are keen to claim a deduction but this is not recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Business assets personally used by owners and staff

Private use of business assets is an area that crosses across a whole series of tax areas: FBT, GST, Division 7A and income tax.

Take the ATO’s example of the property company that claimed deductions for a boat on the basis that it was used for marketing the company. Large deductions were claimed relating to running the boat. This attracted the ATO’s attention and a review was carried out.

The ATO discovered the boat was used by the director and other employees for private trips, and to host parties for people who had paid to attend the company's property seminars.

When looking at the overall business activities, the ATO determined the director had purchased the boat primarily for their own private use. As a result, they disallowed the deductions and the private use of the boat was a fringe benefit for the employees of the company. The company had to lodge an FBT return and pay the resulting FBT liability, as well as the income tax shortfall, interest and penalties.

Employee contributions for FBT purposes and salary sacrifice

An issue that frequently causes confusion is the difference between the employee salary sacrificing in order to receive a fringe benefit and making an employee contribution towards the value of that fringe benefit.

To be an effective salary sacrifice arrangement ( SSA ), the agreement must be entered into before the employee becomes entitled to the income (eg. before the period in which they start to perform the services that will result in the payment of salary etc.).

Where an employee has salary sacrificed on a pre-tax basis towards the fringe benefit provided – laptop, car, etc., they have agreed to give up a portion of their gross salary on a pre-tax basis and receive the relevant fringe benefit instead.

As a starting point, the taxable value of the fringe benefit is the full value of the expense paid by the employer. The salary sacrifice arrangement doesn’t reduce the FBT liability for the employer.

The employer recognises a lower cost of salary and wages provided to the employee as their ‘cost saving’, which results in lower PAYG withholding and in most cases, superannuation guarantee obligations, but they still recognise the full value of the fringe benefit as part of their taxable fringe benefit which is subject to FBT.

The employee recognises that they have a reduced amount of salary and wages, and a non-cash benefit in the form of the fringe benefit.

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns or lodging them late to avoid paying tax.

The ATO will normally pay close attention to any employer that:

Is registered for FBT but lodges late. If your business is likely to face delays in lodging the FBT return, it’s usually a good idea to get in touch with the ATO early and ask for an extension request; or
Is not registered for FBT. If your business employs staff (even closely held staff such as family members), and is not registered for FBT, it’s essential you have reviewed your position and are certain that you do not have an FBT liability. If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing a fringe benefit.

Travelling or living away from home

The ATO have recently finalised their guidance on travel costs and will be looking closely at transport, meal and accommodation benefits.

Travel allowances often cause confusion for many businesses. If your business provides travel allowances to employees, you will normally need to consider whether they are living away from home or just travelling overnight in the course of work.

Where your employees are travelling overnight in the course of work, these travel allowances are normally assessable to your employees. However, they might be entitled to personally claim deductions for some of their travel expenses.

For workers that are living away from home, these allowances are dealt with instead through the FBT system as a fringe benefit. While the taxable value of the benefit is usually the amount paid, there are some generous concessions that can allow for some or all of the allowance to be FBT exempt if certain conditions are met.

As a result, getting the distinction right between travelling overnight for work or living away from home is important.

The ATO explains in Taxation Ruling TR 2021/4 when allowances should be classified as a travel allowance or a living away from home allowance. Helpfully, the ATO has also finalised a ‘safe harbour’ style approach in Practical Compliance Guideline PCG 2021/3 which can be used specifically for this purpose.

FBT housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.

If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025

Thu, 09 Mar 2023 03:36:29 GMT

Further guidance on proposed additional 15% tax on earnings on super balances over $3 million from 1 July 2025

Last week, we released a Tax Alert ( click here ) after the Government announced proposed changes to impose an additional tax of 15% ( the additional tax ), increasing the original concessional tax rate from 15% to an effective new 30% rate, on earnings on total superannuation balances ( TSB ) over $3 million.

This measure is proposed to commence on 1 July 2025 and apply to the 2025-2026 financial year onwards.

This week, the Government released further guidance to help explain how the additional tax would be applied to earnings on TSB over $3 million.

The additional tax only applies to the proportion of earnings corresponding to balances above $3 million, and this means that earnings corresponding to funds below $3 million will continue to be taxed at the original concessional tax rate of 15% or less.

What are earnings?

Earnings are calculated with reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals (added) and contributions (subtracted).

The calculation of earnings includes all notional (unrealised) gains and losses, similar to the way superannuation funds currently calculate members’ interests. The proposed changes intend to treat defined benefit interests in a similar way, however no details are available at this time. We anticipate further details during the consultation process before these proposed changes become legislation.

Negative earnings can be carried forward and offset against any additional tax liabilities assessed in future years. However, it is important to note that any “negative earnings” can only be carried forward, and they can not be carried back to previous years to refund any additional tax liability paid in previous years.

We anticipate this limitation within relation to the “negative earnings” concept will also be debated during the consultation process.

What is your TSB?

An individual’s TSB includes all of their superannuation interests (across multiple superannuation fund accounts) and is not a separate figure for each interest, which means the $3 million threshold will be applied on a per-individual basis and not on a per-account or per-fund basis. TSB includes both pension and accumulation account balances.

The Australian Taxation Office ( ATO ) currently uses superannuation fund reporting to calculate the total amount that individuals have in the superannuation system, for example to determine whether individuals are eligible to make non-concessional contributions.

How is the additional 15% tax assessed and how is it paid?

These proposed changes are scheduled to commence on 1 July 2025 for the 2025-2026 income year.

The ATO will issue a notice of additional tax directly to individual members, notifying them of their additional tax liability to pay. Individuals will then have the choice of either paying the tax out-of-pocket or from their superannuation funds. Individuals who hold multiple superannuation funds can elect the fund from which the tax is paid.

This additional tax liability notice will be separate from an individual’s personal income tax, similar to the existing Division 293 tax. This means that any tax offsets or franking credits available to the individual on their notice of assessment (for income tax purposes) cannot be applied to reduce any additional tax liability imposed by the ATO.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Changes to double concessional tax rate on earnings from super balances over $3 million

Tue, 28 Feb 2023 05:11:23 GMT

Changes to double concessional tax rate on earnings from super balances over $3 million

The Government has announced plans to increase the concessional tax rate from 15% to 30% on superannuation earnings from superannuation fund balances over $3 million from 1 July 2025.

The changes are planned to begin on 1 July 2025, just after the next federal election. Treasurer Jim Chalmers said the timing of the introduction will be “allowing Australians to go to the polls on the issue”.

This announcement does not impose a limit on the size of superannuation account balances in the accumulation phase, and only applies to future earnings, with the changes not being retrospective before 1 July 2025.

It was confirmed that there are no current plans to annually index the $3 million threshold chosen for this announcement, meaning the level at which the higher tax rate of 30% will be levied would not rise over time.

It is relevant to note this announcement is likely to impact less than 1% of all superannuation fund balances in Australia, which is approximately 80,000 individuals. Furthermore, the fundamentals of the superannuation system are not being altered in any other way.

We note that this proposed change potentially marks a seismic shift in superannuation for some of our clients. However, there is a lot of water to go under the bridge between now and the proposed commencement date of this legislation.

We will continue to keep you informed of any major developments as they occur.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Changes to working from home deductions for 2022-23

Sun, 19 Feb 2023 23:51:20 GMT

Changes to working from home deductions for 2022-23

The Australian Taxation Office ( ATO ) has recently finalised guidance explaining record keeping requirements and the methods for calculating working from home ( WFH ) deductions have changed from 1 July 2022.

From the 2022–23 income year onwards, the two methods available to calculate WFH deductions are the:

revised fixed rate method; and
actual cost method.

PCG 2023/1 provides taxpayers with a choice between the actual cost method and revised fixed rate method to calculate their WFH deductions from the 2022–23 income year onwards.

Different taxpayers in the same household can individually choose the method they want to use. Also, a dedicated work area at home is no longer required.

The actual cost method

The actual cost method remains unchanged, and individuals can claim the actual cost of expenses and depreciating assets (ie. such as office furniture and laptop computers) you buy and use while WFH.

The revised fixed rate method

The revised fixed rate method has been updated to better match current WFH arrangements (after two years of the practice becoming commonplace), in an attempt to make it easier to calculate expenses and avoid apportionment calculations.

Taxpayers can use the revised fixed rate method if they meet the following criteria:

they have been WFH while carrying out employment duties or carrying on a business on or after 1 July 2022;
they have incurred deductible additional running expenses; and
they have been keeping and retaining relevant records (ie. tax invoices or receipts).

Record keeping requirements

The finalised guidance in Practical Compliance Guideline PCG 2023/1 explains new record keeping requirements and a revised fixed-rate method which allows taxpayers to calculate a deduction at a rate of 67 cents per hour (increased from 52 cents) for the following additional running expenses:

electricity and gas expenses, for lighting, heating, cooling and electronic items;
internet expenses;
mobile and home phone expenses; and
stationery and computer consumables.

How is the WFH deduction calculated?

A taxpayer should take the following steps to calculate the total deduction for running expenses using the revised fixed rate method:

calculate total number of hours the individual WFH during the income year (based on a timesheet, roster or diary kept contemporaneously);
multiply the total number of hours by 67c per hour;
calculate the work-related decline in value of any depreciating assets used to WFH and any other running expenses incurred (supported by invoices etc) which are not covered by the 67 cents rate per hour (above); and
then the amount of any deduction is the total of the amounts obtained from the second and third points above.

The revised fixed rate method can also be used by businesses that operate some or all of their business from home to claim home based business expenses.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Practice Update – January/Feburary 2023

wquijano@lowelippmann.com.au (Winther Quijano ) — Sun, 05 Feb 2023 23:30:56 GMT

Super guarantee contributions for the December 2022 quarter

A reminder to employers that their December 2022 superannuation guarantee (SG) contributions were due by 28 January 2023.

Do not forget the two changes to SG that commenced on 1 July 2022:

the rate increased from 10% to 10.5%; and
employees no longer need to earn $450 per month to be eligible.

Employers now need to make super contributions for all eligible employees, regardless of how much they were paid – their earnings amount is not relevant. However, employees who are under 18 still need to work more than 30 hours in a week to be eligible.

Electric vehicle FBT exemption legislation is now law

Legislation to make certain electric vehicles exempt from Fringe Benefits Tax ( FBT ) has now been enacted into law. Certain zero or low emissions vehicles provided as a car benefit on or after 1 July 2022 , can be exempt from FBT.

For this exemption to apply various criteria need to be satisfied.

The car needs to have been both held and used for the first time by the employer on or after 1 July 2022 and it cannot have been subject to the luxury car tax when it was purchased.

For the 2023 income year, to qualify for this exemption, the car needs to cost less than the luxury car tax threshold for fuel efficient vehicles of $84,916.

A vehicle is a zero or low emissions vehicle if it satisfies both of these conditions:

It is a:
battery electric vehicle; or
hydrogen fuel cell electric vehicle; or
plug-in hybrid electric vehicle.
It is a car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).

Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric. Please note that in relation to plug-in hybrid electric vehicles, there is a specific limitation on the FBT exemption.

From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law. There are special provisions allowing the exemption to continue when a plug-in vehicle was provided as an exempt benefit under an agreement entered into before 1 April 2025 that continues after this date.

Although the private use of an eligible electric car is exempt from FBT, an employer still needs to include the notional value of the benefit when working out whether an employee has a reportable fringe benefits amount ( RFBA ).

An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year. The RFBA must be reported through Single Touch Payroll or on the employee's payment summary.

The amount of an RFBA reported for an employee is not added to an employee’s taxable income for determining income tax and Medicare Levy liabilities.

However, it is added to an employee’s taxable income for calculating Medicare Levy Surcharge liability, and is included in income tests for family assistance, child support assessments, and some other government benefits and obligations.

Further eligibility age change for downsizer contributions

In another recent legislative change, the eligibility age to make a downsizer contribution into superannuation has been reduced to 55 from 1 January 2023.

This further reduces the downsizer eligibility age, which changed from 65 to 60 from 1 July 2022.

From 1 January 2023, eligible individuals aged 55 years or older can choose to make a downsizer contribution into their super fund of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home that has been held for at least 10 years and qualifies for at least a partial main residence exemption.

There are no changes to the remaining eligibility criteria.

Key dates for downsizer contributions:

Eligible individuals aged 55 years or older can make a downsizer contribution from 1 January 2023.
For any downsizer contributions made between 1 July 2022 and 31 December 2022, eligible individuals must be aged 60 years or older at the time of making their contribution.
Prior to 1 July 2022, the eligibility age was 65 years and over.

Other important information to consider for 55-59 year olds:

Individuals have 90 days from receiving the sale proceeds of their home to make a downsizer contribution.
This means if an individual receives the proceeds of sale prior to 1 January 2023, they can make their contribution after 1 January 2023, so long as they are still making it within 90 days of receiving the proceeds.
If 1 January 2023 falls outside of their 90 day window to make a downsizer contribution, they will not be eligible. It is unlikely the ATO would grant an extension of time in these circumstances.

Unlike most other contributions into superannuation, there is no upper age limit for being eligible to make a downsizer contribution. Even a 95 year could make a downsizer contribution, and there is no need to satisfy the work test.

Builder unable to obtain refund of incorrectly charged GST

The Administrative Appeals Tribunal has held that a builder was unable to receive a refund of GST incorrectly charged on the sale of a residential premises that had been rented for just over five years since construction was complete.

The taxpayer claimed the GST charged on a unit was charged in error, on the basis that the sale was actually an input taxed supply. Accordingly, the taxpayer sought a refund of the GST previously remitted to the ATO on the unit.

For residential premises to fall outside the definition of “new residential premises” and therefore be input taxed rather than a taxable supply, it needs to meet the requirements of section 40-75(2)(a) of the GST Act.

Broadly, to meet the requirements of this section there needs to have been a continuous five-year period since the premises first become residential premises, during which the premises have “only been used for making supplies that are input taxed” (ie. being used as a rental property).

Unfortunately for the builder, this requirement was not satisfied because the unit was also marketed for sale a few months before the completion of the five-year period since the issue of the certificate of occupancy.

A lesson to be learnt here is that any time a residential premises is both rented and on the market for sale it does not meet the requirements to count towards the five-year continuous period that it has “ only been used for making supplies that are input taxed.”

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - Section 100A guidance now finalised

Wed, 21 Dec 2022 22:52:10 GMT

ATO Guidance targeting trust reimbursement agreements now finalised

The Australian Taxation Office ( ATO ) has recently finalised its guidance in relation to trust distributions and “reimbursement agreements”. This guidance impacts all clients with family or discretionary trusts.

The final guidance contained within Taxation Ruling TR 2022/4 Income tax: Section 100A reimbursement agreements and Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach has been developed to support trustees and their advisors, who have been requesting clearer guidance to help them manage their tax obligations.

The ATO guidance has been finalised following an extended consultation period with the tax community, and recommended changes have been incorporated based on this feedback.

The ATO focus surrounding Section 100A relates to trust distributions made to beneficiaries, in order to achieve a tax advantage where the funds relating to the distributions are not paid out to a beneficiary, or are in some way reimbursed back to the trustee or other parties.

Whilst these final documents do not significantly depart from the draft versions released in March 2022, which gave rise to much debate on the ATO’s renewed focus on trust arrangements (see our previous Tax Alert here ), there are some notable changes (see below) and they do provide additional examples which provide further clarity for trustees and advisers as to what trust arrangements the ATO will focus their attention on.

What are the notable changes?

The finalised guidance includes a few changes to the previous draft documents, including the abolition of the “blue zone”, an expansion of “green zone scenarios” concerning distributions, in particular providing a two-year timeframe to pay distributions and the broadening of individuals/entities to whom distributions can be made with less stringent requirements to pay.

However, it is unfortunate that the final guidance still applies retrospectively to trust entitlements that arose prior to 1 July 2022 in certain circumstances.

We note that the ATO has confirmed it will not allocate any compliance resources to review any trust arrangements entered into before 1 July 2014 which are considered to be “low risk”.

What are the next steps?

Given the potential retrospective nature of this ruling, reviews of previous income years distributions may be necessary. Furthermore, careful consideration of the appointment of trust income for the year ending 30 June 2023 and beyond will need to be adopted.

Lowe Lippmann intends to provide further guidance on managing trust distributions by explaining the most salient issues in the new year once the full implications of these changes are fully considered.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - FBT: Christmas Parties & Gifts

Wed, 07 Dec 2022 00:31:43 GMT

FBT: Christmas Parties & Gifts

With the well-earned 2022 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.

However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

FBT and 'entertainment'

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.

Using the actual method

Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible. However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;
the minor benefit exemption* cannot apply; and
the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (eg. family) on an infrequent and irregular basis.

We note that a $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Christmas gifts

With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

Gifts that are not considered to be entertainment

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible ; and
gifts to clients, suppliers, etc. – no FBT , and tax deductible .

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre. Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
gifts to clients, suppliers, etc. – no FBT and not tax deductible .

Non-entertainment gifts at functions

What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible .

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible; and
in relation to the gifts:

the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and
as the gifts are not entertainment, the cost is tax deductible .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update – December 2022

Sun, 04 Dec 2022 23:01:35 GMT

ATO warning to SMSFs: "Paying the price for non-compliance"

There are various courses of action available to the ATO when trustees of self-managed super funds ( SMSFs ) have not complied with the super laws, including applying administrative penalties.

A number of factors determine the amount of the administrative penalty, including:

the type of contravention;
when it occurred; and
the number of penalty units that apply.

For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions.

We note that the Government recently introduced a Bill to Parliament to increase the value of a penalty unit for Commonwealth offences committed on or after 1 January 2023 from $222 to $275, which may make an SMSF trustee exposed to an even larger amount after 1 January 2023.

The ATO imposed total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions such as trustees illegally accessing super benefits, loans, or financial assistance given to members.

Also, just because a trustee receives an administrative penalty doesn’t mean the ATO won't undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.

ATO's record-keeping tips

The ATO has reminded taxpayers that they should understand the record-keeping requirements for their business and keep accurate and complete records as they occur, as this should help them avoid penalties that may apply and reduce the possibility of the ATO denying their expense claims.

The following are some of the ATO's top tips to help businesses get it right and avoid record-keeping errors (based on common record-keeping errors the ATO sees):

Keep accurate records of all cash and electronic transactions.
Reconcile cash and EFTPOS sales regularly (by ensuring payments recorded internally match external records) and enter the amounts into the main business accounting software system.
Check for mistakes if things don't add up.
For expenses that are for both business and private use, work out and record the business portion accurately.
If the taxpayer has used trading stock for private purposes, remember to account for the stock as if the business sold it, and include the value in the business’s assessable income.
Don't use estimates to prepare tax returns and business activity statements ( BASs ).
If claiming credits for GST, set aside the GST in a separate ledger account to make record-keeping and calculations easier.
Most records must generally be kept for at least 5 years — from when the record was prepared or obtained, or the transaction or related acts were completed, whichever is later. Records relating to the calculation of losses may need to be kept longer, depending on when that loss is deducted (or offset against a capital gain).
Accurate and detailed records must also be kept when paying contractors to provide certain services on behalf of the business (so the business can easily complete its taxable payments annual report at the end of each year).
Use the ATO's Record-keeping evaluation tool to find out how well the business is currently keeping its records.

Input tax credits denied due to lodging BASs late

The Administrative Appeal Tribunal ( AAT ) has held that a taxpayer could not claim $91,239 of input tax credits (ITCs) at least partly because it lodged the relevant BASs more than 4 years too late.

Specifically, the GST Act operates such that, if an extension of time to lodge a BAS has not been granted prior to the expiry of 4 years after the day on which it was required to be given to the ATO, the entitlement to ITCs immediately ceases .

The AAT also noted that there is no discretion to circumvent this part of the GST Act, and the ATO cannot provide further time to lodge a BAS retrospectively outside of the relevant 4 year period.

It did not matter that the taxpayer was (for example) involved in a dispute with a franchisor nor that they were impacted by lockdown restrictions.

Therefore, the taxpayer was no longer entitled to claim ITCs in relation to the BASs lodged by the taxpayer 4 years after they were required to have been given (and was also denied other ITCs for BASs that were lodged within the required 4 year period, as a substantial amount of the ITCs claimed remained unsubstantiated by a valid tax invoice).

Chef spending most of a year on cruise ships still a 'resident'

The AAT has also held that a taxpayer, an Australian chef with over 20 years’ experience both in Australia and overseas, was an Australian resident for taxation purposes in the 2016 income year.

During that year, he spent only 86 days in Australia, being the period prior to him leaving Australia to commence employment with a cruise ship company, and a period during which he visited his family between deployments.

However, the AAT noted that he had no intention that any new place of residence be indefinite, and he did not become a resident of a new place.

Importantly, his 'domicile' for tax purposes (being Australia) did not change (and the AAT stated that "a ship cannot be a domicile").

Requesting stapled super fund details for new employees

The ATO is reminding employers that, when they have new employees that have not provided them with their choice of super fund, super contributions should be made into:

the employee's stapled super fund; or
the employer's nominated account (but only if the ATO advises that the employee does not have a stapled super fund).

A stapled super fund is an employee's existing super account which is linked, or 'stapled', to them and follows them as they change jobs.

In December 2022, the ATO is releasing a solution that enables employer software and payroll products to request stapled super funds. That is, stapled super enabled software will allow the employer to request stapled super details from within their business software, so they will no longer have to request them separately via ATO online services.

Employers should contact their software provider to find out if their software solution will incorporate the stapled super functionality.

The ATO also encourages employers using the 'bulk request process' to begin discussions with their software providers, as the ATO's current bulk request process will be decommissioned from mid-2023.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update – November 2022

Tue, 01 Nov 2022 23:38:48 GMT

Federal Budget 2023 commentary updates

Last week the Federal Treasurer, Dr Jim Chalmers, handed down the Labor Government's first Federal Budget. Following the election of the Australian Labor Party to Federal Government in May 2022, this is the second Federal Budget for this calendar year, and it updates economic forecasts and identifies the priorities for the new Labor Government.

We circulated the following commentaries last week, explaining the key issues released in the budget. If you have not seen them yet, please use the links below:

To read the Summary, please click here
To read the Full Commentary, please click here

Director ID deadline is approaching

The Government has launched an awareness campaign to help company directors get their director identification number (director ID) as the 30 November deadline approaches.

A director ID is a unique 15‑digit identifier that a company director will apply for once and keep forever. Director IDs are administered by the Australian Business Registry Services (ABRS), which is managed by the ATO.

All directors of companies registered with ASIC will need a director ID and must apply by the 30 November deadline (although directors of Aboriginal and Torres Strait Islander corporations may have additional time to apply).

Some people may not realise they are directors, so the campaign is targeting those that run small businesses, self‑managed superannuation funds, charities, not‑for‑profits, and even some sporting clubs.

The fastest way to apply is online at abrs.gov.au , and the director ID will be issued instantly once the application is complete. It is free to apply and directors must apply themselves, as they are required to verify their identity (and it is this "robust identification process" that will help prevent the use of false and fraudulent director identities).

More information about director IDs, including who must apply, is available on the ABRS website.

Why are credits and refunds being offset?

The ATO has reached out to small businesses who may have recently received a letter advising that they have a debt on hold and any credits or refunds would be offset against this debt. The ATO’s process of offsetting refunds or credits temporarily paused due to the pandemic and its financial impact on taxpayers. However, the ATO has restarted offsetting refunds and credits to pay off debts on hold since June 2022.

As a result, such a small business may find that their refund or credit is less than expected.

The ATO also sent out 'awareness letters' to some not-for-profits and individuals in September 2022, similarly advising them they had a debt on hold and any credits or refunds would be offset against this debt.

Taxpayers can use the ATO’s Online services for business ( login here ) to search for debts that were previously put on hold and not included in their account balance.

A debt on hold remains payable and collection action may recommence if:

the taxpayer's circumstances change, and the ATO has reason to believe they are now able to pay the debt;
the taxpayer agrees to pay their debt; or
the taxpayer has a refund or credit balance which will automatically be offset to their debt on hold.

Banking business income to a private account

The ATO has stated that it has "no concerns" with business owners banking their business takings or other sales in private accounts, but that this may become an issue when this income is not reported.

Therefore, the ATO notes that a good way to avoid this problem is to establish a separate business bank account and only deposit sales and other business income into this account, as this can help with record keeping and monitoring the business’s cash flow.

The ATO uses many tools to identify income earned and to check if it matches income reported, and reminds taxpayers that business income includes all sales, whether they're cash or electronic (for example, internet sales), and they must all be reported on the business’s tax return (as well as any earnings for services the business provides).

ATO advice for SMSFs thinking about investing in crypto assets

The ATO recommends that trustees of self-managed super funds (SMSFs) thinking about investing in crypto assets should seek professional advice from a licensed financial adviser.

There are organisations who offer trustees help to set up a fund or use their existing fund to invest in crypto assets. However, the ATO notes that some of these organisations are not licensed to provide financial advice, which means the usual consumer protections and access to the Australian Financial Complaints Authority (AFCA) are not available for using these services.

There are many things to consider before deciding to invest in crypto assets, so it is important to get it right, especially since trustees are ultimately responsible for ensuring the investment complies with the super and tax laws.

When investing in crypto assets, trustees must ensure it is allowed under the fund’s trust deed, is made in accordance with the fund’s investment strategy, and the trustee has considered the level of investment risk given the highly volatile nature of the investment.

From a regulatory perspective it is important that:

The crypto assets are owned by the fund and are held separately from the trustee's own personal or business assets. This means the fund must have its own digital wallet, separate to any used by the trustee for personal or business purposes.
The investment is valued at market value in line with the ATO's valuation guidelines.
Any crypto assets that a member or related party hold personally are not sold to the fund or transferred to the fund as a contribution.
The investment is consistent with the sole purpose test, and does not involve the giving of financial assistance to a member.

Valuing fund assets for an SMSF's annual return

The ATO has provided the following reminder and general advice for SMSF trustees regarding their obligations to value the assets annually. One of many responsibilities trustees have when managing an SMSF is valuing the fund's assets at market value.

This must be done every income year, so the ATO knows the SMSF has complied with super laws.

The market value of an asset is the amount someone could be reasonably expected to pay if the asset was for sale.

Each year, the asset valuations will be reviewed by the fund's approved SMSF auditor as part of the annual audit prior to lodgment of the SMSF's annual return (SAR). The auditor will check that assets have been valued correctly, and assess and document whether the basis for the valuation is appropriate given the nature of the asset.

