Tips to reduce study and training loan balances

New 15% super tax to apply from 1 July 2025

The Government recently announced it will be imposing a 15% additional tax on individuals that have more than $3 million in superannuation.  The new measure is expected to commence from 1 July 2025 (i.e., the start of the 2026 income year).

The main takeaways from the information provided thus far include the following:

-    The additional 15% tax will broadly apply to the annual movement in the value of an individual’s superannuation balance, adjusted for withdrawals and contributions.  These ‘earnings’ are further adjusted to ensure only the proportion corresponding to the balance above $3 million will be subject to the new tax.

-   There will be no limit imposed on the size of superannuation account balances.

-    Individuals will have the choice of paying the tax liability personally or from their super fund.

In current terms, the Government expects that the new tax will apply to 0.5% of people with money in superannuation (around 80,000 people).  However, the proposal does not currently allow for indexation of the $3 million threshold, so more individuals may be impacted in the future.

Editor: The Government will consult on the implementation of this proposed measure, so expect to hear much more about it before 2025!

Start thinking about your FBT obligations

The 2023 FBT year ended on 31 March, so it is now time for employers to get ready to lodge their 2023 FBT returns, where they have provided benefits to their employees (or their associates) between 1 April 2022 and 31 March 2023.

If you have provided fringe benefits to employees during the year, we are able to assist you with satisfying the following requirements:

-  self-assessing your FBT liability for the FBT year;

-  lodge an FBT return (if you have an FBT liability or paid FBT instalments through your activity statements);

-   pay the FBT you owe by the due date; and

-   calculate the reportable fringe benefits amount to be included on each employee’s income statement or payment summary (if the total taxable value is more than $2,000).

Employers that have an FBT liability for the year ended 31 March 2023 are generally required to lodge their FBT return and pay their FBT liability by 26 June 2023, where they lodge their FBT return electronically through a registered tax agent (noting the usual due date of 25 June falls on a weekend this year).

Employers that are not included on a registered tax agent’s FBT client list must generally lodge an FBT return by 22 May 2023.

Employers do not need to lodge an FBT return if they are not liable to pay FBT for the year and have not paid FBT instalments during the year. If you are registered for FBT but do not think you need to lodge a 2023 FBT return, please contact our office so that we can confirm and let the ATO know before the due date, to ensure the ATO will not seek a return at a later date.

Editor: Please contact our office to ensure you are ready for FBT season and confirm what information we will need from you to lodge your 2023 FBT return by the due date.

FBT exemption for electric cars

Until recently, the FBT consequences for providing electric cars to employees were effectively the same as any other car. However, from 1 July 2022, FBT is no longer payable on benefits provided for eligible electric cars and associated expenses. Practically, this exemption will be relevant for the first time in the 2023 FBT year.

Broadly, benefits provided for electric cars will be exempt from FBT where the following criteria are met:

-the car is a zero- or low-emissions vehicle;

-the first time the car is both held and used is on or after 1 July 2022;

-the car is used by a current employee or their associate(s) (e.g., a family member); and

-luxury car tax has never been payable on the importation or sale of the car.

Registration, insurance, repairs, maintenance and fuel expenses provided for eligible electric cars are also exempt from FBT.

Note that, while the benefit is exempt from FBT, the taxable value of the benefit must still be determined when working out whether an employee has a reportable fringe benefits amount to be included on their income statement or payment summary.

Editor: Please contact our office if you have any queries about this new exemption and how it may affect your obligations for the 2023 FBT year.

Tips to reduce study and training loan balances

If you have a study and training loan balance (e.g., a HELP debt), it may be worthwhile to consider methods of reducing the balance to ensure you are not left with a large tax bill when your 2023 income tax return is lodged.

While there is no interest charged on study and training loans, indexation is added to these debts on 1 June each year, based upon the consumer price index (‘CPI’). Given the current rate of inflation, individuals with study and training loan balances should expect a larger than normal adjustment this year.

If you have a study and training loan balance, it is worth checking your loan balance and considering the following tips:

• Let your employer know if you have started studying or have a study loan.

• Check the amount your employer is withholding. If there has not been enough withheld to cover your compulsory repayment, you can ask your employer to increase the withholding amount.

• Make a voluntary repayment to reduce your total loan amount. Indexation on the loan is applied on 1 June, so a voluntary repayment prior to this date will reduce the balance that indexation is applied to. Note that it may take a few business days for the ATO to receive and process the payment.

Indexation will not apply to a study and training loan on 1 June if the balance is nil. Any loan debt over 11 months old will be subject to indexation.

Editor: The compulsory repayment threshold for the 2023 financial year is $48,361. If you earn over this amount, the compulsory repayment is worked out when your tax return is lodged, and it will be included on your notice of assessment.

Reminder of March 2023 Quarter Superannuation Guarantee (‘SG’)

Employers are reminded that the SG obligation for the 1 January 2023 to 31 March 2023 quarter is due by 28 April 2023.

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.

As a reminder, from 1 July 2022, the compulsory SG rate increased to 10.5% (previously 10%). The compulsory SG rate will increase again to 11% for the period 1 July 2023 to 30 June 2024. So now might be a good time to ensure your payroll systems are updated by the start of the next 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 and Federal Police crack down on GST fraud

Significant change to claiming working from home expenses

Before 1 July 2022, an individual taxpayer that incurred additional deductible expenses as a result of working from home, had a choice of three methods to claim these expenses. 

These choices were:

-   The shortcut method – which was available from 1 March 2020 to 30 June 2022;

-   The fixed-rate method – which was available from 1 July 1998 to 30 June 2022; or

-   Actual expenses, that is calculating the actual expenses incurred as a result of working from home (Editor: This method can be burdensome to apply in practice)

From 1 July 2022, as a result of the release of PCG 2023/1 by the ATO, the shortcut method and the fixed-rate method have been abolished. 

A replacement method that can be used instead of the actual expenses method (which has not been abolished) is the revised fixed-rate method.

Under the revised fixed-rate method, a deduction can be claimed of 67 cents per hour for energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables.

Other expenses associated with working from home, such as depreciation of  home office furniture and a personally owned computer used at home for work purposes, will need to be calculated on an actual basis when using the revised fixed-rate method.

