Posts Categorized: General

SG super reminder

I trust you had an enjoyable festive season – but it is now time to focus on time critical obligations. So here is a quick Super Guarantee (SG) super deadline reminder.

Tuesday 28^th January is the end date for satisfying your SG super obligations for the December 2024 quarter.

Please make sure you do not confuse this obligation with the December quarter BAS. The December quarter BAS automatically has a one month extension to 28^th February . There are no extensions for reporting and payment of SG super.

Please note that super clearing houses can take up to 8 business days to pass the money through to the super fund. It therefore means that processing and payment to the clearing should be made as soon as possible.

We therefore recommend paying your Dec quarter super by Wednesday 15^th January.

And please make sure you have been calculating super at 11.5% since it increased on 1^st July 2024.

Please refer to our previous quarterly reminder as to what forms of remuneration are subject to and not subject to Superannuation Guarantee.

SG super should never be paid late as late payments attract substantial interest and penalties. Furthermore, SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically can become personal debts of directors.

We welcome any questions you might have.

Beware the new Vacant Residential Land Tax (VRLT)!

One of the state government’s many new taxes is the Vacant Residential Land Tax (VRLT). And it requires action no later than 15^th January.

So what is the VRLT?

It is a tax imposed on residential properties not occupied for 6 months or more during the 2024 calendar year.

Why you need to be careful

Don’t be fooled by Land Tax being within the name of this new tax. This ain’t no small charge!

There are 3 reasons as to why an unexpectedly large liability may arise:-

Whilst Land Tax is based off the value of land, VRLT is based of the capital improved value of the property (so house and land).
There is no threshold as with Land Tax (whereas there is a tax free threshold before Land Tax is payable – albeit that has now been slashed from $300,000 to $50,000).
The rate for 2025 (based off 2024 unoccupancy) is a flat 1%.

So how much is payable?

In the first year, it would be $10,000 on a $1,000,000 property; $15,000 on a $1,500,000 property.

But the rate rises to 2% in 2026 – so $20,000/$30,000 is payable.

And then it rises to 3% in 2027!

The only “good thing” about it is that, as with Land Tax, it is deductible.

So what does the state government need you to do?

Property owners should have received a letter before Christmas from the State Revenue Office.

That letter includes a link with which to notify the State Revenue Office that you have a residential property that was capable of being occupied but was unoccupied for 6 months or more during 2024.

You need to do so no later than Wednesday 15^th January 2025.

There is no obligation to do so if the property was under construction, under renovation or that was uninhabitable as at 31^st December 2023 (but may be liable from the 2026 year as this exemption can only run for 2 years). Beware of what constitutes a property that is under construction, under renovation or that was uninhabitable.

So what constitutes vacancy?

A residential property that is not occupied as either:-

A principal residence of the owner or an occupant permitted by the owner.
Under a lease or genuine short term arrangement.

None of the available State Revenue Office guidance specifies what constitutes a day. Presumably it is counted by nights stayed – so presumably a weekend counts as one day and not two.

Are there any exemptions?

Yes.

Properties that are exempt from Land Tax are exempt from VRLT.

Other exemptions include:-

Holiday homes (see below for special rules).
Homes used for work purposes.
Properties transferred in the previous year.
New residential properties.
Newly developed properties where the ownership is unchanged.

It is beyond the scope of this blog to explore all exemptions so one must be clear on whether they do in fact satisfy one of these exemptions to avoid risking penalties of up to 90% as well as interest.

There is also no exemption based off when a property was purchased. VRLT simply applies to residential properties owned at 31^st December 2024.

Holiday home exemption

We will explore this exemption due to its commonality to many.

An exemption is available to an owner who has an Australian principal residence (either owned or rented from someone else).

It must be a genuine holiday home to the satisfaction of the State Revenue Office. They give regard to location and distance (which is an interesting matter for those people I still know who have long family held generational family holiday homes in places such as Aspendale and Frankston).

The exemption applies when the property is occupied for at least 4 weeks. That need not be consecutive.

One can only claim one holiday home exemption.

Special rules apply to trusts and companies.

Special rules also apply to deceased estates.