Trustees are reminded to get their valuations done before they go to the auditor, as this will streamline the process and avoid delays. It is also the trustees' responsibility to provide objective and supportable evidence to the auditor for the valuation of the fund's assets, including all relevant documents requested by the auditor.

Failure to do so could result in a delay in auditing the fund and potential late lodgment of the fund's annual return (and could also result in a contravention if the auditor believes mistakes have been made).

The ATO says trustees should "start researching now" to find who can value the fund's assets and what type of evidence is needed to support the valuation, as this can take time. In some instances, the law requires valuations to be undertaken by a qualified, independent valuer.

Check that holiday employees get the right super

The ATO is reminding employers that the holiday season is fast approaching, and that their holiday casual employees may now be eligible for super.

From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee (SG) eligibility has been removed.

This change does not affect other eligibility requirements for SG. In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.

For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150.

As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay him super on the $800 earned. However, as Anish works less than 30 hours a week at the café and is under 18, he is not entitled to super from this employer.

The ATO recommends that employers check their payroll and accounting systems are up to date so they are correctly calculating their employees' SG payments, and that registered tax agents and BAS agents can help with their tax and other obligations.

Optus data breach

The ATO is aware of the recent Optus data breach and that people who have been affected might be concerned about their personal data, and is assuring people that ATO systems have not been affected by the Optus data breach.

The ATO recommends that anyone who thinks they have been affected by the Optus data breach should contact Optus Customer Service on 13 39 37.

Information for those caught up in the data breach is available from the Australian Cyber and Security Centre at cyber.gov.au .

The ATO also reminds the community that it is important to always be vigilant for suspicious activity. The following tips can help protect accounts and keep personal information safe:

Use multi-factor authentication for accounts where possible.
Be careful when clicking on links and providing personal information.
Make sure contact details are up to date when using online services.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

FEDERAL BUDGET 2023

Wed, 26 Oct 2022 01:27:07 GMT

Summary and full commentary updates

The Federal Treasurer, Dr Jim Chalmers, handed down the Labor Government's first Federal Budget on the evening of Tuesday 25 ^th October 2022. Following the election of the Australian Labor Party to Federal Government in May 2022, this is the second Federal Budget for this calendar year, and it updates economic forecasts and identifies the priorities for the new Labor Government.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

For furthe r clarification, contact your Relationship Partner at Lowe Lippmann.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - Small Business Immediate Flood Relief Program

Fri, 21 Oct 2022 03:53:32 GMT

Small Business Immediate Flood Relief Program

The Victorian Government has announced a flood relief package to support Victorian businesses incurring significant direct flood damage during the Victorian flood events that commenced in October 2022, with two streams of support available:

Immediate flood relief grant
Business Relief Service

Immediate flood relief grant

Businesses directly impacted by the recent Victorian floods can access a one-off grant of $5,000 to cover immediate expenses. Businesses must be located within an eligible Local Government Area ( search for LGAs here ) and incurred significant direct damage to their place of business, business assets, stock or equipment.

Eligible businesses can apply for the grant to cover expenses incurred from direct flood damage including for (but not limited to):

qualified tradespeople to conduct safety inspections, repair premises and internal fittings;
equipment, materials and services needed for clean-up;
removal and disposal of debris, damaged materials or damaged stock; or
equipment, stock and materials essential for immediately resuming operations.

It is important to carefully consider the program guidelines ( click here ) before making an application. Some frequently asked questions ( click here ) have also been provided to help explain details of the program.

Applications need to be made directly via the Business Victoria website ( click here ) before 4pm on Friday 13 January 2023 or earlier if funds are exhausted.

Applications will be assessed on a first-in, first-served basis.

Business Relief Service

The Business Relief Service is a free service offering one-on-one support from a local business mentor who will be available via telephone and on the ground to guide business owners through the available Commonwealth, state and local supports. They can also help you manage insurance and landlord issues, assess impacts and form strategies for recovery.

To access the Business Relief Service, the Business Victoria hotline (13 22 15) will connect you with dedicated mentors and support.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Queensland land tax changes have been scrapped

Mon, 03 Oct 2022 01:50:53 GMT

Queensland land tax changes have been scrapped

The Queensland Premier Annastacia Palaszczuk has now scrapped the recently announced changes to the state’s land tax rules, to include the value of interstate landholdings for the purpose of assessing land tax payable in Queensland.

The decision was made after other state premiers made it clear the proposed land tax changes did not have their support, which may be a strong indication that other states will not consider implementing similar changes.

In our recent Tax Alert ( see here ), on 17 August 2022, we explained that the proposed changes would change the methodology used to calculate Queensland land tax by including the value of certain land holdings within other states (not just within Queensland) to determine whether the tax-free threshold would been exceeded, and determine the rate of land tax that would be applied to the Queensland proportion of the value of your landholdings.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further .

Tax Alert - Bonus 20% deduction for small business investment in skills and technology

Tue, 20 Sep 2022 06:24:40 GMT

Bonus 20% deduction for small business investment in skills and technology

The Government recently released draft legislation on the proposed small business boosts to provide tax incentives for small businesses to train and upskill their employees and improve their digital and technology capacity.

These incentives were originally announced by the previous Coalition Government as part of the Federal Budget 2022–23 and have now been released by the current Labor Government.

These incentives include two distinct components:

the small business skills and training boost (skills boost) ; and
the small business digital technology investment boost (technology boost ).

The bonus 20% deduction for eligible expenditure under the skills boost and/or the technology boost will be available where a small business (with aggregated turnover less than $50 million) can satisfy the relevant eligibility criteria.

What is the skills boost?

The proposed skills boost will give eligible small businesses a bonus 20% deduction for eligible expenditure on external training provided to their employees.

The following eligibility criteria require that expenditure incurred on external training:

be delivered by registered providers to employees of the business;
must be within the scope of the registered provider’s registration at the time the expenditure is incurred;
provided either in person (with employees physically located in Australia) or online (where employees are not required to be physically located in Australia);
not provided by the small business claiming the bonus deduction or any of their associates;
not be on-the-job or in-house training;
not be for training persons who are not employees of a small business (ie. sole traders, individual partners in a partnership and independent contractors); and
be fully deductible under another provision of the tax law in the income year in which it is incurred.

The expenditure on external training can also include any associated costs such as books and equipment, but will not include fees charged by any entities not delivering the training sessions (ie. fees from an agent entity that helps connect businesses to training providers).

Registered providers of the external training sessions are required to be registered in Australia with at least one of four government authorities at the time the expenditure is incurred, including:

Australian Skills Quality Authority (or ASQA);
Tertiary Education Quality and Standards Agency (or TESQA);
Victorian Registration and Qualifications Authority; and
Training Accreditation Council of Western Australia.

We note that the draft legislation currently limits the external training to persons who are not employees of a small business and this has received criticism from the accounting industry as it excludes sole traders and partners in partnerships who historically have been responsible for their own training to maintain their skill sets. We expect this requirement will be reviewed and the ATO may provide some further guidance in this regard.

How is the bonus deduction for the skills boost claimed?

The skills boost is proposed to apply to eligible expenditure incurred from 29 March 2022 (when the Federal Budget 2022–23 was announced) until 30 June 2024.

A small business entity could claim the bonus deduction in their 2023 tax return for eligible expenditure incurred during both income years ending 30 June 2022 and 2023 . The bonus deduction for expenditure incurred in the income year ending 30 June 2024 will be claimed in the 2024 tax return.

What is the technology boost?

The proposed technology boost will give eligible small businesses a bonus 20% deduction for eligible expenditure on supporting digital adoption, which may include (but not limited to) expenditure on expenses and depreciating assets that support digital operations or digitising operations:

digital enabling items — computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
digital media and marketing — audio and visual content that can be created, accessed, stored or viewed on digital devices;
e-commerce — supporting digitally ordered or platform enabled online transactions; and
repairs and improvement costs for depreciating assets.

We note that during the consultation period, before the draft legislation was released, there was significant feedback from the accounting industry asking for detailed clarification on what expenditure will and will not be eligible for the bonus 20% deduction. We anticipate that ATO guidance will follow the finalisation of the legislation to clarify this important issue.

There are certain types of expenditure which are expressly excluded from the technology boost, including:

Salary or wage costs;
Capital works costs that are deductible under Division 43 of the ITAA 1997 (which includes deductions for capital expenditure incurred in the construction of buildings and other capital works used to produce assessable income);
Financing costs, including interest and borrowing costs;
Training or education costs;
Expenditure incurred that forms part of the cost of trading stock;
Expenses incurred in the development of in-house software allocated to a software development pool; and
Depreciating assets if a balancing adjustment event occurs to the asset while the small business holds it, unless the balancing adjustment event is an involuntary disposal (which basically includes an assessable gain made when the proceeds from selling a depreciating asset exceed the written down value).

The bonus deduction under the technology boost will be capped to total expenditure up to $100,000, with the bonus deduction capped at $20,000 per year. Small businesses can continue to deduct expenditure over $100,000 under existing tax provisions.

The bonus deduction will be equal to 20% of the cost of an eligible depreciating asset that is used for a taxable purpose, regardless of whether the asset is fully expensed under the temporary full expensing regime or a deduction is claimed for the asset’s decline in value over its effective life under the uniform capital allowance regime.

If the expenditure includes mixed business and private use, the bonus deduction is available only to the extent of the proportion of the business expenditure. The business use (or taxable purpose) percentage applied in the first year the asset is used (or installed ready for use) will be applied here in all subsequent years for that asset.

How is the bonus deduction for the technology boost claimed?

The technology boost is proposed to apply to eligible expenditure incurred from 29 March 2022 (when the Federal Budget 2022–23 was announced) until 30 June 2023 . We note the technology boost does not extend to the income year ending 30 June 2024, as it does for the skills boost.

A small business entity can claim the bonus deduction for the technology boost in their 2023 tax return (only), which includes eligible expenditure incurred during both income years ending 30 June 2022 and 2023 .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further .

Practice Update - September 2022

Tue, 13 Sep 2022 04:49:47 GMT

More COVID-19 business grants are now tax-free

The Federal Government has expanded the list of State and Territory COVID grant programs that may be tax-free to eligible businesses.

A State or Territory Government COVID grant payment will generally be tax-free if:

the payment is received under a grant program that is formally declared to be an eligible program;
the recipient carried on a business and had an aggregated turnover of less than $50 million in the income year the payment was received, or in the previous income year; and
the payment was received in the 2021 or 2022 income year.

The following Victorian and ACT COVID-19 grant programs have recently been declared as eligible grant programs for these purposes:

Business Cost Assistance Program Round Two – Top Up (Victoria).
Business Cost Assistance Program Round Three (Victoria).
Business Cost Assistance Program Round Four (Victoria).
Business Cost Assistance Program Round Four – Construction (Victoria).
Business Cost Assistance Program Round Five (Victoria).
Commercial Landlord Hardship Fund 3 (Victoria).
Impacted Public Event Support Program Round Two (Victoria).
Licensed Hospitality Venue Fund 2021 – Top Up Payments (Victoria).
Live Performance Support Program (Presenters) Round Two (Victoria).
Live Performance Support Program (Suppliers) Round Two (Victoria).
HOMEFRONT 3 (ACT).

We previously released a special Tax Alert on this topic, to see click here .

ATO reminder about appointing an SMSF auditor

The ATO is reminding trustees of self-managed super funds ( SMSFs ) that they need to appoint an approved SMSF auditor no later than 45 days before the lodgment of their fund’s SMSF annual return (for example, for the 2022 income year).

In particular, the ATO says:

“Don't risk approaching an auditor the day before you need to lodge as it will result in an overdue lodgment. Approved SMSF auditors are an important part of your lodgment and reporting obligations. They review your fund's financial statements and make sure you're complying with super law.”

Importantly, an audit is required even if no contributions or payments were made to or from the SMSF in the financial year.

Super comparison tool updated

The YourSuper comparison tool helps individuals compare MySuper products and choose a super fund that meets their needs.

It ranks the performance of these products by fees and net returns.

Each year, the Australian Prudential Regulation Authority ( APRA ) assesses the performance of each MySuper product, and this information is displayed in the comparison tool. Updated information for the 2022/23 year is now available.

The comparison tool provides one of the following results for each MySuper product:

Performing – the product has met or exceeded the performance test benchmark.
Underperforming – the product has not met the performance test benchmark.
Not assessed – the product had less than five years of performance history and has not been rated by APRA.

Individuals who are members of underperforming MySuper products will receive correspondence to notify them of the underperforming status.

Individuals can access a personalised version of the tool which allows them to view and compare their existing MySuper products by doing the following:

Log in to ATO online services through myGov.
Go to the 'Super' drop-down menu and select ‘Information’, then select ‘YourSuper comparison’.

To access a non-personalised version of the tool (without logging into myGov), visit:

www.ato.gov.au/yoursuper

Small business tax incentives back on the table

The Labor Government has confirmed its commitment to implementing two tax incentives aimed at supporting small businesses to train and upskill employees, and improve their digital and tech capacity.

The Technology Investment Boost and the Skills and Training Boost were announced in the 29 March 2022 Federal Budget but remain unlegislated.

Small businesses with an annual turnover of less than $50 million will be able to claim a ‘bonus’ 20% deduction for eligible expenditure on:

external training of employees until 30 June 2024; and
the uptake of digital technologies until 30 June 2023.

The incentives will be backdated to 29 March 2022.

We note that these incentives are not yet law.

Rental properties and second-hand depreciating assets

The ATO is reminding taxpayers that have a residential rental property, to take care when making claims for ‘second-hand depreciating assets’ used in their properties.

In most cases, these are items that existed in the taxpayer's property when they purchased it, or were in their private residence (which they later rented out), such as:

flooring and window coverings;
air conditioners, washing machines, alarm systems, spas, pool pumps; and
items used for both the rental property and the taxpayer’s own home.

Since 1 July 2017, taxpayers generally cannot claim the decline in value of second-hand depreciating assets (some limited exceptions do apply).

However, this rule does not apply to a property that was rented out before this date, or if it is newly built or substantially renovated (conditions apply).

If you have a residential rental property, to help us get your claim right, please answer the following:

When did you purchase the property?
Was it a new or existing build?
Did you live in the property before renting it out?
When did you start renting the property?
Was the asset already in the rental property when you bought it?
Is the property used for business purposes?

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - New $2,000 grants for Victorian small businesses to access professional advice

Wed, 31 Aug 2022 06:14:05 GMT

New $2,000 grants for Victorian small businesses to access professional advice

The Victorian Government has launched a new Small Business Specialist Advice Pathways Program for small business owners to access financial and legal advice. The program is designed to support businesses that have adapted, pivoted or changed their core business activities in response to disruptive change caused by COVID.

Eligible small businesses can receive a $2,000 grant to cover the costs of engaging a qualified service provider that can help with financial and legal advice.

The program has been allocated $5 million and any grants will be offered on a first come, first served basis, by the earlier of Friday 30 September 2022 or when funds are exhausted.

What are the eligibility criteria?

This program is for Victorian small businesses that employ staff and have been established and operating since at least 1 July 2020.

To be eligible for a grant, a business must meet the following requirements:

Be a legally structured business registered in Victoria with an Australian Business Number (ABN) and have held that ABN on and from 1 July 2020;
Be registered with WorkSafe Victoria; and
Employ between 1 and 19 full-time equivalent staff.

In addition to meeting the eligibility criteria, any successful applicant must agree to the conditions outlined in the program guidelines ( click here ).

An applicant will need to provide one of the following forms of identification within their application:

Driver licence or learner permit issued by Vic Roads;
Australian Passport;
Medicare Card; or
Foreign passport for those issued with an Australian Visa.

The program also has prepared a list of Frequently asked questions (FAQs) – to see click here .

How will the grant funds be distributed?

Consider the eligibility criteria, program guidelines, and FAQs, then confirm your ABN has been registered since 1 July 2020, which can be done with the ABN checker ( click here ).
Grant funding of $2,000 per ABN is available for eligible expenses on relevant professional advice and services under the program, where the minimum expenditure cost is $2,000 (excluding GST).
The applicant will receive an upfront payment of $1,000 to engage with their preferred qualified service provider.
The applicant will receive a final grant instalment of $1,000 on the satisfactory conclusion of the service activity. Any approved businesses will be asked to complete a claim form to confirm that the project has concluded and;
Provide a statutory declaration stating that the activity has been completed and the Qualified Service Provider has been paid.
Complete the online claim form by 5pm on 31 January 2023.
Businesses will also be required to respond to a survey six months after they submit their application.

When will applications be assessed?

We understand that after applications are submitted before 30 September 2022, the assessment period for applications is expected to happen during October 2022. Furthermore, notifications are also expected to be made during October 2022.

If an application is missing any information, the applicant will be contacted to provide additional information to complete the process.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - More Victorian COVID grants added to list treated as NANE income

Tue, 30 Aug 2022 02:10:04 GMT

More Victorian COVID grants added to list treated as NANE income

The Federal Government has recently announced that various grant programs administered by Victoria and the ACT will be added to the list of eligible grant programs to be treated as being non-assessable non-exempt income (NANE), instead of being treated as assessable income.

The NANE tax treatment under section 59-97 of the Income Tax Assessment Act 1997 is available for the relevant grant payments received in the 2020–21 or 2021–22 income years.

The new eligible grant programs added to the list include the following:

Business Cost Assistance Program Round Four — Construction (Victoria)
Business Cost Assistance Program Round Two — Top Up (Victoria)
Business Cost Assistance Program Round Three (Victoria)
Business Cost Assistance Program Round Four (Victoria)
Business Cost Assistance Program Round Five (Victoria)
Commercial Landlord Hardship Fund 3 (Victoria)
Impacted Public Event Support Program Round Two (Victoria)
Licensed Hospitality Venue Fund Top Up Payments (Victoria)
Live Performance Support Program (Presenters) Round Two (Victoria)
Live Performance Support Program (Suppliers) Round Two (Victoria)
Homefront 3 (ACT).

The new eligible grant programs above now join the original list of eligible grants below, listed state-by-state.

ACT state grants

COVID-19 Business Support Grant

NSW state grants

2021 COVID-19 business grant
2021 COVID-19 JobSaver payment
2021 COVID-19 micro-business grant
NSW Accommodation Support Grant
Commercial Landlord Hardship Grant
NSW Festival Relaunch Package
NSW Performing Arts COVID Support Package
NSW Performing Arts Relaunch Package
2022 Small Business Support Program

QLD state grants

2021 COVID-19 Business Support Grants

SA state grants

COVID-19 Additional Business Support Grant
COVID-19 Business Hardship Grant
COVID-19 Business Support Grant – July 2021
COVID-19 Tourism and Hospitality Support Grant

VIC state grants

Alpine Business Fund
Alpine Resorts Support Program (Streams 1, 2 and 3)
Business Continuity Fund
Business Costs Assistance Program Round Two
Business Costs Assistance Program Round Two – July Extension
Business Support Fund 3
Impacted Public Events Support Program
Independent Cinema Support Program
Licensed Hospitality Venue Fund
Licensed Hospitality Venue Fund 2021
Licensed Hospitality Venue Fund 2021 – July Extension
Live Performance Support Program
Melbourne City Recovery Fund – Small business reactivation grants
Outdoor Eating and Entertainment Package
Small Business COVID Hardship Fund
Sole Trader Support Fund
Sustainable Event Business Program

Given the new eligible grant programs listed above may have distributed the funds during the 2020–21 and/or 2021–22 income years, it may be necessary to lodge amended tax returns to update the NANE tax treatment of the funds received where relevant tax returns have already been lodged.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - Queensland land tax calculations to include value of some interstate land investments.

Wed, 17 Aug 2022 06:06:29 GMT

Queensland land tax calculations to include value of some interstate land investments

Firstly, we must note upfront that the Queensland state government has not changed these rules to tax any land holdings in other Australian states.

Secondly, any Queenslander’s who only have land holdings in their home state will not be impacted and will continue to be able to access all available exemptions on their principal place of residence or primary production exemptions.

What are the changes?

These changes will start to apply to Queensland land tax assessments in the 2023-24 financial year.

From 1 July 2023, the methodology used to calculate Queensland land tax has been changed, which now includes the value of certain land holdings within Australia (not just within Queensland) to determine:

whether the tax-free threshold (currently $600,000 for individuals excluding absentees, and $350,000 for companies, trusts and absentees) has been exceeded; and
the rate of land tax that will be applied to the Queensland proportion of the value of your landholdings.

This change to the calculation method now includes any taxable land in Queensland and any “relevant interstate land”, which is defined to include land located in another state or territory that is valued under interstate valuation legislation (ie. the statutory value) and is not ‘excluded interstate land’ (such as a principal place of residence or primary production land).

What to do if you own Queensland and interstate land?

If you own land in Queensland and in another state or territory, you will need to make a declaration with the Queensland Revenue Office regarding your interstate land holdings by providing details, such as a land description, value and percentage of ownership.

From 30 June 2023, this declaration will need to be completed by the earlier of the following:

within 30 days of the assessment notice date and where the assessment notice is issued before 30 September 2023; or
on or before the 31 October 2023 where the assessment notice is used after 30 September 2023.

We note that land holders may have interest and penalty tax imposed on them if they fail to notify the Commissioner of their landholdings within the prescribed timeframe. Furthermore, it may be possible that ‘infringing’ land holders may also be subject to civil penalties (of up to $14,375).

We stress that these changes apply to companies, individuals and trusts and represent a substantial change in the Australian land tax regime, and we should be aware that other jurisdictions may start looking at these changes with interest.

The immediate impact for the 2023-24 financial year is likely to be an increase in Queensland land tax being felt by commercial tenants, where their landlords are permitted by law to pass-on their increased costs.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - August 2022

Tue, 16 Aug 2022 01:01:04 GMT

August 2022

Tax time focus on rental property income and deductions

The ATO is focusing on four major concerns this tax season when it comes to rental properties.

Concern 1: Include all rental income

When preparing tax returns, make sure all rental income is included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

Concern 2: Accuracy of expenses

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums. Other expenses such as borrowing expenses and capital works need to be claimed over a number of years.

Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Concern 3: Capital Gains Tax upon sale of a rental property

When selling a rental property, capital gains tax ( CGT ) needs to be considered and any capital gains or capital losses need to be reported.

When calculating a capital gain or capital loss, it’s important to get the cost base calculation right.

It is also important to note that when selling any property for $750,000 or more, vendors/sellers must have a clearance certificate otherwise 12.5% will be withheld. These clearance certificate applications can take up to 28 days to process so to avoid delays, sellers should apply as early as practical using the online form.

Concern 4: Record keeping

Records of rental income and expenses should be kept for five years from the date of tax return lodgments or five years after the disposal of an asset, whichever is longer.

Sessional lecturer entitled to superannuation support

The Federal Court has agreed with the ATO that a lecturer providing services to a higher education provider was a common law employee and therefore entitled to superannuation support, despite being engaged as an independent contractor.

The ATO reviewed the situation and concluded that the lecturer was entitled to receive superannuation support. This was on the basis that for superannuation guarantee purposes they were either an ‘employee’ within the ordinary meaning of that term, or was what is referred to as an ‘extended definition employee’ as someone engaged primarily for the provision of their labour services.

Some of the factors which indicated the lecturer was in an employment relationship with the higher education provider included:

that the lecturer was engaged in his personal capacity and not through an interposed entity (such as a company or trust);
that the higher education provider had a right of control over the lecturer, including the question of how, when and where he was required to provide the relevant teaching services; and
the mode or manner by which the lecturer was to be remunerated was clearly expressed by reference to the time that the lecturer was engaged in delivering lectures and marking, not by reference to any readily identifiable or quantifiable product or result.

We recommend that you contact your Lowe Lippmann Relationship Partner if you have circumstances where a ‘contactor’ is engaged personally, remunerated on an hourly basis for hours worked and is not provided with superannuation support.

TD 2022/11 – Discretionary trusts and corporate beneficiaries

When a trustee of a trust makes a decision to create an entitlement to income of the trust in favour of a corporate beneficiary (ie. a privately held company), certain steps need to be taken to ensure that if the entitlement to the distribution remains unpaid (that is, no cash equal to the amount of the entitlement is paid to the corporate beneficiary), that this does not trigger what is called a ‘deemed dividend’ in the hands of the trust.

A deemed dividend is likely to give rise to unwanted taxation consequences for the trust.

Historically, one way to avoid triggering a deemed dividend in such circumstances was to place the amount representing an unpaid distribution in a sub-trust for the benefit of the corporate beneficiary.

With these sub-trust arrangements, the relevant funds are generally being invested in the main trust to be used for working capital or to make plant and equipment or real property acquisitions.

These sub-trust arrangements were typically based on interest only loan arrangements, with the requirement that the principal be repaid at the end of either seven years (ie. as an Option 1 arrangement) or ten years (ie. to as an Option 2 arrangement).

The ATO has now formed the view that for entitlements to trust income that come about from 1 July 2022 (effectively from the 2023 income year) that these interest only Option 1 and Option 2 arrangements are no longer sufficient to avoid the potential triggering of a deemed dividend with respect to any unpaid present entitlements.

Broadly speaking, from 1 July 2022, in relation to an unpaid distribution payable to a corporate beneficiary, one way to avoid the unpaid distribution giving rise to a potential deemed dividend is for the unpaid distribution to be replaced with what is referred to as a complying Division 7A loan.

These Division 7A loans are made under S.109N of the Income Tax Assessment Act 1936.

Ordinarily, such a loan is repaid on a principal and interest basis, over seven years, based on an interest rate provided by the ATO for each year of the loan, with annual minimum loan repayments calculated based on a formula provided by the income tax legislation.

Pandemic Leave Disaster Payment reinstated

In recognition of the risks associated with more infectious new COVID-19 variants through the winter period, the Federal Government has agreed to reinstate the ‘Pandemic Leave Disaster Payment’ to 30 September 2022, which was otherwise set to end as of 30 June 2022.

Eligibility for the payment will be backdated to 1 July 2022, to ensure that anyone unable to work owing to isolation requirements in this period, without access to paid sick leave, is supported.

Access to these payments will commence from Wednesday 20 July 2022, with existing eligibility requirements to continue.

For each 7-day period of self-isolation, quarantine or caring, the Pandemic Leave Disaster payment is:

$450 if you lost at least 8 hours or a full day’s work, and less than 20 hours of work: or
$750 if you lost 20 hours or more of work.

