Year End Tax Highlights Summary

TAX RATES

Income Tax Rates

Resident tax rates 2023–24

Resident tax rates 2024-25

Medicare Levy

The above tables exclude Medicare levy of 2.0%.

Company Tax Rates

If you are a ‘base rate entity’, your company tax rate is : 27.5% from the 2017-18 to 2019-20 income years

26.0% for the 2020-21 income year

25.0% from the 2021-22 income year onwards

For your company to be a ‘base rate entity’, it needs to meet the following eligibility criteria :

• Aggregated turnover of less than $25 million for the 2017-18 income year or $50 million for the 2018-19 income year onwards, and
• If your company earns passive income, it cannot exceed 80% of the company’s assessable income.

WORK RELATED DEDUCTIONS

ATO Approach

• The ATO are continuing to focus on work related deductions such as mobile phones, internet claims, computer claims and home office expenses.

Home Office Expenses

To be eligible to claim a deduction for working from home expenses, you must :

• Incur additional running expenses as a result of working from home
• Be working from home to fulfil your employment duties, not just completing minimal tasks
• Keep records at the time you work to provide you incur the cost

To calculate your working from home expenses, you can use the revised fixed rate method or the actual cost method.

Revised fixed rate method

The revised fixed rate method allows you to claim 67 cents per hour you work from home for the expenses listed below. You no longer require a dedicated home office to use this method. Expenses included in the revised fixed rate are :

• Data and internet
• Mobile and home phone usage
• Electricity and gas
• Computer consumables (e.g. printer ink)
• Stationery.

You can’t claim a separate deduction for any of the expenses the revised fixed rate includes.

You can claim a separate deduction for :

• The decline in value of assets used while working from home, such as computers and office furniture
• The repairs and maintenance of these assets
• Cleaning (only if you have a dedicated home office) Actual cost method

The actual cost method allows you to claim a deduction for the actual expenses you incur as a result of working from home. You may be able to claim a deduction for each of the expenses you incur, such as :

• Data and internet
• Mobile and home phone usage
• Electricity and gas
• Computer consumables (e.g. printer ink)
• Stationery
• The decline in value of assets used while working from home, such as computers and office furniture, as well as any maintenance and repairs of these items.
• Cleaning (only if you have a dedicated home office)

The actual cost method requires detailed calculations and records. For example, you will need to know and have records of the cost per unit of electricity and average units used per hour.

Motor Vehicle Expenses

• A reminder of the substantiation requirements under the following log book method:
  • Log Books must be kept for at least 12 weeks in the first year and then every five years.
  • Odometer records are to be kept in each year in which the method is used. Odometer records must also contain details of the make, model, registration number and engine capacity of the car and all entries must be made before lodging the Income Tax Return.
  • Written evidence of expenses is also required.
• Pursuant to the cents per kilometre method, taxpayers are able to claim up to 5,000km business kilometres per year without written evidence, but must have support for the business kilometres travelled.

SUPERANNUATION

Please refer to article titled 'Summary of superannuation issues and Recent Changes' for a comprehensive update on superannuation matters.

Minimum account based pension drawdown

Please note that the rates are no longer subject to a 50% reduction.

Superannuation contributions

Please be aware that if you make a personal contribution to your Superannuation Fund you MUST provide us with written confirmation from your Superannuation Fund that this payment has been received and processed by 30 June 2024. If we are not provided with confirmation from your Superannuation Fund we will not be able to claim a tax deduction in your income tax return.

Statutory superannuation rate

Current rate is 11.0 % until 30 June 2024, and then increases to 11.5% for the year ended 30 June, 2025.

PLANNING CONSIDERATIONS - BUSINESSES

Non-Commercial Business Losses – Losses for High Net Worth Individuals

• Business losses by individuals are quarantined where the individual’s adjusted taxable income is $250,000 or more, unless a determination is received from the Commissioner of Taxation.

Super Guarantee and Contractors

• Under the SGC rules, employers are required to make contributions for eligible employees. Employees include independent contractors who are engaged under a contract primarily for the provision of labour.
• Where you engage independent contractors, you should determine whether the individuals are really employees for SGC purposes.
• Clauses in contracts which push the SGC obligations down to the contractors are not effective.

Super Guarantee and Hours of Work

• SGC contributions are generally based on an employee’s ordinary hours of work. Ordinary hours of work generally refer to standard hours which a relevant employee is required to work (not necessarily 9am to 5pm).
• SGC contributions do not apply to overtime payments.
• SGC contributions are required based upon all wages paid.

Division 7A

• Loans or financial assistance by private companies to shareholders or their associates can be deemed dividends.
• Associates include trusts, companies and partnerships controlled by shareholders or their relatives.
• Loans for income producing purposes can be caught by Division 7A.
• Ensure you have loan agreements for all loans.
• Ensure minimum repayment amounts are paid.
• The private use of company owned assets is now assessable under Division 7A.

