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14th Apr, 2022
The availability of temporary full expensing of depreciating assets for business has been extended for another year until 30 June 2023. This measure was originally introduced in 2020 as a part of the Federal Government’s COVID-19 business rescue package, aimed at encouraging business investment by providing a cash flow benefit. As originally introduced, the measure was due to end on 30 June 2022.
Businesses with an aggregated turnover below $5 billion or those that meet an alternative eligibility test can deduct the full cost of eligible depreciating assets of any value that are first held and first used or installed ready for use for a taxable purpose from 6 October 2020 until 30 June 2023.
For small business entities with an aggregated turnover of less than $10 million, the temporary full expensing of depreciating asset rules has been effectively replaced with simplified depreciation rules for any assets first held and used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023. This means that the full cost of eligible depreciating assets, as well as costs of improvements to existing eligible depreciating assets, can be fully deducted.
Not all costs relating to assets qualify for temporary full expensing. For example, building and other capital works, as well as software development pools do not generally qualify. Second-hand assets that would otherwise meet the eligibility conditions also do not qualify for temporary full expensing if the entity that holds them has an aggregated turnover of $50 million or more.
Special rules also apply to cars, where the temporary full expensing is limited to the business portion of the car limit.
14th Apr, 2022
If you run a small business and are found by the ATO to have made unintentional record-keeping mistakes, you could face having to pay an administrative penalty. However, this could soon change under a proposed new law that would give ATO the power to issue a direction to complete an approved record-keeping education course instead. Legislation to implement this measure has been introduced into Parliament but not yet passed.
This proposed change originated as a part of the Black Economy Taskforce’s final report, which found that tax-related record-keeping obligations should be made clearer for businesses, and that the ATO should have a range of administrative sanctions available at its discretion for breaches of the rules.
Under the proposed new law, the ATO may issue a tax-records education direction in appropriate situations, which will require the appropriate person within a business to take a specified, approved course of education and provide the ATO with evidence of completion. This would be applied in circumstances where the record-keeping mistakes were unintentional, due to knowledge gaps or variations in levels of digital literacy, or where the ATO reasonably believes that the entity has made a genuine attempt to comply with their obligations.
The tax-records education direction would not be available to businesses that deliberately avoid record-keeping obligations. In those cases, financial penalties will still be applied, and if there is evidence of serious non-compliance, the ATO may also consider criminal sanctions.
14th Apr, 2022
The maximum amount that individuals can take out of their superannuation under the First Home Super Saver Scheme (FHSS) will be increased to $50,000 for any release requests made on or after 1 July 2022. The scheme was originally envisaged as a tax-effective way for first home buyers to save for a deposit, and the increase in the maximum releasable amount presumably reflects the rapidly escalating housing price increases. The scheme is available to both first home buyers and those intending to build their first home, subject to certain conditions of occupation.
The first step in releasing eligible funds is to obtain a FHSS Determination from the ATO which sets out the maximum amount that an individual can have released under the scheme. It’s imperative to make sure you’ve finished making all your voluntary contributions under the scheme before applying for a Determination, and of course, to check the accuracy of the Determination issued by the ATO.
There is a limit of $15,000 of eligible contributions that can be released each financial year (up to a total limit of $30,000 currently, or $50,000 from 1 July 2022).
When you have a FHSS Determination and subsequently sign a contract to purchase, a valid release request must be given to the ATO within 14 days. After the release of money, if you haven’t signed a contract to purchase or construct a home within 12 months, the ATO will generally grant an extension for a further 12 months automatically. You also have the choice to recontribute the amount back into your super fund, or to keep the money and pay a flat 20% tax on assessable FHSS released amounts.
14th Apr, 2022
To help those nearing retirement boost their super balances, people aged 65 and over can currently make downsizer contributions to their super of up to $300,000 from the proceeds of the sale of their home.
As part of a suite of measures introduced to provide more flexibility for those contributing to super, from 1 July 2022 the age limit for those making downsizer contributions will be decreased to include individuals aged 60 years or over. Optimistically, the government expects this decrease in the age threshold will encourage more older Australians to downsize sooner and “[free] up the stock of larger homes for younger families”.
If you or your spouse are thinking of selling the family home to capture a premium, especially in regional areas, some other criteria must be satisfied so you can to make a downsizer contribution to your super, including:
Each person individual can make the maximum contribution of $300,000, so for a couple a total contribution of $600,000 can be made. However, the total contribution amount cannot be greater than the total proceeds from the sale of the home. If a home is owned only by one spouse and is sold, the spouse who didn’t have ownership can also make a downsizer contribution or have one made on their behalf, provided all other requirements are met.