As a reminder, Pandemic Leave Disaster Payments are assessable income and should be reported in the tax return of the recipient in the year of receipt.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - July 2022

Mon, 11 Jul 2022 01:11:16 GMT

Practice Update - July 2022

ATO’s small business focus for 2022 income year

The ATO announced that it will be focussing on the following matters for small business tax returns for the 2021/22 year:

Deductions that are private in nature and not related to business income, as well as overclaiming of business expenses (especially for taxpayers running a home-based business).
Omission of business income (ie. income from the sharing economy or new business ventures).
Record keeping – including insufficient or non-existent records that are needed to substantiate claims.

The ATO acknowledges that it has been a tough couple of years for many small business owners and encourages taxpayers to act early to find a solution if they are getting behind in their tax obligations, either by contacting their tax agent or the ATO.

ATO targeting SMSFs that fail to lodge annual returns

The ATO has observed an increase in the number of SMSFs that fail to lodge their first annual return and become what the ATO refers to as ‘NEVER’ lodgers. The ATO is particularly concerned where there has been a roll-over into these SMSFs, as this is a strong indicator illegal early release of superannuation benefits may have occurred.

A minority of SMSF trustees continue to ignore ATO reminders about lodging annual returns. This group is now being targeted with a compliance campaign the ATO calls ‘3 strikes and you’re out’.

Under this campaign, the ATO will take the following action:

The ATO’s compliance action starts with a blue letter, that encourages trustees to take immediate action and lodge their return and provides a pathway for those in need of support.
If the ATO does not receive a response to the blue letter, it will issue an amber letter warning the trustees of the consequences of failing to lodge their return.
If the ATO still does not receive a response, it will issue a final warning, a red letter advising the ATO is commencing the disqualification process and considering other enforcement action.

Last year the ATO issued red letters to trustees who had never lodged their first annual return and has now commenced disqualifying the 95 trustees that did not respond.

ATO updates ‘cents per kilometre’ rate for individuals

The ATO has updated the cents per kilometre rate relating to individual car expenses for the 2023 income year to 78 cents per business kilometre.

The cents per kilometre method:

uses a set rate for each kilometre travelled for business;
allows taxpayers to claim a maximum of 5,000 business kilometres per car, per year;
does not require written evidence to show exactly how many kilometres were travelled (but the ATO may ask taxpayers to show how they worked out their business kilometres, for example by means of diary records); and
uses a rate that takes all vehicle running expenses (including registration, fuel, servicing and insurance) and depreciation into account.

The cents per kilometre rate was 72 cents for the 2021 and 2022 income years.

ATO to target ‘wash sales’ this Tax Time

The ATO is warning taxpayers to not engage in ‘asset wash sales’ to artificially increase their losses to reduce gains (or expected gains). Wash sales are a form of tax avoidance that the ATO is focussed on this tax time.

Wash sales typically involve the disposal of assets (ie. cryptocurrency and shares) just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets. Such sales are usually done to create a loss to be offset against a gain already derived, or expected to be derived, in certain circumstances, in a tax return.

The ATO’s sophisticated data analytics can identify wash sales through access to data from share registries and crypto asset exchanges. When the ATO identifies this behaviour, the capital loss is rejected, resulting in an even bigger loss to the taxpayer.

The ATO has warned taxpayers engaging in wash sales that they are at risk of facing swift compliance action and additional tax, interest and penalties may apply. Taxpayers are urged to ignore any advice encouraging a wash sale of any asset. The clear advice from the ATO is to check the ATO website or check with an independent registered tax professional and not to rely on advice received through media, social media, or advertisements.

Downsizer contributions age changes from 1 July 2022

From 1 July 2022, people aged 60 years and over will be eligible to make downsizer contributions of up to $300,000 per person ($600,000 per couple) from the sale proceeds of their home into their super. For downsizer contributions made prior to 1 July 2022, eligible individuals must have been aged 65 years or older at the time of making their contribution.

Eligible downsizer contributions do not impact or count towards the member’s concessional or non-concessional super contribution caps.

During the 2022 Federal election, the previous Coalition Government announced it would support a further reduction to the downsizer eligibility age to 55 years. However, this announcement has not become law. Accordingly, contributions received on or after 1 July 2022 from members who are 55 to 59 will:

be ineligible for treatment as downsizer contributions; and
generally count towards either the member’s non-concessional or concessional superannuation contributions caps.

Super guarantee contribution due date for June 2022 quarter

The due date for employers to make super guarantee contributions for their employees for the June 2022 quarter is 28 July 2022. Note that the super guarantee rate in relation to salary and wages paid on or before 30 June 2022 is 10%.

Employers that do not pay an employee’s superannuation guarantee amount on time (and to the right fund) are liable to pay the ‘superannuation guarantee charge’ ( SGC) . The SGC is more than the superannuation amount that is otherwise payable for the employee and is not tax deductible.

As we noted in our June Practice Update, the super guarantee rate increases to 10.5% in relation to salary and wages paid on or after 1 July 2022 (even if they are paid in relation to work performed before that date).

Note also, contributions received by superannuation funds after 30 June 2022 will not be deductible in the 2022 income year, even if they are made in relation to work performed during the 2022 income year.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - June 2022

Tue, 07 Jun 2022 01:42:51 GMT

Practice Update - June 2022

ATO priorities this tax time

The ATO has announced four key areas that it will be focusing on for Tax Time 2022:

Record-keeping.
Work-related expenses.
Rental property income and deductions.
Capital gains from crypto assets, property, and shares.

Before claiming income tax deductions for their expenses, taxpayers must ensure:

they spent the money themselves and were not reimbursed;
if an expense is for both income-producing and private use, only the portion relating to producing income is claimed; and
they have a record to prove it.

Avoid double dipping on your deductions

Taxpayers are reminded not to make the mistake of ‘double dipping’ on deductions (that is, claiming expenses twice) in their tax return this year.

Some of the ‘double dipping’ mistakes commonly made relate to the following deductions:

Working from home expenses

A common mistake involves using the 'shortcut method' to claim working from home expenses and then claiming additional amounts for expenses such as mobile phone and internet bills, as well as the decline in value of equipment and furniture.

The working from home shortcut method is all-inclusive.

There are three methods available to claim a deduction for working from home expenses depending on individual circumstances; namely, the shortcut, fixed rate and actual cost methods.

The method that gives the best outcome can be used, as long as the eligibility and record-keeping requirements for the chosen method are observed.

Car expenses

A common mistake involves using the 'cents per kilometre' method to claim car expenses, and then double dipping by separately claiming expenses such as fuel, car insurance, and registration.

The cents per kilometre rate is all-inclusive and already covers decline in value, registration, insurance, maintenance, repairs, and fuel costs.

Reimbursed expenses

Taxpayers cannot claim expenses that have already been reimbursed by their employer.

Get ready for super changes from 1 July 2022

As the new financial year approaches, employers need to be aware of two important super changes.

From 1 July 2022, employees can be eligible for super guarantee (SG), regardless of how much they earn, because the $450 per month eligibility threshold for when SG is paid has been removed.

Employers only need to pay super for workers under 18, when they work more than 30 hours in a week.

Furthermore, the SG rate will increase from 10% to 10.5% on 1 July 2022. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July, even if some or all of the pay period is for work done before 1 July.

Employers should update their payroll and accounting systems to ensure they continue to pay the right amount of super for their employees.

ATO to start clearing backlog of ENCC release authorities

Due to "unavoidable delays caused by improvements to" its systems, the ATO will start issuing requests to release excess contributions and other charges for individuals who did not make an election on the tax treatment of their excess non-concessional contributions (ENCC) for prior financial years.

This may result in a higher than normal number of release authorities for members of superannuation funds over the coming months while the ATO works through the backlog.

ATO warns about GST fraud

Taxpayers are being warned to be on the lookout for dodgy online ads, often on social media platforms, promising easy GST refunds.

The ATO recently issued a media release about large-scale GST fraud attempts exceeding $850 million, that involve customers setting up an ABN without operating a business, and then submitting fictitious BAS statements to get a GST refund.

The ATO said it has already successfully stopped $770 million in attempted fraud before payment.

“The people who are involved in these activities aren’t accidentally ticking a box on an online form. They’re signing to say that they’ve set up an ABN for a business that doesn’t exist, then lodging a BAS with false information on it, to receive GST refunds that they are not entitled to,” the ATO said.

Taxpayers who think they’ve been involved in this arrangement are urged to let the ATO know (before the ATO contacts them) by calling 1300 130 017.

Confidential reports of suspected tax evasion or crime can be made online (visit ato.gov.au/tipoff) or by calling the ATO’s Tax Integrity Centre on 1800 060 062.

Employers need to prepare for changes under STP expansion

Single Touch Payroll (STP) reporting has been expanded.

This expansion, known as ‘STP Phase 2’, means that employers will need to start reporting extra information to the ATO each time they run their payroll.

Some digital service providers (DSPs) needed more time to update their products and applied for deferrals, which cover their customers – therefore, when an employer can start Phase 2 reporting depends on when their payroll product is ready.

Employers that have not already started Phase 2 reporting should ask their DSP when their product will be ready (if they don't already know).

Employers need to be across the changes and get ready to start Phase 2 reporting. This includes:

checking if changes need to be made to payroll pay codes/categories so they align with Phase 2 requirements;
reviewing allowances employers pay and how they need to be reported in Phase 2;
understanding changes to salary sacrifice reporting; and
understanding how to assign an income type to each payment.

The ATO is also reminding employers that amounts paid to 'closely held payees' should now be reported through STP.

A ‘closely held payee’ is an individual directly related to the entity they receive payments from. For example, family members of a family business, directors or shareholders of a company and beneficiaries of a trust.

There are concessional reporting options for closely held payees reporting which include the following:

Reporting actual payments on or before the date of payment (along with arm's length employees).
Reporting actual payments quarterly.
Reporting a reasonable estimate quarterly.

What tax will children pay on money left to them in a Will?

Children may seem to get the short stick of tax law when it comes to taxation. Children under the age of 18 years can only earn $416 in a year before they pay the top rate of tax (47%) on their income.

For example, if a 15-year-old earns $2,000 in interest for the year, they will pay close to $1,000 in tax on those earnings. The reason for such a high tax price is to prevent people from investing money in their children’s names so that they won’t pay any tax on the earnings.

This may not seem fair though, as children may earn money from investments that haven’t been put there to benefit someone else with tax savings. One such example is the money that may have been received in a will.

The tax law provides a few exemptions to the rule that taxes minors at the top rate of 47%. One such exemption is earning from assets left to them in a will or earning from distributions from a trust established under a will. A trust that is established under a will is known as a testamentary trust.

If a child earns $2,000 in interest from money left to them under a will, the special rules for minors would not subject them to the 47% rate of tax. Instead, as those earnings came from money left to them in a will, they would simply pay the normal adult rates of tax on the interest. If this was their only income, they would be well below the tax-free threshold and would not pay any tax on the earnings.

If you are thinking about leaving assets to a child or grandchild in your will, please contact your Lowe Lippmann Relationship Partner to assist you with tax planning for this eventuality.

Who am I ‘connected to’ tax-wise?

There are instances throughout tax law where you are required to know who the ‘entities connected with you’ are. This is used in determining if you are a Small Business Entity (SBE) or what the value of your assets is if you wish to claim the CGT Small Business Concessions. It is also important in instances where you have sold an asset and claimed that it was used by an ‘entity connected with you’.

Sometimes, having an entity connected to you can be a good thing. If you were to sell a factory unit and a company connected with you ran a mechanics business out of that factory unit for example, this may allow you to claim the CGT Small Business Concessions on the sale of that factory unit.

Conversely, the value of the assets of a connected entity are added to yours when looking at certain asset tests. In that sense, you may not want entities to be connected with you.

If you have a family trust and make a distribution to your adult daughter, you may have to add her assets to your asset pool for determining if you have access to tax concessions. Anyone that has received 40% of the income or capital of a trust in the previous four years is thus connected to that trust.

Two entities that are controlled by the same person or entity are also connected with each other so if you have two trusts that you control, those two trusts are also connected to each other as well as to you.

Interestingly, you and your spouse are not automatically connected to each other, nor would you normally be. If you control a company and your spouse controls their own separate company, then they will most likely not be connected to each other. Depending on the situation, this could be good or bad.

While this may sound complex, your connections are something that needs to be addressed on an ongoing basis. Using the example of the factory unit above, circumstances surrounding its disposal could change the connection. You may have kept the factory unit, but given the company to your son instead five years ago. This means that the company is no longer connected with you which could impact your access to certain tax concessions.

Keeping us apprised of your future plans for your assets and of changes that could impact your connections means that we can ensure that you do not inadvertently miss out on any of the tax concessions that may be available to you.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2021-2022 Business Year End Checklist

Fri, 03 Jun 2022 02:38:54 GMT

Many business clients like to review their tax position before the end of the income year and evaluate any strategies that may be available to legitimately reduce their tax. Traditionally, year-end tax planning for profitable small businesses is based around accelerating deductions and deferring income. Small Business Entities ('SBEs') – i.e., those with an aggregated turnover of less than $10 million – often have greater tax planning opportunities compared to other businesses, due to certain concessions generally only applying to them. SBEs usually also have the flexibility to pick concessions that suit their circumstances. However, for 2021/22, many of the SBE concessions are now also available to medium-

sized businesses ('MSBs'), i.e., businesses with an aggregated turnover of less than $50 million. The following are common strategies that may be considered for all business taxpayers.

Maximising deductions for non-SBE business taxpayers

Deductions can be maximised for non-SBE business taxpayers by prepaying expenses, accelerating expenditure and/or accruing expenses that have been incurred.

2021-2022 Individuals Year End Checklist Tax Return

Fri, 03 Jun 2022 02:38:43 GMT

Tax saving strategies prior to 1 July 2022 A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year. However, in light of the continued impact of the COVID-19 pandemic, any tax planning for individuals with potentially reduced income for the 2022 tax season may require consideration of deferring any deductible expenditure (if possible).

Planning for Superannuation Contributions before 30 June 2022

Tue, 31 May 2022 22:39:31 GMT

Planning for Superannuation Contributions before 30 June 2022

As the end of the financial year is approaching, we take this opportunity to remind you of the superannuation obligations for each of the following three groups:

Self-employed & other taxpayers;
Employers with only related-party employees; and
Employers with unrelated employees.

Each group will be considered below under three separate headings and we recommend you consider the group most relevant to your circumstances.

1. SELF-EMPLOYED & OTHER TAXPAYERS

Individuals can claim a tax deduction for their personal contributions (even when they receive income as an employee).

Concessional tax treatment for contributions that are tax deductible to the self-employed person (and/or the employer) is generally limited to $27,500, per person.

Concessional contribution limits

The concessional contribution limits apply to the total of contributions from all sources. We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Income tax deductions

Self-employed persons can claim a full tax deduction for concessional contributions, subject to notifying their fund accordingly and receiving an acknowledgement letter from the fund.

In order to obtain a tax deduction for the year ending 30 June 2022, please ensure that contributions are paid into the fund to allow time for them to be cleared through your bank account prior to Friday 24 June 2022.

Non-concessional contribution caps

From 1 July 2021, the non-concessional contributions cap increased from $100,000 to $110,000, and members under 65 years of age may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year.

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years. If you are considering making non-concessional contributions for the year ending 30 June 2022, please talk to us first about your specific cap limit and eligibility.

Again, we note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

Further we note that a member will only be eligible to make a non-concessional contribution where they have a total superannuation balance which is less than the general Transfer Balance Cap on 30 June of the previous financial year (ie. FY2020-21 is $1.6 million).

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2. EMPLOYERS WITH ONLY RELATED-PARTY EMPLOYEES

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500, per person.

Concessional contribution limits

The concessional contribution limits apply to the total of contributions from all sources, including employer contributions (including SGC) and salary sacrificed amounts. We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis).

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Superannuation Guarantee Scheme contributions

To comply with the Superannuation Guarantee Scheme (SGC), contributions must be made by 28 July 2022 in respect of the June 2022 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office (ATO).

Under the SGC, an employer must make superannuation contributions of at least 10.0% of gross salary earned by each eligible employee (up to a maximum salary of $58,920 per quarter in 2022 and rising to $60,220 per quarter in 2023). Employees also include working directors.

Income tax deductions

Single Touch Payroll reporting

For the 2022 year, employers continue to be required to report on their employees' payslips, the amount of and the date on which, the employer expects to make the employees' superannuation contributions.

Small employers (with 19 or fewer payees) were exempt from reporting amounts paid to closely held payees through STP until 30 June 2021. However, from 1 July 2021, amounts paid to closely held payees needed to be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

For the 2022 year, it remained compulsory for all employers to pay contributions to superannuation funds (including SMSFs) electronically. There is an exception to the rule where contributions are made to funds for ‘related parties’ of the employer.

Non-concessional contribution caps

From 1 July 2021, the non-concessional contributions cap increased from $100,000 to $110,000, and members under 65 years of age may have been able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year.

We again, we note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

Changes for next year 2022-23

From 1 July 2022, employees can be eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid is being removed.

The super guarantee rate will also increase from 10% to 10.5% on 1 July 2022. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2022, even if some or all of the pay period is for work done before 1 July. The super guarantee rate is legislated to increase to 12% by 2025.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

3. EMPLOYERS WITH UNRELATED EMPLOYEES

Superannuation Guarantee Scheme contributions

Under the Superannuation Guarantee Charge ( SGC ) scheme, an employer must make superannuation contributions of at least 10.0% of gross salary earned by each eligible employee (up to a maximum salary of $58,920 per quarter in 2022 and rising to $60,220 per quarter in 2023). This means that employers will be required to contribute superannuation for all employees (include working directors), regardless of age.

To comply with the SGC scheme, contributions must be made by 28 July 2022 for the June 2022 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office ( ATO ).

Concessional contribution limits

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500 per person . We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis).

These concessional contribution limits apply to the total of contributions from all sources, including employer contributions (including SGC), salary sacrificed amounts, and personal concessional contributions.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

Single Touch Payroll reporting

If you do not currently report employer superannuation contributions through Single Touch Payroll (STP) , you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

Paying contributions electronically

Non-concessional contribution caps

Changes for next year 2022-23

From 1 July 2022, employees can be eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid is being removed.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Tax Alert - Superannuation Guarantee Increase from 1 July 2022

Mon, 16 May 2022 23:59:36 GMT

Superannuation Guarantee increase from 1 July 2022

Increase to superannuation guarantee from 1 July 2022

The Australian Taxation Office (ATO) has recently reminded taxpayers of the scheduled increase to the superannuation guarantee (SG) percentage, while some superannuation limits remain the same.

From 1 July 2022, Australians will be contributing more into their superannuation fund as the SG percentage will increase from 10.0% to 10.5% per annum.

Employers must pay Superannuation Guarantee contributions at the current rate of 10.0 per cent of an eligible worker’s earnings into a super account. As the transitional rates increase, the minimum contribution rate will rise to 10.5 per cent on 1 July 2022, and it will continue to gradually increase up to 12.0 per cent by 1 July 2025.

Concessional contributions are contributions that are made into your super fund before tax, including through salary sacrifice arrangements, and are taxed at a rate of 15 per cent in the superannuation fund. The annual concessional contribution cap will remain at $27,500 from 1 July 2022.

Non-concessional contributions are contributions that are made into your super fund after tax is paid. The annual non‑concessional contribution cap will also remain at $110,000 from 1 July 2022.

We must note that since 1 July 2018, members can make carry-forward concessional super contributions if they have a total superannuation balance of less than $500,000. Members can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

The first year in which you can access unused concessional contributions is the income year ending 30 June 2020.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - May 2022

Tue, 03 May 2022 22:53:32 GMT

No reduction in the Private Health Insurance rebate as of 1 April 2022

An event that we have become accustomed to every 1st April, is that the amount of the Private Health Insurance (PHI) rebate decreases.

The Australian Government rebate on PHI is annually indexed on 1st April by a Rebate Adjustment Factor ( RAF ) representing the difference between the Consumer Price Index and the industry weighted average increase in premiums.

The RAF for 2022 has been calculated as 1, which means there will be no changes to the PHI rebate on 1 April 2022.

Disclosure of business tax debts

The ATO is in the process of writing to taxpayers that may be eligible to have their tax debts disclosed to credit reporting bureaus ( CRBs ).

The ATO can potentially report outstanding tax debts to a CRB where the following criteria are satisfied:

The taxpayer has an Australian business number and is not an excluded entity;
The taxpayer has one or more tax debts and at least $100,000 is overdue by more than 90 days;
The taxpayer is not engaging with the ATO to manage their tax debt; and
The taxpayer does not have an active complaint with the Inspector-General of Taxation about the ATO’s intent to report its tax debt information.

Excluded entities are a deductible gift recipient, a complying superannuation fund, a registered charity and a government entity.

The purpose of this letter from the ATO is to raise awareness of the actions that the ATO can now take under the ‘Disclosure of Business Tax Debts’ measure.

The letter will be sent to all taxpayers with business tax debts that currently meet the criteria (above) for disclosure, and it provide business taxpayers with information on how to effectively engage with the ATO to manage their tax debt.

Taxpayers can avoid disclosure to a CRB by making payment in full or negotiating a payment plan.

If an eligible taxpayer does not take steps to actively manage their debt, they will remain eligible for disclosure.

Before the ATO takes any final action to disclose a tax debt, it will issue the taxpayer with a formal ‘Intent to Disclose Notice’.

If a taxpayer receives an Intent Notice, asking them to 'Act now or your tax debt will be reported to credit reporting bureaus', the taxpayer or their tax agent must contact the ATO within 28 days of receiving the notice to avoid the debt being reported.

It is crucial for taxpayers to engage with the ATO early before their debts become unmanageable.

If the ATO reports a taxpayer that has an outstanding debt to a CRB, this can have a negative impact on the taxpayer’s credit rating, which in turn may affect their ability to borrow from banks and other financial institutions.

If you need any assistance in this regard, please do not hesitate to contact your Lowe Lippmann Relationship Partner.

High Court rejects attempt to disclaim interest in trust distribution

The High Court has rejected a taxpayer’s attempt to disclaim an interest in trust income that arose as a result of a default beneficiary clause being triggered.

Facts of the case

The taxpayer, Ms Natalie Carter, was one of five default beneficiaries of the Whitby Trust, a discretionary trust.
For the 2014 income year the trustee had failed to appoint or accumulate any of the income of the Trust.
The Trust Deed contained a default beneficiary clause, nominating Ms Carter and four other beneficiaries, as the default beneficiaries, in the event that the trustee had failed to allocate trust income for the benefit of beneficiaries by 30 June of a particular year.
The ATO issued each of Ms Carter and the four other default beneficiaries with an assessment for one-fifth of the income of the Whitby Trust for the 2014 income year on October 2015.
This was done on the basis that they were “presently entitled” to that income within the meaning of section 97(1) of the Income Tax Assessment Act 1936.
An initial unsuccessful attempt was made by the default beneficiaries to disclaim their entitlement to default distributions in November 2015.
A further attempt by the default beneficiaries to disclaim their interest in trust income for the 2014 income year was made in September 2016 in what was referred to as the “Third Disclaimers”.
The Administrative Appeals Tribunal held that the Third Disclaimers were ineffective whereas the Full Federal Court found in the taxpayers’ favour that they were effective.
The High Court was then asked to consider the legal status of the Third Disclaimers.

High Court decision

It was the unanimous decision of the High Court that the Third Disclaimers were ineffective.

The High Court carefully analysed the words of section 97(1), in particular, the phrase “is presently entitled to a share of the income of the trust estate” is expressed in the present tense.

The plurality found that expression "is directed to the position existing immediately before the end of the income year for the stated purpose of identifying the beneficiaries who are to be assessed with the income of the trust – namely, those beneficiaries of the trust who, as well as having an interest in the income of the trust which is vested both in interest and in possession, have a present legal right to demand and receive payment of the income."

The High Court took the view that the question of the "present entitlement" of a beneficiary to income of a trust must be tested and examined "at the close of the taxation year", not some reasonable period of time after the end of the taxation year.

Accordingly, Ms Carter and the other four beneficiaries had been appropriately assessed by the ATO under section 97(1) given their status as default beneficiaries under the Trust Deed.

For the sake of completeness, the High Court also rejected the taxpayers’ argument that a beneficiary of a discretionary trust, with reference to events that may occur in a “reasonable period” after the end of an income year, can trigger an event that would disentitle the beneficiary to a distribution.

Our comments

This is a significant decision, as it backs the proposition that disclaimers of trust income cannot be effective if they occur after the end of the income year that gave rise to a present entitlement.

It will be interesting to see in any subsequent Decision Impact Statement guidance documents from the ATO whether they intend to apply the decision in Carter’s case.

With 30 June of another income year on the horizon, this case serves as a timely reminder for discretionary trusts to ensure that steps are taken before the end of the income year to effectively distribute trust income.

This is done to avoid the operation of default beneficiary clauses, or the situation where no beneficiary is presently entitled to trust income and the trustee is assessed at the highest marginal rate.

Please do not hesitate to contact your Relationship Partner if you wish to discuss any of these matters further.

Practice Update - April 2022

Thu, 07 Apr 2022 23:57:07 GMT

Practice Update - April 2022

2022-2023 Budget Measures that are now law

Low and Middle Income Tax Offset

A measure that will no doubt be beneficial for individual taxpayers is the increase in the Low and Middle Income Tax Offset (LMITO) for the 2022 income year by $420. The LMITO is a tax offset which reduces an individual taxpayer’s tax liability.

This means that the maximum amount of the LMITO for the 2022 income year will now be $1,500 (up from $1,080 for the 2021 income year).

However, it should be noted the LMITO will not be extended to the 2023 income year.

Reduction in Fuel Excise

Fuel excise on petrol and diesel will be reduced by 50% (a reduction of 22.1 cents per litre) from 30 March 2022 to 28 September 2022.

This temporary reduction in the fuel excise is to soften the impact of increased petrol and diesel prices that have been triggered by Russia’s invasion of Ukraine.

Tax deductions for work-related COVID-19 tests

Last month’s edition of Practice Update discussed a proposal for COVID-19 tests, to be both:

tax-deductible; and
exempt from FBT;

broadly where they are purchased for work-related purposes.The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

This proposed legislative change is now law with effect from 1 July 2021.

Following the release of the 2022/23 Federal Budget on the evening of Tuesday 29th March 2022, Lowe Lippmann was pleased to provide summary and full commentary updates – to view click here .