To claim a deduction under the new fixed-rate method, an individual needs to meet three criteria, which are:

-   The individual is working from home while carrying out their employment duties or carrying on their business on or after 1 July 2022;

-   They are incurring additional running expenses of the kind outlined in the above discussion as to what the 67 cents per hour amount reflects, as a result of working from home;

-   They keep and retain relevant records in respect of the time they spend working from home and for the additional running expenses (covered by the rate per hour) they are incurring.

There are strict record keeping requirements associated with this new method.

For the year ending 30 June 2023, a taxpayer using this new method will need to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023. 

The taxpayer will also need to keep a record of the total number of actual hours they worked from home for the period 1 March 2023 to 30 June 2023.

The record of the actual hours worked from home could be maintained by timesheets, rosters, time-tracking apps, logs of time spent accessing employer systems or online business systems, or a diary kept contemporaneously.

For the year ending 30 June 2024 and later income years, a taxpayer using this method must also keep a record of actual hours worked from home for the entire year.

Under both the short-cut method and the previous fixed-rate method, there was no need for detailed record keeping of the actual hours worked from home.  Estimates were acceptable.   This is a significant change and increases the record keeping burden on taxpayers.

Another significant change, which results in an increase in record keeping obligations under the revised fixed-rate method, is that in relation to running costs such as energy costs, phone and internet costs, a taxpayer needs to maintain at least one monthly or quarterly bill. 

This is because the ATO now requires proof that the individual has incurred the running costs represented by the 67 cents per hour deduction.

Transfer balance cap indexation

An individual’s transfer balance cap (‘TBC’) determines the maximum amount they can commit to a retirement phase interest in their super fund, such as an account-based pension, without being subject to penal taxation.  

When the TBC concept was introduced with effect from 1 July 2017, it was initially $1,600,000.  It was increased by $100,000 as of 1 July 2021 to $1,700,000. 

The TBC increases in $100,000 increments (or multiples of $100,000) in line with the Consumer Price Index (‘CPI’).

As a result of a substantial increase in the CPI, the TBC is due to increase on 1 July 2023 by $200,000.

Accordingly, an increase in the TBC is seen as a good thing, as it potentially means an individual can have more of their superannuation interest supporting a tax-free pension.

Individuals who start their first retirement phase income stream (otherwise known as a pension) on or after 1 July 2023 will have a TBC of $1.9 million.

From 1 July 2023 individuals will have a TBC between $1.6 million and $1.9 million.

An individual who already had a transfer balance account and at any time met or exceeded their personal TBC will not be entitled to indexation, and their personal TBC will remain the same.

For example, an individual who started their first retirement phase income stream, an account based pension, on 1 January 2022 with a value of $1,700,000 at the time of commencement, would have fully utilised their then TBC of $1,700,000.  

 Such an individual, having already fully utilised their TBC, will not gain any benefit from the increase in the TBC due to indexation.

Where an individual has partially utilised their TBC before 1 July 2023, instead of benefiting from the full $200,000 increase in the TBC, they will have access to a proportional indexation of their TBC based on the unused cap percentage of their transfer balance account.

Editor: To see if this change will impact on how much you can have counted towards a pension interest in your super fund, please contact our office

ATO and Australian Federal Police crackdown on GST-fraud promoters

A raft of enforcement activity has been undertaken across the country by the ATO-led Serious Financial Crime Taskforce, including the execution of search warrants and issuing of warning letters.

At 31 December 2022, the ATO took compliance action on more than 53,000 clients and stopped approximately $2.5 billion in fraudulent GST refunds from being paid to individuals seeking to defraud the system.

Two individuals have been sentenced to jail time for their crimes so far, following their arrest in 2022.

This follows 87 earlier arrests across the country, with many more to come. The ATO has commenced writing to more than 20,000 individuals involved in the fraud, warning them of the serious consequences coming their way unless they come forward and repay the money they have defrauded.

The fraud was first detected in early 2022 and involved offenders inventing fake businesses and Australian business number (ABN) applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.

Promoters of the fraud use social media and other channels to recruit participants.

The ATO has been issuing warnings to the community to be on the lookout for fraud schemes that are being promoted through social media and other channels.

For those who may be tempted by the promise of big gains, the ATO has sophisticated risk models and works with banks, law enforcement agencies, and other organisations to share information and detect fraud. It also has access to intelligence through community tip offs, social media platforms, and other information sources.

Please 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.

Electric vehicle FBT exemption is now law

Super guarantee contributions for the December 2022 quarter

A reminder to employers that their December 2022 superannuation guarantee (‘SG’) contributions were due by 28 January 2023.

Do not forget the two changes to SG that commenced on 1 July 2022:

-   the rate increased from 10% to 10.5%

-  employees no longer need to earn $450 per month to be eligible.

Employers now need to make super contributions for all eligible employees, regardless of how much they were paid – their earnings amount is not relevant. However, employees who are under 18 still need to work more than 30 hours in a week to be eligible.

Electric vehicle FBT exemption legislation is now law

Legislation to make certain electric vehicles exempt from Fringe Benefits Tax (‘FBT’) has now been enacted into law.

Certain zero or low emissions vehicles provided as a car benefit on or after 1 July 2022, can be exempt from FBT.

For this exemption to apply various criteria need to be satisfied. 

The car needs to have been both held and used for the first time by the employer on or after 1 July 2022 and it cannot have been subject to the luxury car tax when it was purchased. 

For the 2023 income year, to qualify for this exemption, the car needs to cost less than the luxury car tax threshold for fuel efficient vehicles of $84,916.

A vehicle is a zero or low emissions vehicle if it satisfies both of these conditions:

-   It is a:

–  battery electric vehicle; or

–  hydrogen fuel cell electric vehicle; or

–  plug-in hybrid electric vehicle.

-   It is a car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).

Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.

Please note that in relation to plug-in hybrid electric vehicles, there is a specific limitation on the FBT exemption.

From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law. 

There are special provisions allowing the exemption to continue when a plug-in vehicle was provided as an exempt benefit under an agreement entered into before 1 April 2025 that continues after this date.

Although the private use of an eligible electric car is exempt from FBT, an employer still needs to include the notional value of the benefit when working out whether an employee has a reportable fringe benefits amount (‘RFBA’).

An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year.  The RFBA must be reported through Single Touch Payroll or on the employee's payment summary.

