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GOOD NEWS: Tax Practice Update changes
starting JULY 2023
The ATO is implementing some changes that could affect your tax obligations. Be sure to stay informed and prepared to comply with these updates.
Being aware of the ATO's new regulations will help you avoid any potential issues and ensure smooth tax reporting for your business.
For Employers & business
The Superannuation guarantee (amount of money your employer contributes to your retirement savings) increases from 10.5% to 11%.
The National and Award minimum increase in wage that all employers have to pay their employees will take effect
Under the Temporary Skilled Migration Income Threshold - If a company sponsors a foreign worker, they must now pay them at least $70,000 per year instead of the previous amount of $53,900
International students holding visas will be allowed to work for up to 48 hours per fortnight instead of unlimited hours.
Workers who are owed unpaid wages can now claim up to $100,000 through small claims court, instead of the previous limit of $20,000.
Small businesses may be eligible for relief on their energy bills through the Energy Bill Relief Fund if they meet certain criteria.
Electronic distribution platforms, like ride-sharing or food delivery apps, will now have to report their earnings to the ATO tax office.
For you & your Family
If you're claiming deductions for working from home using the new 67 cent fixed rate method, make sure to keep a record of when you actually work from home. Just saying you work from home every Wednesday won't be enough for the tax office.
More people are now eligible for the first home loan guarantee, including friends, siblings, and other family members.
The income threshold for qualifying for the Medicare low-income assistance has gone up for the year 2022-23.
Families with a household income under $530,000 will get a higher child care subsidy starting from 10th July 2023. You can find more details on the Services Australia website.
New parents can now claim up to 20 weeks of paid parental leave.
The age at which you can access the age pension has been increased to 67 years.
For Superannuation
The amount your employer contributes to your retirement savings will increase to 11%.
The maximum amount you can transfer into a retirement account without attracting extra taxes has been raised to $1.9 million.
The minimum amount you must withdraw from your retirement account each year will go back to its normal rates.
Self-Managed Super Funds (SMSFs) now need to report events related to the transfer balance every three months instead of once a year.
In depth dive: 120% technology and skills ‘boost’ deduction
Exciting news for small and medium businesses! The Parliament has passed a new law that allows you to claim a special 120% deduction for spending on skills and training, and technology. This means you can get even more tax benefits than usual.
However, there are some important things to consider. To take advantage of this deduction for technology expenses, you must have bought the technology and had it installed and ready to use by 30th June 2023. That's just seven days from when the law was passed in Parliament.
Who can access the boosts?
The 120% skills and training, and technology boosts are special benefits offered to small businesses (individual sole traders, partnership, company or trading trust). To qualify, your business should have an annual turnover of less than $50 million.
This turnover includes the income of your business and that of your affiliates and connected entities
$20k technology investment boost
The Technology Investment Boost is a special deduction for small businesses to encourage digital operations or upgrading to digital technologies. It applies from 29th March 2022 until 30th June 2023.
To qualify for the deduction, you need to have actually incurred the expense or be legally obligated to pay for it. For assets like computer hardware, you must have purchased and installed them for use. For example, if you bought 10 computers, you need to have received and set them up for use by 30th June 2023. Ordering them on 29th June won't be enough to claim the boost if you haven't received and installed them:
The types of expenses that might be eligible for the technology boost include:
Digital enabling items - computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
Digital media and marketing - audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
E-commerce - goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
Cyber security - cyber security systems, backup management and monitoring services.
The technology you want to claim as a deduction for your business must be primarily used for digital purposes or to digitize your business operations. In other words, it should directly relate to how your business operates digitally. For example, if you bought a drone in 2022, you can only deduct its cost if your business, like a real estate agency, needed the drone to take aerial images of properties for your website. The expenses must be relevant to how your business makes money, especially through digital operations.
You can also claim repair and maintenance costs as deductions, as long as they meet the eligibility criteria.
If the expenditure on the technology serves both business and personal purposes (mixed use), you can only apply the bonus deduction to the portion of the expense that is used for business purposes.
The technology boost won't cover certain costs, such as expenses for hiring employees, raising funds for the business, building business premises, and the cost of the products or services the business sells.
The boost will not apply to these specific types of expenses.
Assets that you purchased but then sold within the relevant period (ie. on or prior to 30 June 2023).
Capital works costs (ie. improvements to a building used as business premises).
Financing costs such as interest expenses.
Salary or wage costs.
Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost below).
Trading stock or the cost of trading stock.