Reminder of March 2022 Quarter Superannuation Guarantee

Employers are reminded that their Superannuation Guarantee (SG) obligation for the 1 January 2022 to 31 March 2022 quarter is due by 28 April 2022.

An advance warning is also provided to employers that the compulsory 10% SG rate is going to increase to 10.5% from the period 1 July 2022 to 30 June 2023.

So now might be a good time to ensure your payroll systems and SG calculators are updated by the start of the next income year.

Cents per kilometre deduction for car expenses – 2023 income year

The ATO has proposed for individual taxpayers that use the cents per kilometre method when calculating tax deductions for their work-related car expenses, that the rate per kilometre for the income year starting 1 July 2022 (the 2023 income year) will be 75 cents per kilometre.

This is an increase from the 72 cents rate applicable for both the 2021 and 2022 income years.

A reminder that the ability to claim a deduction under the cents per kilometre method is subject to a cap of 5,000 business kilometres annually.

Individual taxpayers will claim deductions for work-related car expenses (where eligible) under one of two alternative methods: the log-book method or the cents per kilometre method.

Many taxpayers find that they are not able to use the log-book method as they have not maintained a valid 12-week logbook in the last five years.

JobMaker Year 2: adjusting baseline headcount

If you have been claiming the JobMaker Hiring Credit, please be aware that the ATO will now calculate an adjusted baseline headcount for the claim.

The ATO will amend the prefill in the claim form based on information provided in earlier claims. The ATO does this each period by calculating the greatest headcount increase that occurred in a period that began 12 months or more before the current claim period. The ATO then adds that increase to the baseline headcount.

This adjustment will happen because eligible businesses can only claim the JobMaker Hiring Credit for up to a year for each additional job they create.

The baseline headcount is an integrity measure designed to ensure that where an employer is claiming a JobMaker Hiring Credit for a new employee aged between 16-35, that they have also increased their overall number of employees. This is designed to prevent employers terminating the services of current employees and then replacing them with employees aged 16-35.

Broadly speaking, to qualify for the JobMaker Hiring Credit an employer needs to have not only employed an eligible individual but to have also increased their overall employee headcount.

Re-contribution of COVID-19 early release super amounts

Individuals can now re-contribute amounts they withdrew under the COVID-19 early release of super program without the re-contribution counting towards their non-concessional contributions cap.

These contributions can be made between 1 July 2021 and 30 June 2030. Individuals can make COVID-19 re-contribution amounts to any fund of their choice where the funds' rules allow.

COVID-19 re-contribution amounts are reported as personal contributions. If the fund member is found to be ineligible to make the re-contribution (for example, the fund member may be required to satisfy the work test and does not do so at the time of a re-contribution) it may result in that member exceeding their non-concessional contributions cap.

It should be noted that once an amount originally withdrawn under the COVID-19 early release of super program has been re-contributed into a superannuation fund, it will not be able to be released from that fund until the fund member satisfies a condition of release – such as obtaining the age of 65 or having met their preservation age and they have “retired”.

Penalties for overdue Taxable payments annual report

The Taxable payments annual report ( TPAR) must be lodged by 28 August each year. Taxpayers who operate in certain industries and that make payments to contractors may need to report these payments in a TPAR.

Affected industries where taxpayers may have an obligation to lodge a TPAR are:

Cleaning services;
Building and construction services;
Road freight;
Courier services;
Information technology services;
Security, investigation or surveillance services.

From 23 March 2022, the ATO will apply failure to lodge penalties to those who:

did not lodge their 2021 or prior year TPAR;
have already been sent three non-lodgment letters about their overdue TPAR;
do not respond to an ATO follow-up phone call about their overdue TPAR.

In the coming weeks the ATO may be phoning tax agents (or taxpayers directly) about their overdue TPAR, to follow up the non-lodgment letters that have been sent.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Federal Budget 2023

Wed, 30 Mar 2022 02:09:56 GMT

Summary and full commentary updates

The 2022/23 Federal Budget was handed down by Federal Treasurer, Josh Frydenberg on the evening of Tuesday 29 ^th March 2022.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

For further clarification, contact your Relationship Partner at Lowe Lippmann.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

ATO Guidance targeting reimbursement agreements and trust distributions

Tue, 15 Mar 2022 00:06:22 GMT

ATO Guidance targeting reimbursement agreements and trust distributions

The Australian Taxation Office (ATO) has recently issued draft guidance, which sets out the ATO’s new compliance approach, in relation to trust distributions and “reimbursement agreements”.

The ATO focus is on trust distributions made to beneficiaries to achieve a tax advantage where the funds relating to the distributions are not paid out to a beneficiary or are in some way reimbursed by the beneficiary back to the trustee or other parties.

The legislation that this guidance is based on (ie. section 100A of Income Tax Assessment Act 1936) was introduced over 40 years ago with the intention to counter tax avoidance arrangements where a specially introduced low tax (or tax exempt) beneficiary was made presently entitled to income of a trust estate in such a way that the trustee was relieved of any tax liability on the income.

What arrangements may be impacted by this guidance?

Broadly, this guidance will apply to circumstances where:

a beneficiary has become presently entitled to trust income, but it has been agreed that another person will benefit from that income; and
that agreement is made with the purpose that some person will pay less or no income tax as a result; and
the agreement was entered into outside the course of ‘ordinary family or commercial dealings’.

When applied by the ATO, this guidance can deem the trustee (rather than the beneficiary presently entitled to a trust distribution) liable for the tax payable at the top marginal tax rate.

Importantly, there are exclusions from the scope of section 100A where an agreement was not entered into or carried out for a purpose of reducing that person’s income tax liability, and where an arrangement is considered to be an ‘ordinary family or commercial dealing’.

What are the implications when this guidance applies?

The purpose of the guidance is to provide the ATO’s view about each element of these arrangements and give taxpayers an indication of what circumstances this anti-avoidance legislation may be applied to.

The ATO’s new guidance is set to invalidate many commonly made trust distributions, including distributions to adult children, grandparents and even bucket companies. It will challenge some traditional family trust distribution strategies and will impact the required thinking around trustee resolutions as early as 30 June 2022.

What arrangements are at risk?

The concept of a “reimbursement agreement” is so broad that many common arrangements involving trust distributions are exposed to its application.

Consideration is always given to whether a reimbursement agreement exists triggering section 100A whenever a trustee of a discretionary trust makes a distribution in any of the following circumstances:

to an individual on a low tax rate;
to a foreign resident where the net income of the trust includes foreign sourced income, or is otherwise subject to withholding tax in Australia;
to an entity with tax losses;
to a company of which the shareholder is the trustee with the result that the company has no option other than to distribute the income it receives back to the discretionary trust (typically via dividends).

Particular common transactions which now may be at risk include:

applications of trust income by a trustee on behalf of lower marginal tax rate adult beneficiary to meet expenses attributable to them (for example, a trust distribution to an adult child to then repay their parents for university fees or holiday expenses);
Trustee entitlements gifted to a trustee, where a beneficiary being made presently entitled to trust income for a particular year but then deciding to gift their entitlement back to the trustee (or some other person);
gifts from parents to a child, where the lower marginal tax rate parents are repeatedly gifting trust entitlements to higher marginal tax rate children in lieu of the trustee distributing to the adult children directly, and ultimately less tax is payable;
non-commercial loans between family members, where the lower marginal tax rate parents are repeatedly loaning trust entitlements to higher marginal tax rate children in lieu of the trustee distributing to the children directly; and
so called ‘washing machine arrangements’ where a trustee of a discretionary trust owns the shares in a private company and, year on year, income is appointed to the private company and then distributed back to the trustee by way of a franked dividend.

These examples are not intended to be exhaustive and are by no means the only factual circumstances to which the ATO considers that section 100A could apply.

It is important to note that the underlying legislation (in section 100A) has been in place for over 40 years and the ATO has accepted some (or all) of these examples as being acceptable family arrangements to date.

The ATO is releasing this new compliance guidance to warn that the ATO now intends to take a closer look at certain trust arrangements (like the non-exhaustive examples listed above), and if the exemptions do not apply, then the ATO is likely to ask further questions or commence a review.

What are the next steps?

While the guidance is still in draft form, and subject to further consultation by accounting and legal industry bodies, the approach has been closely considered by the ATO over many years and we anticipate that much of the content of the guidance will likely remain in the final versions.

We must state that there is no doubt the ATO has a keen focus on many Australian trusts and their historical pattern of trust distributions in its ongoing concerns of perceived income splitting, particular involving family arrangements.

We will continue to watch how the guidance develops and keep you informed of further developments.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - March 2022

Thu, 10 Mar 2022 23:57:26 GMT

Tax deductibility of COVID-19 test expenses

After much speculation, the Government announced that COVID-19 tests, including Polymerase Chain Reaction (PCR) and Rapid Antigen Tests (RATs), will be both:

tax-deductible; and
exempt from FBT;

broadly where they are purchased for work-related purposes.

This will require the introduction of new specific legislation (ie. to clarify that work-related COVID- 19 test expenses incurred by individuals will be tax-deductible or FBT exempt where employers provide the tests to their staff) which will apply both where an individual is required to attend the workplace or has the option to work remotely.

The Government intends that these changes take effect from the 1 July 2021 and will apply permanently once enacted.

Super changes and full expensing 12-month extension now law

A plethora of superannuation law tweaks has recently been made (via recent legislative reforms) which include:

Removing the $450 monthly super guarantee threshold.
Reducing the eligibility age for making downsizer contributions from 65 to 60.
Changes to facilitate the removal of the work test for those aged between 67 and 75 regarding non-concessional and salary sacrificed contributions. In addition, the bring-forward rule will now be available for people under the age of 75 (rather than 67, as is currently the case).
Increasing the maximum releasable amount under the First Home Super Saver scheme from $30,000 to $50,000.
Allowing super fund trustees to choose not to use the segregated assets method in certain circumstances.

Furthermore, the Government has also ‘made good’ on their promise to extend accelerated depreciation with legislation passing to allow current Temporary Full Expensing measures to continue for another 12 months (extended out to 30 June 2023).

12-month extension of the temporary loss carry-back measure

As announced in the 2020-21 Federal Budget, legislation has now passed to allow eligible corporate entities (ie. with, amongst other things, an aggregated turnover of less than $5 billion) a 12-month extension to claim a loss carry-back tax offset in the 2023 income year.

The temporary loss carry-back rules were initially implemented in 2020 to promote economic recovery by providing cash flow support to previously profitable companies that fell into a tax loss position due to the COVID-19 pandemic.

The law allows eligible companies to carry-back tax losses from 2020, 2021, 2022 and now the 2023 income year, to previously taxed profits in the 2019 or later income years.

A company that does not elect to carry back losses under this temporary (yet extended) measure is still eligible to carry losses forward as usual.

Keeping and maintaining SMSF records

Trustees of SMSFs have been put on notice by the ATO that keeping and maintaining good records is one of their key responsibilities and legal obligations. Good record keeping ensures trustees can ensure accurate and timely SMSF accounts, audits and income tax return lodgments.

As a result, the ATO has recently confirmed that even where SMSF trustees rely upon super or tax professionals to administer their SMSF, each trustee remains personally responsible for good record keeping.

If trustees are unsure of their obligations, the ATO has encouraged them to view the ATO’s record-keeping videos available on their website (refer to QC 23333 ) and undertake an approved education course (refer to QC 41142 ) to improve their understanding and knowledge.

So how many people use a SMSF?

The ATO has released its annual statistical overview for SMSFs for the 2020 income year

(based on information obtained from lodged 2020 SMSF annual returns).

Some interesting SMSF statistics as of 30 June 2021 include that SMSFs have been reported as making up 25% of all super assets (ie. $822 billion as of 30 June 2021).

At the same time, there were approximately 598,000 SMSFs with almost 1.115 million individual members. Furthermore, as of 30 June 2020, on average, each SMSF has assets of just over $1.3 million.

The ATO has also reported that the total contributions to all SMSFs in 2020 was around $17.9 billion (a 4% increase from 2019).

Finally, according to ATO statistics, over 25,000 SMSFs were established in 2021 (with average assets of $391,000 upon establishment), and of these new SMSFs, 85% were founded with a corporate trustee (ie. rather than an individual trustee).

New shield against debt recovery proposed for small business

Small businesses are to be afforded the ability to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (the Tribunal) for orders to stay (ie. temporarily suspend) specific ATO debt recovery actions. Broadly, amending legislation will allow the Tribunal to make such an order only if the proceeding is brought under the Small Business Taxation Division of the Tribunal.

This proposal (initially announced in the most recent Federal Budget) aims to provide small business entities (SBEs) with a cheaper and easier way to pause the effects of an ATO decision to recover a tax debt whilst their tax dispute is being considered.

Small employers and STP – the ATO gets serious

The ATO has advised it is in the process of shifting from its previous engagement and communication focus on Single Touch Payroll (STP). In particular, it will begin a ‘failure to lodge penalty’ process for small business employers (ie. those with 19 or fewer employers) who have yet to commence STP reporting.

STP reporting has been mandatory for most small employers from the 2020 income year, with a final ‘nudge letter’ being issued to approximately 700 small employers in late January 2022.

Notably, the ATO advised that any remaining non-compliant small employers (ie. those not subject to any appropriate reporting extensions or exemptions) will have been issued pre-penalty warning letters from 18 February 2022.

Where an employer receives a pre-penalty warning letter, they will have a further 28 days to take action by either starting to lodge or contacting the ATO before a failure to lodge penalty will be imposed.

APRA confirms it will not take action against trustees who re divest Russian assets

The Australian Prudential Regulation Authority (APRA) has confirmed the Government’s statement confirming its strong expectation that Australian superannuation funds will review their investment portfolios and take steps to divest any holdings in Russian assets.

Data provided to APRA indicates that superannuation fund holdings of Russian assets are a very small proportion of the $3.5 trillion superannuation asset pool.

APRA confirms it will not be taking any action against trustees who seek to divest Russian assets in this context where trustees have considered such divestments in accordance with their duties.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2022 FBT Year End is Fast Approaching

Tue, 08 Mar 2022 05:19:37 GMT

2022 FBT Year End is Fast Approaching!

The end of the Fringe Benefits Tax (FBT) year is fast approaching on 31 March 2022, so we take this opportunity to revisit some hot FBT topics for both employers and employees, including:

Assistance and benefits provided due to COVID-19
Motor vehicle problem areas
Mismatched FBT and income tax amounts
Business assets personally used by owners and staff
Not lodging FBT returns
Salary sacrifice and superannuation guarantee
Car parking changes
Travelling or living away from home
Retraining and reskilling benefits
Housekeeping essentials

Assistance and benefits provided due to COVID-19

Many businesses are likely to have provided different types of benefits and assistance to their employees because of COVID-19. For many of these benefits, it can be challenging to work out whether FBT should apply.

In general, minor benefits should be FBT exempt where their individual cost is under $300 and it is reasonable to treat the benefit as minor (for example, it is provided infrequently).

Outside of this and in many cases, there are specific FBT concessions that could be available, but it is important to work through these concessions carefully.

Working from home

COVID-19 related office and site closures have meant that many employees worked from home for most of the FBT year. To assist with the transition, employers often provided work-related items such as computer monitors, printers and other equipment to assist with transition.

Where common work related items (such as laptops and mobile phones) have been provided to team members, it is unlikely an FBT liability will be triggered as long as the equipment is primarily used for work purposes.

If an FBT exemption is not available, it is often worthwhile instead considering whether the FBT liability of such items could be reduced to the extent the employee could claim a once-only deduction in their personal return (ie. had they purchased the item themselves).

Emergency assistance

If your business provided emergency assistance to employees because of COVID-19, then FBT is unlikely to apply. While we doubt anyone would be thinking about FBT during a crisis, it’s good to know that the tax system does not disadvantage your generosity.

Examples of the kinds of benefits that are exempt from FBT include immediate relief your business provides to an employee:

for them to relocate back to Australia, including flights and transport of household goods (eg. due to health risks around COVID-19); and
on clothing, food and temporary accommodation if an employee is stranded due to travel restrictions or is required to self-isolate or quarantine.

First aid or other emergency health care provided to an employee is also exempt if the treatment is provided by another employee (or a related company employee), or is provided at your premises (or those of a related company), or at or near an employee's worksite.

Protective equipment

Many businesses increased their workplace health and safety processes and infrastructure in response to COVID-19.

If your business provided protective equipment to allow your employees to safely continue to work, this benefit may be exempt from FBT. Unfortunately, this does not seem to be available for all employers.

Typically, an FBT exemption would be available if your employees are involved in cleaning premises or required to be in close proximity with customers or clients. For example, the ATO suggests that this should include hairdressers, cleaners, medical practitioners and hospitality workers.

Rapid antigen testing

With the use of rapid antigen tests becoming more common, it is important to keep across the proposed changes in this area.

Under the current rules, if your business regularly provides your employees with rapid antigen tests so that they can attend their regular place of work, a FBT liability may potentially arise.

The good news is that the government has proposed changes to the rules to make it clear that such work-related COVID-19 testing benefits would be FBT exempt. If the rules are passed, the changes are intended to apply retrospectively to include benefits provided in the 2022 FBT year.

Motor Vehicle problem areas

Private use of work vehicles

Just because your business buys a motor vehicle and it is used almost exclusively for work, that alone does not mean that the car is exempt from FBT. If you use the car for private purposes - pick the kids up from school, do the shopping, use it freely on weekends, garage it at home, your spouse uses it - FBT is likely to apply. The private use of work vehicles is firmly in the sights of the ATO and has been for some time.

Private use is when you use a car provided by your employer (this includes directors) outside of simply travelling for work related purposes.

While there are two methods to calculate the FBT liability on the private use of a car, the choice of method can result in very different FBT liabilities. For example, using the logbook method may provide a better result especially this year if the work vehicle has not been used at all and garaged at or near the employee’s home. This is because if your business keeps a valid logbook/odometer records and is eligible to use the logbook method, the ATO will accept that a FBT liability won’t arise if the car:

Has not been driven at all during the period even if it has been garaged at home; or
Has only been driven briefly to maintain the car.

In comparison, if the statutory method is used, the FBT liability could be much higher. This is because the FBT calculation under this method will include the days that the car has been garaged at home and is taken to be available for private use of the employee (regardless of whether or not the employee has permission to use the car privately). Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.

Mismatched FBT and income tax amounts

The ATO is picking up mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer's tax return.

The ATO focuses on mismatches between the employee contributions relating to the fringe benefits, which are reported on the employer’s fringe benefits tax return, and reporting those contributions as income on their income tax return. In particular, what concerns the ATO is where the employer has incorrectly overstated the employee contributions that they have received on their fringe benefits tax return to reduce the taxable value of the fringe benefits provided (and thereby, the employer’s FBT liability).

The ATO's approach is very evidence-based, there needs to be documentation to back up whatever the business is claiming.

When business assets are used personally by owners and staff

Private use of business assets is an area that crosses across a whole series of tax areas; FBT, GST, Division 7A, and income tax.

Take the ATO’s example of the property company that claimed deductions for a boat on the basis that it was used for marketing the company. Large deductions were claimed for the upkeep and running of the boat. On review, the ATO discovered the boat was used by the director and other employees for private trips and to host parties for people who had paid to attend the company's property seminars.

When looking at the activities of the business overall, the ATO determined that the director had purchased the boat primarily for their own private use. As a result, they disallowed the deductions and the private use of the boat was a fringe benefit for the employees of the company. The company had to lodge an FBT return and pay the resulting FBT liability, as well as the income tax shortfall, interest and penalties.

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns or lodging them late to avoid paying tax. While we hope the ATO understands that this was a difficult year for many businesses, it’s likely the ATO will still pay close attention to any employer that:

Is registered for FBT but lodges late - If your business is likely to face delays lodging the FBT return, it’s a good idea to contact us as early as possible and we will get in touch with the ATO to request an extension.
Is not registered for FBT but employs staff (even closely held staff such as family members), and is not registered for FBT - it’s essential you have reviewed your position and are certain that you do not have an FBT liability. If your business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then it is likely you are providing a fringe benefit.

Salary sacrifice and superannuation guarantee

Calculating superannuation guarantee on salary sacrifice

From 1 January 2020, new rules came into effect to ensure that an employee’s salary sacrifice contributions cannot be used to reduce the amount of superannuation guarantee (SG) paid by the employer.

Previously, some employers were paying SG on the salary less any salary sacrificed contributions of the employee. Previously, employers were required to contribute a percentage (from 1 July 2021, this is 10.0%) of an employee’s ordinary time earnings (OTE) and they could choose whether or not to include the salary sacrificed amounts in OTE.

Now, the SG contribution is 10.0% (from 1 July 2021) of the employee’s ‘OTE base’. The OTE base is an employee’s OTE and any amounts sacrificed into superannuation that would have been OTE, but for the salary sacrifice arrangement.

Car parking changes

A controversial ruling from the ATO could expand the scope of the FBT rules dealing with car parking benefits. This is because the draft ruling changes the ATO’s view on what constitutes a commercial parking station. Where an employer provides:

Car parking facilities for employees within 1km of a commercial parking station, and
That commercial car park charges more than the car parking threshold ($9.25 for the year ended 31 March 2022),

a taxable car parking fringe benefit will arise unless the employer is a small business and able to access the car parking exemption.

The ruling is now finalised but the ATO has stated it will apply the new expanded definition of a commercial parking station from 1 April 2022. If you provide car parking facilities to team members, it is important that you either:

Are certain you are able to access the small business exemption (which has a more generous turnover threshold of less than $50m from 1 April 2021 onwards); or
Understand the implications of the ruling to the car park facilities you provide.

Travelling or living away from home

Historically, travel allowances have caused confusion for many businesses.

Also with the ATO recently finalising its key guidance on travel costs the ATO is likely to focus on benefits relating to transport, meals and accommodation. .

If your business provides travel allowances to its employees, you will normally need to consider whether they are living away from home or just travelling overnight in the course of work.

Where your employees are travelling overnight in the course of work, travel allowances paid in relation to such travel are normally assessable to your employees. However, they might be entitled personally to claim deductions for some of their travel expenses.

For employees that are living away from home, these living away from home allowances are dealt with instead through the FBT system as a fringe benefit.

While the taxable value of the benefit is usually the amount paid, there are some generous concessions that can allow for some or all of the allowance to be FBT exempt if certain conditions are met.

Therefore, making this distinction is important.

The ATO has recently finalised its guidance in Taxation Ruling TR 2021/4 on when allowances should be classified as a travel allowances or a living away from home allowance. Helpfully, the ATO has also finalised a ‘safe harbour’ style approach in Practical Compliance Guideline PCG 2021/3 which can used specifically for this purpose.

Retraining and reskilling benefits

Recognising that there is a change in the mix of skills required in the modern labour force, the Government has passed new rules that provide a specific FBT exemption for employers that provide retraining and reskilling benefits to their employees.

If the conditions are met, a FBT exemption is available for education or training benefits (such as course fees) provided by your business to your employees whose jobs are redundant (or soon to be redundant). Importantly, this FBT exemption can apply even if your employees are being redeployed to another part of your business.

The rules apply retrospectively to education or training benefits provided on or after 2 October 2020, which means it is relevant to the 2022 FBT year.

Housekeeping

It can be difficult to ensure records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

ATO Compliance Guidance issued for Allocation of Firm Profits

Fri, 04 Mar 2022 01:07:31 GMT

ATO Compliance Guidance issued for Allocation of Firm Profits

During December 2021, the Commissioner issued Practical Compliance Guideline PCG 2021/4 titled Allocation of professional firm profits — ATO compliance approach ( the Guideline ).

The Guideline sets out the Australian Taxation Office’s ( ATO ) compliance approach in relation to the allocation of profits or income from professional firms being recognised in the assessable income of the individual professional practitioner (IPP).

At a high level the ATO is concerned about arrangements which involve redirecting income or profits from a professional firm to related parties and where this has the effect of reducing the tax liability of the relevant IPP .

In particular, the ATO is concerned about arrangements where:

taxpayers redirect their income to an associated entity from a business or activity which includes their professional services, with the effect of significantly reducing their tax liability;
in the context of business structures involving company and trust entities, the compensation received by an individual is artificially lowered while associated entities or other the individuals benefit, and commercial reasons do not justify the arrangement.

Relevant taxpayers can use the risk assessment guidelines to assess whether they are rated as low, moderate or high risk using the parameters set out in the Guideline, as reproduced in the two tables below.

The risk rating determines the ATO’s allocation of compliance resources. If the client has a low risk rating, the ATO will generally not devote compliance resources to review the individual’s allocation of professional firm profits, except to ensure that the self-assessment is appropriately supported and evidenced.

If the arrangement falls within the moderate risk or high risk zones, the ATO is likely to undertake review activities and request further information. This will be treated as a matter of priority in the case of a high risk assessment.

What is the date of effect?

The Guideline applies from 1 July 2022. The ATO will review the use and application of the guideline from and during the 2022–23 income year.

What is the scope of the Guideline?

The Guideline applies to tax compliance risks associated with relevant arrangements within professional firms including (but not limited to) accounting, financial services, legal, medical, architectural, engineering and management consulting professions.

The Guideline sets out a proposed risk assessment framework to indicate the level of compliance attention that the ATO show in relation to profit allocation arrangements. Under a self-assessment system, an IPP may use the Guideline to:

determine the level of risk applicable to their profit allocation arrangement, based on the risk assessment framework;
determine what level of interaction with the ATO they can expect, based on their risk assessment level; and
provide the opportunity for an application for binding advice with the ATO (if necessary).

When will the Guideline apply to an arrangement?

The Guideline applies if all of the following criteria are met :

An IPP provides professional services to clients of the firm, or is actively involved in the management of the firm, and (in either case) the IPP or any associated entities have a legal or beneficial interest in the firm entity;
The income of the firm is not subject to the personal services income ( PSI ) rules;
The firm operates by using a legally effective structure (ie. partnerships, trusts or companies);
The IPP is an equity holder in the structure (directly or indirectly);
The arrangement is commercially driven (see Gateway Test 1 below);
The firm and IPP do not demonstrate any high risk features (see Gateway Test 2 below).

An IPP will be expected to make a documented annual assessment of their eligibility to apply the Guideline, and also review eligibility in the event of business, structure or arrangement changes.

What are the two gateway tests that need to be satisfied to apply the Guidelines?

The Gateway Test 1 is the commercial rationale test, and it can be passed where there exists a commercial basis for the arrangement and the way profits are distributed to the IPP.