Whilst the State Revenue Office has commented on properties owned by trusts and companies, it has not commented on properties owned by companies where that company itself is owned by a company or trust. It is unclear whether the VRLT has been poorly drafted or the State Revenue’ Office guidance is lacking.

When is the VRLT payable?

It remains to be seen how quickly these notices issue.

One then has 60 days to pay the tax.

It can be paid by B-Pay, credit card, debit card or instalments.

Objection rights

An owner has 60 days to object upon receipt of the assessment.

We suspect given other current State Revenue Office activity in respect of other taxes that response times will be slow.

If unsuccessful, one can then appeal to VCAT.

Should I keep or sell my vacant property?

Perhaps the first question is can I or should I rent it? This may require a substantial outlay to ensure that it meets rental standards – noting that one modern requirement is heating within every room.

Whether you hold or sell is not a matter to be taken lightly. For most people the most appropriate course of action is to engage a financial planner as they have powerful modelling software that can extrapolate the financial outcomes.

A word of warning

No doubt there will be some who may be tempted to falsely not declare a vacant property subject to VRLT. We have already referred to the substantial penalties and interest. One should also be mindful that the State Revenue Office can cross match rental bonds as well as water and electricity usage.

Closing remarks

This has been a difficult blog to write as the tax is new, there is little literature to refer to and some of that is confusing or unclear.

If there is doubt, it seems best to notify and then appeal.

That all said, we welcome any question you may have.

National Scam Awareness Week

No doubt you have heard through multiple channels that it is National Scam Awareness Week.

Some of the stories that have come out this week have been frightening. Perhaps the most alarming one was that the Commonwealth Bank stated that they are pulling down 50 fake web sites a week!

One must be vigilant and rely on common sense. If your employer, should be running training and moreover have the best security software. We have just ramped up our security and would welcome introducing you to an IT specialist.

Here are some scary facts – losses year to date from various forms of scams have been:-

$94,120,506 from investment scams
$13,399,355 from romance scams
$10,126,156 from phishing scams

But I suspect the real number is much higher as many would be too embarrassed to report their loss. and rarely can it be undone.

The three most common scam contact methods are:-

Text message – 62,121
Email – 51,023
Phone call – 26,804

There are many things I could say but perhaps the best 4 tips I can give are:-

Never click on a link from a text or email; always log in from your normal log in page.
Never respond to a request for personal information.
Use two factor authentication.
Have an IT specialist make sure your security is state of art and up to date.

You can read more at the National Anti-Scam Centre – https://www.nasc.gov.au/

How can I claim car travel?

In order to claim car travel in your personal Tax Return:-

You (or your partner) must own the car.
You must have undertaken a trip for either your business or your employer.

You can claim under two methods:-

Log book, or
Cents per kilometre

Tip

You can use a log book kept for three months in the current year or in the last four years (provided the pattern of travel hasn’t changed significantly).

Tip

You must have a properly kept log book. You can do so by buying one in a stationers or you can access an electronic one form our firms app.

Tip

As old school as it may seem, it is best to keep a paper log book.

Throw it on the dash so you can see it when you get in the car (and get out).

I can’t tell you the number of times a client has told me they started an app log book but kept forgetting to record trips. End result? Either have to revert to a lower cents per km claim (see below) or endured the frustration of having to start a new log.

Tip

If you are wanting to claim under the log book method, you will need to keep other records other than the look book. Click here to see the required documents.

Tip

You can claim 88 cents per kilometre under the cents per kilometre method for up to 5,000 work/business strips. This means you can still claim 5,000 km where you travel say 5,500km. Some people choose to do so as it gives them a better claim than under a log book. All you need is a reliable estimate of all trips undertaken during the year.

Want to know what works best for you

Call us. We even have a salary sacrifice calculator so we work out the best way to package up a work car and legally minimise the Fringe Benefits Tax.

What is the depreciation limit?

What is the depreciation limit is a very good question as it has unclear for too long.

It was all clear after 30^th June 2023 that the instant asset write-off provisions for small businesses had ended. It was great whilst it lasted (but noting the flip side that the proceeds from selling car fully written off are now fully assessable).

