Know more about the Accounting News

2023 Federal Budget Highlights

The Federal Treasurer Jim Chalmers handed down the 2023 Federal Budget on 9 May 2023. The following is a list of highlights from a tax and superannuation perspective.

Businesses

• The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023-24 income year.
• An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
• FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
• An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
• The clean building managed investment trust (MIT) withholding tax concession will be extended from 1 July 2025 to eligible data centres and warehouses, where construction commences after 7:30pm (AEST) on 9 May 2023.
• The start date of a measure to prevent franked distributions funded by certain capital raisings announced in the 2016-17 Mid-Year Economic and Fiscal Outlook has been postponed from 19 December 2016 to 15 September 2022.
• The patent box regime announced in the Coalition government’s 2021-22 Budget, and expanded in the 2022-23 Budget, will not proceed.The introduction of tradeable biodiversity stewardship certificates issued under the Agriculture Biodiversity Stewardship Market scheme will be delayed to 1 July 2024.
• The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
• Deductible gift recipients list to be updated.

Individuals

• Income support payment base rates will be increased by $40 per fortnight.
• The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
• The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
• Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
• Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
• The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
• CPI indexed Medicare levy low-income threshold amounts have been announced for the 2023-24 income year.
• Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.

Multinationals

• Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.
• The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
• Changes will be made to petroleum resource rent tax (PRRT), including the introduction of a cap on deductible expenditure at 90% of assessable income for projects that produce liquefied natural gas from 1 July 2023.
• The meaning of “exploration for petroleum” in the petroleum resource rent tax legislation will be amended to reflect the government’s intent and ATO guidance.
• Taxation legislation will be amended to realign the taxation law with the reissued AASB 17: Insurance contracts for income years beginning from 1 January 2023.

Superannuation

• Superannuation tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
• Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
• The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.

Tax administration

• Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small business spend doing taxes.
• Reduction in GDP adjustment factor for pay-as-you-go and GST instalments.
• Funding to improve the administration of student loans will be implemented.
• Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgment penalty amnesty program will be provided to small businesses.
• The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.

GST and indirect taxes

• Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
• The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023-24 to 2025-26.
• Indirect Tax Concession Scheme: diplomatic and consular concessions extended.
• The start date for streamlining of excise administration measures announced in the Coalition government’s 2022-23 Budget will be amended.
• Tobacco excise measures to improve health outcomes and align the treatment of stick and non-stick tobacco tax.

If you would like to know more information about any of these measures, please do not hesitate to contact our office.

Incentives to increase the supply of housing

On 28 April 2023, the Australian Government announced it would provide incentives to increase the supply of housing, by:

reducing the withholding tax rate for eligible fund payments from managed investment trusts (MIT) attributable to residential build-to-rent projects from 30% to 15%. This measure will apply from 1 July 2024 for income attributable to newly built build-to-rent projects. Currently, foreign residents from an information exchange country are subject to a final MIT withholding tax rate of 30% for income attributable to a residential property, including build-to-rent projects.
increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year. This measure will apply to projects where construction commences after the Budget (9 May 2023) and will shorten the period that construction costs of eligible buildings are depreciated from 40 to 25 years.
These measures are not yet law.

Prepare for Finalising Single Touch Payroll

It’s nearly time to make a finalisation declaration for Single Touch Payroll. There is no need to issue payment summaries to employees you have reported through STP.

Employers must complete the finalisation declaration by 14 July for employees. Employers with a mixture of employees and closely held payees have until 30 September to make the declaration.

Small employers (fewer than 19 employees) that only pay closely held payees have until the payee’s income tax return due date. Employers will need to liaise with the individual payee about the exact tax return due date.

You may have some payees who have not been reported through STP, so you still need to issue a payment summary for anyone not reported through STP. You will also need to submit a payment summary annual report (PSAR) for any payments outside the STP system.

Once the STP finalisation has been sent to the ATO, the employee’s information will be released in their myGov account and listed as ‘tax ready’.

STP Payroll Checklist

Be efficient and prepare as much as you can now so that you are able to finalise your data by 14 July.

• Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software.
• You should already have necessary details for all employees, both current and any who have terminated throughout the year if you are using STP. The essential information is full name, date of birth, address and tax file number.
• Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly?
• Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
• Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
• Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments.
• You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements—check that you have reported them correctly.

Finalising Single Touch Payroll

It’s important to verify payroll figures before finalising, in order to minimise the chance of errors and having to re-issue at a later date.The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2.