The amount of an RFBA reported for an employee is not added to an employee’s taxable income for determining income tax and Medicare Levy liabilities. 

However, it is added to an employee’s taxable income for calculating Medicare Levy Surcharge liability, and is included in income tests for family assistance, child support assessments, and some other government benefits and obligations.

Further eligibility age change for downsizer contributions

In another recent legislative change, the eligibility age to make a downsizer contribution into superannuation has been reduced to 55 from 1 January 2023.

This further reduces the downsizer eligibility age, which changed from 65 to 60 from 1 July 2022.

From 1 January 2023, eligible individuals aged 55 years or older can choose to make a downsizer contribution into their super fund of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home that has been held for at least 10 years and qualifies for at least a partial main residence exemption.

There are no changes to the remaining eligibility criteria.

Key dates for downsizer contributions:

-   Eligible individuals aged 55 years or older can make a downsizer contribution from 1 January 2023.

-   For any downsizer contributions made between 1 July 2022 and 31 December 2022, eligible individuals must be aged 60 years or older at the time of making their contribution.

• Other important information to consider for 55-59 year olds:

-   Individuals have 90 days from receiving the sale proceeds of their home to make a downsizer contribution.
This means if an individual receives the proceeds of sale prior to 1 January 2023, they can make their contribution after 1 January 2023, so long as they are still making it within 90 days of receiving the proceeds.

-   If 1 January 2023 falls outside of their 90 day window to make a downsizer contribution, they will not be eligible. It is unlikely the ATO would grant an extension of time in these circumstances.

Unlike most other contributions into superannuation, there is no upper age limit for being eligible to make a downsizer contribution.  Even a 95 year could make a downsizer contribution, and there is no need to satisfy the work test!

Builder unable to obtain refund of incorrectly charged GST

The Administrative Appeals Tribunal has held that a builder was unable to receive a refund of GST incorrectly charged on the sale of a residential premises that had been rented for just over five years since construction was complete.

The taxpayer claimed the GST charged on a unit was charged in error, on the basis that the sale was actually an input taxed supply.  Accordingly, the taxpayer sought a refund of the GST previously remitted to the ATO on the unit.

For residential premises to fall outside the definition of ‘new residential premises’ and therefore be input taxed rather than a taxable supply, it needs to meet the requirements of S.40-75(2)(a) of the GST Act.  

Broadly, to meet the requirements of this section there needs to have been a continuous five-year period since the premises first become residential premises, during which the premises have “only been used for making supplies that are input taxed” (i.e., being used as a rental property).

Unfortunately for the builder, this requirement was not satisfied because the unit was also marketed for sale a few months before the completion of the five-year period since the issue of the certificate of occupancy.  

A lesson to be learnt here is that any time a residential premises is both rented and on the market for sale it does not meet the requirements to count towards the five-year continuous period that it has “only been used for making supplies that are input taxed.” 

Please 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 record-keeping tips

ATO warning to SMSFs: "Paying the price for non-compliance"

There are various courses of action available to the ATO when trustees of self-managed super funds ('SMSFs') have not complied with the super laws, including applying administrative penalties.

A number of factors determine the amount of the administrative penalty, including:

- the type of contravention;

- when it occurred; and

- the number of penalty units that apply.

For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions.

Editor: Note that the Government recently introduced a Bill to increase the value of a penalty unit for Commonwealth offences committed on or after 1 January 2023 from $222 to $275.

The ATO imposed total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions such as trustees illegally accessing super benefits, loans, or financial assistance given to members.

Also, just because a trustee receives an administrative penalty doesn’t mean the ATO won't undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.

ATO's record-keeping tips

The ATO has reminded taxpayers that they should understand the record-keeping requirements for their business and keep accurate and complete records as they occur, as this should help them avoid penalties that may apply and reduce the possibility of the ATO denying their expense claims.

The following are some of the ATO's top tips to help businesses get it right and avoid record-keeping errors (based on common record-keeping errors the ATO sees):

- Keep accurate records of all cash and electronic transactions.

- Reconcile cash and EFTPOS sales regularly (by ensuring payments recorded internally match external records) and enter the amounts into the main business accounting software system.

- Check for mistakes if things don't add up.

- For expenses that are for both business and private use, work out and record the business portion accurately.

- If the taxpayer has used trading stock for private purposes, remember to account for the stock as if the business sold it, and include the value in the business’s assessable income.

- Don't use estimates to prepare tax returns and business activity statements ('BASs').

- If claiming credits for GST, set aside the GST in a separate ledger account to make record-keeping and calculations easier.

- Most records must generally be kept for at least 5 years — from when the record was prepared or obtained, or the transaction or related acts were completed, whichever is later. Records relating to the calculation of losses may need to be kept longer, depending on when that loss is deducted (or offset against a capital gain).

- Accurate and detailed records must also be kept when paying contractors to provide certain services on behalf of the business (so the business can easily complete its taxable payments annual report at the end of each year).

- Use the ATO's Record-keeping evaluation tool to find out how well the business is currently keeping its records.

If businesses aren't sure how this information applies to their situation, the ATO recommends they ask their registered tax or BAS agent, or contact the ATO for help. The ATO says it will help businesses get back on track if they make an error.

Input tax credits denied due to lodging BASs late

The Administrative Appeal Tribunal ('AAT') has held that a taxpayer could not claim $91,239 of input tax credits ('ITCs') at least partly because it lodged the relevant BASs more than 4 years too late.

Specifically, the GST Act operates such that, if an extension of time to lodge a BAS has not been granted prior to the expiry of 4 years after the day on which it was required to be given to the ATO, the entitlement to ITCs immediately ceases.

The AAT also noted that there is no discretion to circumvent this part of the GST Act, and the ATO cannot provide further time to lodge a BAS retrospectively outside of the relevant 4 year period.

It did not matter that the taxpayer was (for example) involved in a dispute with a franchisor nor that they were impacted by lockdown restrictions.

Therefore, the taxpayer was no longer entitled to claim ITCs in relation to the BASs lodged by the taxpayer 4 years after they were required to have been given (and was also denied other ITCs for BASs that were lodged within the required 4 year period, as a substantial amount of the ITCs claimed remained unsubstantiated by a valid tax invoice).