The depreciation limit for 2023/24 was up in the air for far too long. Unfortunately the proposed amendment of a $30,000 limit was not passed. So the depreciation limit for 2023/24 is $20,000 – to read about tips and traps about the $20,000 limit, please refer to our earlier blog at – https://www.mrsaccountants.com.au/asset-depreciation-claims-for-2023-24/

So what is the depreciation limit for 2024/25?

$20,000.

Who can claim these depreciation rates?

These limits are available to businesses (whether operated via a company, trust or partnership or as a sole trader in one’s own name).

The $20,000 limit also applies to an opening pool

Small businesses who have elected to use the pooling depreciation system with its high depreciation rate can also claim the pool balance when it falls below $20,000. That is defined as being:-

The opening balance of the pool
Plus the taxable portion of acquired assets
Less the taxable portion of assets sold during the year.

So if your business bought an asset costing say $22,000 ex GST in 2023/24, then the opening balance of $18,700 can be written off in full in 2024/25 (assuming no other assets acquired or disposed of).

It is beyond the scope of this article to run through all the rules but please keep in mind that you can only claim depreciation from when an asset is installed and ready for use.

Please don’t hesitate to contact us if you have a query.

Can I deduct the cost of charging my electric vehicle?

This has become a common tax question. And the answer is it depends whether you can deduct the cost of charging your electric vehicle.

No claim is available if you claim work car expenses under the cents per kilometre method. That is because the per kilometre rate takes into account charging costs.

Electric charging costs can be claimed at the rate of 4.20 cents pkm where:-

Claiming car expenses under the log book method.
Motor vehicle expenses for vehicles that are not a car (such as a one-tonne ute).

To qualify to use this rate you must satisfy the following three conditions:-

The car or vehicle is a zero emissions vehicle. It is important to note that hybrid vehicles are not zero emission vehicles.
You must have incurred electricity costs at home.
You have kept relevant records.

There are 3 relevant records to keep:-

A valid log book.
Opening and closing odometer readings.
An electricity bill (with proof of obligation to pay if in a shared house).

What if I charge my vehicle out of home?

Thankfully the ATO have dropped their initial harsh stance of not allowing such claims.

To be able to claim such costs, the vehicle must have functionality that accurately reports the percentage of a vehicle’s total charge based on the charging location. One is then to adjust the home charging percentage adjusted accordingly.

If your electric vehicle doesn’t identify charging by location then one can only claim either:-

The home charge at 4.2 cents pkm or
Commercial charging charge costs.

But not both.

We hope this charges up your tax claim – but please contact us if you have any queries.

Correctly claiming your home office expenses

With the start of a new financial year it is timely to explore how to correctly claiming your home office expenses.

Can I claim home office expenses?

Yes you can if:-

You are undertaking genuine employment related activities, or
Home is your sole base of operations (which includes employees who are not provided with an office, or
You are carrying on a business from home.

What can home office expenses can I claim?

You can claiming running costs such as:-

Heat, light and power
Phone expenses
Internet
Consumables such as computer supplies and printing & stationery items

Those who run a business from home or it is their sole base of operations can also claim occupancy costs.

How can I quantify my claim?

There are two available methods:-

Fixed rate method
Actual expenses

How does the fixed rate method work?

Under this method, one claims 67 cents for every hour worked at home. Occasionally checking emails doesn’t is not sufficient to allow a claim.

To qualify to sue this method you must incur at least one of the following expenses:-

Electricity or gas for heating and/or cooling or to power equipment.
Internet
Mobile or home phone
Printing and stationery.

Receipts must be kept to evidence one or more of these costs have been incurred.

And additional to this claim is the depreciation of any home office work items.

TRAP Irrespective of how much you may genuinely use your mobile away from your home office, you will not be able to make a separate claim for using that mobile.

TIP You don’t need to have a set aside office only used for work purposes. You just need a dedicated area.

TIP Once can also claim for hours worked at a holiday home (provided above criteria satisfied).

What records do I need to keep under the cents per hour method?

In addition to the receipts above, as we have highlighted in past posts and Tax Return covering letters, you have been required since February 2023 to log every hour worked at home.