Here is an Example:
Imagine Company A, bought several laptops on 15th July 2022 to help its employees work from home. The total cost of the laptops was $100,000, and they were given to the employees to use exclusively for work.
As the owner of the laptops, Company A can claim a deduction for their depreciation as a capital expense. This means that in its 2022-23 income tax return, Company A can deduct the full $100,000 cost of the laptops under the temporary full expensing rule. Additionally, Company A can also claim a bonus deduction of $20,000, which is the maximum allowed, in the same tax return.
However, it's important to note that the $20,000 bonus deduction doesn't mean Company A will receive cash back. Instead, it is used to reduce the amount of taxable income that Company A has to report. If Company A is already in a position where it's making a loss, the bonus deduction would increase that tax loss further. The actual benefit to Company A will depend on whether it generates a taxable profit or loss during that year and the applicable tax rate.
This technology boost is good news for many eligible businesses. Your technology subscriptions and other products used in your business might also qualify for the boost.
When claiming the boost in your tax return, you get an extra 20% added on top of your normal claim. It doesn't matter whether you claim the expense or asset immediately or over time; the bonus 20% applies in the same way, giving you a higher deduction for eligible business expenses.
The Skills and Training Boost
The Skills and Training Boost allows you to get a 120% tax deduction for training courses that you provide to your employees. This boost is designed to help small and medium-sized businesses (SMEs) expand their workforce by hiring less-experienced employees and then improving their skills through external training. The goal is to help these employees grow and become more productive, benefiting both the business and its workers.
Individuals who work as sole traders, partners in a partnership, independent contractors, and other non-employees are not eligible for the boost because they are not considered employees. Additionally, associates like spouses or partners, as well as trustees of a trust, are also not eligible for the boost.
To be eligible for the boost, consider these important conditions:
Employee registration for the training course must be between 7:30 pm (AEST) on 29th March 2022 and 30th June 2024. If an employee started an eligible training course before 29th March 2022, it won't be eligible for the boost. Only enrollments in courses or classes after this date qualify.
The training should be directly related to how your business earns its income, and it must be deductible under the regular tax rules.
The training needs to be provided by a registered training provider, and your business must be charged for it, either directly or indirectly. Check the list of approved organizations that can offer training for the boost.
The training must be intended for your business's employees and must be conducted in-person within Australia or through online means.
Your business or any related entity cannot be the training provider. The training provider must be independent and not associated with your business in any way.
When a business spends money on employee training, it can also include some additional costs related to the training, like books or necessary equipment. However, these extra costs can only be included if the training provider charges the business for them.
What organisations can provide training for the boost?
The boost won't apply to all training courses offered by training companies. It only applies to courses offered by registered training providers within their official registration. Usually, this includes vocational training to learn a specific trade or courses that lead to a qualification, rather than courses for general professional development.
Qualifying training providers will be registered by:
Tertiary Education Quality and Standards Agency (search the register – includes States and Territories)
Australian Skills Quality Authority (ASQA)
Victorian Registration and Qualifications Authority (search the register)
Training Accreditation Council of Western Australia
Even if the training you want for your employees is not provided by registered training organizations, there are still plenty of options available. Many universities offer short courses, and there are flexible courses designed specifically for upskilling rather than obtaining a degree. If you have recently conducted performance reviews for your staff and training is part of their development plan, it might be worth looking into these alternative training options.
Important: 1 July 2023 wage increases
For employers, incorrectly calculating wages is not portrayed as a mistake, it’s “wage theft.” Beyond the reputational issues of getting it wrong, the Fair Work Commission backs it up with fines of $9,390 per breach for a corporation. In 2021-22 alone, the Fair Work Ombudsman recovered $532 million in unpaid wages recovered for over 384,000 workers.
On 1 July 2023, award rates of pay and the National Minimum Wage increased by 5.75%.
It is crucial for all employers to check their payroll systems and make sure they are paying their employees the correct rates and Awards.
For workers not covered by an Award or registered agreement, the National Minimum Wage is now $23.23 per hour or $882.80 per week (for a full-time employee working 38 hours per week) starting from 1st July 2023.
Casual workers have a minimum wage of $29.04 per hour, which includes a 25% casual loading.
For employees under an Award, their minimum wages have increased by 5.75%, and this applies from the first full pay period on or after 1st July 2023. Junior workers, apprentices, and supported wages will also have proportionate increases according to their respective Awards.
In addition, the superannuation guarantee increased from 10.5% to 11% on 1 July 2023.