Chef spending most of a year on cruise ships still a 'resident'

The AAT has also held that a taxpayer, an Australian chef with over 20 years’ experience both in Australia and overseas, was an Australian resident for taxation purposes in the 2016 income year.

During that year, he spent only 86 days in Australia, being the period prior to him leaving Australia to commence employment with a cruise ship company, and a period during which he visited his family between deployments.

However, the AAT noted that he had no intention that any new place of residence be indefinite, and he did not become a resident of a new place.

Importantly, his 'domicile' for tax purposes (being Australia) did not change (and the AAT stated that "a ship cannot be a domicile").

Requesting stapled super fund details for new employees

The ATO is reminding employers that, when they have new employees that have not provided them with their choice of super fund, super contributions should be made into:

• the employee's stapled super fund; or

• the employer's nominated account (but only if the ATO advises that the employee does not have a stapled super fund).

Editor: A stapled super fund is an employee's existing super account which is linked, or 'stapled', to them and follows them as they change jobs.

In December 2022, the ATO is releasing a solution that enables employer software and payroll products to request stapled super funds. That is, stapled super enabled software will allow the employer to request stapled super details from within their business software, so they will no longer have to request them separately via ATO online services.

Employers should contact their software provider to find out if their software solution will incorporate the stapled super functionality.

The ATO also encourages employers using the 'bulk request process' to begin discussions with their software providers, as the ATO's current bulk request process will be decommissioned from mid-2023.

Please 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.

Deadline for all company directors

Director ID deadline is approaching

The Government has launched an awareness campaign to help company directors get their director identification number ('director ID') as the 30 November deadline approaches.

A director ID is a unique 15‑digit identifier that a company director will apply for once and keep forever.  Director IDs are administered by the Australian Business Registry Services ('ABRS'), which is managed by the ATO.

All directors of companies registered with ASIC will need a director ID and must apply by the 30 November deadline (although directors of Aboriginal and Torres Strait Islander corporations may have additional time to apply).

Some people may not realise they are directors, so the campaign is targeting those that run small businesses, self‑managed superannuation funds, charities, not‑for‑profits, and even some sporting clubs.

The fastest way to apply is online at abrs.gov.au, and the director ID will be issued instantly once the application is complete.  It is free to apply and directors must apply themselves, as they are required to verify their identity (and it is this "robust identification process" that will help prevent the use of false and fraudulent director identities).

More information about director IDs, including who must apply, is available on the ABRS website.

Editor: Feel free to contact our office if you need more information about this but, as noted above, we cannot actually make the application for you.

Why are credits and refunds being offset?

The ATO has reached out to small businesses who may have recently received a letter advising that they have a debt on hold and any credits or refunds would be offset against this debt.

As a result, such a small business may find that their refund or credit is less than expected.

Editor: The ATO has advised that this process of offsetting refunds or credits temporarily paused due to the pandemic and its financial impact on taxpayers.  However, the ATO has restarted offsetting refunds and credits to pay off debts on hold since June 2022.

The ATO also sent out 'awareness letters' to some not-for-profits and individuals in September 2022, similarly advising them they had a debt on hold and any credits or refunds would be offset against this debt.

Taxpayers can use Online services for business to search for debts that were previously put on hold and not included in their account balance.

A debt on hold remains payable and collection action may recommence if:

-      the taxpayer's circumstances change, and the ATO has reason to believe they are now able to pay the debt;

-      the taxpayer agrees to pay their debt; or

-      the taxpayer has a refund or credit balance which will automatically be offset to their debt on hold.

ATO advice for SMSFs thinking about investing in crypto assets

The ATO recommends that trustees of self-managed super funds ('SMSFs') thinking about investing in crypto assets should seek professional advice from a licensed financial adviser.

There are organisations who offer trustees help to set up a fund or use their existing fund to invest in crypto assets.  However, the ATO notes that some of these organisations are not licensed to provide financial advice, which means the usual consumer protections and access to the Australian Financial Complaints Authority ('AFCA') are not available for using these services.

There are many things to consider before deciding to invest in crypto assets, so it's important to get it right, especially since trustees are ultimately responsible for ensuring the investment complies with the super and tax laws.

When investing in crypto assets, trustees must ensure it is allowed under the fund’s trust deed, is made in accordance with the fund’s investment strategy, and the trustee has considered the level of investment risk given the highly volatile nature of the investment.

From a regulatory perspective it's important that:

-      The crypto assets are owned by the fund and are held separately from the trustee's own personal or business assets.  This means the fund must have its own digital wallet, separate to any used by the trustee for personal or business purposes.

-      The investment is valued at market value in line with the ATO's valuation guidelines.

-      Any crypto assets that a member or related party hold personally are not sold to the fund or transferred to the fund as a contribution.

-      The investment is consistent with the sole purpose test, and does not involve the giving of financial assistance to a member.

Check that holiday employees get the right super

The ATO is reminding employers that the holiday season is fast approaching, and that their holiday casuals may now be eligible for super.

From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee ('SG') eligibility has been removed.

This change doesn’t affect other eligibility requirements for SG.  In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.

For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax.  He also works 5 hours at his local café, earning $150.

As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay him super on the $800 earned.  However, as Anish works less than 30 hours a week at the café and is under 18, he is not entitled to super from this employer.

The ATO recommends that employers check their payroll and accounting systems are up to date so they are correctly calculating their employees' SG payments, and that registered tax agents and BAS agents can help with their tax and other obligations.

Optus data breach

The ATO is aware of the recent Optus data breach and that people who have been affected might be concerned about their personal data, and is assuring people that ATO systems have not been affected by the Optus data breach.

The ATO recommends that anyone who thinks they have been affected by the Optus data breach should contact Optus Customer Service on 13 39 37.

Information for those caught up in the data breach is available from the Australian Cyber and Security Centre at cyber.gov.au.

The ATO also reminds the community that it is important to always be vigilant for suspicious activity.  The following tips can help protect accounts and keep personal information safe:

-       Use multi-factor authentication for accounts where possible.

-       Be careful when clicking on links and providing personal information.

-       Make sure contact details are up to date when using online services.

Please 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 updates ‘cents per kilometre’ rate for individuals

July 2022

ATO’s small business focus for 2022 income year

The ATO announced that it will be focussing on the following matters for small business tax returns for the 2021/22 year:

-   Deductions that are private in nature and not related to business income, as well as overclaiming of business expenses (especially for taxpayers running a home-based business).