Once the payroll year is completed at 30 June, you can then analyse the payroll amounts for each employee and cross-check against the numbers in your profit and loss accounts.

Talk to us today if you would like us to make the STP end of year process easier by reviewing and validating your payroll figures prior to finalising the data and lodging with the ATO. The end of the payroll year will be here sooner than you think!

Fringe Benefits Tax and Business

Benefits provided to employees or their associates in addition to salary or wages are known as fringe benefits. These benefits are paid for by the employer from pre-tax earnings, making the provision of benefits attractive to employees as it may reduce their taxable income while receiving payment in other forms.

Fringe benefits tax (FBT) may apply based on the type of benefit provided.

Tax is payable because the benefits are a different form of payment by an employer instead of salary and wages. The tax is calculated on the taxable value of the benefit, which reflects the grossed-up salary the employee would have had to earn to pay for the benefits from post-tax earnings.

Employers can generally claim a tax deduction for the benefits and related FBT payable.

Types of Benefits

There are many different types of fringe benefits employers may provide to employees. These include:

• Vehicle owned by the business provided for private use
• Vehicle lease arrangements
• Car parking
• Entertainment, such as golf club membership or tickets to major events
• Expense payments, such as credit cards or health insurance
• Other types include debt waiver, living away from home allowance, or property benefits.

Some benefits provided to employees don’t attract FBT. If you pay for expenses that an employee would otherwise have been able to claim as a work-related tax deduction, FBT won’t apply. For example, if you pay for employees to attend a professional development course, there won’t be any FBT liability on this benefit.

FBT Administration

The fringe benefits tax year runs from 1 April to 31 March. You must then include the reportable amount for each employee on their Single Touch Payroll finalisation by 14 July, so it flows through to their annual income statement.

As with all business transactions, keeping accurate records is essential to determining whether FBT applies or not and how much needs to be included on the employee’s income statement, if any.

If you’re interested in seeing how fringe benefits might apply to your business, talk to us about FBT registration and administration. We can advise on the types of benefits available, how much tax is payable or how to reduce the FBT liability. We’ll also get your bookkeeping software set up to make record keeping easy.

Take care of yourself, not just your business

Being a business owner can be stressful. When the buck stops with you, it can be easy to let the pressure mount up and to discount your own wellbeing.

But taking care of your own mental health is equally as important as taking care of the business – research from MYOB showed that 53% of business owners suffer from stress and anxiety relating to the running of their business So, what can you do to take care of your own mental health and work mindfullness into your usual life routines?

Ways to nurture your wellbeing as an entrepreneur

Looking after your mental health is as important as looking after your balance sheet. That’s the reality. So, having an improved focus on rest, wellbeing and talking about your struggles is a big part of moving towards becoming a better business leader.

For example:

• Don’t overwork yourself – it’s tempting to work every hour that’s available, in an attempt to meet your goals. But working yourself into the ground is, ultimately, a destructive thing to do. If you’re tired and burnt out then you’re in no position to lead the company. Try to stick to set working hours, and avoid working 60-hour weeks wherever possible. Sleep, rest and downtime are vital.
• Schedule time for non-work-related activities – make sure you have time blocked out for things that aren’t work. That might be a walk in the countryside, time with your kids, or a game of tennis. The aim is to take yourself away from the stresses of the business and to give yourself a broader life outside the company. It’s a chance to have fun, to relax or to be someone who isn’t just ‘the boss’
• Take up an activity that promotes wellbeing – there are plenty of pastimes that can help you bring down your anxiety levels and bring you to a calmer place. Yoga is a good way to stay fit, but also an excellent form of relaxation. Equally, finding time for meditation helps you to empty your mind of business concerns and allow yourself to become more grounded and calm. Even something as traditional as a fishing trip could help you to chill out and relax, away from a screen.
• Talk about your worries, concerns and anxiety – if business-related stress is building up, the worst thing you can do is keep it all bottled up. It’s beneficial to open up and talk about this anxiety. This could be with a partner, a fellow entrepreneur, your accountant or even a professional counselor. Be transparent about your state of mind and you’ll find people are more than willing to listen, understand and offer some support.

Talk to us about your business worries

As your accountant and adviser, we’re in the perfect position to help you open up about your business worries. We know your business and your sector inside out, and we know the common threats, challenges and goals that will be on your mind.