If your workers have an employment agreement where they are paid a fixed amount that includes their base salary, Superannuation Guarantee (SG), and any other allowances, their take-home pay may be reduced by 0.5%. This means a slightly higher portion of their total pay will go towards their superannuation fund.
However, for employees who are paid a separate rate in addition to their superannuation, their take-home pay will remain the same, and the 0.5% increase will be added to their SG contributions.
Minimum annual payments for super income streams
The ATO wants to remind people with a Self-Managed Super Fund (SMSF) that if they are receiving a pension that started after 20th September 2007 (known as account-based pensions), the fund must pay a minimum amount to the member each year. This minimum payment is important to meet certain tax requirements.
During the COVID-19 pandemic, the government temporarily reduced the minimum amount that needed to be withdrawn from account-based pensions and similar products by 50% for the 2020, 2021, 2022, and 2023 financial years.
However, starting from 1st July 2023, for the 2024 financial year, this 50% reduction will no longer apply. This means that when calculating the minimum amount they need to withdraw for their pension from 1st July 2023 onwards, the 50% reduction will not be considered, and the full minimum payment will apply as usual.
Know your private company loan arrangements before you lodge
The ATO wants to remind taxpayers that if they or someone associated with them borrows money from their own private company, they must remember the rules for repaying the loan for income tax purposes. If they don't follow these rules, the loan could be treated as a "Division 7A deemed dividend" and added to their taxable income or the income of the person associated with them.
Before filing their private company tax return, taxpayers should keep these points in mind:
Make sure their loan follows the rules of a "Division 7A complying loan" and make the required minimum yearly repayments.
They cannot borrow more money or assets from the same company, either directly or indirectly, to make these minimum repayments or repay the loan. Doing so might lead to those payments not being counted, and they could end up with a taxable deemed dividend.
The ATO advises taxpayers to check their loan repayments, and if they are worried that a payment may not be considered, they should talk to their registered tax adviser or get in touch with the ATO for assistance.
Proportional indexation of transfer balance caps from 1 July 2023
The ATO wants to remind taxpayers that on 1st July 2023, the general transfer balance cap will be increased. Individuals will have a personal transfer balance cap ranging from $1.6 million to $1.9 million, based on the highest balance in their transfer balance account between 1st July 2017 and 30th June 2023.
However, the ATO will not display the updated personal transfer balance caps until 11th July 2023.
The ATO encourages all Self-Managed Super Funds (SMSFs) to report any events that occurred before 1st July 2023 by 30th June 2023. This will ensure that the member's personal transfer balance cap calculations are based on correct and up-to-date information.
Starting from 11th July, both members and their agents can view the member's personal transfer balance cap on the ATO's website.
If the ATO receives reports of events that occurred before 1st July 2023, a member's personal transfer balance cap will be recalculated after 11th July 2023.
From 1st July 2023 to 11th July 2023, individuals can still report transfer balance cap information to the ATO, but the processing of these reports will happen after this period.
During this time, the ATO won't issue or revoke any excess transfer balance determinations or commutation authorities sent to a member or a fund.
Normal processing of reported events will resume after 11th July 2023.
Masters course fees not deductible as self-education expenses
The Administrative Appeals Tribunal (AAT) ruled that a music teacher couldn't claim a deduction for tuition fees spent on a public policy Masters course because it wasn't directly related to his work as a music teacher.
The teacher wanted to broaden his teaching skills and qualify for management positions by pursuing the Masters course at the University of Melbourne. However, the ATO disagreed, saying there wasn't a clear connection between the course and his current job.
The AAT supported the ATO's decision, stating that the tuition fees weren't deductible as self-education expenses since they didn't contribute to the teacher's current job as a music teacher or relief teacher.
Additionally, the AAT noted that the expenses couldn't be deducted because the teacher's intention was to use the course for potential new job opportunities, which is not a sufficient reason for claiming the deduction.
Court penalises AMP $24 million for charging deceased customers
The Federal Court has ruled that four companies associated with AMP Group broke the law by charging life insurance premiums and advice fees from the superannuation accounts of over 2,000 deceased customers.
As a result of the court's decision, two of these AMP companies have been ordered to pay a total penalty of $24 million for their actions.
Both AMP Life Limited and AMP Financial Planning admitted that they engaged in unfair conduct by deducting and not properly refunding insurance premiums and advice fees from the superannuation accounts of deceased members, even after being informed of their deaths. They also admitted to accepting these fees, even when there were clear reasons to believe that they couldn't provide the insurance or advice.
Additionally, the Court found that all four AMP companies violated their overall obligations as financial services licensees in Australia, which require them to act efficiently, honestly, and fairly.
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