Practice Update – October 2023

Lowe Lippmann Chartered Accountants

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


October 7, 2026
ATO to stop accepting credit cards as payment method after 30 November 2026 The Australian Tax Office ( ATO ) has announced it will stop accepting credit cards as a payment method after 30 November 2026. The move follows after the Reserve Bank of Australia’s ( RBA ) Review of Merchant Card Payment Costs and Surcharging, where the RBA concluded that “it is in the public interest” to scrap surcharging for all designated card networks from 1 October 2026 (including EFTPOS, Mastercard, and Visa). It said that as a government agency, the ATO has decided it would not be appropriate for the cost of credit card merchant fees to be transferred to the community. The ATO recognises that some taxpayers currently rely on credit card payments to manage their tax payments and understands this change may require some adjustments. The ATO is writing directly to those who currently have a payment plan linked to a credit card to explain the changes and outlining the steps they need to take. There are alternative payment options available for taxpayers, including direct deposit, direct debit from a debit card, direct debit from an Australian cheque or savings account, Government EasyPay, in person at Australia Post, by mail, or international money remitter. The ATO said it is committed to helping taxpayers transition to alternative payment methods and will continue to support those experiencing financial hardship or other circumstances that make it difficult to meet their obligations. Alternative payment options for taxpayers are outlined at www.ato.gov.au/howtopay Taxpayers who need extra support are encouraged to visit www.ato.gov.au/supporttolodgeandpay , contact the ATO on 13 11 42 during business hours or speak with their registered tax professional.
September 4, 2026
Yesterday, Treasurer Jim Chalmers released draft legislation to implement the key components of the 30% minimum trust tax on discretionary trusts announced in the Federal Budget during May 2026.
September 2, 2026
Discretionary trusts and the proposed 30% minimum tax Discretionary trusts, often referred to as family trusts, have been a popular structure for Australian families and businesses for many decades. They are commonly used to operate family businesses, hold investments and assist with succession planning. Their flexibility, together with asset protection and estate planning benefits, has made them an attractive option for many groups. In the 2026–27 Federal Budget, the Government announced a significant proposed change. From 1 July 2028 , trustees of discretionary trusts would generally be required to pay a minimum tax of 30% on the trust's taxable income . According to the Government, the proposal is intended to better align the tax paid on trust income with that paid by salary and wage earners, while reducing opportunities to split income between family members. However, the announcement has generated considerable debate. Professional bodies, business groups and tax advisers have expressed concerns that the changes could increase complexity and compliance costs for many genuine family businesses and investment structures. How the proposal is expected to work Under the proposal, the trustee would generally pay the minimum 30% tax on the trust's taxable income. Where trust income is distributed to individual beneficiaries or certain other non-corporate beneficiaries , those beneficiaries would generally receive a non-refundable tax offset recognising the tax already paid by the trustee. This is intended to reduce the risk of the same income being taxed twice, but while maintaining the impact of the 30% minimum tax rate. Importantly, the minimum tax would not apply to every trust . The Government has indicated that a number of trusts would be excluded, including fixed trusts, widely held trusts, complying superannuation funds, charitable trusts, deceased estates, special disability trusts and genuine testamentary trusts. Primary production income and certain income relating to vulnerable minors would also be excluded. The Government has also stated that more than 90% of small businesses are not expected to be affected. While that may be reassuring for some taxpayers, there are still some important issues that could affect family groups using discretionary trusts. What could this mean in practice? One area likely to receive close attention is the use of companies as beneficiaries of family trusts. Many family groups have historically distributed some trust income to a company. This can provide flexibility in managing cash flow, retaining profits within the business and funding future growth. Under the proposed rules, however, the corporate beneficiary would not receive a tax offset for the tax already paid by the trustee . In many cases this will mean that income distributed from a discretionary trust to a company would be subject to double taxation. Another practical impact of the proposed change is that some family groups may find it more difficult to fully utilise existing tax losses. While the impact will depend on each group's circumstances, the proposed minimum tax is likely to reduce some of the flexibility that currently exists when managing taxable income across a family structure within many groups. The Government has also proposed a temporary three-year rollover period, commencing from 1 July 2027, to help restructure into alternative business structures , such as companies or fixed trusts, without triggering immediate income tax or capital gains tax consequences. While this may assist some groups, restructuring is rarely straightforward. Depending on the circumstances, it might be necessary to consider things like stamp duty, loan approvals, financing arrangements, contract changes, licensing requirements and professional advice. Even relatively simple restructures can involve significant time and cost, so careful planning will be important. The rules are not yet final At this stage, the proposal remains subject to consultation . Treasury released a consultation paper in July 2026 seeking feedback on a range of design issues, including how the new rules would operate in different situations. Final legislation has not yet been introduced , meaning aspects of the proposal could still change before the rules become law. For this reason, most groups utilising discretionary trust structures should avoid making major structural decisions based solely on the announcement. Instead, it is sensible to monitor developments while considering whether existing structures are likely to remain appropriate if the proposal proceeds. What should you do now? For many families, discretionary trusts are about much more than tax. They can continue to provide valuable asset protection, succession planning and business flexibility. The proposed changes do not remove those benefits, nor do they prevent discretionary trusts from continuing to be used. However, the proposal does have the potential to change the tax outcomes for some family groups, particularly those with more complex structures or those that regularly distribute income to companies. With the proposed start date still some time away, there is an opportunity to pause and carefully understand how the changes may affect your circumstances and consider whether any planning or restructuring might be appropriate. As the legislation develops, we can help you assess the impact on your business or investment structure and determine whether any action is warranted.
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