TIP As stated above, you can only claim hours you have logged. You can download a spreadsheet below that is set to track very hour worked at home.

TIP We recommend downloading the spreadsheet below and saving it in the middle of your desktop or laptop – that way you won’t forget to log the hours as you work them.

You can download the home office cents per hour method by clicking here – 2024-25-Home-Office-Expenses-hours-worked-log

What is included within an occupancy home office expenses claim?

One first measures and calculates the area that is used for work/business purposes.

The work/business area % is then applied to:-

Heat, light and power costs.
Rent paid
Mortgage interest
Council & water rates
Insurance

However, the area that is claimed under this method means that the Capital Gains tax Principal Residence is lost on the claimed area for the years claimed.

Please call us if you wish to discuss your claim in greater details.

Can you benefit from catch-up super contributions?

It’s that time of year when people are looking for tax deductions. The relatively new catch-up concessional contribution system may be ideal for some.

Long gone are the days when contributions of more than $100,000 could be made into super.

And now that the deducible contribution limit is just $27,500 it just doesn’t leave much to fund for retirement after taking out 15% contribution tax and life insurance premiums. And this low limit becomes more of problem if one doesn’t use their limit in any year(s).

This low limit particularly hurts those who leave the workforce to bring up children. The same can also be said for those who have a couple of tough years financially. This is particularly true of many Victorian business owners during covid and beyond.

The catch up concessional system allows some to contribute more than the $27,500 limit for which a tax deduction can be claimed for the full amount.

To qualify to make a catch-up concessional contribution before 30^th June 2024 one must:-

Have less than $500,000 in super as at 30^th June 2023.
Not used all of one’s limit in any year from 2018/19 to 2022/23.
Must qualify to be able to make a contribution.

This year is particularly important as it is the first year an unused year will drop off. That is, if you didn’t have concessional contributions of $25,000 accepted by your super fund(s) in the 2018/19 year, that shortfall will be lost if not used by the end of this month.

Things to be wary or mindful of:-

Some super funds cease accepting contributions by Monday 24^th
The 30^th June falls on a Sunday. Those with their own self managed super fund need to avoid making a contribution (banking transfer) after cut off time on Friday 28^th June as it will be treated as a contribution in July. That is next financial year.
And that problem becomes doubly worse if you are not able to make a contribution in July 2024.
A contribution may not suit you from a tax perspective this year as your income may be too low.
Or perhaps it is a good year to trigger a capital gain.
Those with incomes over $250,000 need to be mindful of the extra 15% tax on contributions (and be mindful of how Section 293 income is defined).
A catch-up concessional contribution cannot be accessed one satisfies what is called a “condition of release” is satisfied (with the main one becoming retired).

So there are many factors to take into consideration.

Whether you should or shouldn’t make a catch up concessional contribution is best done by receiving personal financial planning advice. Such personal advice will address your current situation and future goals and needs. Please let us know if you would like a referral.

2024 super co-contribution

Under the super co-contribution scheme, the government will contribute $1 for every $2 of personal contributions made by an employed or self employed person.

The maximum government co-contribution is $500. So if you wish to target the full $500, you will need to contribute $1,000.

To be qualify, one must:-

Be employed with their employer paying the compulsory SGC or be a self employed person running a business.
Have 10% or more of one’s income coming from employment and/or a sole trader business.
Be less than 71 at the end of the financial year.
Have combined assessable income (that being income before deductions), Reportable Fringe Benefits (RFBA) and employer super contributions in excess of basic SGC amount (RESC) of less than $60,400.
Have paid a non-deductible contribution into superannuation from after tax money by 30^thJune 2024. This means the contribution must be made from a personal or joint bank account.
Not be a temporary visa holder.
Lodge a Tax Return for the year ending 30^thJune 2024.
The maximum co-contribution for a personal contribution of $1,000 is $500 if your combined assessable income is under $45,400. Thereafter it progressively reduces by 3.333 cents for every dollar in excess of $45,400. There is no entitlement if your combined assessable income exceeds $60,400.
Not have contributed more than your non-concessional cap.
Have a total super balance under the Transfer Balance Cap (between $1,800,000 and $1,900,000).

