Federal Budget 2024-25

On Tuesday night, 14 May 2024, Federal Treasurer Jim Chalmers handed down his third Federal Budget for the Labor Government.  If anything, it was quite an underwhelming budget, leaning towards higher spending particularly over the upcoming year.  While this is the second consecutive budget surplus for the Labor Government, there is a forecast $28.3 billion deficit for the next financial year.  In fact, for the four years after the current year surplus, the forecast is for a combined deficit of $122 billion.

The economic story though is all about inflation at the moment: “When will we be rid of it?”  “And how much damage has it done along the way?”

Energy bill relief – $2.6 billion – yes it makes your electricity bills cheaper today, but will this lead to upwards inflationary pressure over the longer period?

The Government indicates inflation will be under control by Christmas 2025, but many economists and perhaps, more importantly, the RBA may not agree with that.

We would still call for more broader tax reforms including reducing state based taxes like transfer duty and payroll taxes, and replacing it will greater broad based consumption taxes (like GST).

Production tax credits and critical mining projects and fast-tracked investment processes were helpful wins for the top end of town.

We’ve outlined below some of the measures that were announced in the Budget that will impact on our clients.  As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government.  We will keep you updated on the status of any proposed measures.

Impact for individuals

Individual income tax rates

As previously announced by the Treasurer, the Stage 3 individual income tax rates were amended to provide tax relief to all taxpayers. 

The current tax rates (to 30 June 2024) are as follows:

 

From 1 July 2024, the reduced tax rates are as follows:


The tax savings for certain income levels are as follows:

 

The last table shows the difference between the tax payable for the 2024 financial year, compared to the tax payable for the 2025 financial year and how much that translates to a weekly saving.

Energy bill relief

A $300 rebate will be applied to all Australian households towards their electricity bills.  This will be a $75 credit on each quarterly electricity bill in the 2024-25 financial year.  Eligible small businesses will receive a credit of $325.

HECS

Another measure that was announced last week was the change to the HECS indexation rate.  Currently, HECS debts are indexed each year on 1 June using the Consumer Price Index (CPI).  Given the high rates of inflation, this resulted in an indexation rate of 7.1% applied to HECS debts on 1 June 2023.

The Budget announcement is to use the lower of CPI and Wage Price Index (WPI) to index HECS debts (backdated to 1 June 2023).  This means that the 7.1% CPI indexation rate used last year will be replaced with a 3.2% WPI (and a credit applied to HECS accounts to reflect the lower indexation at 1 June 2023).

It is also forecasted for the WPI to be 4% for the 1 June 2024 indexation.

Please read our article for more information about the indexation of HECS debts and whether it is beneficial to repay some or all of your debt.

Medicare Levy Low-Income Thresholds

The Medicare Levy low-income thresholds for singles, families, seniors and pensioners will also be increased from 1 July 2023.  The family income threshold will also now be increased by $4,027 per child (up from $3,760).

Rent Assistance

The Commonwealth Rent Assistance maximum rates have been increased by 10% from 20 September 2024 to address rental affordability challenges.

Paid Parental Leave

$1.1 billion was allocated in the budget towards paying superannuation on Commonwealth Funded Paid Parental Leave for births and adoptions on or after 1 July 2025.

Impact for businesses

The Budget contained a few measures to help small businesses:

Instant asset write-off threshold extended

From 1 July 2023, the instant asset write-off threshold was due to reduce to $1,000.  Last budget, this threshold was increased to $20,000 for businesses with an aggregated turnover of less than $10 million.  The increased threshold was to apply until 30 June 2024.  The announcement in this budget was to extend the $20,000 threshold to 30 June 2025.  We note that the announcement from last year’s budget (to increase the threshold to the $20,000) has still not passed by Parliament, leaving this measure uncertain as we close in on the end of the financial year.

We also note that, assets acquired for more than $20,000 can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first year and 30% thereafter.

