Practice Update – July 2024

Lowe Lippmann Chartered Accountants

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.

Liability limited by a scheme approved under Professional Standards Legislation


July 21, 2025
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.
July 16, 2025
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.
July 4, 2025
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.
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