-   Omission of business income (e.g., income from the sharing economy or new business ventures).

-   Record keeping – including insufficient or non-existent records that are needed to substantiate claims.

The ATO acknowledges that it has been a tough couple of years for many small business owners and encourages taxpayers to act early to find a solution if they are getting behind in their tax obligations, either by contacting their tax agent or the ATO.

ATO targeting SMSFs that fail to lodge annual returns

The ATO has observed an increase in the number of SMSFs that fail to lodge their first annual return and become what the ATO refers to as ‘NEVER’ lodgers.  The ATO is particularly concerned where there has been a roll-over into these SMSFs, as this is a strong indicator illegal early release of superannuation benefits may have occurred.

A minority of SMSF trustees continue to ignore ATO reminders about lodging annual returns.  This group is now being targeted with a compliance campaign the ATO calls ‘3 strikes and you’re out’.

Under this campaign, the ATO will take the following action:

1.    The ATO’s compliance action starts with a blue letter, that encourages trustees to take immediate action and lodge their return and provides a pathway for those in need of support.

2.    If the ATO does not receive a response to the blue letter, it will issue an amber letter warning the trustees of the consequences of failing to lodge their return.

3.    If the ATO still does not receive a response, it will issue a final warning, a red letter advising the ATO is commencing the disqualification process and considering other enforcement action.

Last year the ATO issued red letters to trustees who had never lodged their first annual return and has now commenced disqualifying the 95 trustees that did not respond.

ATO updates ‘cents per kilometre’ rate for individuals

The ATO has updated the cents per kilometre rate relating to individual car expenses for the 2023 income year to 78 cents per business kilometre.

The cents per kilometre method:

q   uses a set rate for each kilometre travelled for business;

q   allows taxpayers to claim a maximum of 5,000 business kilometres per car, per year;

q   does not require written evidence to show exactly how many kilometres were travelled (but the ATO may ask taxpayers to show how they worked out their business kilometres, for example by means of diary records); and

q   uses a rate that takes all vehicle running expenses (including registration, fuel, servicing and insurance) and depreciation into account.

The cents per kilometre rate was 72 cents for the 2021 and 2022 income years.

ATO to target ‘wash sales’ this Tax Time

The ATO is warning taxpayers to not engage in ‘asset wash sales’ to artificially increase their losses to reduce gains (or expected gains).  Wash sales are a form of tax avoidance that the ATO is focussed on this tax time.

Wash sales typically involve the disposal of assets (e.g., cryptocurrency and shares) just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets.  Such sales are usually done to create a loss to be offset against a gain already derived, or expected to be derived, in certain circumstances, in a tax return.

The ATO’s sophisticated data analytics can identify wash sales through access to data from share registries and crypto asset exchanges.  When the ATO identifies this behaviour, the capital loss is rejected, resulting in an even bigger loss to the taxpayer.

The ATO has warned taxpayers engaging in wash sales that they are at risk of facing swift compliance action and additional tax, interest and penalties may apply.  Taxpayers are urged to ignore any advice encouraging a wash sale of any asset. The clear advice from the ATO is to check the ATO website or check with an independent registered tax professional and not to rely on advice received through media, social media, or advertisements.

Downsizer contributions age changes from 1 July 2022

From 1 July 2022, people aged 60 years and over will be eligible to make downsizer contributions of up to $300,000 per person ($600,000 per couple) from the sale proceeds of their home into their super.  For downsizer contributions made prior to 1 July 2022, eligible individuals must have been aged 65 years or older at the time of making their contribution.

Eligible downsizer contributions do not impact or count towards the member’s concessional or non-concessional super contribution caps.

During the 2022 Federal election, the previous Coalition Government announced it would support a further reduction to the downsizer eligibility age to 55 years.  However, this announcement has not become law.  Accordingly, contributions received on or after 1 July 2022 from members who are 55 to 59 will:

q   be ineligible for treatment as downsizer contributions; and

q   generally count towards either the member’s non-concessional or concessional superannuation contributions caps.

Super guarantee contribution due date for June 2022 quarter

The due date for employers to make super guarantee contributions for their employees for the June 2022 quarter is 28 July 2022.  Note that the super guarantee rate in relation to salary and wages paid on or before 30 June 2022 is 10%.

Employers that do not pay an employee’s superannuation guarantee amount on time (and to the right fund) are liable to pay the ‘superannuation guarantee charge’ (‘SGC’).  The SGC is more than the superannuation amount that is otherwise payable for the employee and is not tax deductible.

As we reported last month, the super guarantee rate increases to 10.5% in relation to salary and wages paid on or after 1 July 2022 (even if they are paid in relation to work performed before that date).

Note also, contributions received by superannuation funds after 30 June 2022 will not be deductible in the 2022 income year, even if they are made in relation to work performed during the 2022 income year.

Please 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 focus for tax returns 2022

ATO priorities this tax time

The ATO has announced four key areas that it will be focusing on for Tax Time 2022:

-   Record-keeping.

-   Work-related expenses.

-   Rental property income and deductions.

-  Capital gains from crypto assets, property, and shares.

Before claiming income tax deductions for their expenses, taxpayers must ensure:

-   they spent the money themselves and were not reimbursed;

-   if an expense is for both income-producing and private use, only the portion relating to producing income is claimed; and

q   they have a record to prove it.

Avoid double dipping on your deductions

Taxpayers are reminded not to make the mistake of ‘double dipping’ on deductions (that is, claiming expenses twice) in their tax return this year.

Some of the ‘double dipping’ mistakes commonly made relate to the following deductions:

q   Working from home expenses

A common mistake involves using the 'shortcut method' to claim working from home expenses and then claiming additional amounts for expenses such as mobile phone and internet bills, as well as the decline in value of equipment and furniture.

The working from home shortcut method is all-inclusive.

There are three methods available to claim a deduction for working from home expenses depending on individual circumstances; namely, the shortcut, fixed rate and actual cost methods.

The method that gives the best outcome can be used, as long as the eligibility and record-keeping requirements for the chosen method are observed.

q   Car expenses

A common mistake involves using the 'cents per kilometre' method to claim car expenses, and then double dipping by separately claiming expenses such as fuel, car insurance, and registration.

