Hiring for the Festive Season and Deductions for Advice fees

Hiring 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' (e.g., 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 (i.e., 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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

AVOID TAX TIME SHOCK

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 (i.e., 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.

Editor: 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.

Editor: 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 obbtained 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.

Asset class Minimum asset value threshold

Caravans, motorhomes $65,000

Motor vehicles $65,000

Thoroughbred horses $65,000

Fine art $100,000 per item

Marine vessels $100,000

Aircraft $150,000

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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO's tips for correctly claiming deductions for rental properties

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.

Editor: Please make sure to let us know if you made any purchases that may be eligible for this bonus.

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 (e.g., laundry expenses), some kind of record may still be necessary.  Taxpayers may also need a record that shows their private and work-related use (e.g., 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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO may cancel inactive ABNs

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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO's three focus areas this tax time

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 (e.g., that the resolution must be in writing).  In any case, resolutions regarding distributions need to be made by the end of the income year.

Editor: If you need any assistance in relation to your trusts, 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.

Editor: If you need assistance in relation to paying your tax bill, please contact our office.

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 (i.e., 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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Government warns of 'malicious' myGov scammers

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 check with us) 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.

Editor: 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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

How to claim working from home expenses

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.

Editor: If you need more information regarding making these claims, please contact our office.

Reminder of March 2024 Quarter Superannuation Guarantee (‘SG’)

Employers are reminded that employee super contributions for the 1 January 2024 to 31 March 2024 quarter must be received by the relevant super funds by 28 April 2024 (which is a Sunday), in order to avoid being liable to pay the SG charge.

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, and then calculate their benchmark using the ATO app 'Business performance check' tool.

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.

Quarterly TBAR lodgment reminder

SMSFs must report certain events that affect any 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.

SMSF trustees must report and lodge within 28 days after the end of the quarter in which the event occurs, although they are not required to lodge if no TBA event occurred during the quarter.

For example, if an SMSF had a TBA event in the quarter ending 31 March 2024, the trustee of the SMSF must lodge a TBAR by 28 April 2024.

If an SMSF does not lodge a TBAR by the required date, the member's TBA may be adversely affected.  The member may need to commute any amounts in excess of their transfer balance cap and pay more in excess transfer balance tax.

Editor: If you need assistance in relation to any of these issues, please contact our office.

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 to 'Regulation details removed', and this status will remain until any overdue lodgments are brought up to date.

Taxpayer who lived and worked overseas found to be tax resident

The Administrative Appeals Tribunal ('AAT') recently held that a taxpayer was a tax resident of Australia, even though he was mostly living and working overseas during the relevant period.

The taxpayer was born in Vietnam and obtained Australian citizenship in 1978.  He was living and working in Dubai, United Arab Emirates from 2015 until 2020.

The taxpayer 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".

The AAT noted in this regard that the taxpayer:

-      left his wife and three daughters in the family home in Australia while he worked in Dubai, continued to fully support his family financially, and chose to spend each of his leave periods with his family in Australia;

-      maintained his vehicle registrations and Australian drivers licence so he could use the vehicles upon his return to Australia;

-      intended to retire in Australia;

-      failed to demonstrate any connection with Dubai outside of his employment; and

-      maintained his private health insurance.

Earning income for personal effort

Taxpayers should remember 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, e.g., as a financial professional, IT consultant, construction worker or medical practitioner.

Taxpayers who earn PSI while running a business (e.g., as 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 (i.e., 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.

Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Big news for those contributing to super!

Super contribution caps to rise

The big news story for those contributing to super is that the contribution caps are set to increase from the 2025 income year.

-  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.

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. 

Editor: We are always on the look-out for what tax concessions may be of use to our clients based on their individual circumstances.  These small business concessions in particular, can be very beneficial when applicable. 

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 (Editor: by asking us to lodge 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 PCG 2024/2 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 note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO's lodgment penalty amnesty is about to end

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.

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.

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 above 'boosts', a business taxpayer must satisfy a number of conditions.

Editor: 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.

They 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% for the 2024 income year.

Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO says: "Be cyber wise, don't compromise"

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 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 Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.