If you want to find out what you might be entitled to, click on the following link to the ATO’s calculator here

Other matters to note are:-

One’s own contribution and that made by the government will be preserved. That is, one will not be able to access it until one retires or satisfies another condition of release.
The ATO will deposit the co-contribution into one’s super account once they have reconciled one’s lodged 2024 Tax Return with the information provided by one’s super fund(s). Consequently, most co-contributions will not be credited until at least January 2025.
If your super is with a public or employer superannuation fund, you will need to ensure they accept such contributions. You also need to obtain the appropriate form.
You will need to make your contribution well before 28^th June (as 30^th June falls on a Sunday). For those with your own SMSF, your fund can only accept such a contribution if permitted by its trust deed. We will take no responsibility where a client does not consult with us beforehand.

What is best for you depends on your circumstances and take into account a large number of considerations.

You should therefore seek financial planning advice to ensure such a contribution will work as intended and is in your best overall interests.

Tips and traps in the 2024 Federal Budget

So for the second year in a row we have a Federal Budget with few announcements and therein little of significance. That said, there are a number of matters not publicly discussed within the Budget which need to be considered.

The following examination of the 2024/25 Federal Budget is not a full analysis of all announcements within the Federal Budget. Rather this Tips & Traps edition is limited to exploring those matters of relevance to our clients. Please refer to the Budget paper we issued last Wednesday for all announcements.

INDIVIDUALS

Revised Stage 3 tax cuts
Further to their revised policy announced earlier in the year, the revised Stage 3 tax cuts will take effect from 1^st July 2024 with changes marked in yellow.

For employees, correspondingly less tax will be deducted from pay packets. And those paying PAYG Instalments will see those instalments reduced as from the September 2024 quarter activity statement.

$300 energy rebate

All households will receive a $300 reduction in their electricity bills. This will be passed on by electricity suppliers (who need to amend their systems) in the form of 4 quarterly $75 credits. The $300 is not income tested. Furthermore, as the grant is to be applied to every household – so those who own a holiday home will receive $600.

HELP indexation

As previously announced, with effect from 1^st June 2023, HELP debts will be indexed by the lower of CPI or Wage Price Index.

This will reduce last year’s indexation from 7.1% to 3.2% and reduce next month’s indexation from 4.7% to about 4%.

TIP With both these indices running now at high levels, those soon to clear their remaining HELP debt should consider paying it out before 1^st June 2024.

Centrelink deeming

The current deeming rate will be frozen for another 12 months.

BUSINESSES

$325 energy rebate

Similar to the household rebate, small businesses will receive $325 off the next year’s electricity bills. A qualifying small business will be one that:-

Has a turnover (gross income) of less than $10,000,000 (but it is unclear how an electricity company will know whether to apply the grant or not) and
Have annual electrical consumption under 40 MWh. It is unclear why small businesses with greater consumption (manufacturers and the like) won’t receive a benefit.

$20,000 asset write-off

The $20,000 asset write-off will be extended for another 12 months from 1^st July 2024 for small businesses with turnover under $10,000,000.

That said, the bill to extend the $20,000 write-off for this financial year ending 30^th June 2024 has yet to be passed. As annoying as that is, it must also be said there are two proposed amendments – to increase that limit to $30,000 for this 2023/24 year and be extended to businesses with annual group turnover under $50,000,000.

TIP The $20,000 is the ex GST amount.

TRAP An asset costing more than $20,000 is subject to depreciation under the Simplified Tax System – 15% in the year of acquisition followed by 30% of the remaining balance in following years.

TIP If you are thinking of buying a $40,000 asset you need for your business and the price is good, buy it before July – that way your business can claim 15% in this tax year (even though owned for a few weeks) and the 30% of the residual 85%. So your business is able to claim $16,200 of depreciation in the first 54 weeks of ownership – but only $6,000 if bought in the first week of July.

TIP The asset must be installed ready for use by 30^th June 2024.

TIP There is no grouping of like items – your business could claim the cost of 30 lap-tops costing $1,500 each.

TRAP The write-off threshold is set to return to $1,000 from 1^st July 2025 – but history has shown that both left and right wing governments love to extend it.

