2023
2023
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Learn more about tax areas and issues that may impact you.
Christmas Parties & Gifts 2023 With the well-earned 2023 holiday season on the way, many employers will be planning to reward staff with a celebratory party or event. However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.
ATO's lodgment penalty amnesty is about to end The ATO is remitting failure to lodge penalties for eligible small businesses. Businesses which have not yet taken advantage of the ATO's lodgment penalty amnesty only have until 31 December 2023 to do so. Businesses must meet the following criteria in order to be eligible for the amnesty: had an annual turnover under $10 million when the original lodgment was due; have overdue income tax returns, business activity statements or FBT returns that were due between 1 December 2019 and 28 February 2022; and lodge between 1 June and 31 December 2023. When taxpayers lodge their eligible income tax returns, business activity statements and FBT returns, failure to lodge penalties will be remitted without the need to apply. The amnesty does not apply to privately owned groups or individuals controlling over $5 million of net wealth. Directors who bring their company lodgments up to date can also have penalties remitted and, if they are reliant on company lodgments to finalise their own tax affairs, any failure to lodge penalties will be remitted. This also applies to eligible lodgments made between 1 June and 31 December 2023.
Background For the year ending 31 December 2024, VRLT only impacts properties in 16 of Melbourne’s inner and middle suburbs, which is imposed in addition to any other land tax or surcharge land tax that may apply. A property is taken to be “vacant” if it has not been lived in for more than six months out of a calendar year, and this does not need to be a consecutive period of occupancy. Determining whether a property is “vacant” is done by considering the use of the land in the year that immediately precedes the relevant land tax year (ie. the use in the 2024 calendar year will determine whether VRLT applies in 2025). VRLT is an annual tax for vacant land (subject to some exemptions), and for the year ending 31 December 2024, the VRLT rate is 1.0% of the capital improved value ( CIV ) of taxable land. The CIV of a property is a value of the land, buildings and any other capital improvements made to the property as determined by the general valuation process. It is displayed on the council rates notice for the property.
Background During February 2023, the Treasury Laws Amendment (2023 Measures No 1) Bill 2023 ( the Bill ) was introduced to improve the integrity of off-market share buy-backs undertaken by listed public companies. These measures were first announced in the October 2022–23 Federal Budget. At that time, the difference between the total purchase price and that part of the purchase price debited against the company's share capital account (in relation to the off-market share buy-back ) was taken to be a dividend, which could be franked where imputation credits were available. Conversely, at that time, in the case of an on-market buy-back (ie. on an exchange in the ordinary course of trading), no part of the buy-back price was treated as a dividend and the total amount received by the shareholder was treated as consideration for the sale of the shares. The amendments put forward in the Bill proposed to ensure that where a listed public company undertakes an off-market share buy-back of a share, no part of the purchase price in response of the buy-back will be taken to be a dividend.
Government releases draft legislation on total superannuation balances over $3 million On 3 October 2023, the Government released draft legislation to impose tax on individuals with total superannuation balances ( TSB ) of $3 million or more at 30%, rather than 15%. The higher 30% rate only applies to “taxable superannuation earnings” which represents the proportion of earnings corresponding to the part of the TSB that exceeds $3 million. An individual’s TSB includes all of their superannuation interests and is not a separate figure for each interest, for example, the $3 million threshold will be applied on a “per-individual basis” and not on a “per-account or per-fund basis”. Unfortunately, the way the tax is imposed is very unusual, and will (amongst other issues) result in such individuals paying tax on their super fund's unrealised capital gains. The consultation process for this draft legislation has been completed and the submissions made by professional accounting and superannuation bodies are currently being considered. We note this is not law yet, however we continue to watch this space as the draft legislation moves towards the final release of the legislation.
Taxpayers need to get their 'rental right' The ATO reminds rental property owners and their tax agents to take care when lodging their tax returns this tax time. When preparing their tax returns, taxpayers should make sure all rental income is included, including income from short-term rental arrangements, renting part of a home, and other rental-related income. Rental income must be reported in the year the tenant pays, rather than when the taxpayer’s agent transfers it to them, and it must be reported as the gross amount received (ie. before the property managers fees and other expenses they pay on the taxpayer’s behalf are taken out). There are three categories of rental expenses, as follows: Expenses where taxpayers cannot claim deductions – ie. expenses arising from a taxpayer’s personal use of their property and capital expenses; Expenses where taxpayers can claim an immediate deduction in the income year they incur the expense – ie. interest on loans, council rates, general repairs and maintenance, and depreciating assets costing $300 or less; and Expenses where taxpayers can claim deductions over a number of income years – ie. 'capital works' deductions and borrowing expenses incurred when setting up a loan. The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes, or the loan was re-financed for some private purpose. Taxpayers should ensure they have the records to demonstrate they incurred expenses for their rental property and the extent to which the expenses relate to producing rental income.
