News & Insights

This month’s edition of our client newsletter includes an article on the extra 15% “Division 293 tax” which applies to high income earners who have income and concessional superannuation contributions exceeding $250,000 in 2023/24. The article explains how the extra tax works and how you can pay for it if you’re liable. 
 
This is followed by an item which discusses the fine line between carrying on a business of property development and merely realising an asset. This article may be of interest to you if you are contemplating carrying out such an activity as there are different tax implications depending on the nature of the activity and property involved.
 
There is also an article about how useful the CGT main residence exemption concessions are, particularly for individuals who are considering buying or selling a home. Depending on your particular circumstances, these concessions can be used to allow you to access a full (or at least partial) CGT main residence exemption in a way that was probably never originally envisaged.

Our next article covers tax file numbers (TFN) and provides some insights on how TFNs are verified in tax return software. 
 
Finally, we provide an article which explains why you cannot add further money to a superannuation pension once it has commenced, and the alternative options to consider if you find yourself in this situation.  

Happy reading.

This month’s edition of our client newsletter includes an article on the importance of making your superannuation last in retirement. Superannuation is often a key source of income when you retire so it’s important to ensure your investment strategy makes your retirement savings last for as long as possible.
 
This is followed by an item that explains the personal services income rules that apply to income that is earned mainly from the personal efforts or skills of a person. Included is a handy flowchart which explains the rules depending on the different circumstances. It is worth noting that these rules do not apply to income earned from being an employee. 
 
Our next article covers the different types of amounts that you may receive which are not considered as “income” by the ATO. Although such amounts may not be assessable, they may need to be included elsewhere in your tax return for other purposes.
 
There is also an article about being on the lookout for scammers who may contact you about your superannuation. This is an important reminder as the number of cold callers is on the rise and many people are falling victim and losing their superannuation to scammers. 
 
Finally, we provide an article which explains the steps you should follow when on-boarding new employees, as there are a number of tax, workplace and superannuation obligations you must adhere to as an employer.

Happy reading.

The Federal Budget, handed down on Tuesday 14 May, contained a number of tax, superannuation, tax administration and social security/cost of living proposals that may impact your clients (and their businesses) in relation to the following matters:

• Instant asset write-off 

• CGT and foreign residents 

• The training and energy efficiency boosts

• ATO discretion to offset old tax debts 

• Refund frauds and BAS refunds

• Student loans repayments 

• Super to be paid on paid parental leave

• Social security deeming rates

• Commonwealth Rent Assistance

• and more.

Contact us if you would like to discuss any of these measures.

This month’s edition of our client newsletter includes an article on being aware of a partial capital gains tax (CGT) liability that may apply to you if you sell your main residence. 
 
This is followed by an item that explains why you should be wary of timing when making superannuation contributions this financial year. You may not realise it, but a contribution is deemed to be made at the time it is received by your superannuation fund, not when you process the transaction. For this reason, it’s best to allow plenty of time to make your superannuation contributions well before 30 June for your contribution to be received by your superannuation fund this financial year. 
 
For those who have rental properties, there is an important article which summarises the traps and pitfalls to be aware of as the ATO is currently on the lookout. This is because majority of residential rental property investors who have been audited have been getting their returns wrong. 
 
There is also an item on succession planning for family businesses. This may be of interest for families who plan on transferring their business onto the next generation.  
 
Finally, we provide an article which helps explain how myGov can help you keep track of your superannuation balance. 
Happy reading.

This month’s edition of our client newsletter sets out six different strategies for boosting your superannuation nest egg while potentially saving on tax. This is followed by an item that explains what happens to your tax status on leaving Australia to live or work somewhere else in the world. You might be surprised to learn how long after heading off some people have to continue to call Australia home for tax purposes.

For those who run their business through a corporate structure there is a must read article on the pitfalls of treating the company’s bank account and other assets as your own – the ATO has its eye on this area. There is also an item on the tax issues that can potentially arise when deciding to sell the family home.

We have included a piece on the receipt of compensation for various events, including damage to property, wrongful dismissal or work injuries. In some cases, it may pay to obtain tax advice before settling on an amount with the insurer.

Finally, we offer a perspective on the question of where to put your spare cash (assuming you have any) – on the mortgage or into superannuation?

Happy reading.