ATO Counter-Fraud Strategy

$187 million has been allocated to the ATO Counter Fraud Strategy, including allocating funds to:

  • Identify and block suspicious activity in real time
  • Recover lost revenue from fraud
  • Counter fraud
  • Extend the period for which the ATO can withhold GST refunds (extended from 14 days to 30 days)

ATO Tax Avoidance Taskforce

The ATO Tax Avoidance Taskforce has been extended for 2 years from 1 July 2026.  The task force pursues key tax avoidance risks from multinationals, large public and private businesses and high-wealth individuals.

Foreign Resident CGT regime

The foreign resident capital gains tax (CGT) regime will be strengthened to provide greater certainty about the operation of the rules.  The amendments will apply to CGT events on or after 1 July 2025 and will:

  • Clarify and broaden the types of assets that foreign residents are subject to CGT on
  • Amend the point-in-time principal asset test to a 365-day testing period
  • Require foreign residents disposing of shares and other membership interests exceeding $20 million to notify the ATO, prior to the transaction being executed

Supporting Small Businesses

$41.7 million has been specifically allocated to supporting small businesses, as follows:

  • $25.3 million to support the Payment Times Reporting Regulator;
  • $10.8 million to extend the Small Business Debt Helpline;
  • $3 million to implement the Government’s response to the Review of the Franchising Code of Conduct;
  • $2.6 million for the Australian Small Business and Family Enterprise Ombudsman to support unrepresented small businesses to navigate business-to-business disputes through alternative dispute resolution.

We will keep you up-to-date with the progress of the implementation of these Budget measures.

If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

ATO Hit List – 2024 tax returns

ATO Hit List 2024 tax returns

The ATO have released their hit-list for the 2024 tax returns – essentially, this is a list of key areas that they will be focusing on for their tax return reviews (noting that, really, all areas are subject to review):

  • Incorrectly claiming work-related expenses
  • Inflating claims for rental properties
  • Failing to include all income in your tax return

Work-related expenses

Last year the ATO changed the records that were required to be kept to claim the fixed rate working from home deduction (see more in our article here).

To claim a working from home deduction using the fixed rate method, you need to have kept the following records:

  • Diary evidence showing the total hours worked from home; and
  • Records of the additional costs you have incurred for working from home (eg. Electricity bill, internet bill).

Simply “copying and pasting” your deduction from last year will likely result in a review of your tax return.

Rental properties

The ATO have specifically identified repairs and maintenance of rental properties as one of the areas of concern.  General repairs can be claimed as a tax deduction, but expenses that are capital in nature are not deductible as repairs (these may be eligible for a depreciation deduction instead).

While not specially identified by the ATO, interest deductions are also another area where significant mistakes are made by taxpayers. 

You need to ensure you keep full and complete records to ensure so your tax return can be prepared accurately.

See our previous article for rental properties here.

Missing income

If you rush to lodge your tax return on 1 July, not all of your income will be available on your ATO prefill report. 

Check that your income statement from your employer is marked as “tax ready” before lodging your tax return. 

Also check that all of your investment income has been included in your tax return (as it can take some time for this to be available on your ATO prefill report).

By following these steps, it means it will be less likely that your return will need to be amended.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore, it should be regarded as confidential and not be made available to any person without our consent,

Higher Education Debt – should I make voluntary repayments?

Higher Education Debt: 

Should I Make Voluntary Repayments?

Higher education debts (eg. HECS/HELP debts) that are unpaid on 1 June (and have been outstanding for 11 months) are automatically increased by an indexation rate. Previously, these debts have been increased by CPI. Last year, the application of CPI as the relevant indexation rate saw HECS debts increase by 7.1% last year – the highest indexation rate ever applied. 

On 6 May 2024, the Federal Government announced that the calculation of the indexation rate for HECS/HELP debts would be changed.  They would be increased by either the Consumer Price Index (CPI) or the Wage Price Index (WPI) whichever is lower. They also announced that this would be backdated to 1 June 2023. The relevant WPI for June 2023 is 3.2% (less than half of the 7.1% CPI rate applied last year). Noting that this is subject to the legislation being passed

For anyone who had a HECS/HELP debt that was indexed on 1 June 2023 at the 7.1% CPI rate, you will receive a credit on 1 June 2024 for the difference between the 7.1% CPI and the new 3.2% WPI rate*.  