Retaining BAS refunds

The period in which the ATO can retain a BAS refund will be increased from 14 to 30 days. As unwelcome as that sounds, the reality is that it gives the ATO a better opportunity to detect fraud (and therefore protect the public purse).

Building cyber resilience for small business

I remain sceptical about the millions spent within Canberra on committees and reviews staffed by bureaucrats without any real input sought from industry bodies and small businesses. But it is pleasing to see 3 announcements in respect of cyber protection:-

Cyber wardens to provide free on-line training.
The introduction of a Small Business Cyber Resilience Service to both help small businesses build their cyber resilience and moreover provide support in response to a cyber incident.
The introduction of an online Cyber Health Check so small businesses can self assess their situation and exposure.

TIP Upcoming government support should not let you decide to deal with this later. And in particular, seriously consider adding cyber insurance cover to your existing business policy(ies).

TIP The best policy is not the cheapest; the best policy is the one that will cover you for what you need when you need it.

Unpaid super entitlements on liquidation

Currently employee’s pay and leave entitlements are protected under a federal scheme. That scheme however doesn’t extend to unpaid superannuation. From 1^st July 2024, directors of companies which have entered liquidation can be pursued for unpaid super.

ATO will cease chasing old tax debts

Out of the blue, the ATO started chasing old tax debts they had previously written off; debts that had long since been forgotten and did not show in either Tax Agent Portal or Taxpayer Portal. Tax debts that had been “put on hold” before 1^st January 2017 can no longer have a tax refund offset against those debts.

RECENT CHANGES NOT ANNOUNCED OR
NOT SUBJECT TO ANNOUNCEMENTS WITHIN THE BUDGET

Increase in super contribution limits

On-going indexation will see contribution limits increase from 1^st July 2024:-

Concessional (deductible) – will increase from $27,500 to $30,000.
Non-concessional (non-deductible) – will increase from $110,000 to $120,000.

No increase in Transfer Balance Cap (TBC)

Indexation of the TBC (the maximum starting amount of any new super pensions) will not see an increase until 1^st July 2025. However, at that time, the $1,900,000 threshold could well be indexed to $2,100,000.

TIP Those considering starting a super pension will need to receive financial planning advice to determine whether it is best to start a pension now, after June 2025 or sometime in between.

Pay day super payments

Quarterly super payments will soon be a thing of the past. From 1^st July 2026, super is to be paid to be paid on pay day.

TIP All employers paying weekly should seriously switch to fortnightly pay runs.

Increase in SG % rate

From 1^st July 2024, the SG contribution rate will increase from 11.0% to 11.5%.

TIP Employers using common accounting software programs such as Xero, QuickBooks Online and MYOB on line versions need not do anything – those software programs will update the required SG %.

$3,000,000 super balance tax

The bill to introduce Division 296 which taxes the unrealised gains assets for super interests in excess of $3,000,000 is being considered by a Senate Committee and appears to be following party lines.

It is novel, unprecedented and in my mind an alarming development to tax the rise in value of assets that haven’t been sold.

But of more concern is that the $3,000,000 threshold will not be indexed. This means that my daughter who has only recently started work will almost certainly breach the $3,000,000 threshold in her working life just based of employer SG contributions alone. And she is nowhere near what a tradie earns; most tradies will breach the unindexed threshold way before age 65.

Some odd Budget facts

Here are some numbers of interest within the Budget

Net foreign liabilities as a % Gross Domestic Product 32.3%
Australia’s population 26.8 million
Resources as a % of total exports 62.5%

CLOSING WORDS

There is comparatively less change to address as we enter the most important time of the year – pre year end tax planning. We have a terrific and robust process to ensure you maximise your opportunities, have clarity of your future tax payments and attend to matters that require rectification.

This process will kick off at the end of the month. We will be amending our pre year end tax planning checklist in response to the above budgetary matters and from what we learn at tax seminars in the weeks ahead.

Please ensure your accounting records are up to date so we can quickly and reliably predict your position and thereby enable us to identify opportunities and matters that require rectification.

We look forward to maximising your tax situation with you in the lead up to 30^th June.