This edition of our client newsletter features a run down on what taxpayers can do to maximise the benefits of the Stage 3 tax cuts that have recently been passed by Parliament. It explores some options for shifting taxable income from this year (2023-24) to the next (2024-25) by bringing forward deductions or deferring income. While the potential gains are not huge, they are not trivial either and they represent a permanent tax saving. On the deduction side, it is as simple as buying a depreciating asset or painting your rental property a few months earlier than you might otherwise have planned. Bear in mind, however, that bringing deductions forward involves a cash flow that you will have to fund.
 
Next, there is a short piece on the capital gains tax concessions that are potentially available for small business owners on the sale of their business. It’s a must read for anyone contemplating such a sale in the coming years.
 
We have also included an item we hope you will never need to be across, until you do. It’s about the ins and outs of briefing a barrister. Did you know that you can brief a barrister directly (ie. without engaging a solicitor)? Not all barristers accept direct access briefs, but many do, and their costs can compare favourably with those charged by solicitors. Many of them also specialise, so you might be able to track one down who has expertise in your issue.
 
Finally, we have a very informative piece on super contributions in light of increases in various contributions caps that apply from 1 July 2024. The article stresses that the super rules are highly complex and anyone with some spare cash who may be looking to make additional super contributions should first get specialist advice.

This edition features pieces on:

• Compensation - is it taxable? Have you received compensation for bad advice or unethical behaviour, particularly from the banking and financial advice sector? There may be tax consequences. We explain how to navigate these payments from a tax perspective.

• Tax issues when dealing with volunteers: Volunteers can be an invaluable resource to many clubs, groups and charities. But what of payments made to these volunteers? We look at whether payments to volunteers constitute assessable income and whether their expenses are tax deductible.

• Collectibles and inherited jewellery: Whether you’re a genuine collector or just a hoarder, those trinkets may come with a capital gains tax kicker. We look at the rules to be aware of when selling certain of these types of assets.

• Using super to pay the mortgage: You may be able to use your super to pay down your mortgage, but there are tricks and traps. We look at this highly topical issue.

• Returning to work after retirement: Retirement just not cutting it? We look at the superannuation consequences of returning to work after retirement.

This edition features pieces on:

• Give yourself a super gift this Christmas. We provide a super to-do list - including consolidating your super, reviewing your investment strategy, making extra contributions, checking your insurance and more to help boost the amount of super you will have in retirement.

• Lost or destroyed tax records? Don't panic! Natural disasters, moving house, technology failures - all of these often unforeseen events can result in the loss or destruction of important documents. This article provides some leads on how to recover lost information - including contacting the ATO, your employer, and of course your friendly tax professional.

• Taken goods for private use? Here's the latest values. It's common practice for business owners to take goods from their trading stock for private use. The ATO has released values for these goods for the 2023-24 income year. Be aware that the ATO may accept greater or lesser values - but you must provide evidence to back up your valuation.

• Two main residences is possible. This article looks at the circumstances in which it's possible to access the main residence for two properties. It's to do with overlapping ownership for a period of up to six months. The conditions which must be met are complex so you will need the help of your tax adviser. 

• Don't ignore those tax debts - the ATO won't! While the ATO was keen to assist businesses during covid, that period is well and truly over and it is taking a more robust approach to collecting debts. Contact us to see if you are eligible to use the ATO's Simplified Debt Restructuring program.

• The taxation of super death benefits. The tax treatment of superannuation death benefits can be complex - is the beneficiary a tax dependant? What are the components of the benefit? Will it be paid in a lump sum or income stream? We can help you to ensure your death benefits will be distributed in the most tax-effective manner.

This edition features pieces on:

• Who can I nominate as my super beneficiary? Unlike other assets such as shares and property, your superannuation and any insurance benefits you have in superannuation do not form part of your estate. This article explains how to go about specifying who you want your superannuation money to be distributed to, and the importance of that person being a “dependant” for super purposes.

• Who is a resident for tax purposes? It’s not just a case of whether you are a “citizen” of Australia. Tax residency is a difficult issue to determine in Australian tax law, and while a recent AAT case sheds some light, there are other factors to consider; for example, any relevant double tax agreements.

• Introducing the energy incentive: The new Energy Incentive provides a bonus tax deduction of 20% of expenditure on improving the energy efficiency of your business. The incentive is not yet law, but it may be useful to put in some time now preparing the ground to take advantage of this bonus. And remember that you can still take advantage of the Skills and Training Boost (generally for expenditure on training employees incurred before 30 June 2024).