The cents per kilometre rate is all-inclusive and already covers decline in value, registration, insurance, maintenance, repairs, and fuel costs. 

q   Reimbursed expenses

Taxpayers cannot claim expenses that have already been reimbursed by their employer.

Get ready for super changes from 1 July 2022

As the new financial year approaches, employers need to be aware of two important super changes.

From 1 July 2022, employees can be eligible for super guarantee (‘SG’), regardless of how much they earn, because the $450 per month eligibility threshold for when SG is paid has been removed. 

Employers only need to pay super for workers under 18, when they work more than 30 hours in a week.

Furthermore, the SG rate will increase from 10% to 10.5% on 1 July 2022.  Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July, even if some or all of the pay period is for work done before 1 July.

Employers should update their payroll and accounting systems to ensure they continue to pay the right amount of super for their employees.

ATO to start clearing backlog of ENCC release authorities

Due to "unavoidable delays caused by improvements to" its systems, the ATO will start issuing requests to release excess contributions and other charges for individuals who did not make an election on the tax treatment of their excess non-concessional contributions ('ENCC') for prior financial years.

This may result in a higher than normal number of release authorities for members of superannuation funds over the coming months while the ATO works through the backlog.

ATO warns about GST fraud

Taxpayers are being warned to be on the lookout for dodgy online ads, often on social media platforms, promising easy GST refunds.

The ATO recently issued a media release about large-scale GST fraud attempts exceeding $850 million, that involve customers setting up an ABN without operating a business, and then submitting fictitious BAS statements to get a GST refund.

The ATO said it has already successfully stopped $770 million in attempted fraud before payment.

“The people who are involved in these activities aren’t accidentally ticking a box on an online form.  They’re signing to say that they’ve set up an ABN for a business that doesn’t exist, then lodging a BAS with false information on it, to receive GST refunds that they are not entitled to,” the ATO said.

Taxpayers who think they’ve been involved in this arrangement are urged to let the ATO know (before the ATO contacts them) by calling 1300 130 017.

Confidential reports of suspected tax evasion or crime can be made online (visit ato.gov.au/tipoff) or by calling the ATO’s Tax Integrity Centre on 1800 060 062.

Employers need to prepare for changes under STP expansion

Single Touch Payroll ('STP') reporting has been expanded.

This expansion, known as ‘STP Phase 2’, means that employers will need to start reporting extra information to the ATO each time they run their payroll.

Some digital service providers (‘DSPs’) needed more time to update their products and applied for deferrals, which cover their customers – therefore, when an employer can start Phase 2 reporting depends on when their payroll product is ready.

Employers that have not already started Phase 2 reporting should ask their DSP when their product will be ready (if they don't already know).

Employers need to be across the changes and get ready to start Phase 2 reporting.  This includes:

q   checking if changes need to be made to payroll pay codes/categories so they align with Phase 2 requirements;

q   reviewing allowances employers pay and how they need to be reported in Phase 2;

q   understanding changes to salary sacrifice reporting; and

q   understanding how to assign an income type to each payment.

The ATO is also reminding employers that amounts paid to 'closely held payees' should now be reported through STP.

A ‘closely held payee’ is an individual directly related to the entity they receive payments from. For example, family members of a family business, directors or shareholders of a company and beneficiaries of a trust.

There are concessional reporting options for closely held payees reporting which include the following:

q   Reporting actual payments on or before the date of payment (along with arm's length employees).

q   Reporting actual payments quarterly.

q   Reporting a reasonable estimate quarterly.

Editor: Should you have any questions (or require any assistance) about any of the issues raised in this update, please feel free to contact our office.

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.

Business Tax debts to go to credit reporting agencies?

No reduction in the Private Health Insurance rebate as of 1 April 2022

An event that we have become accustomed to every 1 April, is that the amount of the Private Health Insurance (‘PHI’) rebate decreases.

The Australian Government rebate on PHI is annually indexed on 1 April by a Rebate Adjustment Factor (‘RAF’) representing the difference between the Consumer Price Index and the industry weighted average increase in premiums.

The RAF for 2022 has been calculated as 1.

This means there will be no changes to the PHI rebate on 1 April 2022.

Editor:  With inflation at levels Australians have been unaccustomed to over the last 20 years, at least there is one very small piece of good news.

Disclosure of business tax debts

The ATO is in the process of writing to taxpayers that may be eligible to have their tax debts disclosed to credit reporting bureaus (‘CRBs’).

The ATO can potentially report outstanding tax debts to a CRB where the following criteria are satisfied:

-   The taxpayer has an Australian business number and is not an excluded entity;

-    The taxpayer has one or more tax debts and at least $100,000 is overdue by more than 90 days;

-     The taxpayer is not engaging with the ATO to manage their tax debt; and

-     The taxpayer does not have an active complaint with the Inspector-General of Taxation about the ATO’s intent to report its tax debt information.

Excluded entities are a deductible gift recipient, a complying superannuation fund, a registered charity and a government entity.

The purpose of this letter from the ATO is to raise awareness of the actions that the ATO can now take under the Disclosure of Business Tax Debts measure.

The letter will be sent to all taxpayers with business tax debts that currently meet the criteria (discussed above) for disclosure.

This letter from the ATO provides business taxpayers with information on how to effectively engage with the ATO to manage their tax debt.

Taxpayers can avoid disclosure to a CRB by making payment in full or negotiating a payment plan.

If an eligible taxpayer does not take steps to actively manage their debt, they will remain eligible for disclosure.

Before the ATO takes any final action to disclose a tax debt, it will issue the taxpayer with a formal Intent to Disclose Notice.

If a taxpayer receives an Intent Notice, asking them to 'Act now or your tax debt will be reported to credit reporting bureaus', the taxpayer or their tax agent must contact the ATO within 28 days of receiving the notice to avoid the debt being reported.

It is crucial for taxpayers to engage with the ATO early before their debts become unmanageable.

Editor:  If the ATO reports a taxpayer that has an outstanding debt to a CRB, this can have a negative impact on the client’s credit rating. 

This in turn may affect the client’s ability to borrow from banks and other financial institutions.

High Court rejects attempt to disclaim interest in trust distribution

The High Court has rejected a taxpayer’s attempt to disclaim an interest in trust income that arose as a result of a default beneficiary clause being triggered.

