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19th May, 2025
In today’s sharing economy, platforms like Airbnb have made it easier than ever to earn extra income by renting out a spare room or your entire home – but many Australians are unaware of the tax implications that come with these arrangements.
When you rent out all or part of your residential property through digital platforms, the ATO requires you to declare this income on your tax return. Keeping meticulous records of all rental income earned is essential, as is maintaining documentation of expenses you intend to claim as deductions. Most property rental arrangements don’t constitute a business in the eyes of the ATO, even if you provide additional services like breakfast or cleaning.
One area where many property owners get caught out is capital gains tax (CGT). While your main residence is typically exempt from CGT, this exemption can be partially lost when you rent out portions of your home. The reduction in your exemption is calculated based on the floor area rented and the duration of the rental arrangement. This is a crucial consideration if you’re thinking of selling your property in the future, as it could significantly impact your tax position.
When it comes to deductions, you can claim a portion of expenses related to the rented space, including council rates, loan interest, utilities, property insurance and cleaning costs. The deductible amount depends on both the percentage of the property being rented and the duration of the rental period throughout the financial year. Platform fees or commissions charged by services like Airbnb are often 100% deductible, providing some relief against your rental income.
You’ll need to maintain statements from rental platforms showing your income, along with receipts for any expenses you plan to claim. Without proper documentation, you risk having legitimate deductions disallowed during an ATO review or audit, potentially leading to additional tax liabilities.
The ATO has intensified its focus on all aspects of the sharing economy, particularly short-term rental arrangements, and has sophisticated data-matching capabilities with third-party platforms like Airbnb. This means they can identify discrepancies between what’s reported on your tax return and what the platforms’ records show.
19th May, 2025
The way superannuation is paid may be about to undergo a significant transformation. The Labor government’s proposed “payday super” reforms would require employers to pay employees’ superannuation contributions within seven calendar days of every payday. Draft laws have been released for comment, and payday super is intended to apply from 1 July 2026, it’s important to understand what this could mean for you.
According to the ATO, while most employers do the right thing by their employees, an estimated $5.2 billion in super went unpaid in 2021–2022. The change to payday super is designed to improve the management of super payments and simplify payroll arrangements, reduce unpaid super incidents, and ultimately enhance retirement savings for Australians.
For employers, transitioning to payday super represents a shift in administrative processes. Some key considerations:
For employees, payday super offers several potential benefits:
The draft legislation was open for public comment until 11 April 2025, with introduction of final legislation dependent on the 3 May 2025 federal election outcome.
17th Jan, 2025
If you’re one of the millions of Australians with a Higher Education Loan Program (HELP) debt, you might be wondering how the government’s proposed changes to HELP loans could affect you. These changes are subject to the passage of legislation, but are proposed to take effect by 1 June 2025.
One of the most significant aspects of the proposed changes is a one-off 20% reduction in all HELP debts. This reduction would be automatically applied by the ATO before the annual indexation on 1 June 2025. For example, if you have a HELP balance of $27,600, you could expect a reduction of approximately $5,520 in your debt.
From 1 July 2025, the minimum income threshold for making compulsory HELP repayments is proposed to increase from $54,435 to $67,000. This means you’ll only start repaying your HELP debt once your income exceeds $67,000. The new repayments will be calculated only on the income above this threshold, but the rates will be higher compared to the current system. Here are the proposed new marginal repayment rates:
Another crucial change is the proposed capping of the HELP indexation rate. Once the legislation is passed, the indexation rate will be the lower of either the consumer price index (CPI) or the wage price index (WPI). This adjustment will be backdated on all existing HELP, VET student loans, and other similar accounts from 1 June 2023. This means that if your HELP balance was indexed based on the CPI in 2023 and 2024, the ATO will adjust your account to reflect the lower indexation, potentially providing a refund if your balance falls below zero.
17th Jan, 2025
Facing a tax bill is a common challenge for many Australian businesses, and the ATO has recently shifted to a more active approach to debt recovery. However, this doesn’t mean they’re out to get you. The ATO’s primary goal is to work with businesses to manage and clear tax debts effectively.