Prior to this announcement, we knew that the CPI rate for the June 2024 indexation of the HECS/HELP debts was 4.7%. We are now awaiting the release of the WPI figures to determine the indexation rate under WPI. The Federal Government have suggested that this will be approximately 4%*.  

For anyone who has a HECS/HELP debt, it is forecasted that it will be indexed on 1 June 2024 by approximately 4%* (with a credit also applied for the reduction in the indexation rate at 1 June 2023 noted above).

Any reduction of the debt prior to this date will mean the amount of indexation will be lower (as the debt is lower).  If you have an outstanding tax return that will reduce the debt, we recommend you lodge the return as soon as possible to ensure the payment from your tax return is applied. 

If you want to make a voluntary repayment towards the debt, we recommend this be done no later than 22 May to ensure it is received by the ATO and applied to your debt prior to 1 June. 

You can check your outstanding higher education debt via your myGov app if it is linked to the ATO.  You can also find payment details for the debt in your ATO account via myGov.  If you have any problems finding these details, please do not hesitate to contact us. 

For your reference, the following debts are affected by indexation: 

  • Higher Education Loan Program (HELP, formerly HECS)
  • VET Student Loan (VSL)
  • Student Financial Supplement Scheme (SFSS)
  • Student Start-up Loan (SSL
  • ABSTUDY Student Start-up Loan (ABSTUDY SSL)
  • Trade Support Loan (TSL)

 
* The recent announcements by the Federal Government are subject to the passing of legislation.  If the legislation is not passed, the backdated credit will not be applied for the 2023 year and the indexation rate applied on 1 June 2024 will be 4.7% (CPI).

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Use it or Lose it – Carried Forward Super Contributions

Super Contributions: Use it or Lose it

If your superannuation account balance was less than $500,000 as at 30 June 2023, you have until 30 June 2024 to catch up any unused concessional superannuation contributions from 2019.

From the 2020 financial year onwards, new rules came into effect that enabled individuals with a total superannuation balance of less than $500,000 to catch up on superannuation contributions that may not have been maximised made in prior years. 

For example, in the 2019 year, the total concessional contribution cap was $25,000.  If you only made contributions of $15,000, then you have $10,000 unused from that same year.  You can carry this unused cap balance forward for up to 5 years.  After 5 years, the unused balance expires.  This means that you have until 30 June 2024 to use up any unused concessional cap from the 2019 financial year.  If you don’t use up the 2019 carried forward balance before 30 June 2024, it will be lost.

But there’s a catch: your current year contributions first go towards this year’s cap.  Once that is maxed out, any extra goes towards past years, starting from the oldest.

So, to claim your 2019 unused cap, you’ve first got to max out your 2024 contributions ($27,500).  Anything above that goes towards your unused caps from previous years, starting with 2019.

Not sure what your prior year unused caps are?  Check your myGov account or as your tax agent.

Now, before you go all in, chat with your financial planner to make sure it aligns with your retirement goals.

Remember, if you are looking to claim a personal tax deduction for superannuation contributions, you need to:

  1. Ensure the contribution is received by your superfund prior to 30 June;
  2. Give your superannuation fund a “Notice of Intention to Claim a Tax Deduction” for the contributions;
  3. Receive an acknowledgement letter from your fund prior to lodging your 2024 tax return.

If you’re considering extra contributions this year, talk to your tax agent and your financial planner to figure out how much and if it fits your retirement plan.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Upcoming Changes to ATO Interest: What Businesses Need to Know

Upcoming Changes to ATO Interest: What Businesses Need to Know

As part of the Mid-Year Economic and Fiscal Outlook, the Government announced that it will pass legislation to deny deductions for ATO interest charges (this includes General Interest Charge (GIC) and shortfall interest charges (SIC)) from 1 July 2025.