Factors that suggest a lack of commercial rationale, include where the arrangement:

Seems more complex than is necessary to achieve the relevant commercial objective;
Includes a step (or multiple steps) which appear to serve no real purpose other than to gain a tax advantage (ie. arrangements that involve a circular distribution of funds);
Results in a tax result that appears to be at odds with its commercial or economic result;
Results in little or no risk in circumstances where significant risks would normally be expected;
Operates on non-commercial terms or in a non-arm's length manner (ie. using loans with interest rates above/below the market rate); or
Present a gap between the substance of what is being achieved and the legal form it takes.

It is also necessary to consider whether there is a commercial basis in the way profits are distributed.

The Gateway Test 2 is the high risk factors test, and this test is failed if the arrangement is covered by an ATO Taxpayer Alert or it contains certain high risk features.

The ATO has flagged the following as being potentially high risk features (but not limited to):

Financing arrangements relating to non-arm's length transactions;
Exploitation of the difference between accounting standards and tax law;
Arrangements where a partner assigns a portion of their partnership interest to another individual or entity which is a related party or the IPP's relationship with the firm is more akin to a contractor or employee of the entity; or
Multiple classes of shares or units are held by non-equity holders (ie. issuing shares which contain discretionary dividend rights to associated entities of the equity holder or individual professional).

If both Gateway Tests are satisfied, how is the IPP’s risk rating determined?

Where you satisfy Gateways 1 and 2, you may self-assess your risk level against each of the risk assessment factors (per the first table below).

If the IPP’s entire profit entitlement (ie. 100%) from the professional firm’s group is assessed to the IPP (ie. no income or profits are taxed in the hands of related parties or associated entities), then the arrangement should be treated as low risk and there is no need to assess against the risk factors (described in the first table below). A low risk rating will generally not attract the ATO’s compliance resources to test the relevant tax outcomes of the IPP’s arrangement.

On the other hand, where an IPP (and their tax advisers) perform a review (against the first risk assessment table below) and it identifies that a practitioner has either a moderate risk or high risk rating, the ATO is likely to implement some review activities and request further information. This will be treated as a matter of priority in the case of a high risk assessment.

How do the risk assessment tables determine the risk rating?

The following table sets out the score for each risk assessment factor:

An IPP can self-assess your profit allocation arrangement using:

risk assessment factors 1 and 2 only, or
all three risk assessment factors (nb. the use of the third risk assessment factor is optional as it is difficult to determine accurately).

The following table sets out the risk rating depending on whether you risk assess against two factors or all three factors (in the table above):

Conclusion

The overriding message of the Guideline is that an IPP needs to continue to maintain accurate records of their income distributions from professional firms and early engagement with the ATO is encouraged when it is required.

Where an IPP (and their tax advisers) perform a review and identifies that the practitioner has either a moderate risk or high risk rating, but they want to transition their arrangements to a lower risk zone, the IPP can inform the ATO of their intentions and this engagement will be treated on a ‘without prejudice’ basis (where the IPP is acting in good faith).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Victoria announces new $200 million support package

Tue, 22 Feb 2022 01:17:20 GMT

The Victorian Government has announced a major stimulus injection of $200 million to target key sectors led by hospitality and tourism and will help businesses recover strongly from the effects of the Omicron variant.

The package includes the following supports for Victorian residents:

New and extended $100 million voucher scheme will provide rebates to Victorians for entertainment, dining and travel;
This includes a $10 million round of Melbourne Money to be delivered with the City of Melbourne, enticing diners back to city cafes, bars and restaurants by reimbursing part of their bill;
New $30 million round of the Victorian Travel Voucher Scheme will encourage even more people to holiday at home and spend on accommodation, attractions and tours; and
New entertainment voucher scheme will provide $30 million in rebates for tickets to the theatre, live music, cinemas, museums, galleries, conferences, exhibitions and other events across Victoria.

The package includes the following supports for businesses:

$60 million Ventilation Voucher Program to help small businesses purchase equipment and upgrades to reduce the spread of COVID-19 in the workplace and improve customer confidence;
$34.2 million of Jobs Victoria funding to place workers in over 1,500 jobs across hospitality, warehousing and logistics, tourism and food processing;
Further $5 million to extend the Small Business Digital Adaptation Program, providing rebates of up to $1,200 so businesses can access a range of digital tools; and
Extension of the Business Recovery and Resilience Mentoring Program with the Victorian Chamber of Commerce and Industry so more small businesses have access to coaching.

For more information on the package and when each program opens, visit vic.gov.au/business-stimulus-package .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update -February 2022

hsteinberg@lowelippmann.com.au (Helen Steinberg) — Tue, 15 Feb 2022 04:03:29 GMT

COVID-19 testing to be tax-deductible and FBT free

The Federal Government has announced that COVID-19 tests (including Polymerase Chain Reaction and Rapid Antigen Tests) will be tax deductible and exempt from FBT for businesses, where they are purchased for work-related purposes.

This deduction will be available from the beginning of the 2021-22 tax year and will be in place permanently. It will apply both when an individual is required to attend the workplace or has the option to work remotely.

The Government will also introduce legislation confirm that work-related COVID-19 test expenses incurred by individuals will be tax deductible and FBT in the appropriate circumstances.

COVID-19 vaccination incentives and rewards

The ATO has reminded employers to consider their tax and super obligations when employees are provided with incentives or rewards for getting their COVID-19 vaccination.

When employees are provided a cash payment, including paid leave for employees to get their COVID-19 vaccination (or additional paid leave to recover from any vaccination side effects), employers should withhold PAYG withholding and make super contributions on the amount.

Furthermore, the payment must be reported to the ATO via Single Touch Payroll (STP) as part of the employee's salary or wage.

On the other hand, employers must consider the FBT consequences of providing non-cash benefits as an incentive for their employees to get vaccinated.

Such benefits may include:

Goods or services provided to the employee.
Vouchers and gift cards.
Prizes won by an employee in a competition (ie. a raffle).

We note that certain FBT exemptions and reductions may apply in some circumstances. For example, if an employer provides or pays for an employee's transport to get their COVID-19 vaccination, there is generally no FBT payable.

ATO support for businesses in difficult times

The ATO has reminded taxpayers that it has a range of support available for small businesses experiencing difficult situations, such as natural disasters, mental health challenges or financial hardship.

Depending on the business taxpayer’s circumstances, the ATO may be able to:

give the business extra time to pay its tax;
set up a payment plan tailored to its situation;
re-issue tax returns, activity statements and notices of assessment;
help the business reconstruct lost or damaged tax records;
prioritise any refunds the business is owed; and
remit penalties or interest charged during the time the business has been affected.

Government extends SME Recovery Loan Scheme to 30 June 2022

The Government has recently extended the SME Recovery Loan Scheme by a further six months (to 30 June 2022) to support SMEs adversely economically affected by the Coronavirus Pandemic.

Under the Scheme, eligible businesses can obtain loans through participating bank and non-bank lenders with the backing of a Government loan guarantee.

Around 80,000 loans worth approximately $7.3 billion have been written to date since the Scheme commenced in March 2020.

SMEs who are dealing with the economic impacts of COVID-19 with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years.

Other key features of the Scheme include the following:

Lenders can offer borrowers a repayment holiday of up to 24 months.
Loans can be used for a broad range of business purposes, including to support investment.
Loans may be used to refinance any pre-existing debt of an eligible borrower.
Loans can be either unsecured or secured (excluding residential property).

Importantly, the Government’s loan guarantee has been reduced to 50% (down from 80%) for loans available from 1 January 2022 until 30 June 2022.

Higher PAYG withholding rates continue to apply to backpackers

The High Court has recently held that the 'working holiday maker tax' (also known as the “backpackers tax”) did not apply to a taxpayer on a working holiday visa from the United Kingdom who was also an Australian tax resident (in Addy v Commissioner of Taxation [2021] HCA 34) This was due to the application of the Double Tax Agreement between Australia and the United Kingdom.

This tax treatment will only apply where the working holiday maker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

However, the ATO has recently told employers that the higher PAYG withholding rates continue to apply to working holiday maker employees.

This is regardless of the country they are from (unless the employer receives an PAYG variation notice from the ATO).

Broadly, the working holiday maker withholding rates apply as follows:

If the employer is registered with the ATO as an employer of working holiday makers, they should withhold tax at the tax rate of 15% from the first dollar the working holiday maker employee earns up to $45,000. Tax rates change for amounts above $45,000.
If the employer is not registered with the ATO as an employer of working holiday makers, they must withhold tax at 32.5% from every dollar the working holiday maker employee earns up to $120,000. The foreign resident withholding rates must be applied to income over $120,000.

If a working holiday maker employee has had excessive amounts of PAYG withheld from their salary, they can lodge a tax return at the end of the income year to receive a tax refund (where eligible).

Single Touch Payroll exemption extended for WPN holders

The ATO has extended the Single Touch Payroll (STP) reporting exemption available to entities that have a withholding payer number (WPN).

As a result of this extension, certain entities that have a WPN (but not an ABN) will not be required to report under STP for the 2021‑22 and 2022-23 financial years.

This continues the exemption that has been provided to relevant entities since the commencement of the 2018-19 financial year.

We note that any entity covered by the exemption may still choose to voluntarily report under STP.

Payment extension relating to JobKeeper objections

The JobKeeper rules have been amended to ensure the ATO can make payments to certain taxpayers after 31 March 2022.

Where a taxpayer has objected to an ATO decision relating to JobKeeper, a payment can be made by the ATO after 31 March 2022 to give effect to the objection decision and decisions of the AAT or a court.

Importantly, this extended payment date will only apply where a valid objection was given to the ATO on or before 30 November 2021.

Car parking fringe benefits and the impact of COVID-19 lockdowns

A car parking benefit should arise for FBT purposes when (amongst other conditions) a “commercial parking station” is located within a one-kilometre radius of where the employee’s car is parked.

In other words, a car parking benefit should not arise during any period in which all commercial parking stations within a one-kilometre radius of where the employee’s car is parked have closed, or the parking station has provided free parking – this is particularly relevant during periods of lockdowns caused by COVID-19.

In circumstances where all relevant car parks were closed or offering free parking, no commercial parking station will be regarded as being located within the one-kilometre radius during this period.

Under the FBT rules for providing car parking fringe benefits, the relevant testing time for reviewing the applicable all-day car parking threshold ($9.25 for the 2022 FBT year) within your one-kilometre radius is “on the first business day of an FBT year”, which is 1 April 2021.

Therefore, if on 1 April 2021 the lowest fee charged for all-day parking by all commercial parking stations located within a one-kilometre radius of the premises on which a car is parked, was no more than $9.25, then a car parking fringe benefit may not arise with respect to those premises for the entire 2022 FBT year.

This assumes the lowest fee is a “representative” fee, as anti-avoidance rules can apply if car parking rates are artificially low. The ATO has acknowledged that this situation arises where all of the commercial parking stations discounted their all-day parking rate (to at or below $9.25) due to COVID-19 on and around 1 April 2021.

ATO releases guidance on starting an SMSF

The ATO has released a new guide ( Starting a self-managed super fund ) to help taxpayers

consider whether a Self-Managed Super Fund (SMSF) is right for them. Topics in the guide include the following:

What is an SMSF?
Choosing a structure.
An outline of the relevant obligations.
Registering an SMSF
Getting professional advice.

Furthermore, the guide contains a checklist of steps that must be undertaken in the initial stages of starting and running an SMSF.

The guide is the first in a set of three SMSF “lifecycle” publications to help taxpayers understand each stage throughout the life of an SMSF. The other guides (‘Running a self-managed super fund’ and ‘Winding up a self-managed super fund’) will be available in the future.

If you wish to discuss the details surrounding starting a SMSF, please do not hesitate to contact your Lowe Lippmann Relationship Partner.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Commercial Tenancy Relief Scheme extended two more months

Tue, 18 Jan 2022 22:45:17 GMT

Commercial Tenancy Relief Scheme extended two more months

The Victorian Government recently announced the Commercial Tenancy Relief Scheme (CTRS) will be extended for another two months ending on 15 March 2022, after the CTRS was originally due to end on 15 January 2022.

This extension has been made to help support small business owners under financial pressure as Victoria continues to respond to the COVID-19 Omicron variant.

While full details of the new regulations for the extended scheme are yet to be released, however the Victorian Government has confirmed the following details will now apply, including:

The extended scheme will apply to tenants with:
an annual turnover of $10 million or less (which is down from the original $50 million threshold); and
at least a 30% decline in turnover.
The extended scheme will have retrospective operation from 16 January 2022, to ensure that tenants who were already receiving rent relief and remain eligible for relief should experience a gap in support.
Landlords will be required to keep providing proportional rent relief in line with a reduction in turnover experienced by the tenant, with at least half of that rent relief offered by way of waiver of rent.
Eligible commercial landlords who provide rent relief under the extended scheme should continue to be supported through the $20 million Commercial Landlord Hardship Fund.
For tenants with existing agreements repayment of deferred rent, the repayment obligation will be paused until 15 March 2022, giving these businesses more time to repay deferred rent because of the extended scheme.
The 'freeze' preventing landlords increasing the rent under the lease will continue.
The eviction moratorium will also be extended, so eligible tenants cannot be evicted without undertaking mediation through the Victorian Small Business Commission (VSBC). While it still needs to be confirmed, tenants who have not yet sought rent relief may still be entitled to apply for CTRS relief, albeit for a limited time of two months.

Regulations for the Scheme will be made shortly and the VSBC’s website and FAQs will be updated.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Victorian Windfall Gains Tax bill passed

Tue, 07 Dec 2021 02:36:04 GMT

Victorian Windfall Gains Tax bill passed

During May 2021, the Victorian State Budget first announced new measures to impose a windfall gains tax on the increase in value of land resulting from a rezoning.

The bill outlining the legislative framework for these measures has now passed through the Victorian parliament and received royal assent on 30 November 2021.

What is a windfall gains tax?

Broadly, the windfall gains tax ( WGT ) is a tax on unrealised property value gains which arise as result of a rezoning or amendment to a planning scheme (ie. the “taxable value uplift” ) and occurs at the time land is rezoned (ie. a WGT event). The WGT is not a duty, nor is it a form of land tax.

Where an entity owns multiple parcels of land that are impacted by the same rezoning, WGT is levied on the aggregate taxable value uplift of the land, ignoring any decreases in taxable value.

Grouping and aggregation provisions are applicable so that the $100,000 threshold applies only once to properties owned by the same owner or group of associated entities and rezoned under the same planning scheme amendment.

The WGT will apply when the taxable value uplift of all land owned by an owner (or group) resulting from the same planning scheme amendment (ie. rezoning) exceeds $100,000, as follows:

Who pays WGT and when?

The owner of the land at the time of the rezoning is liable for the WGT. Taxpayers will be issued with a notice setting out their WGT liability and the date by which payment must be made.

Landowners liable to pay WGT will be able to defer payment of up to 100% of the tax until the earlier of:

30 years after the rezoning;
a dutiable transaction (other than an excluded dutiable transaction) occurring in relation to the rezoned land; and
a relevant acquisition (other than an excluded relevant acquisition) occurring in respect of a landholder who is the owner of the rezoned land.

When a liability is deferred, it will continue to accrue interest daily at the 10-year bond rate.

Although responsibility for the WGT is the landowner’s, and would ordinarily be triggered upon the sale of the WGT land, it is possible for a purchaser of affected land to assume liability for the WGT where the transaction involves no consideration and the transferee elects to assume the liability.

In these circumstances, the 30 year deadline (above) for the payment of the WGT does not reset; it remains 30 years from the WGT event (or rezoning).

Are there any exemptions?

Exemptions will apply in specified circumstances for up to 2 hectares of residential land (used primarily for residential or primary production purposes), land used exclusively for charitable purposes and land rezoned to correct technical errors.

Rezoning in relation to Growth and Infrastructure Contribution (GAIC) areas and public land zones will be excluded from the scope of the tax.

Certain exemptions and exclusions have been inserted to ensure that projects commenced before the announcement of the WGT will not be caught by these new provisions. For example, WGT is not imposed where a contract of sale was executed before 15 May 2021, but a WGT event occurs after 1 July 2022 but before the land has been transferred.

When will these new rules start to apply?

The tax will apply for amendments to planning schemes that take effect on or after 1 July 2023. Transitional arrangements will apply for certain contracts, option arrangements and rezonings that were underway when the WGT was announced on 15 May 2021.

The WGT is a new tax imposed when a WGT event occurs, this being the time land is rezoned. When rezoning occurs, and provided no exemption applies, the taxpayer will be liable for WGT on the taxable value uplift, calculated as the difference in the capital improved value of the land before and after the rezoning.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - December 2021

Mon, 06 Dec 2021 03:54:17 GMT

Tax Planning Tips For 2022

After the many challenges that businesses may have had to face as a result of COVID during 2021, business owners should be reviewing and measuring their performance in comparison to the previous year. By regularly reviewing this information, a greater understanding of the basis for tax planning and budgeting can be determined more accurately. While tax planning is a process that should be continuously managed over the year for better and more adaptive results, it’s never too late to start.

This is especially relevant now as business owners need to understand the business’s current ability to move forward in the current economic circumstances and plan for the future. Otherwise, past mistakes could be repeated in the future.

Here are some general tax tips that business owners can take with them into 2022.

Timing Of Expenses

An expense is an allowable deduction that is necessarily incurred in carrying on a business or for the purpose of gaining or producing assessable income. Expenses should be recognised in the same period as the revenues to which they relate when it comes to lodging your tax.

Most prepayments that are made now are not deductible until the period to which they relate (though some exceptions may apply). Small businesses and individuals may be able to deduct 12 months of prepayments in the year paid, as an expense.

Payments to Workers

Deductions on payments to workers (whether they are employees, contractors, directors, etc.) can only be claimed when the business has complied with their PAYG withholding and reporting obligations.

Family businesses or businesses that employ family members should be especially concerned with preparing for this, as they have additional obligations to ensure that they are correctly paying the right amount of tax. If they have received wages, or been given allowances below the tax-free threshold, they will need to be registered as a withholder and a PAYG summary provided.

Your business should already be in the position to process payments through Single Touch Payroll, as it was made mandatory for all businesses to use from 1 July 2021.

Bad Debts

Conduct a review on the debts that may be affecting your business. If any of these are unlikely to be recovered, the best course may be to write them off as ‘bad’ prior to the end of the financial year. You can speak with us about this process to ensure that it is performed correctly (and that you are able to do so).

Writing off bad debts can reduce your income tax, and generate a GST refund.

Bonuses

With the holiday period approaching, businesses may be considering giving their staff a bonus. It is important to remember though that bonuses are only deductible when they are actually incurred.

Managing business cash flow

The ATO has issued a reminder to businesses that paying regular attention to their record-keeping and reporting tasks will help them better manage their cash flow and allow them to plan for the future.

The best way to make sure a business has enough cash available to meet its tax and other obligations is to do a cash flow budget or projection. This information will help the business to:

see its likely cash position at any time;
identify any fluctuations that may lead to potential cash shortages;
plan for tax payments;
plan for any major expenses; and
provide lenders with information.

Accounting for income and expenses can help keep a business running smoothly — by giving it an overview of when it can expect money to come in and when it may go out, and highlighting where the business may need to direct its money.

The ATO provides resources about record keeping for business, and there is also information on business.gov.au regarding how to create a budget, and how to improve a business's financial position.

Single Touch Payroll Phase 2 Deadline Approaches

The mandatory start date for businesses to be using STP software is fast approaching, and the ATO is urging businesses to ensure that they are meeting their obligations beforehand.

Phase 2 of Single Touch Payroll is expected to commence from 1 January 2022.

In this phase, additional information (including a breakdown of gross amounts and income types) will need to be reported to the ATO each payday. It will subsequently be shared with Services Australia in an effort to reduce employers’ reporting obligations to multiple government agencies.

If the payroll solution that you use is ready by 1 January 2022, your business should start Phase 2 reporting. One important concession from the ATO is that your business will be considered to be reporting on time if Phase 2 is started before 1 March 2022.

If you require any assistance, please contact your Lowe Lippmann Relationship Partner.

Super is now following new employees

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

A stapled super fund is an existing super account which is linked, or “stapled”, to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

offer eligible employees a choice of super fund;
if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
pay super contributions into one of the following:

o the super fund they choose;

o the stapled super fund the ATO provides if they have not chosen a fund; or

o the employer's default fund (or another fund that meets the choice of fund rules) if the employer cannot pay into the two above.

ABN “intent to cancel” program

The ATO is reviewing Australian business numbers ( ABNs ) to identify potentially inactive ABNs for cancellation, and it has introduced a new automated process to allow taxpayers (or their tax agents) to confirm if their ABN is still required via a secure voice response system.

An ABN may be selected if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information.

The ATO reminds taxpayers that any income earned under an ABN needs to be reported in their tax return, regardless of the amount. By keeping their tax obligations up to date, the ATO can see they are actively undertaking a business (so, therefore, their ABN should not be cancelled).

“Backpacker tax” may not apply to some backpackers

The High Court has held that the “working holiday maker tax” (also known as the “backpackers tax”) did not apply to a taxpayer on a working holiday visa from the United Kingdom who was also an Australian tax resident, due to the application of the Double Tax Agreement between Australia and the United Kingdom.

The ATO has responded to this High Court decision, noting that it is only relevant where a working holiday maker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

Working holiday makers who may potentially be affected by this decision are encouraged to check the ATO website for updated guidance prior to lodging or amending a return or lodging an objection.

Employers should continue to follow rates in the published withholding tables for working holiday makers until the ATO updates its website with further guidance.

The ATO notes that a working holiday maker’s residency status for tax purposes is determined by the taxpayer’s individual circumstances, but most working holiday makers will be non-residents (consistent with their purpose of being in Australia to have a holiday and working to support that holiday).

Beware of scams

Scamwatch is warning that scams cost Australian consumers, businesses and the economy hundreds of millions of dollars each year and cause serious emotional harm to victims and their families.

Cryptocurrency scams are the most 'popular' type of investment scams, representing over 50% of losses. Often the initial investment amount is low (between $250 and $500), but the scammers pressure the person to invest more over time before claiming the money is gone or ceasing communication and blocking access to the funds.

All age groups are losing money to investment scams, but the over-65s have lost the most, with $24 million lost this year.

Some simple steps individuals can take to protect themselves (and their businesses) are:

Never give any personal information to someone who has contacted you.
Hang up and verify the identity of the person contacting you by calling the relevant organisation directly — find them through an independent source such as a phone book, past bill or online search.
Do not click on hyperlinks in text/social media messages or emails, even if it appears to come from a trusted source.
Go directly to a website through a browser (e.g., to reach the MyGov website, type ‘my.gov.au’ into the browser).
Search for reviews before purchasing from unfamiliar online traders.
Be wary of sellers requesting unusual payment methods.
Verify any request to change bank details by contacting the supplier directly.
Consider a multi-factor approval process for transactions over a certain dollar amount.
Never provide a stranger remote access to your computer, even if they claim to be from a telco company such as Telstra.

Data-matching program: Services Australia benefits and entitlements

The ATO has advised it will acquire Medicare Exemption Statement ( MES ) data relating to approximately 100,000 individuals from Services Australia for the 2021 financial year through to the 2023 financial year inclusively, and compare it with claims made by taxpayers on their tax returns.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - November 2021

Sun, 31 Oct 2021 21:30:46 GMT

Victoria releases new outdoor economy package

Wed, 20 Oct 2021 21:29:39 GMT

Director Identification Number required from November 2021

Tue, 12 Oct 2021 21:28:42 GMT

Practice Update - October 2021

Mon, 04 Oct 2021 21:27:25 GMT

Super Choice roles will change from 1 November 2021

Sun, 26 Sep 2021 21:26:54 GMT

Commercial Landlord Hardship Fund 3 - now open

Tue, 14 Sep 2021 22:25:59 GMT

Practice Update - September 2021

Thu, 02 Sep 2021 22:23:09 GMT

Commercial Tenancy Relief Scheme Expanded

Mon, 30 Aug 2021 03:30:19 GMT

More Victorian small and medium businesses that have experienced a loss in turnover of more than 30% during periods of COVID restrictions will receive financial relief in the form of proportionate rent reduction. New businesses will also be protected, with special arrangements in place to calculate the turnover for businesses that were not operating in before 1 April 2019.

The new Commercial Tenancy Relief Scheme ( CTRS ) is available for an "eligible lease", which includes a retail or non-retail commercial lease or licence that was in effect on 28 July 2021 under which the tenant (which includes licensees) is an operator of a small to medium businesses (with annual turnover of less than $50 million) and is eligible under the scheme.

Broadly, this makes it a requirement for commercial landlords to provide proportional rent relief in line with a business's reduction in turnover, by landlords providing at least half of any sum of rent relief by a waiver .

What eligibility rule has been expanded?

The Commercial Tenancy Relief Scheme ( CTRS ) was reintroduced in July 2021 to ease pressure by providing rent relief for eligible tenants. The CTRS rent relief program applies from the announcement date on 28 July 2021 and will continue until 15 January 2022 .

Under the original eligibility requirements of the CTRS, businesses (including sole traders) had to prove they had lost significant revenue by comparing the final quarter of FY2020-21 to the final quarter of FY2018-19.

Now, more businesses should now be eligible for rent relief under recent changes to expand the eligibility requirements for tenants. For tenant businesses which started trading before 1 April 2019, tenants are now allowed to choose any three consecutive months between 1 April and 30 September 2021 , and then compare this amount to the income for the corresponding period between 1 April and 30 September 2019.

For other tenant businesses which started trading after 1 April 2019, it is necessary for the business to use different comparison periods, these have been summarised in the CTRS Comparison and turnover periods table – click here .

What rent relief will be provided to eligible tenants?

Landlords will be required to provide rent relief to eligible tenants which is proportionate to the tenant's decline in turnover, to be adjusted throughout the CTRS in line with the tenant's turnover.
At least 50% of any rent relief provided to tenants must be in the form of a rent waiver and the other 50% of the rent relief must by way of a rent deferral .
There will be a freeze on rent increases until 15 January 2022.
Landlords are prevented from evicting eligible tenants without a determination from the Victorian Small Business Commission, and both parties can access free mediation services (explained below).

For eligible tenants under the new CTRS where there is also a rent relief agreement in place pursuant to the first release of the CTRS scheme (in May 2020), existing deferred rent repayment requirements will be 'frozen' until 15 January 2022, when the outstanding amount will be added to the deferred rent which accrues during the new CTRS. In the event a dispute arises between the landlord and a tenant, the parties will be able to refer the dispute the VSBC for mediation (explained below).