Unpaid Trust Distributions

• Unpaid trust distributions to private companies are subject to Division 7A.
• Ensure these unpaid distributions that were created between 16 December 2009 and 30 June 2024 are :
  • Placed in a sub-trust for the exclusive benefit of the company by 30 June 2024;
  • Turned into a complying loan by the lodgement due date for the 2024 trust tax return; or
  • Repaid by the lodgement due date for the 2024 trust tax return.

ONGOING YEAR END ISSUES

Small Business Entities

• The taxpayer is eligible to be a small business entity for the 2024 financial year if their annual turnover is less than $10 million.
• Benefits include simplified depreciation and trading stock rules.

Note : Small business CGT concessions are only available for businesses with an annual turnover of less than $2 million.

Depreciation

• You are able to increase depreciation rate by reassessing effective life of assets if the use of the assets exceeds ATO estimates of effective life.

· Small Business $20,000 instant asset write-off (or is it $30,000)

It was proposed that small businesses with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

The $20,000 threshold was to apply on a per asset basis, so small businesses can instantly write off multiple assets.

Please note that this measure has yet to be passed and it is now proposed to be increased to eligible assets costing less than $30,000.

It has just been announced in the most recent budget that the $20,000 instant asset write off will continue into the next financial year.

Assets valued at more than the threshold (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

Income Received in Advance

• Income received in advance is not taxed until the services are provided as long as the income is credited to an unearned income account, and released to profit only when the services are provided. Rent is an exception to this and is taxed as received.

Timing of Expenses

• Expenses are deductible if incurred by 30 June 2024.
• Provisions are generally not deductible.
• Some accruals are not deductible.
• Some prepayments are not deductible.
• Interest paid after business ceases may continue to be deductible.

Repairs

• Deduct expenses for repairs and maintenance incurred before 30 June 2024, unless expenses relate to initial repairs, substantial replacement or improving an asset.

Gifts

• Check the recipient is an endorsed “deductible gift recipient”.
• Gifts are not deductible if some benefit is received by the donor except when given at an eligible fundraising event.

Trading Stock

• Valuation – choose cost, market value or replacement.
• Identify any obsolete stock – special valuation rule.
• Small business entity taxpayers do not have to undertake a stock valuation if the difference between opening and closing value is less than $5,000.

Prepayments/Expenditure in advance

• Prepayment rules can operate to spread the deduction over more than one year.
• The prepayment rules do not apply to salary, amounts required to be paid by law or a court, or expenditure under $1,001.
• Small business entity taxpayers and non-business individuals are allowed prepayments if the benefit does not extend beyond 12 months.

Imputation

• If shares are not held at risk for at least 45 full days the franking offset may not be available (except for individuals whose franking offset is less than $5,000).
• For non-fixed trusts receiving dividends, the franking offset will be lost unless beneficiaries have a vested and indefeasible interest or a family trust election is made.

Rental Properties

• Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property are not allowable and have not been allowable from 1 July 2017.
• Plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017.

Private Health Insurance

• Please be aware that if ALL members/dependants of your family are not covered by private health insurance you could be liable for an ATO surcharge levy.

Trust reimbursement agreements.

The ATO has issued guidance on Section 100A Trust reimbursement agreements.

A reimbursement agreement generally involves making someone presently entitled to trust income in circumstances where both:

• someone other than the presently entitled beneficiary actually benefits from that income.
• At least one party enters into the agreement for purposes that include getting a tax benefit.

This guidance is controversial as it calls into question long standing practices relating to trust distributions.

Where applicable, we will work with you having regard to this issue, with a view to being compliant with these requirements.

VICTORIA STATE BUDGET 2023-24 MAJOR CHANGES

The State Budget 2023-24 included a number of announcements related to legislation administered by the State Revenue Office.

Land transfer duty

Land transfer duty (stamp duty) on commercial and industrial properties has been abolished and replaced with an annual property tax.

From 1 July 2024, commercial and industrial properties will transition to the new system as they are sold, with the annual property tax to be paid either up front or via a 10 year State Government loan.

COVID-19 debt – temporary payroll tax surcharge

A temporary payroll tax surcharge will apply on wages paid in Victoria by businesses with national payrolls over $10 million a year.

A rate of 0.5% will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5%.

The surcharge will apply for 10 years until 30 June 2033.

COVID-19 debt – temporary land tax surcharge

A new COVID-19 debt temporary land tax surcharge will apply in additional to existing land tax from the 2024 land tax year for ten years.

Exempt properties – including our home – remain exempt from this surcharge. This means the value of exempt property is not included in our landholdings.

General land tax rates

• For taxable landholdings between $50,000 and $100,000 – a $500 flat surcharge will apply.
• For taxable landholdings between $100,000 and $300,000 – a $975 flat surcharge will apply.
• For taxable landholdings over $300,000 :
  • A $975 flat surcharge
  • An increased rate of land tax by 0.10 percentage points

The absentee owner surcharge rate will increase from 2 per cent to 4 per cent and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000. (The threshold for land held by an absentee trust remains unchanged at $25,000). This is effective from 2024 land tax year.

Vacant Residential Land Tax (VRLT)

From 1 January 2025, VRLT will apply to residential land across all of Victoria if the land is vacant for more than 6 months in the preceding calendar year.