This applies to all GIC and SIC charged by the ATO – including interest charged on payment arrangements.

Despite the ATO’s interest rates rendering it an expensive debt financing option (current rate is 11.34% in June 2024), numerous businesses have favoured it for its ease and accessibility, bypassing the formalities associated with traditional lenders like banks.

Although the ATO imposed GIC/SIC will no longer be deductible, if businesses were to seek finance elsewhere to pay their ATO debt, interest on this finance is deductible. 

What does this mean for businesses?

If you currently use payment plans with the ATO as a means of financing your tax liabilities (including GST, PAYG withholding and income tax), we recommend that you review your cashflow forecasting to ensure you have sufficient cashflow to pay your tax liabilities as and when they fall due.

Cashflow forecasting should always be a cornerstone of your business planning.  However, if you don’t currently forecast your cashflow, we recommend that you start from at least 1 July 2024 to ensure that you have sufficient cashflow to fund your 2024-25 and future ATO liabilities.

As needed, consider exploring alternative financing avenues to pay ATO liabilities, such as bank overdrafts or loans secured by property. Interest incurred on such borrowings is tax-deductible when used for business purposes, including paying ATO obligations.

How can we help?

We’re here to help you evaluate your business’s cash flow and forecasts. Additionally, we can connect you with finance brokers who specialise in assisting clients in accessing additional financing options for their businesses.

Note: Legislation to enact this has not yet been passed.  We will keep you up-to-date of the passage of the relevant legislation.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Selling a property? Do you need a tax clearance certificate?

Property Sales

Do you need a tax clearance certificate?

 

From 1 July 2016, purchasers of residential property were required to withhold 10% of the purchase price where the property cost was more than $2 million (this changed to 12.5% and $750,000 from 1 July 2017).  The ultimate goal of the withholding regime was to have tax withheld for the anticipated capital gain for foreign vendors.  However, under the legislation all sellers are deemed to be foreign vendors.  Australian residents could only avoid the withholding obligation by obtaining a clearance certificate from the ATO and providing it to the purchaser.

Recently, the Government announced that from 1 July 2025, it would increase the withholding rate to 15% and reduce the threshold for withholding to $0.  As such (provided the relevant legislation is passed for these changes), from 1 July 2025, all Australian resident vendors of property will be required to obtain a clearance certificate to provide to the purchaser.  Failure to do so will result in 15% of the sales proceeds being withheld by the purchaser and remitted to the ATO.

What do you need to do?
 
If you are an Australian resident selling property, currently you will need to obtain a clearance certificate from the ATO if the sales price is more than $750,000.  From 1 July 2025, all Australian resident vendors will need to obtain a clearance certificate.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Rental Properties – Getting the Best Tax Outcome in 2024

Rental Properties

Getting the Best Tax Outcome in 2024

 

To get the best tax outcome from your rental property, we recommend paying any upcoming expenses before 30 June. 

Any deductible expense that is paid prior to 30 June can be claimed in this financial year.  If you pay the same expense after 30 June, it can’t be claimed as a deduction until next financial year.

With the individual tax rates decreasing after 30 June 2024, you will get an even bigger advantage in paying your rental property expenses prior to 30 June (as a deduction is worth more in the 2024 year than the 2025 year).  For example, a $5,000 expense will get you a $125 greater tax deduction in 2024 than in 2025:

2024 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2024 return) = $1,625
Net out of pocket = $3,375

2025 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2025 return) = $1,500
Net out of pocket = $3,500

Rental expenses

For rental properties, examples of some of the deductible expenses you might be able to pay before 30 June include:

  • Repairs and maintenance
  • Cleaning
  • Gardening
  • Pest control
  • Smoke alarm review and maintenance
  • Servicing costs – eg. air conditioner, pool

Have a chat with your property manager to see if there are any expenses that can be paid prior to 30 June.