• Qualifying as an interdependent or financial dependant: Qualification for these categories is vital in order for potential beneficiaries to receive a death benefit. This article explains the conditions which must be met for interdependency relationship and financial dependency status. These terms are not expressly defined in superannuation law and can be complex to determine. 

• How to nominate a superannuation beneficiary: Many different types of nominations exist; for example, Binding death benefit nominations, Non-binding death benefit nominations, and Reversionary pension nominations. Getting the type of nomination right is vital to ensure your super ends up in the right hands.  And a reminder that if your nominated beneficiary does not meet the definition of a superannuation law dependant at the time of your death, the nomination will be invalid.

This edition features pieces on:

• Personal Deductible Superannuation Contributions: 
  Overview: This article delves into the complexities surrounding the age-based rules and the work test for making deductible contributions to your superannuation fund. 
  Key Points: It covers the age brackets that are eligible for making contributions, the "work test" that individuals aged 67 to 74 must pass, and the annual caps on contributions. 
  Relevance: Understanding these rules is crucial for maximising your retirement savings while also taking advantage of tax benefits. 

• Capital Gains Tax (CGT) Roll-over Concessions:
  Overview: This piece provides an in-depth look at CGT roll-over concessions, which allow the deferral of capital gains tax. 
  Key Points: It explains the types of assets that qualify, the conditions under which the concessions can be applied, and the documentation required. 
  Relevance: Small business owners will find this particularly beneficial for tax planning and asset management.

• Small Business Skills and Training Boost: 
  Overview: This article focuses on the government's skills and training boost aimed at small businesses. 
  Key Points: It outlines the eligibility criteria, the types of training that qualify, and how businesses can claim tax deductions on these expenses. 
  Relevance: Investing in employee training not only enhances skills but also offers financial incentives through tax deductions. 

• Retirement Concession and Capital Gains:
  Overview: This section offers insights into capital gains concessions available to those aged 55 or over. 
  Key Points: It discusses how a capital gain of up to $500,000 can be taken tax-free or channelled into a super fund, along with the conditions that must be met. 
  Relevance: For those nearing retirement or considering asset liquidation, this information is invaluable for financial planning. 

1. Property Development and Taxation: 
   Overview: This article explores a Federal Court decision that has implications for property developers. 
   Key Points: It examines how the original purchase price of land can influence the costs that can be claimed as a tax deduction. 
   Relevance: Property developers and investors will find this information crucial for understanding the tax implications of their projects.

This edition features pieces on:

• Registering a trademark for your business: A trademark legally protects your brand and helps customers distinguish your products or services in the market from others. Trademarks can be used to protect a logo, phrase, word, letter, colour, sound, smell, picture, movement, aspect of packaging or any combination of these. Have you considered registering one? Do you know how?

• Appointing an SMSF auditor: Early last month, the ATO issued a reminder around auditors.  If you have an SMSF, You need to appoint an approved SMSF auditor for each income year, no later than 45 days before you need to lodge your SMSF annual return (SAR). Your auditor will perform a financial and compliance audit of your SMSF’s operations before lodging. Approved auditors must be registered with ASIC.

• Purchasing and maintaining a caravan/motor home for work-related travel: In these challenging and changing times, many have jumped on the modern version of the proverbial band wagon and purchased a caravan or motor home to use for work or business-related travel. We explore the tax treatment of this scenario including where you have a business logo on the side on your van or motor home.

• Self-education: It’s not uncommon for individuals to change careers, seek a promotion, top-up their current skills or knowledge etc. In doing so, they may incur significant self-ed expenses. However, there are certain criteria which must be met before these expenses become deductible.

• 50% CGT discount: This can effectively halve any capital gain that you make when you sell a CGT asset including land, rental properties, shares etc. However, the asset must be held for 12 months or more. Most entities are eligible with the main exclusions being companies and trusts.

• Beware of SMSF scheme promoters: Don't be tempted by 'too good to be true' SMSF schemes promoted by an advisor you don’t trust and who isn’t on the ASIC Financial Register. You may risk losing some or all of your retirement savings and receive significant penalties if you enter into one of these schemes.