Facts

The taxpayer, Ms Natalie Carter, was one of five default beneficiaries of the Whitby Trust, a discretionary trust.

For the 2014 income year the trustee had failed to appoint or accumulate any of the income of the Trust.

The Trust Deed contained a default beneficiary clause, nominating Ms Carter and four other beneficiaries, as the default beneficiaries, in the event that the trustee had failed to allocate trust income for the benefit of beneficiaries by 30 June of a particular year.

The ATO issued each of Ms Carter and the four other default beneficiaries with an assessment for one-fifth of the income of the Whitby Trust for the 2014 income year on October 2015.

This was done on the basis that they were “presently entitled” to that income within the meaning of S.97(1) of the Income Tax Assessment Act 1936.

An initial unsuccessful attempt was made by the default beneficiaries to disclaim their entitlement to default distributions in November 2015.

A further attempt by the default beneficiaries to disclaim their interest in trust income for the 2014 income year was made in September 2016 in what was referred to as the “Third Disclaimers”.

The Administrative Appeals Tribunal held that the Third Disclaimers were ineffective whereas the Full Federal Court found in the taxpayers’ favour that they were effective.

The High Court was then asked to consider the legal status of the Third Disclaimers.

Decision

It was the unanimous decision of the High Court that the Third Disclaimers were ineffective.

The High Court carefully analysed the words of S.97(1).

In particular, the phrase “is presently entitled to a share of the income of the trust estate” in S.97(1) is expressed in the present tense. 

The plurality found that expression "is directed to the position existing immediately before the end of the income year for the stated purpose of identifying the beneficiaries who are to be assessed with the income of the trust – namely, those beneficiaries of the trust who, as well as having an interest in the income of the trust which is vested both in interest and in possession, have a present legal right to demand and receive payment of the income."

The High Court took the view that the question of the "present entitlement" of a beneficiary to income of a trust must be tested and examined "at the close of the taxation year", not some reasonable period of time after the end of the taxation year.

Accordingly, Ms Carter and the other four beneficiaries had been appropriately assessed by the ATO under S.97(1) given their status as default beneficiaries under the Trust Deed.

For the sake of completeness, the High Court also rejected the taxpayers’ argument that a beneficiary of a discretionary trust, with reference to events that may occur in a “reasonable period” after the end of an income year, can trigger an event that would disentitle the beneficiary to a distribution.

Editor:  This decision is significant, because it backs the proposition that disclaimers of trust income cannot be effective if they occur after the end of the income year that gave rise to a present entitlement. 

It will be interesting to see in any subsequent Decision Impact Statement how the ATO intends to apply the decision in Carter’s case.

As we head towards the end of another income year, this case serves as a timely reminder to ensure for discretionary trusts, that steps are taken before the end of the income year to effectively distribute trust income.

This is done to avoid the operation of default beneficiary clauses, or the situation where no beneficiary is presently entitled to trust income and the trustee is assessed at the highest marginal rate.

Please 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.

$450 monthly earnings threshold removed for Super guarantee

Tax deductibility of COVID-19 test expenses

After much speculation, the Government announced that COVID-19 tests, including Polymerase Chain Reaction (‘PCR’) and Rapid Antigen Tests (‘RATs’), will be both:

-   tax-deductible; and

-    exempt from FBT;

broadly where they are purchased for work-related purposes.

This will require the introduction of new specific legislation (i.e., to clarify that work-related COVID- 19 test expenses incurred by individuals will be tax-deductible or FBT exempt where employers provide the tests to their staff) which will apply both where an individual is required to attend the workplace or has the option to work remotely.

The Government intends that these changes take effect from the beginning of the 2022 income year and will apply permanently once enacted.

Super changes and full expensing 12-month extension now law

A plethora of superannuation law tweaks has recently been made  (via recent legislative reforms) which include:

-   Removing the $450 monthly super guarantee threshold.

-   Reducing the eligibility age for making downsizer contributions from 65 to 60.

-   Changes to facilitate the removal of the work test for those aged between 67 and 75 regarding non-concessional and salary sacrificed contributions.  In addition, the bring-forward rule will now be available for people under the age of 75 (rather than 67, as is currently the case).

-   Increasing the maximum releasable amount under the First Home Super Saver scheme from $30,000 to $50,000.

-   Allowing super fund trustees to choose not to use the segregated assets method in certain circumstances.

Furthermore, the Government has also ‘made good’ on their promise to extend accelerated depreciation with legislation passing to allow  current Temporary Full Expensing measures to continue for another  12 months (i.e., to 30 June 2023).

12-month extension of the temporary loss carry-back measure

As announced in the 2020/2021 Federal Budget, legislation has now passed to allow eligible corporate entities (i.e., with, amongst other things, an aggregated turnover of less than $5 billion) a 12-month extension to claim a loss carry-back tax offset in the 2023 income year.  

The temporary loss carry-back rules were initially implemented in 2020 to promote economic recovery by providing cash flow support to previously profitable companies that fell into a tax loss position due to the COVID-19 pandemic.

The law allows eligible companies to carry-back tax losses from 2020, 2021, 2022 and now the 2023 income year to previously-taxed profits in the 2019 or later income years.

A company that does not elect to carry back losses under this temporary (yet extended) measure is still eligible to carry losses forward as usual.

Keeping and maintaining SMSF records

Trustees of SMSFs have been put on notice by the ATO that keeping and maintaining good records is one of their key responsibilities and legal obligations.  Good record keeping ensures trustees can ensure accurate and timely SMSF accounts, audits and income tax return lodgments. 

As a result, the ATO has recently confirmed that even where SMSF trustees rely upon super or tax professionals to administer their SMSF, each trustee remains personally responsible for good record keeping.

If trustees are unsure of their obligations, the ATO has encouraged them to view the ATO’s record-keeping videos available on their website (refer to QC 23333) and undertake an approved education course (refer to QC 41142) to improve their understanding and knowledge.

Editor: Talking about SMSFs... The ATO has recently released some interesting statistics, outlined in the article below. These statistics were taken from the information provided in the 2020 SMSF annual return lodgments.

SMSF – statistical overview from 2020 lodgments published

As of 30 June 2021, SMSFs have been reported as making up 25% of all super assets (i.e., $822 billion as of 30 June 2021).