Appointing an SMSF auditor The ATO reminds self-managed superannuation funds ( SMSF ) trustees that they need to appoint an approved SMSF auditor for each income year, no later than 45 days before they need to lodge their SMSF annual return. An SMSF’s audit must be finalised before the trustees lodge their SMSF annual return, as the trustees will need some information from the audit report to complete the annual return. An SMSF’s auditor is to perform a financial and compliance audit of the SMSF’s operations before lodging. An audit is required even if no contributions or payments are made in the financial year. An approved SMSF auditor must be independent, which means that an auditor should not audit a fund where they hold any financial interest in the fund, or have a close personal or business relationship with members or trustees. If a fund doesn’t meet the rules for operating an SMSF, the auditor may be required to report any contraventions to the ATO.
New payroll tax guidance for medical centre businesses and contractors The Victorian State Revenue Office ( SRO ) has recently released new guidance explaining the application of the contractor provisions in the Payroll Tax Act 2007 on an entity operating a medical centre business ( the medical centre ) that contracts with medical and health practitioners ( the practitioners ) to provide services to patients. The guidance intends to provide greater clarity for entities that operate the medical centre, including dental clinics, physiotherapy practices, radiology centres and similar healthcare providers who contract with medical, dental and other health practitioners (or their entities) to provide patients with access to the services of the practitioners. This new guidance is to be applied retrospectively and prospectively. However, we note this new guidance does not have the force of law, and each decision made by the SRO must be done on the merits of each individual case.
Tax refunds expected by many Australians may be dramatically reduced this year, why? There is a psychology to tax refunds that successive Governments have been reticent to tamper with. As a nation, Australia relies heavily on personal and corporate income tax, with personal income tax including taxes on capital gains representing 40% of revenue compared to the OECD average of 24%. And, for the amount of income tax we pay, we expect a reward. The reward is in the form of tax deductions that reduce the amount of net income that is assessed for tax purposes and tax offsets that reduce the tax payable, generating a refund for some. Tax refunds have a positive impact on tax compliance. As part of the previous Government’s efforts to flatten out the progressive individual income tax system, a time-limited “ low and middle income tax offset ” was introduced. The lifespan of the offset was extended twice, partly as a stimulus measure in response to COVID-19. The offset delivered up to $1,080 from 2018-19 to 2020-21, and up to $1,500 in 2021-22 for those earning up to $126,000. This was a significant boost for many people each tax time and bolstered the tax returns of millions of Australians. For many, the end of the “low and middle income tax offset” means that their tax refund will be reduced dramatically for the 2023 income year, compared to previous income years.
What changed on 1 July 2023 Employers & business Superannuation guarantee increases to 11% from 10.5% National and Award minimum wage increases take effect. The minimum salary that must be paid to a sponsored employee - the Temporary Skilled Migration Income Threshold - increased to $70,000 from $53,900. Work restrictions for student visa holders reintroduced to 48 hours per fortnight. The cap on claims via the small claims court procedures for workers to recover unpaid work entitlements increases from $20,000 to $100,000. Energy Bill Relief Fund for small business kicks in – it will apply to your energy bills if you meet the criteria. Sharing economy reporting to the ATO commences for electronic distribution platforms. Superannuation Superannuation guarantee increases to 11% Indexation increases the general transfer balance cap to $1.9 million. Minimum pension amounts for super income streams return to default rates. SMSF transfer balance event reporting moves from annual to quarterly for all funds. For you and your family The new 67 cent fixed rate method for working from home deductions – make sure you have a record of when you work from home. The ATO won’t accept a simple “I work from home every Wednesday” x 8 hours calculation. Access to the first home loan guarantee expands to “friends, siblings, and other family members.” The Medicare low income threshold has increased for 2022-23. The child care subsidy will increase from 10 July 2023 for families with household income under $530,000. See the Services Australia website for details. New parents able to claim up to 20 weeks paid parental leave. Access the age pension increased to 67 years of age.
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