What transitional arrangements exist between the first release of the CTRS scheme (in May 2020) and the current CTRS scheme?

Many tenants and landlords will have agreements or arrangements in place that were negotiated under the first release of the CTRS scheme from May 2020. Tenants should continue to make genuine efforts to pay their rent as previously negotiated.

We must note that if a business was eligible for the first release of the CTRS scheme (in May 2020), the tenant is not automatically eligible for the current CTRS scheme and must request rent relief again under the new rules from their landlord. Tenants and landlords are encouraged to enter negotiations as soon as possible.

Where a compliant request for rent relief has been made under the first release of the CTRS scheme (in May 2020) and where there is also an agreement already in place, the existing deferred rent repayments are frozen until 15 January 2022. At this time, the tenant must resume repaying the previously deferred rent in the same instalments and frequency as previously deferred..

What mediation services are available under the CTRS scheme?

Tenants and landlords will be encouraged to enter negotiations directly, with the Victorian Small Business Commission ( VSBC ) available to provide mediation if parties cannot reach satisfactory agreement.

A tenant and landlord must negotiate 'in good faith' to reach an agreement that they are both happy with. There is no cost to small business tenants or their landlords for mediation to help resolve a dispute over rent relief. If a landlord and tenant reach agreement at mediation, they can sign binding Terms of Settlement.

Tenants and landlords can contact the VSBC on 13 87 22 or applications can be made through the Victorian Small Business Commission website .

If a small business tenant or landlord has already submitted a mediation application to the VSBC for help to resolve a dispute over rent relief and now wants to request further rent relief, the tenant or landlord should contact the VSBC dispute resolution officer managing their dispute matter to find out what further information they might need to provide.

If mediation fails to resolve a dispute over rent relief, the VSBC can issue a certificate stating that mediation has failed. The landlord or tenant may then be able to file an application with Victorian Civil and Administrative Tribunal ( VCAT ) ( click here ) to ask for a rent relief order..

What supports are available to a landlord who provides rent relief to their tenant?

A $120 million package to support landlords who provide rent relief to their commercial tenants was announced on 5 August 2021. The package is made up of a $20 million Commercial Landlord Hardship Fund and $100 million to support land tax relief of up to 25 per cent for landlords who support their tenants.

Details of the Commercial Landlord Hardship Fund have not been released at this time, however the details should be provided soon on the Business Victoria website .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Commercial Tenanacy Relief Scheme Expanded

Sun, 29 Aug 2021 22:31:37 GMT

Small Business COVID Hardship Fund (Vic) release!

Mon, 16 Aug 2021 03:19:01 GMT

Last Thursday (12 August 2021), the Victorian Government released full details of the Small Business COVID Hardship Fund intended to assist eligible small and medium businesses whose operations have been severely impacted by COVID restrictions that have been in place between 27 May 2021 and August 2021.

This program offers grants of $10,000 to eligible small and medium businesses, including employing and non-employing businesses.

Application are open from Thursday 12 August 2021 until program funds are exhausted or Friday 10 September 2021 , whichever is earlier

This program intends to offer support for more businesses who have previously not received support via other COVID support packages. Grant funds must be used to assist the business with meeting business costs (ie. utilities, wages, rent), developing marketing and communications activities; or any other supporting activities related to business.

Who is not eligible to apply?

Before we consider the eligibility criteria, it is worth noting which businesses are not eligible to apply for this support package.

Businesses will not be eligible to receive this grant if they have previously received support under any of the government COVID support packages launched on and after 27 May 2021 , including:

Business Costs Assistance Program Round Two
Business Costs Assistance Program Round Two Extension
Licensed Hospitality Venue Fund 2021
Licensed Hospitality Venue Fund 2021 – July Extension
Alpine Resorts Support Program
Victorian Events Support Package, comprising of:
Sustainable Events Business Program
Impacted Public Events Support Program
Independent Cinema Support Program
Live Performance Support Program (Presenters)
Live Performance Support Program (Suppliers)

Further information on the packages listed above can be seen via the Business Victoria website .

Finally, organisations that operate a private gender-exclusive club where membership is only by invitation or nomination by an existing member are not eligible for this support package.

What are the Eligibility Criteria?

To be eligible for this support package, a business must satisfy all of the following:

be located within Victoria; and
as a direct consequence of COVID restrictions since 27 May 2021 (the " Impacted Period "), have experienced a reduction in turnover of at least 70% for a minimum consecutive two-week period comparable to a " Benchmark Period " in 2019 (note alternative arrangements are available for businesses who do not have a trading history in 2019 – explained below); and
have an annual Victorian payroll of up to $10 million in 2019-20 on an ungrouped basis; and
be registered for Goods and Services Tax ( GST ) on and from 28 July 2021; and
hold an Australian Business Number ( ABN ) and have held that ABN on and from 28 July 2021; and
be registered with the responsible Federal or State regulator (ie. Australian Securities and Investment Commission ( ASIC ); the ACNC for charities and not for profits; and Consumer Affairs Victoria ( CAV ) for incorporated associations.); and

There are two additional eligibility requirements for employing businesses (ie. defined as those businesses required to be registered for WorkCover insurance or equivalent):

be registered with WorkSafe Victoria; and
attest that the business is supporting its workers to access any paid leave entitlements, or that if a person can work from home, to work from home during the COVID restrictions, and supporting their casual workers, where possible.

We will clarify here that a business which does not employee staff is eligible to consider this support package, and you should simply ignore the two additional requirements (g) and (h) above.

There are a few concepts within the eligibility criteria which need to be explained in further detail below.

Condition (2) - How do I calculate business turnover?

Turnover is measured as the GST turnover of the business. This will be a familiar concept for businesses who received (or applied for) the JobKeeper Support Payment during 2020.

GST turnover is the total business income (not profit) minus:

GST included in sales to customers;
sales that are not for payment and are not taxable;
sales not connected with the business;
input-taxed sales;
sales not connected with Australia.

If you need a refresher, more information is available on the Australian Taxation Office website .

We note that while there is no specific guidance provided on whether you should use a cash or accruals basis for calculating your GST turnover, we recommend you use the accounting method which your business had adopted before this support package was announced . We would not recommend changing methods just to satisfy the 70% reduction in business turnover requirement..

Condition (2) - How do I calculate the 70% reduction in business turnover?

To calculate whether your business has experienced a 70% reduction in turnover, consider the following steps:

Select a minimum consecutive two-week period (the Impacted Period ) since 27 May 2021 where your business turnover was most impacted by COVID restrictions.
Select a minimum consecutive two-week trading period (the Benchmark Period ) in 2019, or an " Alternative Period ") as explained below, as a comparison point. Then this two-week trading period can be any two consecutive weeks within the benchmark period (27 May – 10 September 2019).
Calculate the reduction in turnover using the following formula:
Reduction in turnover % = [1 - (GST turnover in Impacted Period/GST turnover in Benchmark Period)] x 100

If your calculations give a reduction in turnover of less than 70%, then your business is not eligible for this program.

It is important to note that if your business was not operational in 2019 , you can compare the GST turnover amount calculated for the Impacted Period to a minimum consecutive two-week period between 1 February 2021 and 28 July 2021 (the Alternative Period ).

Condition (2) - The 70% reduction in business turnover needs to be attested by a Qualified Accountant/Agent

When calculating your 70% reduction in turnover, it will be necessary to have supporting evidence to prove the calculation. It is a requirement that the calculation of the 70% reduction in turnover must be attested to by a qualified accountant ( Qualified Agent ). Your Lowe Lippmann Relationship Partner can assist with this requirement.

The Qualified Agent may submit an application on behalf of the applicant. Alternatively, if you prefer to submit the application for your business, you will still be required to include a PDF copy of a signed copy of a " Letter from the Qualified Agent ", which the Victorian Government will accept as confirmation that a Qualified Agent attests the calculations of the reduction in turnover are accurate.

How to apply?

You can only apply for one grant per ABN. If you have separate ABNs for your businesses, you must submit separate applications for each ABN and each business (under each ABN) must satisfy all the eligibility criteria.

Your Lowe Lippmann Relationship Partner can assist with the application process on your behalf and verify the 70% drop in business turnover as part of the application.

Alternatively, you can apply directly as a business owner and have the application verified by Lowe Lippmann as your Qualified Agent.

An application can be prepared and submitted via the Business Victoria website .

The Victorian Government or our representatives may audit your application, so you will need to produce evidence at the request of the Victorian Government.

What evidence and supporting documentation is required?

To demonstrate a reduction in turnover of at least 70% for a minimum consecutive two-week period, the following evidence to support calculations for both the Benchmark Period and the Impacted Period;
a Business Activity Statement (ie. month, quarter or annual statement);
total sales;
invoices;
financial statements; and/or
bank statements.
Endorsement of the reduction in turnover by a Qualified Agent may require evidence including sales reports, financial statements and/or a BAS to demonstrate the reduction in turnover.
A valid proof of identity document (ie. Australian driver licence, Australian Passport, Medicare Card or Australian visa information and foreign passport).
If you are an employing business, you will need to:
be registered with WorkSafe Victoria
attest that their business is supporting:
its workers to access any paid leave entitlements
its workers to work from home during COVID-19 Restrictions, where possible
its casual workers, where possible.
If you are an employing business, you will need to include your unique WorkCover Employer Number ( WEN ) on your application. Your WEN can be found on the top right-hand corner of your 2020-21 invoice from WorkSafe Victoria.
Non-employing businesses do not need to provide a WEN on their application.

We note that the Victorian Government has stated that they endeavour to process applications and notify successful outcomes within 15 business days of receiving a completed application.

However, we must stress that incomplete or incorrect information may delay your application assessment.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Update: Current COVID-19 Support Packages for Victorians

Thu, 12 Aug 2021 03:00:33 GMT

**This information is current as at 12 August 2021**

The update below is a summary of government support packages which are currently available to help Victorian businesses during the recent COVID-19 lockdown and assist their recovery, including further details released in relation to new measures announced in July 2021.

COMMONWEALTH support measure

Summary of the assistance

COVID-19 Disaster Payment

Under the current version of the COVID-19 Disaster Payment, Victorian workers in lockdown in a Commonwealth hotspot (check current VIC hotspots here ) will be eligible for:

$450 (previously $375) for each relevant period where there has been a loss of either: (i) between 8 and less than 20 hours of work per week, or (ii) a full day of "usual work" hours per week.
$750 (previously $600) for each relevant period for a loss of 20 hours or more of work per week.

Note: " A full day of usual work " is what an individual was scheduled to work, however could not because of a restricted movement order. This includes full time, part time or casual shift of less than 8 hours.

We note that the vast majority of Victorian microbusinesses (annual turnover < $75,000) not registered for GST will also be eligible for this Payment.

Administered by Service Australia at: www.servicesaustralia.gov.au

General eligibility rules:

The applicant is an Australian resident or hold an eligible working visa.
The applicant is 17 years or older.
The applicant is not getting an income support payment, ABSTUDY Living Allowance, Dad and Partner Pay or Parental Leave Pay.
The applicant is not getting the Pandemic Leave Disaster Payment, a state or territory pandemic payment or a state small business payment for the same period.
The applicant lost income and doesn't have any appropriate paid leave entitlements.
The applicant lives in, works from or has visited a Commonwealth-declared COVID-19 hotspot that is subject to a state restricted movement order.
The applicant was unable to earn their usual income of 8 hours or more or a full day's work because they were in the COVID-19 hotspot and are subject to restricted movement.

Specific rules will also apply to each recognised hotspot, particularly around eligibility periods.

Note: On 9 August 2021, legislation was passed that would retrospectively make this payment non-assessable, non-exempt (NANE) income in the hands of the individual recipient. It is assumed that where taxpayers received such payments in June 2021 and have already lodged their 2021 income tax returns, they will receive an appropriate adjustment from the ATO in due course.

Pandemic Leave Disaster Payment

Available in all States and territories to residents who cannot work because they are required to self-isolate, or they are in quarantine.
Residents are eligible for $1,500 for each 14-day period they are required to self-isolate or quarantine.

More details can be found at:

https://www.servicesaustralia.gov.au/individuals/ services/centrelink/pandemic-leave-disaster- payment

VICTORIAN support measure

Summary of the assistance

[NEW] Business Costs Assistance Program (BCAP) Round Three

On 6 August 2021, it was announced that eligible businesses will be automatically paid a BCAP Round Three grant of $2,800 .

This is in addition to the BCAP Round Two which looked to pay grants of up to $7,000 (plus two additional "Top-Up Payments" in July 2021, totalling another $4,800) to eligible small and medium businesses in sectors most affected by the May-June 2021 COVID-19 Victorian restrictions.

Businesses that missed out on the BCAP Round Two may instead be eligible under a "BCAP Round Two July Extension" to receive a grant of up to $4,800.

A business eligible for the BCAP Round Two or BCAP Round Two July Extension should automatically receive the BCAP Round Three by mid-August 2021 .

These payments will generally be tax-free .

Further information and Frequently Asked Questions (FAQs) on BCAP Round Three can be found on the Business Victoria website .

Business Continuity Fund

On 28 July 2021, it was announced that the fund will deliver $5,000 grants to businesses that remain impacted by capacity limits due to public health restrictions.

The fund includes twenty-four eligible sectors.

Recognising businesses located in the Melbourne CBD will continue to be impacted due to restrictions on the number of staff allowed in office buildings, they will be eligible to receive an additional $2000 CBD grant .

Businesses eligible for either the BCAP Round Two or BCAP Round Two July Extension will be contacted from mid-August 2021 and this payment will be processed automatically .

It is currently assumed that the Federal Government will declare these grants to be tax-free .

Businesses that have not previously applied for this program or had been ineligible to apply but are now eligible, will be able to apply for lockdown support payments from July and should be considered outside of the automatic top-up process.

Further information and FAQs can be found on the Business Victoria website .

Small Business COVID Hardship Fund

On 28 July 2021, it was announced that a new fund would be set up to pay grants of up to $5,000 to small businesses that

payroll of up to $10 million;
has experienced a 70% or greater reduction in revenue; and
the business has not been eligible under existing business support funds.

On 6 August 2021, is was announced that additional funding would be added to the Small Business COVID Hardship Fund allowing grants of up to $8,000 to be paid .

It is currently assumed that the Federal Government will declare these grants to be tax-free .

More information and instructions on how to apply will be provided soon on the Business Victoria website .

Support for Commercial Tenants and Landlords

On 28 July, the Commercial Tenancy Relief Scheme has been reintroduced to ease pressure by providing rent relief for eligible tenants.

Eligibility:

annual turnover of less than $50 million; and
experienced a decline in turnover of at least 30% due to coronavirus.

Broadly this makes it a requirement for commercial landlords to provide proportional rent relief in line with a business's reduction in turnover, by providing at least half of any sum of rent relief by a waiver .

Separate support is being given to landlords who provide rent relief (via the Landlord Hardship Fund ).

A mediation service for tenants and landlords will further support fair tenancy negotiations.

Tenants and landlords can contact the Victorian Small Business Commission on 13 87 22 or applications can be made through the Victorian Small Business Commission website .

Licensed Hospitality Venue Fund

On 28 July 2021, it was announced that automatic payments of up to $20,000 will be made to Victorian hospitality venues that received funding from the Licensed Hospitality Venue Fund through the May/June lockdowns.

An additional $2,000 grant will also be made available to the business if it is located within the CBD.

On 6 August 2021, it was announced that new automatic payments of $5,000 to $20,000 will be made to hospitality venues that received funding support from the Licenced Hospitality Venue Fund through the May/June and July Lockdowns.

These payments will generally be tax-free .

Businesses that have not previously applied for this program or had been ineligible to apply but are now eligible, will be able to apply for July lockdown support payments and will be considered outside of the automatic top-up process.

More details can be found on the Business Victoria website in relation to the existing fund, with further updates expected soon .

Alpine Business Support Program

On 28 July 2021, it was announced Alpine businesses can receive between $5,000 (off-mountain) and $20,000 (employing businesses, on mountain ) in recognition of restricted inter and intra-state travel during the peak winter season.

The fund also includes support to alpine resort operators and management boards.

On 6 August 2021, it was announced that Alpine businesses will receive between $5,000 (off-mountain) and $20,000 (employing businesses, on mountain ) under a further extension of the Program.

These payments will generally be tax-free .

Further information on how to apply will be available shortly on the Business Victoria website .

Public events and public events suppliers

On 21 July 2021, it was announced that a further round of the Impacted Public Events Support Program will open shortly.

Eligible public events and public events suppliers affected by the lockdown will receive support of up to $25,000 and $10,000 respectively through an extension of the Impacted Public Events Support Program .

More details can be found on the Business Victoria website .

Applications closed on Friday 23 July 2021.

Sporting Clubs Grants Program

The Sporting Clubs Grants Program will provide $2,000 grants for community sport and active recreation organisations for events unable to proceed.

Grants of $2,000 for Victorian sport and active recreation organisations with a payroll of up to $3 million, to compensate for irrecoverable costs greater than $2,000 arising directly from the cancellation or postponement of events during the lockdown from 11:59pm on Thursday 15 July to 27 July 2021.

Applications are currently open and close on 13 August 2021.

Administered by Sports Victoria at: sport.vic.gov.au

Small Business Digital Adaptation Program

This program provides $1,200 rebates for small businesses to access a range of digital business tools to help build your website, improve your cash flow, start online marketing, manage your jobs and projects, and keep better track of stock.

The program will re-open for applications soon.

You can register your interest via the Business Victoria website .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - August 2021

Wed, 11 Aug 2021 02:23:04 GMT

Reminder of superannuation caps indexation for 2022

From 1 July 2021, the superannuation contributions caps have been indexed for the 2022 income year, as follows:

The new concessional contributions cap is now $27,500 (increased from $25,000)
The new non-concessional (i.e., non-deductible) contributions cap is now $110,000 or (where the 'bring forward' rules are applicable) $330,000 over three years (increased from $100,000 or $300,000 respectively).

Also, the CGT cap amount for the 2022 financial year is now $1,615,000 (increased from $1,565,000).

We note that the increase in the concessional contributions cap in particular will require individuals who are salary sacrificing additional superannuation to consider if they wish to increase their packaging arrangements so as to maximise the $2,500 increase in the cap.

Division 7A benchmark interest rate for 2022 remains unchanged

The Division 7A benchmark interest rate for the 2022 income year remains unchanged from the 2021 rate of 4.52% .

Changes to STP reporting from 1 July 2021

Employers should have already been reporting through Single Touch Payroll ( STP ) unless they only have closely held payees, or they are covered by a deferral or exemption.

From 1 July 2021, there have been changes to STP reporting for small employers with closely held payees and quarterly reporting for micro employers.

More specifically, for employers with closely held payees, employers must now report amounts paid to their closely held payees through STP. They can choose to report such payments via one of three methods, being:

actual payments each pay day;
actual payments quarterly; or
a reasonable estimate quarterly.

For micro employers reporting quarterly, the STP quarterly reporting concession is only available to micro employers who meet certain eligibility requirements (which now include the need for exceptional circumstances to exist).

Maximum contributions base for super guarantee

The maximum super contributions base is used to determine the limit on any individual employee's earnings base for superannuation guarantee purposes on a quarterly basis. Employers do not have to provide the minimum quarterly support for earnings above this limit.

For the 2022 financial year, the maximum contributions base has increased to $58,920 (up from $57,090).

We note this means once an employee earns over $235,680 during the 2022 income year, no additional superannuation guarantee will generally be required to be paid by an employer. Practically, this means that the maximum superannuation guarantee contribution that an employer must pay for the 2022 income year is 10% of $235,680 (or $23,568 ).

The 'gigs up' with a new sharing economy reporting regime

Treasury has released draft legislation introducing the long-awaited third-party reporting regime (proposed to apply from 1 July 2022). This measure was first announced in the 2020 Mid-Year Economic and Fiscal Outlook ( MYEFO ) following a recommendation from the Black Economy Taskforce established in 2016.

The new regime will initially require ride-sharing and short-term accommodation online platform operators to report transactions they facilitate directly to the ATO.

It is intended to extend to all other types of sharing ('gig') economy online platforms such as food delivery and task services from 1 July 2023.

Under this new proposed regime, the identity of participants and payments they receive will be reported to the ATO (twice a year) to identify entities who may not be meeting their tax obligations.

Taxable Payments Annual Reports (TPARs) due 28 August

The 2021 TPARs are due to be lodged for businesses who have paid contractors to provide the following services:

building and construction;
cleaning;
courier, delivery or road freight;
information technology ( IT ); or
security, surveillance or investigation.

With specific reference to the TPAR due on 28 August 2021, the ATO has reminded taxpayers they may need to report payments made to contractors during the 2021 income year for the first time.

This will particularly be the case where such payments were made for delivery services done on behalf of their business (ie. perhaps a result of a COVID-19 business 'pivot' during lock down periods).

Importantly, the ATO has reminded taxpayers that they already have the records needed to lodge a TPAR from preparing their relevant activity statements including the:

contractor's name, address and ABN (if known); and
total amounts for the income year of payments to each contractor (including GST) and tax withheld where the contractor did not quote their ABN.

New FBT retraining and reskilling exemption available

Recent legislative amendments mean that employers who provide training or education to redundant (or soon to be redundant employees) may now be exempt from fringe benefits tax ( FBT ).

The ATO has reminded eligible employers that they can apply the exemption to retraining and reskilling benefits provided on or after 2 October 2020. There are no limits on the cost or number of training or education courses that employees may undertake.

Furthermore, retraining and reskilling benefits that are exempt from FBT do not need to be included in the FBT return, or in an employee's reportable fringe benefits amount.

The ATO has also advised that if an employer has already lodged and paid for their 2021 FBT return, they will need to amend to reduce the FBT paid for any exempt retraining and reskilling benefits.

Further tax relief for Australian brewers and distillers

The Government has put regulations in place to ensure Australia's brewers and distillers can receive additional tax relief from 1 July 2021. Under changes announced in the 2021-22 Budget, the Excise remission scheme for alcohol manufacturers will provide brewers and distillers a full remission of any excise they pay, up to an annual cap of $350,000.

This Budget measure builds on and complements the Government's 2020-21 MYEFO announcement to allow eligible alcohol manufacturers to receive their excise duty remission automatically, thereby reducing administrative overheads and providing additional assistance by addressing cash flow concerns, which will also commence from 1 July 2021.

These changes will bring the Remission Scheme into alignment with the existing Wine Equalisation Tax ( WET ) producer rebate for wine producers, ensuring all alcohol manufacturers are placed on an equal footing. Guidance and instructions have been released on the ATO website ( click here ).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Landlords Beware!

Wed, 04 Aug 2021 02:10:21 GMT

Is your tenant bond secure?

It is important for Landlords to know how to best protect their interests, particularly when it comes to the options of cash security bonds or bank guarantees.

Where a tenant provides a cash security bond to secure its obligations under a lease, this creates a "security interest" in favour of the Landlord under the Personal Property Securities Act 2009. Landlords must register their interest on the Personal Property Securities Register (the " PPSR ") to properly perfect this security interest. Failing to do so will run the risk of that interest being defeated by a liquidator in the winding up of the tenant, and the cash bond being lost by the landlord.

Without the protection of a registered security interest on the PPSR, a Landlord holds no better position than any other unsecured creditor, and any claim made by the Landlord on a cash bond may amount to a voidable transaction and be claimed by the liquidator in the insolvency of the tenant.

It is therefore important for Landlords to:

Request a bank guarantee as this is generally the preferred form of security under a lease.
However, where a cash bond is held, the Landlord should register their interest, within the prescribed time, on the PPSR to perfect their interest over the bond.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

UPDATE: Current COVID-19 Support Packages for Victorians

Tue, 03 Aug 2021 00:29:15 GMT

**This information is current as at 3 August 2021**

COMMONWEALTH support measure

Summary of the assistance

COVID-19 Disaster Payment

Payment has been expanded and increased on 28 July 2021.

Victorian workers in lockdown in a Commonwealth hotspot ( check current VIC hotspots here ) will be eligible for:

$450 (up from $375) for each relevant period where there has been a loss of either: (i) between 8 and less than 20 hours of work per week, or (ii) a full day of "usual work" hours per week.
$750 (up from $600) for each relevant period for a loss of 20 hours or more of work per week.

Note: "A full day of usual work" is what an individual was scheduled to work, however could not because of a restricted movement order. This includes full time, part time or casual shift of less than 8 hours.

We note that the vast majority of Victorian microbusinesses (annual turnover < $75,000) not registered for GST will also be eligible for this Payment.

Administered by Service Australia at: www.servicesaustralia.gov.au

General eligibility rules:

The applicant is an Australian resident or hold an eligible working visa.
The applicant is 17 years or older.
The applicant is not getting an income support payment, ABSTUDY Living Allowance, Dad and Partner Pay or Parental Leave Pay.
The applicant is not getting the Pandemic Leave Disaster Payment, a state or territory pandemic payment or a state small business payment for the same period.
The applicant lost income and doesn't have any appropriate paid leave entitlements.
The applicant lives in, works from or has visited a Commonwealth-declared COVID-19 hotspot that is subject to a state restricted movement order.
The applicant was unable to earn their usual income of 8 hours or more or a full day's work because they were in the COVID-19 hotspot and are subject to restricted movement.

Specific rules will also apply to each recognised hotspot, particularly around eligibility periods.

Note: Eligibility criteria is subject to change through negotiations between the Federal and State Governments and should be reconfirmed before applications are lodged.

Pandemic Leave Disaster Payment

Available in all States and territories to residents who cannot work because they are required to self-isolate, or they are in quarantine.
Residents are eligible for $1,500 for each 14-day period they are required to self-isolate or quarantine.

More details can be found at:

https://www.servicesaustralia.gov.au/individuals/ services/centrelink/pandemic-leave-disaster- payment

VICTORIAN support measure

Summary of the assistance

[NEW] Business Continuity Fund

The fund will deliver $5,000 grants to businesses that remain impacted by capacity limits due to public health restrictions.

The fund includes twenty-four eligible sectors.

Businesses located in the CBD will be eligible to receive an additional $2,000.

All recipients must have received or been eligible for the previous Business Cost Assistance Program.

Information on how to apply will be updated shortly on the Business Victoria website .

[NEW] Small Business COVID Hardship Fund

The fund will deliver grants of up to $5,000 to small businesses.