This edition features pieces on:

• FBT and employee gifts:  Some employers, especially at Christmas time or for birthdays, give small gifts to their employees or employee associates (such as their spouses). How FBT, GST and income tax applies to such gifts depends on a range of factors including the value of the gift, the type of gift, and the recipient. 

• Research and development: A recent court case around R&D is a timely reminder of the eligibility rules around this tax incentive. By way of background, the research and development tax incentive (R&DTI) helps companies innovate and grow by offsetting some of the costs of eligible R&D. If your company is conducting certain R&D activities, it may be eligible for this incentive. 

• Super withdrawal options: For individuals who have retired and met a condition of release, or who have turned 65 and are still working, you can receive your superannuation as an super income stream, as a lump sum, or a combination of both. There are advantages of each withdrawal option.

• SMSFs and higher interest rates: While higher interest rates (10 increases since May 2022) have provided SMSFs with a viable and very safe investment opportunity, there are certain downsides, especially for those funds with a limited recourse borrowing arrangement (LRBA).

• Trusts – are they still worth it?: Despite the ATO’s recent crackdown on what were long-regarded as legitimate trust distribution strategies, they remain very much a viable business structure for a range of reasons including legitimate tax minimisation, asset protection, and more!

• Unexpected, first-time, tax debts: For a range of reasons, some taxpayers (particular younger folk) are receiving tax bills for the first time. We tackle some of the likely reasons and myths in this area.

This edition features pieces on:

• Employee contractor case law: Another key Federal Court case handed down in June may have a bearing on whether you owe certain workers you engage superannuation guarantee or not. A key factor is whether the worker has the ability to delegate or subcontract the work.

• Working out your car expense deductions: With the cents per kilometer rated having just increased, we weigh up the pros and cons of the two alternative methods to use when calculating your work-related car expense deductions.

• Lodgment amnesty: Since Budget night, the ATO has released more information around the small business lodgment amnesty which can now be taken advantage of from 1 June 2023. It applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022 and runs from 1 June 2023 to 31 December 2023.

• Fair Work changes: The national minimum wage has increased from 1 July to $882.80 per week or $23.23 per hour. There have also been changes to the award minimum wage, the paid parental leave scheme, and more!

• Choosing your business structure: There are four main types of structures; each with its pros and cons. The new financial year is an opportune time to review your structure to see if it still meets your and your business’s needs. There are a number of factors to take into account when making this decision.

• Increased superannuation guarantee rate: This came on stream from 1 July meaning that employees and certain contractors will be entitled to 11% superannuation payable on their ordinary time earnings. This rate change can be more complex that one may think!

This edition features pieces on:

• Maximising cashflow: The predicted slowing of the economy in 2023-24 along with the pay-day super guarantee (SG) proposal are sure to make cashflow more important than ever for business over the coming months and years, noting that it is one of the biggest difficulties faced by business. There are some simple steps you can employ, in consultation with your tax agent to maximise your cashflow moving forward.

• Side-hustles: With the cost of living skyrocketing, have you taken up a side-hustle? With new and emerging ways to make money, the ATO is reminding taxpayers to consider if they are ‘in business’ and to declare to their tax agent if they are engaged in a side-hustle.

• Super pensions and the senior’s health card: Are you a self-funded retiree who does not qualify for the Age Pension? If you’ve answered yes, then help may be available for certain living expenses by way of the Commonwealth Senior’s Health Card. But how does your super pension impact your health card eligibility?

• Tax time focus areas: With the end of the financial year on our doorstep, the ATO has announced that it will focus on the following areas this Tax Time – capital gains, work-related expenses, and rental property deductions. In view of this, what are the record-keeping requirements in these areas?

• What type of super funds can you contribute to?: There are five types of super funds you can contribute to. This article provides a brief summary of those types and highlights the differences between each.

• Final days of generous depreciation: Temporary full expensing (TFE) ceases from 1 July. From that date, less generous depreciation rules will come on stream. What do you need to do to in order to take advantage of the final days of TFE?

Contents

The federal budget, handed down last night, contained a number of tax, superannuation, and social security/cost of living proposals that may impact your clients including:

• The end of temporary full expensing

• Small business energy initiative

• Crackdown on unpaid tax and superannuation

• No change to stage 3 tax cuts

• Confirmation of an extra 15% tax on super ‘earnings’ for account balances above $3 million

• Pay day superannuation guarantee

• Boost to Centrelink payments

….and more