At the same time, there were approximately 598,000 SMSFs with almost 1.115 million individual members.  Furthermore, as of 30 June 2020, on average, each SMSF has assets of just over $1.3 million.

The ATO has also reported that the total contributions to all SMSFs in 2020 was around $17.9 billion (a 4% increase from 2019).

Finally, according to ATO statistics, over 25,000 SMSFs were established in 2021 (with average assets of $391,000 upon establishment), and of these new SMSFs, 85% were founded with a corporate trustee (i.e., rather than an individual trustee).

New shield against debt recovery proposed for small business

Small businesses are to be afforded the ability to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (‘the Tribunal’) for orders to stay (i.e., temporarily suspend) specific ATO debt recovery actions.  Broadly, amending legislation will allow the Tribunal to make such an order only if the proceeding is brought under the Small Business Taxation Division of the Tribunal.

This proposal (initially announced in the most recent Federal Budget) aims to provide small business entities (‘SBEs’) with a cheaper and easier way to pause the effects of an ATO decision to recover a tax debt whilst their tax dispute is being considered.

Small employers and STP – the ATO gets serious

The ATO has advised it is in the process of shifting from its previous engagement and communication focus on Single Touch Payroll (‘STP’).  In particular, it will begin a ‘failure to lodge penalty’ process for small business employers (i.e., those with 19 or fewer employers) who have yet to commence STP reporting.

STP reporting has been mandatory for most small employers from the 2020 income year, with a final ‘nudge letter’ being issued to approximately 700 small employers in late January 2022.

Notably, the ATO advised that any remaining non-compliant small employers (i.e., those not subject to any appropriate reporting extensions or exemptions) will have been issued pre-penalty warning letters from 18 February 2022. 

Where an employer receives a pre-penalty warning letter, they will have a further 28 days to take action by either starting to lodge or contacting the ATO before a failure to lodge penalty will be imposed.

Editor: Should you have any questions (or require any assistance) about any of the issues raised in this update, please feel free to contact our office.

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.

Scamwatch : Scams cost Australia hundreds of millions per year

Super is now following new employees

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

-   offer eligible employees a choice of super fund;

-   if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and

-   pay super contributions into one of the following:

       –    the super fund they choose;

       –    the stapled super fund the ATO provides if they have not chosen a fund; or

       –    the employer's default fund (or another fund that meets the choice of fund rules) if the employer cannot pay into the two above.

ABN 'intent to cancel' program

The ATO is reviewing Australian business numbers ('ABNs') to identify potentially inactive ABNs for cancellation, and it has introduced a new automated process to allow taxpayers (or their tax agents) to confirm if their ABN is still required via a secure voice response system.

An ABN may be selected if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information.

The ATO reminds taxpayers that any income earned under an ABN needs to be reported in their tax return, regardless of the amount.  By keeping their tax obligations up to date, the ATO can see they are actively undertaking a business (so, therefore, their ABN should not be cancelled).

'Backpacker tax' may not apply to some backpackers

The High Court has held that the 'working holiday maker tax' (also known as the 'backpackers tax') did not apply to a taxpayer on a working holiday visa from the United Kingdom who was also an Australian tax resident, due to the application of the Double Tax Agreement between Australia and the United Kingdom.

The ATO has responded to this High Court decision, noting that it is only relevant where a working holiday maker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

Working holiday makers who may potentially be affected by this decision are encouraged to check the ATO website for updated guidance prior to lodging or amending a return or lodging an objection.

Employers should continue to follow rates in the published withholding tables for working holiday makers until the ATO updates its website with further guidance.

The ATO notes that a working holiday maker’s residency status for tax purposes is determined by the taxpayer’s individual circumstances, but most working holiday makers will be non-residents (consistent with their purpose of being in Australia to have a holiday and working to support that holiday).

Beware of scams

Scamwatch is warning that scams cost Australian consumers, businesses and the economy hundreds of millions of dollars each year and cause serious emotional harm to victims and their families. 

Cryptocurrency scams are the most 'popular' type of investment scams, representing over 50% of losses.  Often the initial investment amount is low (between $250 and $500), but the scammers pressure the person to invest more over time before claiming the money is gone or ceasing communication and blocking access to the funds. 

All age groups are losing money to investment scams, but the over-65s have lost the most, with $24 million lost this year.

Some simple steps individuals can take to protect themselves (and their businesses) are:

-    Never give any personal information to someone who has contacted you.

-    Hang up and verify the identity of the person contacting you by calling the relevant organisation directly - find them through an independent source such as a phone book, past bill or online search.

-    Do not click on hyperlinks in text/social media messages or emails, even if it appears to come from a trusted source.

-    Go directly to a website through a browser (e.g., to reach the MyGov website, type ‘my.gov.au’ into the browser).

-    Search for reviews before purchasing from unfamiliar online traders.

-    Be wary of sellers requesting unusual payment methods.

-    Verify any request to change bank details by contacting the supplier directly.

-    Consider a multi-factor approval process for transactions over a certain dollar amount.

-   Never provide a stranger remote access to your computer, even if they claim to be from a telco company such as Telstra.

Editor: Feel free to contact our office if you need any help at all with this or anything else.

Managing business cash flow

The ATO has issued a reminder to businesses that paying regular attention to their record-keeping and reporting tasks will help them better manage their cash flow and allow them to plan for the future.

The best way to make sure a business has enough cash available to meet its tax and other obligations is to do a cash flow budget or projection.  This information will help the business to:

-   see its likely cash position at any time;

-   identify any fluctuations that may lead to potential cash shortages;

-   plan for tax payments;

-  plan for any major expenses; and

-   provide lenders with information.

Accounting for income and expenses can help keep a business running smoothly — by giving it an overview of when it can expect money to come in and when it may go out, and highlighting where the business may need to direct its money.

The ATO provides resources about record keeping for business, and there is also information on business.gov.au regarding how to create a budget, and how to improve a business's financial position.

Data-matching program: Services Australia benefits and entitlements

The ATO has advised it will acquire Medicare Exemption Statement ('MES') data relating to approximately 100,000 individuals from Services Australia for the 2021 financial year through to the 2023 financial year inclusively, and compare it with claims made by taxpayers on their tax returns.

Please 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.