Eligibility:

payroll of up to $10 million;
has experienced a 70% or greater reduction in revenue; and
the business has not been eligible under existing business support funds.

Information on how to apply will be updated shortly on the Business Victoria website .

Support for Commercial Tenants and Landlords

The Commercial Tenancy Relief Scheme has been reintroduced to provide rent relief for eligible tenants, while separate support will be provided to landlords who do the right thing by their tenants.

Eligibility:

annual turnover of less than $50 million; and
experienced a decline in turnover of at least 30% due to coronavirus.

Landlords will be required to provide proportional rent relief in line with a business's reduction in turnover, by providing at least half of any sum of rent relief by a waiver.

A mediation service for tenants and landlords will further support fair tenancy negotiations.

Legislation will shortly be introduced to re-enact the Scheme, which will be applied to ensure rent relief can start immediately.

Applications can be made through the Victorian Small Business Commission website .

Eligible Business Costs Assistance Package Round Two – Top-Up Payments

Businesses that successfully applied for this program which closed on 24 June will receive an automatic 'Top Up Payment' of $2,000 .

On 21 July the VIC Government announced that Business Costs Assistance Program recipients will receive an automatic top up $2,800, increasing the total payment to $4,800.

More details can be found on the Business Victoria website .

Licensed Hospitality Venue Fund 2021 – Top-Up Payments

Businesses that received support under this program which closed on 24 June will receive an automatic 'Top Up Payment' of $3,000 .

On 21 July the government announced that Licensed Hospitality Venue Fund program recipients will receive an automatic top up $4,200, increasing the total payment to $7,200.

To receive this funding, venues will need to have received or been eligible for the Licensed Hospitality Venue Fund 2021 .

The program provided grants for eligible liquor licensees operating a restaurant, hotel, café, pub, bar, club, or reception centre registered to serve food and alcohol.

More details can be found on the Business Victoria website .

Alpine Business Support Program

Alpine Business Support will receive a further $9.8 million to deliver grants of between $5,000 and $20,000 to 430 Alpine based businesses in recognition of restricted inter and intra-state travel during the peak winter season.

The funding also includes $5 million support to alpine resort operators and management boards.

Further information on how to apply will be available shortly on the Business Victoria website .

Public events and public events suppliers

A further round of the Impacted Public Events Support Program will open shortly.

More details can be found on the Business Victoria website .

Applications closed on Friday 23 July 2021.

Sporting Clubs Grants Program

The Sporting Clubs Grants Program will provide $2,000 grants for community sport and active recreation organisations for events unable to proceed.

Applications are currently open and close on 13 August 2021.

Administered by Sports Victoria at: sport.vic.gov.au

Small Business Digital Adaptation Program

The program will re-open for applications soon.

You can register your interest via the Business Victoria website .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Summary of COVID-19 Lockdown Support Packages, by State (July 2021)

Mon, 26 Jul 2021 00:04:29 GMT

This information is current as at 24 July 2021**

There has been a large amount of COVID-19 support packages and grants announced in the last two weeks, and this can easily become information overload!

We have prepared this Tax Alert to summarise each of the packages and grants, and we have separated them by State, so you can focus on the relevant packages and grants which may be available to you and/or your business.

COMMONWEALTH announcements

The Commonwealth Government will fund income support payments for those who live and/or work in the areas declared as a Commonwealth Hotspot. To confirm the impacted Commonwealth Hotspot areas currently impacted in NSW, VIC and SA – see each States' list here .

The following table includes extracts from information provided by Services Australia, and the full details of the packages can be found at: https://www.servicesaustralia.gov.au/

Commonwealth support measure

Summary of the assistance

COVID-19 Disaster Payment

Federally funded support for areas recognised a hotspot for Commonwealth support.

The period of support depends on when the area in question was recognised as a hotspot for Commonwealth support and when it stopped being recognised as such.

Amount of support:

First two weeks:

Loss of less than 20 hours work per week = $325 for each relevant period .
Loss of 20 hours or more of work per week = $500 for each relevant period .

Third and subsequent weeks:

$375 for each relevant period where there has been a loss of either: (i) between 8 and less than 20 hours of work per week, or (ii) a full day of "usual work" hours per week.
$600 for each relevant period for a loss of 20 hours or more of work per week.

Administered by Service Australia at: www.servicesaustralia.gov.au

General eligibility rules:

The applicant is an Australian resident or hold an eligible working visa.
The applicant is 17 years or older.
The applicant is not getting an income support payment, ABSTUDY Living Allowance, Dad and Partner Pay or Parental Leave Pay.
The applicant is not getting the Pandemic Leave Disaster Payment, a state or territory pandemic payment or a state small business payment for the same period.
The applicant lost income and doesn't have any appropriate paid leave entitlements.
The applicant lives in, works from or has visited a Commonwealth-declared COVID-19 hotspot that is subject to a state restricted movement order.
The applicant was unable to earn their usual income of 8 hours or more or a full day's work because they were in the COVID-19 hotspot and are subject to restricted movement.

Specific rules will also apply to each recognised hotspot, particularly around eligibility periods.

Note: Eligibility criteria is subject to change through negotiations between the Federal and State Governments and should be reconfirmed before applications are lodged.

Pandemic Leave Disaster Payment

Available in all States and territories to residents who cannot work because they are required to self-isolate, or they are in quarantine.
Residents are eligible for $1,500 for each 14-day period they are required to self-isolate or quarantine.

More details can be found at:

https://www.servicesaustralia.gov.au/individuals/ services/centrelink/pandemic-leave-disaster- payment

VICTORIAN announcements

The Victorian Government has announced further "top-up" payments to multiple Victorian support packages which were administered prior to July 2021.

The following table includes extracts from information provided by Business Victoria, and the full details of the packages can be found at: https://business.vic.gov.au/

Victorian support measure

Summary of the assistance

Eligible Business Costs Assistance Package Round Two

Previously successful (business and sole trader) recipients of the Program will receive an additional $2,800 .

These payments will be processed automatically in July 2021.

Recipients will receive $2,800, making the total payment of $4,800.

Businesses that had chosen not to apply for these support programs in relation to the May/June lockdown, or had been ineligible to apply but are now eligible, will be welcome to apply for July lockdown support payments and will be considered outside of the automatic top-up process.

Eligible Licensed Hospitality Venue Fund 2021

Previously successful recipients of the Program will receive an additional $4,200 .

These payments will be processed automatically in July 2021.

Recipients will receive $4,200, making the total payment of $7,200.

Alpine Business Support

Alpine businesses that were eligible for grants of up to $15,000 will receive an additional $3,000 , on top of any entitlements under the two Victorian programs above.

We note very limited details are currently available, and if this applies to you, we recommend you follow the Business Victoria page here .

Public events and public events suppliers

A further round of the Impacted Public Events Support Program will open shortly.

We note very limited details are currently available, and if this applies to you, we recommend you follow the Business Victoria page here .

Live Performance Support programs

A new round of the Live Performance Support programs will provide:

up to $7,000 for presenters; and
up to $2,000 for suppliers.

We note very limited details are currently available, and if this applies to you, we recommend:

Presenters see Business Victoria page here .
Suppliers see Business Victoria page here .

Sporting Clubs Grants Program

The Sporting Clubs Grants Program will provide $2,000 grants for community sport and active recreation organisations for events unable to proceed.

Applications are currently open and close on 13 August 2021.

Administered by Sports Victoria at: sport.vic.gov.au

NEW SOUTH WALES announcements

The New South Wales Government has announced a number of support packages to help individuals and businesses impacted by the extended lockdown currently in place during July 2021.

The following table includes extracts from information provided by Service NSW, and the full details of the packages can be found at: https://www.service.nsw.gov.au/

NSW support measure

Summary of the assistance

2021 COVID-19 Business Grant

Grants of up to $15,000 for businesses, sole trader or not-for-profit organisation impacted by the NSW COVID-19 restrictions.

The grant can be used for business costs incurred from 1 June 2021.

The grant is subject to a turnover test

to determine assistance levels:

$7,500 for a decline of 30% or more
$10,500 for a decline of 50% or more; or
$15,000 for a decline of 70% or more.

Administered by Service NSW at service.nsw.gov.au with registrations open from 19 July 2021.

General eligibility rules:

Active Australian Business Number (ABN).
Business was operating in NSW as at 1 June 2021.
Total annual Australian wages of $10 million or less as at 1 July 2020.
An aggregated annual turnover between $75,000 and $50 million (inclusive) for the year ended 30 June 2020.
No other government support available.
Maintain employee headcount as at 13 July 2021.

Job Saver – NSW Small and Medium Business Support Payments

Eligible entities will receive 40% of their NSW payroll payments , at a minimum of $1,500 and a maximum of $10,000 per week.

For non-employing businesses (ie. eligible sole traders) the payment will be set at $1,000 per week .

Administered by Service NSW at service.nsw.gov.au with applications open from 26 July 2021.

Eligible NSW businesses with an annual turnover of between $75,000 and $50 million that can demonstrate a 30% reduction in turnover (compared to an equivalent two-week period in 2019) will be entitled to business support payments from week four of the lockdown.

Assistance will cease when the current lockdown restrictions are eased, or when the Commonwealth hotspot declaration is removed.

To receive the payment, entities will be required to maintain the headcount of their full time, part time and long-term casual staffing level as of 13 July 2021 .

COVID-19 Micro Business Grants

Fortnightly payments of $1,500 per fortnight of restrictions.

Administered by Service NSW at service.nsw.gov.au with applications open in late July 2021.

General eligibility rules:

Micro businesses (small business or sole trader with annual turnover of more than $30,000 and under $75,000).
Applicants must have experienced a decline in turnover of 30 per cent.
The business provides the primary income source for a person associated with the business.

NSW Payroll Tax Deferrals

Businesses can opt in to defer payments on the 2020-21 annual reconciliation return and wages paid in July and August. Interest free repayment plans for up to 12 months will be available.

Deferral of 2020-21 reconciliation (due 28 July) and payments due on 7 August and 7 September until 7 October 2022.

Administered by Revenue NSW at revenue.nsw.gov.au

General eligibility rules:

Any business paying payroll tax.

NSW Payroll Tax Concessions

Concessions to help reduce overheads for eligible businesses with a 30% decline in turnover.

Payroll tax waivers of 25% for businesses with grouped Australian wages of between $1.2 million and $10 million that have experienced a 30% decline in turnover.

Administered by Revenue NSW at revenue.nsw.gov.au

General eligibility rules:

A revenue decline of 30%.
For businesses with Australian wages up to $10 million.

NSW Land Tax Concessions

Land tax relief equal to the value of rent reductions provided by commercial, retail and residential landlords to financially-distressed tenants is available for up to 100% of the 2021 NSW land tax year liability.

A capped grant up to $1,500 for residential landlords who are not liable to pay land tax who reduce rent for tenants.

Administered by Revenue NSW at revenue.nsw.gov.au

Short-term Eviction Moratorium and other Tenant Safeguards

The NSW Government will introduce a short-term eviction moratorium for rental arrears where a residential tenant suffers loss of income of 25% due to COVID-19 and meets other eligibility criteria.

In addition, it will restrict recovery of security bonds, lockouts or evictions of impacted retail and commercial tenants prior to mediation.

More information available at Fair Trading NSW at fairtrading.nsw.gov.au

SOUTH AUSTRALIAN announcements

The South Australian Government has announced a number of support packages to help individuals and businesses impacted by the lockdown currently in place during July 2021.

The following table includes extracts from information provided by the South Australian Treasury, and the full details of the packages can be found at: https://www.treasury.sa.gov.au/Growing-South-Australia/COVID-19

South Australian support measure

Summary of the assistance

July 2021 COVID-19 Business Support Grant Program

To support South Australian small and medium-sized businesses, with grants of:

$3,000 for employing businesses; and
$1,000 for non-employing businesses.

Non-employing businesses under common control will be restricted to one grant for all non-employing businesses.

Non-employing businesses are not eligible to apply if persons associated with the business, and who derive income from it, have applied for, or are receiving, the Commonwealth COVID-19 Disaster Payment .

Administered by South Australian Treasury at www.treasury.sa.gov.au with registrations closing on 30 September 2021.

General eligibility rules (as at 12:01am Tuesday 20 July 2021):

Be located within South Australia.
Have an annual turnover of $75,000 or more in 2020-21 or 2019-20, and be registered for GST.
Have a valid and active ABN.
Must employ people in South Australia.
Have an Australia-wide payroll of less than $10 million in the 2019-20 financial year.
Experienced at least a 30 per cent reduction in turnover in the week of Tuesday 20 July 2021 – Monday 26 July 2021 (inclusive) (compared to the prior week) due to restricted trading conditions.

Businesses will be required to declare that they have experienced a loss or reduction in turnover due to restricted trading conditions.

Businesses will not be required to provide any supporting information at the time of application but will be required to retain supporting information for 12 months.

Supporting information would include:

Turnover comparison data for the week prior to the assessment period.
Emails or texts to or from clients or suppliers detailing cancelled orders or appointments.
Receipts for refunds provided.
Invoices or delivery dockets.
Appointment/scheduling platform, demonstrating cancelled appointments or bookings.
Screenshots of cancelled events.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - July 2021

Tue, 20 Jul 2021 22:38:14 GMT

PRACTICE UPDATE - JULY 2021

Special Topic: Summary of NSW COVID-19 assistance measures

On 13 July 2021, the NSW and Federal Governments announced their economic support package aimed at supporting businesses and residents to deal with the recent COVID-19 lockdown.

The key economic support measures being offered to those impacted economically by the health and safety requirements currently being experienced by the community have been summarised here:

Economic support measure

Summary of Government assistan ce

NSW 2021 business grant

Administered by Service NSW at service.nsw.gov.au with registrations open from 19 July 2021.

The Federal Government has indicated that these payments will not be taxable.

Eligible NSW businesses (including sole traders and not-for-profit organisations) with Australian wages below $10 million can claim grants between $7,500 and $15,000 as a result of the COVID-19 restrictions.

Three different grant amounts will be available depending on the decline in turnover experienced during the restrictions, being:

$7,500 for a decline of 30% or more;
$10,500 for a decline of 50% or more; or
$15,000 for a decline of 70% or more.

Saving Jobs – NSW small and medium business support payments

Administered by Service NSW at service.nsw.gov.au

The Federal Government has indicated that these payments will not be taxable.

Eligible entities will receive 40% of their NSW payroll payments , at a minimum of $1,500 and a maximum of $10,000 per week.

Assistance will cease when the current lockdown restrictions are eased, or when the Commonwealth hotspot declaration is removed.

To receive the payment, entities will be required to maintain their full time, part time and long-term casual staffing level as of 13 July 2021 .

For non-employing businesses (ie. eligible sole traders) the payment will be set at $1,000 per week .

Micro business grants

Administered by Service NSW at service.nsw.gov.au

The Federal Government has indicated that these payments may not be taxable.

Eligible 'micro businesses' (including sole traders) with a turnover of between $30,000 and $75,000 that have experienced a decline in turnover of at least 30% will be eligible for payments of $1,500 per fortnight of restrictions from late July 2021.

NSW Payroll concessions

Administered by Revenue NSW at revenue.nsw.gov.au

NSW payroll tax concessions include

Payroll tax waivers of 25% for businesses with grouped Australian wages of between $1.2 million and $10 million that have experienced a 30% decline in turnover.
Payment deferrals and interest-free repayments .

NSW Land tax concessions

Administered by Revenue NSW at revenue.nsw.gov.au

NSW Land tax relief concessions include:

Land tax relief equal to the value of rent reductions provided by commercial, retail and residential landlords to financially-distressed tenants is available for up to 100% of the 2021 NSW land tax year liability.
A capped grant up to $1,500 for residential landlords who are not liable to pay land tax who reduce rent for tenants.

Short-term eviction moratorium and other tenant safeguards

More information available at Fair Trading NSW at fairtrading.nsw.gov.au

The NSW Government will introduce a short-term eviction moratorium for rental arrears where a residential tenant suffers loss of income of 25% due to COVID-19 and meets other eligibility criteria.

In addition, it will restrict recovery of security bonds, lockouts or evictions of impacted retail and commercial tenants prior to mediation.

Targeted industry support

Other targeted industry support measures include:

The deferral of gaming tax assessments for clubs until 21 December 2021 and hotels until 21 January 2021.
A $75 million support package for the performing arts sector (administered by Create NSW).
A $26 million package for the accommodation sector.

COVID-19 Disaster Payment Support for individuals

Administered by Services Australia at servicesaustralia.gov.au

This payment is assessable income to the individual recipient.

The COVID-19 Disaster Payment was originally introduced in response to the previous two-week Victorian lockdown (and was made applicable to all future Commonwealth-declared COVID-19 hotspots).

The payment is not applicable for the first seven days of an eligible lockdown (ie. it is payable to eligible recipients from the second week) and now, in response to the current NSW lockdown, the Federal Government has extended this support for individuals who have lost work (and pay) as a result of the COVID-19 lockdowns.

Specifically, from week four of the lockdown, the COVID-19 Disaster Payment will increase:

from $500 to $600 each week if a person has lost 20 hours or more of work a week; or
from $325 to $375 each week if a person has lost between 8 and 20 hours of work (or a full day of their usual work hours per week).

This will be a recurring payment for approved recipients for as long as the Commonwealth-declared hotspot and lockdown restrictions remain in place.

Furthermore, from 18 July 2021, this payment will be available to eligible NSW residents outside Commonwealth-declared hotspots (which will be funded directly by the NSW Government).

Businesses can register their interest in the key business support measures that are administered by Service NSW – click here .

Tax treatment of different COVID-19 support payments

Now that 30 June 2021 has passed and many taxpayers are preparing their tax records to complete their 2021 income tax returns, it is important to be aware of the different tax treatments of the various COVID-19 support payments. Here is a quick summary:

JobKeeper

JobKeeper payments received as an employee will be included in the employee's income statement as either salary and wages or as an allowance, and the ATO will automatically include this information on their online tax return.
Income statements can be accessed in ATO online services through the individual's myGov account and should be finalised by 14 July (tax agents also have access to this information).
Sole traders who have received JobKeeper payments on behalf of their business will need to include the payments as assessable income for the business.

JobSeeker

JobSeeker payments will also be included in a recipient's tax return at the Government Payments and Allowances question once it is ready. However, if an individual lodges their tax return before this information is input, they will need to add it themselves.

Stand down payments

One-off or regular payments received from an employer after being temporarily stood down due to COVID-19 are taxable and should appear in the income statement and will be automatically included in the stood-down employee's return.

COVID-19 disaster payment for people affected by restrictions

The Australian Government (through Services Australia) COVID-19 disaster payment for people affected by restrictions is taxable and must be included as income in the return.

Tax treatment of other assistance

The tax treatment of assistance payments can vary; the ATO website outlines how a range of disaster payments impact tax returns – click here .
The ATO website also includes guidance on COVID payments, including the taxable pandemic leave disaster payment – click here .

Early access to superannuation

If an individual accessed their super early under the special arrangements due to COVID-19, they do not need to declare this in their tax return, as any eligible amounts withdrawn under that program are tax-free.

Lost, damaged or destroyed tax records

The ATO knows that many taxpayers are facing lasting impacts left in the wake of natural disasters, so if they find their records have been lost or destroyed, whether in cyclones, floods or bushfires, the ATO can provide special assistance.

According to ATO Assistant Commissioner Tim Loh:

"If you have a myGov account linked to the ATO, you'll be able to view some of your records, including income tax returns, income statements and previous notices of assessments. If you lodge through a registered tax agent, they can also access these documents on your behalf."

Government agencies, private health funds, financial institutions and businesses provide information to the ATO which is available to tax agents and automatically included in returns by the end of July.

If taxpayers have lost receipts due to a natural disaster, the ATO can accept reasonable claims without evidence, provided it is not reasonably possible to access the original documents (although the taxpayer may be required to explain to the ATO how they calculated their claim).

Super guarantee contribution due date for June 2021 quarter

The due date for employers to make super guarantee contributions for their employees for the June 2021 quarter is 28 July 2021 .

We note that the super guarantee rate in relation to salary and wages paid on or before 30 June 2021 is 9.5%, but the new super guarantee rate is 10% in relation to salary and wages paid from 1 July 2021 (even if they are paid in relation to work performed before that date).

Contributions made (and received by the fund) after 30 June 2021 will not be deductible in the 2021 income year, even if they are made in relation to work performed during the 2021 income year.

Extension of time to make repayments on Division 7A loans

Under a complying Division 7A loan from a private company, the borrower must make minimum yearly repayments (MYR) before the end of the lender's income year to avoid the loan being treated as an assessable dividend.

MYR for the year ended 30 June 2021

To offer more support due to the ongoing effects of COVID-19, an extension of the repayment period is now available for those who were unable to make their MYRs by the end of the lender's 2020-21 income year (generally 30 June).

The borrower can apply for this administrative relief using the ATO's streamlined online application. Note that they must still make up the shortfall of their 2020-21 MYR by 30 June 2022.

MYR from the year ended 30 June 2020

A similar extension was also available for the MYR for the 2019-20 year, and borrowers who obtained this extension needed to have made up that shortfall by 30 June 2021.

If they did not meet this deadline, they will need to either obtain a further extension of time for the 2019/20 MYR from the ATO outside of this streamlined process or amend their 2019-20 tax return to include a dividend.

Rent or lease payment changes due to COVID-19

The ATO has provided updates regarding the tax implications when a landlord gives, or a tenant receives, rent concessions (such as waivers or deferrals of rent) as a result of COVID-19.

Rent waivers relating to "past periods of occupancy"

For example, for tenants that have received a rent waiver, if it relates to a past period of occupancy that the tenant has already incurred and claimed a deduction for, they are still entitled to that deduction.

However:

if they have already paid the incurred rent and it has been waived and refunded to the tenant, they will need to include this amount in their assessable income when they receive it; or
if they have not already paid the incurred rent and it has been waived, the amount of the rent waived will be a debt forgiveness . When such a debt is forgiven, the tenant will make a gain. The amount is not usually included in the business's assessable income, instead it is offset against amounts that could otherwise reduce the business's taxable income.

Rent waivers relating to "a future period of occupancy"

If the waived rent is related to a future period of occupancy , they will not be entitled to a deduction for that amount.

We note that these types of rent concessions can give rise to some complicated tax treatment (including GST implications) and the ATO has recently updated their guidance for both Landlords ( click here ) and Tenants ( click here ). If you require any special assistance in this regard, please contact your Lowe Lippmann contact.

New ATO data-matching programs

The ATO has advised that it will engage in two new data matching programs, as outlined below:

the ATO will acquire novated lease data from McMillan Shakespeare Group, Smartgroup Corporation, SG Fleet Group, Eclipx Group, LeasePlan, Toyota Fleet Management, LeasePLUS and Orix Australia for the 2018-19 through to 2022-23 financial years (relating to approximately 260,000 individuals each financial year); and
the ATO will acquire account identification and transaction data from cryptocurrency designated service providers for the 2021 financial year through to the 2023 financial year inclusively (relating to approximately 400,000 to 600,000 individuals each financial year).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Victorian Five-Day Lockdown Support Packages (July 2021)

Sun, 18 Jul 2021 21:14:47 GMT

Victorian Five-Day Lockdown Support Packages (July 2021)

Last Thursday (15 July 2021), the Victorian Government announced a five-day lockdown to be enacted between 16 July – 20 July 2021.

Both the Commonwealth and Victorian Governments have agreed to work together to change (and hopefully expediate) the way economic support will be delivered to individuals and businesses in those areas that are impacted by the current lockdown restrictions.

There are two main support packages available for eligible businesses and individuals as part of this most recent Victorian lockdown.

1. July 2021 Top-Up Payment (by Victorian Government)

This new payment package provides additional support to eligible small to medium businesses in sectors affected by the current restrictions in metropolitan and regional Victoria. Eligible businesses should include restaurants, cafes bars, event suppliers, tourism and accommodation providers and non-essential retailers.

To be eligible, businesses must have successfully applied for the Business Costs Assistance Program Round Two ( see eligibility requirements here ) or the Licensed Hospitality Venue Fund 2021 ( see eligibility requirements here ).

Successful recipients of:

the Business Costs Assistance Program Round Two will receive an additional $2000; and
the Licensed Hospitality Venue Fund 2021 will receive an additional $3000 .

Businesses that are ineligible for a grant under the Business Costs Assistance Program Round Two or the Licensed Hospitality Venue Fund 2021 are not eligible to receive the July 2021 Top-Up Payment.

You do not need to apply for the July 2021 Top-Up Payment. Automatic payments will be made to eligible businesses and sole traders across the state to minimise delays in getting money into the pockets of businesses who need it now.

We understand the automatic payments are due to commence over the course of next week (ending Friday 23 July 2021) and should be processed automatically during July 2021.

2. COVID-19 Disaster Payments for Individuals (by Commonwealth Government)

The Commonwealth Government has agreed to fund income support payments (or COVID-19 Disaster Payments) from the first day of the current lockdown (ie. Thursday, 16 July 2021), for those who live and/or work in the areas declared as a Commonwealth Hotspot (see a full list of hotspots here ).

Workers affected by the public health restrictions are now eligible for either:

Payment of $600 for individuals that lose 20 hours or more of work during the period of the lockdown (ie. the five day period); or
Payments of $375 for individuals that lose between 8 - 20 hours of work during the period of the lockdown (ie. the five day period).

There is no liquid assets test applied to these payments at any time. Payments will be made 7 days after the commencement of the lockdown (that is from Friday 23 July 2021) once applications have been submitted to via the Services Australia website here .

Full details of the COVID-19 Disaster Payment for Victorians can be found on the Services Australia website – click here .

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Practice Update - June 2021

Wed, 23 Jun 2021 02:24:54 GMT

Practice Update - June 2021

New ATO data-matching programs involving property

The ATO has recently announced that it will be launching two new data matching programs dealing with property transactions.

First, the ATO will acquire property management data from property management software providers for the 2018-19 through to 2022-23 financial years (relating to approximately 1.6 million individuals each year), including:

Property owner identification details, including names, addresses, Australian business numbers (if applicable), contact details and account details such as BSB number, bank account number and bank account name; and
Rental property details, including the date the property was first available for rent, the rental income categories and amounts, rental expense categories and amounts, and the net rent amount; and
Property manager details, including business name, managing agent name, business addresses (business, postal, internet) and contact details, ABN and licence number.