Come and talk to us about your business worries and let us take some of the weight off your shoulders. A chat can be the start of a whole new way of thinking about your own wellbeing.

Which business expenses can you claim against tax?

Incurring expenses is an unavoidable fact of running a business. But which expenses can you claim tax deductions against and which don’t meet the tax-free criteria?

Here’s our lowdown on which expenses you can claim against tax.

Which business expenses can you claim deductions against?

If your business expense is directly related to earning your assessable income then you should be able to claim a tax deduction against this particular cost.

For example, everyday business expenses that you may be eligible include:

• Your day-to-day operating expenses
• The purchases of products or services you’ve made for your business
• Certain capital expenses, such as the cost of depreciating assets like machinery and equipment used in your business.

The amount of a deduction (and when you can claim it) will vary, based on the type of expenses you’re claiming. You can find out more on the Australian Tax Office (ATO) website here.

There are three basic rules for checking the your expense claim is a valid business deduction – and that it won’t be challenged by the ATO.

1. The expense must have been for your business, available as an allowable deduction and not for private use.
2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
3. You must have records to prove that the expense was incurred.

Which business expenses can you NOT claim?

As we’ve explained, you can claim a deduction against most business expenses that are incurred as part of your day-to-day revenue-generation activities. But there are some business expenses you cannot claim against tax.

These non-tax-deductible expenses include:

• traffic fines you receive
• private or domestic expenses, such as childcare fees or clothes for your family
• expenses relating to earning income that is not assessable
• Non-compliant payments – payments for which you have not met your PAYG withholding or reporting obligations –
• the GST component of a purchase if you can claim it as a GST credit on your business activity statement.
• Generally you cannot claim a deduction for the cost of capital assets that are dealt with under the capital gains tax rules, although there are some exceptions.
• Your deductions may be limited for expenses incurred in relation to personal services income (PSI) if the PSI rules apply to that income.

Talk to us about reducing your business expenses

This isn’t an exhaustive list of tax-deductible expenses. There will be various ways to claim your operational expenses against the relevant reliefs and incentives offered by the ATO.

If you’re looking to cut back your costs and improve your tax efficiency, we can help. Talk to us about your regular operational expenses and tax costs and we’ll work with you to find the important reliefs, incentives and allowances that can be claimed.

Get in touch to start reducing your expenses.

Your PAYG withholding statement (IAS) is due on the 21st

Some employers need to pay PAYG withholding liabilities to the ATO monthly, even if the BAS is lodged quarterly. The monthly instalment activity statement (IAS) and payment is due on the 21st, whether you are lodging your own statement or using our lodgement service.

Things to review before finalising the IAS:

• Have you allocated all payroll related bank transactions to the correct accounts?
• Have you checked your payroll detail reports for accuracy?
• Have you classified the different payroll items such as allowances, bonuses or director fees correctly?
• Have you included relevant payroll items or categories at W1 reporting field?
• Do you need to include amounts such as no ABN withholding?
• Have you had to prepare any special pay runs such as termination payments that require manual tax calculation?

Checking the accuracy of the IAS figures each month ensures your statements are more likely to be accurate and less likely to need adjustments at the end of the financial year. This means that issuing annual payment summaries to employees and preparing your ATO payment summary annual report will be straightforward and prompt.

We can assist with preparing your monthly IAS or review your business accounting systems to make sure you are correctly categorising and reporting all pay items.

Small business lodgement penalty amnesty

In an effort to support small businesses struggling with inflation hikes and high cost pressures, small businesses with aggregate turnover of less than $10m will be given an amnesty which will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due between 1 December 2019 to 29 February 2022.

Taxpayers who fail to lodge tax returns and other documents by the due date or, if required, in the “approved form” are liable to a penalty under Tax Administration Act sch 1 of Div 286.

A small business entity may attract the following maximum penalties for failure-to-lodge returns:

• 1st offence: Fine of 20 penalty units which amounts to $4,440
• 2nd offence: Fine of 40 penalty units which amounts to $8,880
• 3rd and each subsequent offence: Fine of 250 penalty units which amounts to $55,500

Approved forms

The requirements for a return, notice, statement, application or other document under a taxation law to be an approved form are set out in TAA Sch 1 s 388-50. For example, the BAS is the approved form for lodging a GST return and notifying PAYG withholding amounts, PAYG instalments and other tax instalments.

Failure to lodge a BAS on time or in the approved form could result in multiple applications of the administrative penalty, depending on the number of tax obligations that were reportable. Each kind of payment imposes a separate notification obligation for penalty purposes.