You or your tax agent can review your income tax assessment notices or use the ATO’s online services to check your current tax debt. You can also contact the ATO directly by phoning 13 28 66 (the business enquiries line).
If you find yourself unable to settle your tax debt in full by the due date, don’t panic. The ATO offers several repayment options, including:
Remember, entering into a payment plan means committing to paying future tax obligations on time.
When proposing a payment plan, it’s essential to accurately assess your capacity to pay. The ATO will require specific information depending on your business structure. This may include income sources, expenses, and cash flow information for the past three months.
It’s important to note that the general interest charge (GIC) applies to unpaid tax debts. This rate is currently 11.38% per annum. The government has also recently announced plans to make GIC non-tax-deductible, which would increase the effective cost of unpaid tax debts.
The key to managing your tax debt successfully is proactive communication. If you’re experiencing difficulties, don’t wait for the ATO to contact you. Reach out to the ATO directly, or to your registered tax agent, as soon as possible. By engaging early and honestly, you can avoid more serious potential consequences like director penalty notices, garnishee notices or having your tax debt disclosed to credit reporting bureaus.
13th Sep, 2024
If you’re an Australian resident for tax purposes, you don’t have to pay income tax on the first $18,200 you earn each year, from any source. This is called the “tax-free threshold”. If you have more than one job, change employers during the year, have a sole trader side gig or get government payments, it’s important to think about the tax-free threshold and which employer, job or payment you’ll claim it for.
The ATO advises claiming the tax-free threshold once from your “main” payer – typically the job, gig or payment that pays you the most during the year. That payer will not withhold income tax from the first $18,200 they pay you but will withhold tax from payments once your earnings go over the threshold.
At the end of the financial year, the ATO calculates your total income and tax withheld. If not enough tax has been withheld, you can expect a tax bill. If more tax has been withheld than you owe for your total earnings, you can expect a refund.
When starting a new job, your employer should ask you to complete a withholding declaration.
To claim the tax-free threshold, you must be an Australian resident for tax purposes on the declaration and answer “yes” to the question “Do you want to claim the tax-free threshold from this payer?”. Where you answer “no”, tax will be withheld from all income from that payer.
Avoid claiming the threshold from multiple payers simultaneously unless you’re sure you’ll earn less than $18,200 total for the year. Overclaiming might make your take-home pay higher each pay cycle but will likely mean a tax debt later.
When changing jobs you can claim the threshold from your new payer even if you have claimed it from your previous one.
If you add a job or side gig that will provide more income than your existing main payer, you can change your claim at any time using ATO online services, via your myGov account. If you’re earning income outside of employment (eg as a sole trader) you’ll need to pay tax yourself on that income. Consider setting aside a percentage for tax or using pay as you go (PAYG) instalments each time you are paid.
13th Sep, 2024
Does your business or investment structure make payments such as interest, dividends or royalties to any foreign residents? You may be required to withhold tax from these payments. The ATO is currently focusing on ensuring that taxpayers are aware of these obligations.
If these withholding requirements apply to you, you’ll need to lodge a PAYG annual report or an annual investment income report, and withhold and pay the correct amount of tax.
Figuring out whether an obligation to pay withholding tax arises from a particular payment can be complex. Assuming your structure is resident in Australia, the starting point is that the withholding tax regime generally applies to interest, dividends and royalties derived by foreign residents, unless an exemption applies. This means the withholding tax obligation arises whether you make the payment to the foreign resident, credit it to their account, or deal with the payment on their behalf or at their direction. (Certain payments can also be captured if your structure is not resident but has a permanent establishment in Australia.)
However, a number of exemptions apply. These can be technical in operation, so it’s important to seek advice specific to your circumstances if you make any payments to non-residents.
The ATO is alert to payers who have not withheld and paid amounts (or have withheld and paid incorrect amounts), incorrectly relied on an exemption or treaty relief, or misclassified deductions for interest or royalty payments to an offshore entity.