Depreciation

We also recommend getting a depreciation schedule for your property.  Contact a qualified quantity surveyor to prepare a depreciation schedule for your property (for example – BMT Tax Quantity Surveyors or Deppro).  The cost of the report can be claimed as a deduction and the report will also provide you with the details of the depreciation you can claim in your tax return.

What should you do now?

  1. Talk to your property manager about any expenses that you can pay for your property prior to 30 June;
  2. Book in any relevant services now to ensure that they are completed and paid prior to 30 June (keep a valid tax invoice for all services that you want to claim as a tax deduction);
  3. Contact a quantity surveyor to get a depreciation report for your property;
  4. Start compiling records for the expenses already paid for your property during this financial year.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Ensuring Asset Valuations: A Vital Responsibility for SMSF Trustees

Ensuring Asset Valuations:

A Vital Responsibility for SMSF Trustees

 

If you are a trustee of a self-managed superannuation fund (SMSF), you need to ensure that your fund’s assets are reflected at market value in the annual financial statements.

Our SMSF auditor will check that the assets have been valued correctly and that the basis of the valuation is appropriate.  These valuations are also reported to the ATO on an annual basis via the tax return. 

The ATO is using the data reported in the tax returns to identify funds who have recorded the same values for assets in their annual returns for the past several years (which suggests that these assets are not reported at an appropriate market value).

There are approximately 16,500 funds who have reported the same value for certain assets for at least three income years.  This includes residential and commercial property, unlisted companies and unlisted trust investments.  Furthermore, there were no auditor contravention reports listed for these funds for potential breaches of the market valuation rules for the assets.

The ATO will be sending messages to trustees of these particular SMSFs to remind them of the obligation to report assets at market values (and the next tax return will be monitored by the ATO).

If your fund fails to meet the valuation requirements, the fund and members may be required to pay additional tax and could be liable to administrative penalties. 

What do you need to do?

If you are the trustee of an SMSF, you need to review the value of the assets that you hold.  Each year, we will request evidence from you of the market value of these assets.  Often, these values will be readily available (for example, the current price of listed shares).  Other times, the services of an independent valuer may be required to confirm the valuation.  For example, if your fund holds direct real property, you need to factor in the cost of an annual valuation into the ongoing running costs of your fund.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Superannuation – Concessional Cap Increases

Superannuation Caps

 

From 1 July 2024, the concessional contribution cap for superannuation is increasing to $30,000.  This will have a flow on effect to other areas of super as well:

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Self-Education Expenses – TR 2024/3

Self-Education Expenses 

New Tax Ruling – TR 2024/3

On 21 February 2024, the ATO finalised the ruling for Self-Education Expenses (TR 2024/3).  The ruling sets out the principles on the deductibility of self-education expenses under the Income Tax Assessment Act and provides 38 examples.

When are self-education expenses deductible?

Self-education expenses are deductible to the extent they:

  • Are incurred in gaining or producing your assessable income; AND
  • Are not:
    • Capital, private or domestic in nature
    • Incurred in gaining or producing exempt income
    • Prevented from being deductible by a specific provision in the tax law.

If you are reimbursed for the self-education expenses, you cannot claim a personal deduction.

Gaining or producing assessable income

You need to be able to show one (or both) of the following apply:

  • Your income-earning activities are based on the exercise of a skill or specific knowledge, and the self-education enables you to maintain or improve that skill;
  • The self-education is likely to lead to an increase in income from your current income-earning activities.

They will not be deductible if you have incurred them to obtain new employment or open up a new income-earning activity.

Types of self-education expenses

Some of the self-education expenses that may be deductible include:

  • Course fees but not if you have a Commonwealth Supported Place (CSP) (including where you have used a FEE-HELP loan or personal loan to fund the fees)
  • Interest on monies borrowed to fund the self-education expenses
  • Books, digital subscriptions, stationery
  • Travel (including airfares, accommodation and meals)
  • Depreciation of equipment

Action to take

If you are personally paying for any self-education costs that are related to your current employment, please ensure you keep all details and invoices of the costs incurred.  We can review these at tax time to determine whether they are deductible in your individual tax return.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.