Contact us

If your business falls under the relevant periods that are eligible to receive amnesty for failure-to-lodge penalties, please feel free to contact our office and we will walk you through the process of application.

Temporary full expensing is due to end soon – your tax deduction guide

With the temporary full expensing (TFE) incentive due to end on 30 June 2023, the federal government has announced the reintroduction of the small business instant asset write-off.

Businesses with an aggregated turnover of less than $5 billion

The TFE rules provide for a full deduction to businesses for the cost of eligible depreciating assets in the year they are first used, or installed ready for use, for a taxable purpose before 30 June 2023.

You and your business must be mindful that this tax incentive is set to expire next month so you will need to act now to avoid missing out on the available full write-off.

Assets must be installed ready for use, or be first used, by 30 June 2023, merely entering into a contract to purchase or owning the asset is insufficient to qualify for the full write-off.

If your turnover is under $50 million, you can also get the full write-off for second-hand assets.

Businesses with an aggregated turnover of less than $10 million

For small business entities using simplified depreciation, the cost threshold of an asset for instant write-off was set to revert to $1,000 until a reintroduction of the instant asset write-off was announced in the 2023–24 Federal Budget.

As per the announcement, from 1 July 2023, small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets for tax purposes.

For you to be eligible to claim the instant asset write-off next year, the asset must:

• be first installed or ready to use between 1 July 2023 and 30 June 2024, and
• cost less than $20,000.

The $20,000 threshold will apply on a per asset basis — this means that you will be able to instantly write-off multiple assets.

Opportunities

With the TFE incentive end date approaching on 30 June 2023, you and your business should consider investing in assets before 30 June 2023 to avail the TFE accelerated tax deductions.

However, if your business’ turnover is under $10 million, making an asset purchase after 30 June can still get you a full write-off, if you stay under the $20,000 threshold.

Small business entities that want to elect into a general small business pool should consider doing so for the 2022–23 income year. This could allow them to bring the tax written down values of eligible depreciating assets into the pool in 2022–23 income year, with a full write-off of the balance being available.

Other taxpayers

For other taxpayers, no instant asset write-off applies from 1 July 2023, assets costing less than $1,000 can be allocated to a low value pool if the taxpayer elects to do so.

Contact us

Tell us your plans by contacting our office, and we will guide you through the best course of action available for your business.

Tax Tips for Individuals 2023

Although your tax return is not due for a few months yet, the end of the financial year is near. Get ahead now by preparing all the documents required for your 2023 tax return so you can get your tax done quickly and get any refund due to you in your bank!

Income

The Australian Taxation Office (ATO) automatically receives information from your employers about salary and wages that you have been paid for the financial year.

You need to declare all income, (even if it’s just a small amount), from other sources on your tax return as well. You’ll also need documents such as statements, invoices and reports to show all earnings.

• Wages, salaries, allowances or bonuses from all employers.
• Pensions, annuities or other government payments.
• Investment income including interest earned and dividends received.
• Business and hobby income, if you have a side-business as well as a job.
• Foreign income.
• Crowdfunding income.
• Sharing economy income such as Uber or Airbnb.
• Income from overseas sources.
• Income such as hobbies, prize money, compensation or insurance payments may be tax free but check with us.

Work-Related Expenses

Employees are entitled to claim work-related expenses as a tax deduction. To claim a deduction, you must have spent the money out of your own funds and not have been reimbursed by your employer. The expenses must relate to your earnings as an employee. Make sure you have invoices and receipts as proof of payment for any work-related expenses.

Expenses you may be able to claim

• Vehicle and travel expenses – use a travel diary to record details of trips taken for your employment.
• Clothing, laundry and dry-cleaning expenses – you can claim for occupation specific clothing, uniforms and protective gear.
• Self-education expenses – some education expenses that relate to your current employment are claimable.
• Tools and equipment – if you buy gear to help you in your job, this may be claimable. Small tools of trade, protective items, professional references and laptops are some examples of equipment you may be able to claim.
• Superannuation contributions you have made separate to your employer’s contributions.
• Occupation and industry specific requirements – check the ATO fact sheets for your industry.
• Working from home – new rules apply this year that make claiming expenses for working from home easier. Check the ATO information for details.

Book a time with us now to prepare for your tax return and we’ll make tax time easy for you – and get any refund that might be due to you processed quickly!