Second, the ATO will acquire rental bond data from state and territory rental bond regulators bi-annually through to 30 June 2023 (relating to an estimated 350,000 individuals each year), including:

Landlord and managing agent identification details (names, addresses, email addresses, phone numbers, etc); and
Rental bond transaction details including rental property address, period of lease (including commencement and expiration of lease), amount of rental bond held, amount of rent payable for each period, type of dwelling, and unique identifier of the rental property.

We remind you that it is very important to keep accurate records and working papers in relation to any property transactions, and we note this should be a continued focus beyond the current tax year ending 30 June 2021.

Loss Carry Back Tax Offset requires an accurate Company Franking Account to be maintained

The loss carry back rules provide a refundable tax offset that eligible corporate entities can claim:

After the end of their 2020–21 and 2021–22 income years,
In their 2020–21 and 2021–22 company tax returns.

Eligible entities can access the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The tax offset effectively represents the tax the eligible entity would save if it were able to deduct the loss in the earlier year using the loss year corporate tax rate.

As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owing to the ATO. Importantly, the eligible entity does not need to amend the earlier income tax returns to claim the offset.

The amount of tax offset available is limited to the franking account surplus on the last day of the income year for which the company intends to make a claim. The ATO has recently updated its guidance on the ATO website ( click here ) to include more information about how to make a loss carry back claim by reviewing the relevant company's franking account to ensure it is accurate and up to date.

When reviewing their franking account, clients should check to ensure they have:

Identified all transactions that result in a credit or debit in their franking account;
Recorded all transactions correctly in their franking account; and
Calculated the balance of the franking account correctly in determining whether the franking account is in a surplus (credit) or deficit (debit) position at the end of the income year.

We recommend that company franking accounts are up to date and accurate, particularly if errors have been identified and corrected in previous tax years.

Cryptocurrency under the microscope this tax time

The Australian Taxation Office (ATO) is concerned that many taxpayers believe their cryptocurrency gains are tax-free, or only taxable when the holdings are cashed back into Australian dollars.

The ATO's data analysis shows a dramatic increase in trading since the beginning of 2020 and has estimated that there are over 600,000 taxpayers that have invested in crypto-assets in recent years.

For the tax year ending 30 June 2021, the ATO will be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. The ATO also expects to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses.

Gains from cryptocurrency are similar to gains from other investments (such as shares) and generally taxed under the capital gains tax (CGT) regime. Generally, as an investor, if you buy, sell, swap for currency, or exchange one cryptocurrency for another, it will be subject to CGT and must be reported. We also note that the CGT rules apply to the disposal of non-fungible tokens (NFTs).

Holding a cryptocurrency for at least 12 months as an investment may mean the holder is entitled to a CGT 50% general discount if they have made a capital gain.

The ATO matches data from cryptocurrency designated service providers to individuals' tax returns, helping it to ensure investors are paying the right amount of tax.

"The best tip to [manage] your cryptocurrency gains and losses is to keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it's just their wallet address," Assistant Commissioner Tim Loh said.

Businesses or sole traders that are paid cryptocurrency for goods or services will have these payments taxed as income based on the value of the cryptocurrency in Australian dollars.

The ATO has released a cryptocurrency factsheet ( see here ) with general tips and information on how CGT applies to cryptocurrency.

ATO warns on 'copy/pasting' tax deduction claims

The ATO is alerting taxpayers that its sights are set on work-related expenses like car and travel claims that are predicted to decrease in this year's tax returns.

The ATO has noted that COVID-19 has changed people's work habits. The ATO expects that work-related expenses will most likely reflect an increase in deduction amounts, but the ATO have noted that deductions for travelling between worksites or business trips would most likely have reduced.

The ATO have announced that they will be reviewing taxpayers with significant working from home expenses, that maintains or increases their claims for deductions relating to car, travel or clothing expenses, stating that "You can't simply copy and paste previous year's claims without evidence."

We recently published our 2020-21 End of Year Individuals Checklist, which can be used as a helpful guide when preparing your tax documents for 30 June 2021 – you can download the LLCA Checklist here .

Luxury Car Tax thresholds increase

The ATO has updated the luxury car tax (LCT) thresholds for the 2021-22 financial year.

The LCT threshold for fuel efficient vehicles in 2021-22 is $79,659 (up from $77,565 in 2020-21) and the LCT threshold for other vehicles in 2021-22 is $69,152 (up from $68,740 in 2020-21).

We note that these thresholds determine whether LCT is payable, and are different from the luxury car depreciation limit of $60,733 for 2021-22.

Super Guarantee rate rising from 1 July 2021

On 1 July 2021, the super guarantee rate will rise from 9.5% to 10%, and some care may need to be taken before simply increasing superannuation contributions after 1 July 2021 passes.

In particular, when a payroll period crosses over the months of June and July, you need to consider how the super guarantee rate change should be executed.

The super guarantee rate employers are required to apply is determined based on when the employee is paid, not when the income is earned. A super guarantee rate of 10% will need to be applied for all salary and wages that are paid on and after 1 July 2021, even if some or all of that pay period relates to income earned before 1 July 2021.

The ATO has recently updated some guidance examples to consider the change of the super guarantee rate increase – see ATO page here .

Temporary reduction in pension minimum drawdown rates has been extended

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022.

As part of the response to the coronavirus pandemic (and the negative effect on the account balance of superannuation pensions), the Government reduced the superannuation minimum drawdown rates by 50% for the 2019-20 and 2020-21 income years.

This 50% reduction will now be extended to the 2021-22 income year.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2020-2021 End of Year Business Checklist

Wed, 16 Jun 2021 02:21:27 GMT

Many of our business clients like to review their tax position before the end of the income year and evaluate any strategies that may be available to legitimately reduce their tax. Traditionally, year-end tax planning for small businesses is based around accelerating deductions and deferring income. However, this year, consideration will also need to be given to the impact of the COVID-19 pandemic. Small Business Entities ('SBEs') – i.e., those with an aggregated turnover of less than $10 million – often have greater tax planning opportunities due to certain concessions only applying to them. Further, SBE taxpayers generally have the flexibility of being able to pick the concessions that suit their circumstances. The following are a number of areas that may be considered for all business taxpayers.

2020-2021 End of Year Individuals Checklist

Wed, 16 Jun 2021 02:18:41 GMT

Tax saving strategies prior to 1 July 2021 A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year. However, in light of the continued impact of the COVID-19 pandemic, any tax planning for individuals with potentially reduced income for the 2021 tax season may require consideration of deferring any deductible expenditure (if possible).

Temporary COVID 19 Disaster Payment up to $500...

Sun, 06 Jun 2021 02:15:29 GMT

Temporary COVID-19 Disaster Payment (up to $500) for workers impacted by lockdown restrictions

The Federal Government has announced a new Temporary COVID-19 Disaster Payment for people who have had their hours of work and income significantly affected due to lockdown restrictions in declared COVID-19 hotspots.

The payment will be part of a new "national framework" and will be made available to other states if they are declared a Commonwealth hotspot and a lockdown is needed for more than a week.

Eligibility requirements

Eligible recipients can receive up to $500 per week for losing 20 hours or more of work, and $325 per week for losing under 20 hours. The payment will be made in respect of the second and any subsequent weeks of restrictions – in other words, after 7 full days of lockdown.

Further eligibility requirements, include:

Applicants must be at least 17 years old;
Available for Australian citizens and permanent residents and eligible working visa holders;
Employed prior to the commencement of the lockdown restrictions;
Not receiving any other income support (ie. JobSeeker, business support payments, or the Pandemic Leave Disaster Payment);
People will need to have exhausted any leave entitlements (other than annual leave) or other special pandemic leave; and
Must only have access to less than $10,000 in "liquid assets".

This now raises the question; what is a "liquid asset"? According to the Government's definition, it is how much money you have to draw on, either in savings or other liquid assets (ie. shares or loans owed to you by other people). However, it should not include your superannuation fund balance and credit card limits.

How to apply?

People can make an application online from next Tuesday (8 June 2021) by visiting Services Australia Disaster Assistance at www.servicesaustralia.gov.au or over the phone on 180 22 66.

The Government has stated the Temporary COVID-19 Disaster Payment would be done on a "week-by-week basis", which means that if a lockdown goes beyond two weeks, eligible people will have to reapply to have another weekly payment for as long as the lockdown lasts.

The Temporary COVID-19 Disaster Payment will end when the Commonwealth no longer defines an area as a hotspot.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

UPDATED: Victorian Circuit Breaker Business Support Package

Thu, 03 Jun 2021 02:11:52 GMT

UPDATED: Victorian Circuit Breaker Business Support Package

Building on the Circuit Breaker Business Support Package announced on Sunday 30 May 2021, the Victorian Government announced yesterday (2 June 2021) the various grant payments will be increased to help businesses and sole traders who are now entering a second week of lockdown restrictions.

This new support package should assist small to medium businesses and sole traders impacted by the circuit breaker restrictions (enacted on 28 May 2021 and currently extended to 10 June 2021), to support those businesses unable to operate due to these necessary public health measures, including targeted support for the events industry.

There are three initiatives available for eligible businesses as part of this latest Victorian Circuit Breaker Business Support Package.

1) Business Costs Assistance Program (Round Two)

UPDATE: 3 June 2021

The Business Costs Assistance Program (Round Two) grants for eligible businesses located in metropolitan Melbourne will be doubled from $2,500 to $5,000.

Regional businesses unable to open due to the ongoing restrictions, such as nightclubs and amusement parks, will also be eligible for the extended $5,000 payment.

Metropolitan businesses that will have restrictions eased from Friday 3 June 2021 will not be eligible for the extended payment and should receive the original $2,500 grant payment only.

The program will open for applications on Thursday 3 June 2021 and will remain open for applications for three weeks.

This second round of the Business Costs Assistance Program provides grants for eligible employing and non-employing businesses in sectors most impacted. This includes businesses operating in an industry that cannot operate under the circuit breaker restrictions and which cannot work remotely.

This program should help eligible businesses with costs incurred as a result of the circuit breaker action. For example, businesses may have incurred costs through loss of perishable food or produce and cancelled bookings.

More information in relation to the eligibility requirements will be available on the Victorian Business website shortly ( click here ).

To be alerted when the Business Costs Assistance Program is open for applications, please register for the Business Victoria Update newsletter ( click here ).

2) Licensed Hospitality Venue Fund 2021

UPDATE: 3 June 2021

The Licensed Hospitality Venue Fund 2021 grants for businesses in metropolitan Melbourne with eligible liquor licences and food certificates will be doubled from $3,500 to $7,000.

The program will open for applications on Thursday 3 June 2021 and will remain open for applications for three weeks.

Eligible liquor licensees under the Licensed Hospitality Venue Fund payment will be emailed directly by Business Victoria tomorrow, Thursday 3 June 2021, with a link to their grant application form.

The $40.7 million Licensed Hospitality Venue Fund 2021 program provides businesses holding an eligible liquor licence and food certificate with one grant per premises.

More information in relation to the eligibility requirements will be available on the Victorian Business website shortly ( click here ).

To be alerted when the Licensed Hospitality Venue Fund 2021 is open for applications, please register for the Business Victoria Update newsletter ( click here ).

3) Victorian Events Support Package

As at 3 June 2021, there have been no updated details released in relation to this support package.

The $20 million package dedicated to supporting operators in the events industry who have incurred losses due to the circuit-breaker restrictions.

More information in relation to the eligibility requirements will be available on the Victorian Business website shortly ( click here ).

To be alerted when the Victorian Events Support Package is open for applications, please register for the Business Victoria Update newsletter ( click here ).

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Victorian Circuit Breaker Business Support Package - May 2021

Mon, 31 May 2021 00:23:54 GMT

Yesterday the Victorian Government announced a new support package to assist small to medium businesses and sole traders, under the circuit breaker restrictions (enacted between 28 May - 3 June 2021) which are unable to operate due to these necessary public health measures, including targeted support for the events industry.

Victorian State Budget 2021 - 2022 announcements

Thu, 20 May 2021 00:26:17 GMT

The Victorian Government delivered the 2021-22 State Budget on Thursday 20 May 2021. While the full details have yet to be released, we can provide the following summary of the relevant state tax measures which have been announced.

FEDERAL BUDGET 2022

Wed, 12 May 2021 00:27:45 GMT

For further clarification, contact your Relationship Partner at Lowe Lippmann.

Practice Update - May 2021

Wed, 05 May 2021 02:07:09 GMT

Practice Update - April 2021

Thu, 08 Apr 2021 01:42:45 GMT

Increases to Superannuation Contribution Caps from 1 July 2021

Tue, 06 Apr 2021 01:42:02 GMT

Victorian SRO - 2021 Land Tax Relief Applications Opening Soon

Thu, 25 Mar 2021 00:41:13 GMT

Tax Alert - FBT Year End is Fast Approaching

Wed, 17 Mar 2021 00:40:23 GMT

Practice Update - March 2021

Wed, 03 Mar 2021 00:39:30 GMT

Victorian Circuit Breaker Action Business Support Packages

Mon, 22 Feb 2021 00:38:29 GMT

Electronic Document Signing | Corporate Secretarial Documents

Wed, 17 Feb 2021 00:37:40 GMT

Practice Update - January 2021

Thu, 28 Jan 2021 00:36:35 GMT

JobKeeper Payment 2.0 ... the final phase!

Mon, 11 Jan 2021 00:35:33 GMT

Update to landholding valuations for Victorian land holders

Wed, 16 Dec 2020 23:15:02 GMT

Practice Update - December 2020

Tue, 15 Dec 2020 23:14:01 GMT

Insurers lose COVID-19 “business interruption” test case

Mon, 23 Nov 2020 23:12:48 GMT

Last week, a unanimous judgment from the New South Wales Court of Appeal, constituted by five judges, was handed down which ruled that certain insurance policyholders could be entitled to claim for COVID-19 related “business interruption” losses, when their business was forced to close due to the coronavirus pandemic.

Practice Update - October 2020

Sun, 25 Oct 2020 23:11:50 GMT

JobKeeper 2.0: Additional (8th Category) of Alternative decline in turnover test released

Wed, 21 Oct 2020 23:08:31 GMT

2020/2021 Federal Budget

Tue, 06 Oct 2020 23:02:04 GMT

FEDERAL BUDGET 2021

SUMMARY AND FULL COMMENTARY UPDATES

The 2020/21 Federal Budget was handed down by Federal Treasurer, Josh Frydenberg on the evening of Tuesday 6th October 2020.

Lowe Lippmann is pleased to provide the following commentaries, explaining the key issues released in the budget.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

JobKeeper 2.0: New alternative decline in turnover tests explained

Mon, 28 Sep 2020 22:54:57 GMT

JobKeeper 2.0 New Rules

Wed, 16 Sep 2020 23:54:12 GMT

Legislation passed & Further Guidance released

Victorian Government announces Business Survival Package worth $3bn

Mon, 14 Sep 2020 03:12:06 GMT

Yesterday (13 September 2020) the Victorian Government announced another round of cash grants, tax relief and cashflow support packages to assist Victorian businesses that have been most affected by COVID-19 restrictions.

Practice Update - September 2020

Thu, 03 Sep 2020 23:52:01 GMT

Further land tax relief for landlords & business owners

Mon, 24 Aug 2020 23:51:15 GMT

On 20 August 2020, the Victorian Government announced further land tax relief for landlords and business owners to extend the commercial & residential tenancy relief schemes until 31 December 2020.

Assistance available for Victorian Hospitality Businesses Impacted by COVID-19 restrictions.

Sun, 23 Aug 2020 23:50:21 GMT

The Victorian Government has recently announced three distinct grant assistance programs for Victorian hospitality businesses impacted by the restrictions implemented to help slow the spread of COVID-19. We will discuss each program below, and note that all three programs are now open to take grant applications.

JobKeeper 1.0 Rule Changes after 3 August 2020

Sun, 16 Aug 2020 23:26:11 GMT

As you will be aware, the Government made an announcement two weeks ago (on 7 August 2020) to relax and expand the eligibility criteria for the JobKeeper Payment scheme after 28 September 2020 (now known as, JobKeeper 2.0). We explained the details in our previous Tax Alert.

JobKeeper Payment Scheme rules relaxed and expanded after 28 September 2020

Sun, 09 Aug 2020 23:25:11 GMT

Last Friday (7 August 2020) the Government made an announcement to relax and expand the eligibility criteria for the JobKeeper Payment scheme after 28 September 2020. These rules are being referred to as "JobKeeper2.0".

Victorian Business Support Fund - Expansion Program open until 14 September 2020

Wed, 05 Aug 2020 23:23:57 GMT

On Monday (3rd August 2020, the Victorian Government announced updated restrictions to help slow the spread of COVID-19 in Victoria by introducing the following..

2020 Property Valuations during the time of Coronavirus

Tue, 04 Aug 2020 23:22:11 GMT

With most Victorian Council Rate Notices for the 2020-21 Year currently being issued, we thought it timely to make you aware to take particular notice of the unimproved values noted therein. In particular, as such valuations will be adopted by the Victorian State Revenue Office for the 2021 Land Tax Assessments.

COVID19 - Business Continues During Stage 4 restrictions

Tue, 04 Aug 2020 23:20:57 GMT

COVID19 - Business continues during Stage 4 restrictions

Lowe Lippmann Chartered Accountants and staff continue to work remotely, despite the business restrictions which come into effect midnight tonight, Wednesday 5th August 2020 forcing the office at 616 St Kilda Road, Melbourne to be closed for six weeks.

All Partners and staff continue to work from home remotely and and are available to assist you.

You can continue to call our office number and your call will be relayed to the person you wish to speak to.

If you want to pay your account, please visit our website and PayOnLine securely.

Adhere to the restrictions and stay safe.

JobKeeper Payment Scheme now extended until 28 March 2021

Tue, 21 Jul 2020 23:10:09 GMT

Yesterday (21 July 2020), the Federal Government announced an extension of the JobKeeper Payment scheme for a further six months to 28 March 2021, and is now being referred to as JobKeeper 2.0.

New JobTrainer Package Explained

Sun, 19 Jul 2020 23:09:11 GMT

The Government has announced yesterday the latest $2.5bn stimulus package, the JobTrainer package, with the intention of helping employers re-train, upskill and open new job opportunities.

Victorian Business Support Fund has been Expanded

Sun, 12 Jul 2020 23:08:08 GMT

Last Friday (10th July 2020) the Victorian Government announced that expanded support will soon be available for businesses in metropolitan Melbourne and Mitchell Shire affected by the current "Stage 3 Stay at Home restrictions".

Practice Update - July 2020

Mon, 06 Jul 2020 23:07:04 GMT

Extending the instant Asset Write-Off Testamentary trusts and minotrs Regulations confirm no Superannuation Guarantee (SG) obligation on JobKeeper payments where work is not performed

Local Lockdowns Business Support Program:

Tue, 30 Jun 2020 23:03:02 GMT

$5,000 Grant to help businesses through temporary COVID-19 lockdowns.

$25,000 Home Builder Grant Scheme Announced

Mon, 08 Jun 2020 22:31:44 GMT

The Federal Government has announced a new Home Builder grant scheme, providing eligible owner-occupiers (including first home buyers) with a tax-free grant of $25,000 to encourage people to build a new home or substantially renovate their existing home.

Amended Guidelines for Ancillary Funds During COVID-19

Sun, 31 May 2020 22:26:07 GMT

The Federal Government recently announced amendments to ancillary fund guidelines that will change the way they are administered during the COVID-19 pandemic. Ancillary funds are trusts that act as an intermediary between donors and Deductible Gift Recipients (DGRs). Donations and transfers to these ancillary funds are tax deductible, subject to the funds distributing a minimum amount each year to DGRs, which is normally 4% of the market value of net assets for public ancillary funds (PuAFs) and 5% for private ancillary funds (PAFs). The objective of the amendments is to encourage ancillary funds to maintain or increase distributions to help meet the increased demand on the services of many DGRs during the COVID-19 pandemic.

JobKeeper Payments Expanded to include Religious Practitioners

Wed, 13 May 2020 22:24:55 GMT

Generally, religious practitioners may not be classified as “employees” for tax purposes, and may receive financial support via non monetary benefits and/or a stipend, rather than salary and wages. The eligibility rules for the JobKeeper Payment scheme have now been expanded to include religious institutions in respect of religious practitioners (with the exception of those that are students only) who are impacted by the COID-19 pandemic.

Access to the Victorian Business Support Fund $10,000 Grants have been Expanded

Mon, 11 May 2020 22:23:50 GMT

The Victorian Business Support Fund is dedicated to small businesses that do not pay payroll tax and which operate in those sectors of the economy that have been directly or severely impacted by the trading restrictions arising as a result of the COVID-19 pandemic. During the first phase, businesses in sectors such as retail, tourism, hospitality, accommodation and the arts were eligible for $10,000 Victorian Business Support Fund grants. After more than $150 million already being paid out in grants to businesses across Victoria, the Business Support Fund will now move to the second phase of support.

COVID-19 Rent Relief Regulations are now in place

Sun, 10 May 2020 22:23:06 GMT

The Commercial Leases and Licences Regulations (the Regulations) have now come into force and will be applied with retrospective effect from 29 March 2020 and continue until 29 September 2020. These Regulations provide the guidelines for landlords and tenants to deal with rent relief for those impacted by the COVID-19 pandemic.

REMINDER: JobKeeper Payment key dates for May 2020

Thu, 07 May 2020 22:22:13 GMT

Among the various JobKeeper Payment conditions, it is important to remember that an employer is eligible to receive a JobKeeper payment for an individual for a fortnight if the employer passes on the $1,500 fortnightly payment to its eligible employees in full (the wages payment condition).

JobKeeper Payment and Service Entities Guidance has now been clarified

Tue, 05 May 2020 22:21:31 GMT

On Monday we released a Tax Alert with the initial guidance released by the Treasurer, expanding the JobKeeper “decline in turnover” tests to now consider service entities which provide employment services to a group. To see our previous Tax Alert – click here. The Treasurer has now provided some more detailed guidance on how service entities can test whether it can satisfy the JobKeeper “decline in turnover” threshold (ie. 30% or 50%), and determine if they may be eligible for the JobKeeper Payments scheme.

COVID-19 Relief Measures for Not For Profit Organisations

Mon, 04 May 2020 22:20:04 GMT

The Federal and State Governments have provided various relief measures for not-for-profits (NFPs) to assist with the economic impacts caused by the COVID-19 pandemic. The following is a summary of the various relief measures available.

Victorian Land Tax Relief: Instructions on How to Claim

Sun, 03 May 2020 22:18:57 GMT

The Victorian Government has released instructions on how landlords can claim land tax relief .

JobKeeper Payment and Expanded Test for Service Entities

Sun, 03 May 2020 22:17:41 GMT

On 2 May 2020, the Treasurer released some guidance in relation to a new rule introduced for the JobKeeper “decline in turnover” test. The test has been expanded to allow service entities, which may not suffer the necessary decline in turnover in their own right, to test whether they may now become eligible for JobKeeper Payments.

JobKeeper Payment Enrolment Extension & Latest Announcements

Mon, 27 Apr 2020 22:16:53 GMT

The ATO has now extended the time given to enrol for the initial JobKeeper periods, from the original date of 30 April 2020, until 31 May 2020. If eligible businesses enrol by 31 May 2020, they will still be able to claim for the four fortnights in April and May, provided the business meets all of the eligibility requirements for each of those fortnights. This includes having paid eligible employees by the appropriate date for each fortnight. For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept that eligible businesses will now have until 8 May 2020 to pay the minimum payment of $3,000 gross wages. However, eligible businesses can enrol and claim for JobKeeper earlier if they choose.

COVID-19 Commercial/Retail Landlords & Tenants Legislation Passed in Victoria

Sun, 26 Apr 2020 22:15:43 GMT

Two weeks ago, the National Cabinet announced that property industry stakeholders were working on a National Cabinet Mandatory Code of Conduct (the Code), to allow each State and Territory to introduce legislation to implement leasing principles to help guide landlords and tenants impacted by the COVID-19 pandemic.

JobKeeper Payment "Alternative Decline in Turnover Tests" Guidance Released

Sun, 26 Apr 2020 20:48:02 GMT

The JobKeeper scheme aims to assist entities that have a significant decline in turnover due to the economic impacts of the COVID-19 pandemic. The JobKeeper rules establish a decline in turnover test that must be satisfied at the end of a fortnight for an employer to qualify. Once an entity satisfies this test it does not need to retest its turnover in later months.

Victorian Land Tax Relief: Frequently Asked Questions

Sun, 26 Apr 2020 04:12:41 GMT

Both houses of Victorian Parliament has recently passed amendments to the Victorian land tax provisions and they should be passed into law next week. This amendment will ensure that if a landlord provides tenants impacted by the COVID-19 pandemic with rent relief, the landlord will be eligible for a 25% discount on land tax, with any remaining land tax able to be deferred until March 2021. It is expected that land tax relief will be available from 1 May 2020 via the State Revenue Office (SRO) website portal. Here are some frequently asked questions relating to the Victorian land tax relief concession.

JobKeeper Payment Application Process Explained

Thu, 16 Apr 2020 04:11:22 GMT

Yesterday, details were released by the Australian Taxation Office (ATO) in relation to the necessary steps which need to be completed for an Eligible Employer to receive the JobKeeper Payment. We have prepared the following as a practical step-by-step guide on how to navigate the application process for the JobKeeper Payment scheme, including what information and details you are required to provide, and what your obligations will be as an Eligible Employer.

ATO Announces Shortcut Method for Home Office Tax Deductions

Tue, 14 Apr 2020 04:10:21 GMT

The Australian Taxation Office (ATO) has announced a new temporary short cut method to simplify claiming tax deductions for working from home due to COVID–19. Under the new shortcut method, from 1 March 2020 until at least 30 June 2020 (which may be extended), taxpayers can claim $0.80 cents per work hour for additional running expenses, where an individual carries out genuine work duties from home (ie. not just checking emails). This is an alternative method to claiming home running expenses under existing arrangements, which generally require an analysis of specific running expenses incurred and more onerous record-keeping.

JobKeeper Payment Legislation Passed, but Full Guidance Not Released Yet

Sun, 12 Apr 2020 04:09:08 GMT

On 31 March, the Federal Government announced Stage 3 of its stimulus package, to help businesses and workers affected by COVID-19, by announcing the JobKeeper Payment scheme. Last Wednesday (8 April 2020) the legislation enacting the JobKeeper Payment scheme was passed through Federal Parliament, however more clarification on certain key issues still needs to be released. While we await the Government’s full guidance, these are the issues which we consider need some urgent clarification.