14th Apr, 2022
From 1 July 2022, people aged between 67 and 75 will be able to make non-concessional and salary-sacrificed contributions to their superannuation without the need to pass the work test or satisfy the work test exemption criteria. The removal of the work test from that date also allows people aged under 75 to access the bring-forward of non-concessional contributions in some cases, which may allow you to access up to three times the annual non-concessional contributions cap in a single year. Personal contributions will also be affected, although now instead of having to pass the work test to contribute, the work test only applies if a deduction is sought.
These changes are designed to provide older Australians with more flexibility to contribute to their super and add to their comfort in retirement.
Contribution caps will still apply to any contributions made to your super.
To pass the work test, an individual must be gainfully employed for at least 40 hours during a consecutive 30-day period in each income year in which contributions were made. It’s an annual test, which means that once it is met, the individual can make contributions for that entire income year.
31st Mar, 2022
In the Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.
The 2022–2023 tax rates and income thresholds for residents are unchanged from 2021–2022:
Stage 3: from 2024–2025
The Stage 3 tax changes will commence from 1 July 2024, as previously legislated. From 1 July 2024, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. The 37% tax bracket will be entirely abolished at this time.
Therefore, from 1 July 2024, there will only be three personal income tax rates: 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. With these changes, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
The low and middle income tax offset (LMITO) will be increased by $420 for the 2021–2022 income year so that eligible individuals will receive a maximum LMITO benefit up to $1,500 for 2021–2022 (up from the current maximum of $1,080).
This one-off $420 cost of living tax offset will only apply to the 2021–2022 income year. Importantly, the Government did not announce an extension of the LMITO to 2022–2023. So it remains legislated to only apply until the end of the 2021–2022 income year (albeit up to $1,500 instead of $1,080).
The Government said the LMITO for 2021–2022 will be paid from 1 July 2022 to more than 10 million individuals when they submit their tax returns for the 2021–2022 income year. Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase. That is, the proposed one-off $420 cost of living tax offset will increase the maximum LMITO benefit in 2021–2022 to $1,500 for individuals earning between $48,001 and $90,000 (but phasing out up to $126,000). Those earning up to $48,000 will also receive the $420 one-off tax offset on top of their existing $255 LMITO benefit (phasing up for incomes between $37,001 and $48,000).
All other features of the current LMITO remain unchanged (including that it will only apply until the end of the 2021–2022 income year). Consistent with the current LMITO, taxpayers with incomes of $126,000 or more will not receive the additional $420.
As already noted, the Government has proposed that eligible taxpayers with income up to $126,000 will receive the additional one-off $420 cost of living tax offset for 2021–2022 on top of their existing LMITO benefit.
Currently, the amount of the LMITO for 2021–2022 is $255 for taxpayers with a taxable income of $37,000 or less. Between $37,000 and $48,000, the value of LMITO increases at a rate of 7.5 cents per dollar to the maximum amount of $1,080. Taxpayers with taxable incomes from $48,000 to $90,000 are eligible for the maximum LMITO of $1,080. From $90,001 to $126,000, LMITO phases out at a rate of 3 cents per dollar.
Low income tax offset (unchanged)
The low income tax offset (LITO) will also continue to apply for the 2021–2022 and 2022–2023 income years. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022–2023, but the new LITO was brought forward in the 2020 Budget to apply from the 2020– 2021 income year.
The maximum amount of the LITO is $700. The LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
For the 2021–2022 income year, the Medicare levy low-income threshold for singles will be increased to $23,365 (up from $23,226 for 2020–2021). For couples with no children, the family income threshold will be increased to $39,402 (up from $39,167 for 2020– 2021). The additional amount of threshold for each dependent child or student will be increased to $3,619 (up from $3,597).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,925 (up from $36,705 for 2020– 2021). The family threshold for seniors and pensioners will be increased to $51,401 (up from $51,094), plus $3,619 for each dependent child or student.
Legislation is required to amend these thresholds, and a Bill will be introduced shortly.
The Budget papers confirm that the costs of taking COVID-19 tests – including polymerase chain reaction (PCR) tests and rapid antigen tests (RATs) – to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.
This measure was previously announced 8 February 2022.
The Government will reduce the excise and excise- equivalent customs duty rate that applies to petrol and diesel by 50% for six months. The excise and excise- equivalent customs duty rates for all other fuel and petroleum-based products, except aviation fuels, will also be reduced by 50% for six months.
The Treasurer said this measure will see excise on petrol and diesel cut from 44.2 cents per litre to 22.1 cents. Mr Frydenberg said a family with two cars who fill up once a week could save around $30 a week, or around $700 over the next six months. The Treasurer made a point of emphasising that the Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is fully passed on.
The measure will commence from 12.01 am on 30 March 2022 and will remain in place for six months, ending at 11.59 pm on 28 September 2022.