What we will examine in our 2022/ 2023 Practice Update..

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January/ February 2023 Practice Update

🟠 Super guarantee contributions for the December 2022 quarter

Employers should be aware that the deadline for their December 2022 superannuation guarantee (SG) contributions was on January 28, 2023. It's important to keep in mind that there have been two significant changes to the SG that took effect on July 1, 2022:

The rate increased from 10% to 10.5%.
The eligibility requirements for employees were altered so that they no longer have to earn $450 per month.

As a result of these changes, employers are now required to make super contributions for all eligible employees, regardless of their earnings. It's worth noting, however, that employees under the age of 18 still need to work more than 30 hours per week to be eligible.

🟠 Electric Vehicle FBT exemption legislation is now law

The legislation making certain electric vehicles exempt from Fringe Benefits Tax (FBT) has now been officially enacted into law. This means that zero or low emissions vehicles provided as a car benefit on or after July 1, 2022, may be exempt from FBT, as long as certain criteria are met.

For a car to be eligible for this exemption, it must have been held and used by the employer for the first time on or after July 1, 2022 and it cannot have been subject to the luxury car tax when it was purchased. Additionally, for the 2023 income year, the car must cost less than the luxury car tax threshold for fuel-efficient vehicles, which is $84,916.

A vehicle is considered a zero or low emissions vehicle if it meets both of the following conditions:

It is a battery electric vehicle, hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle.
It is designed to carry a load of less than 1 tonne and fewer than 9 passengers, including the driver.

Please note that motorcycles and scooters, even if they are electric, do not qualify for the exemption, as they are not considered cars for FBT purposes. Additionally, there is a limitation on the FBT exemption for plug-in hybrid electric vehicles. After April 1, 2025, a plug-in hybrid electric vehicle will no longer be considered a zero or low emissions vehicle under FBT law, but there are special provisions that allow the exemption to continue for vehicles provided as an exempt benefit under an agreement entered into before April 1, 2025 and that continues after this date.

It's worth mentioning that even though the private use of an eligible electric car is exempt from FBT, the notional value of the benefit must still be included when determining whether an employee has a reportable fringe benefits amount (RFBA). An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year. The RFBA must be reported through Single Touch Payroll or on the employee's payment summary. The amount of an RFBA is not included in determining income tax and Medicare Levy liabilities, but it is included in the calculation of Medicare Levy Surcharge liability and is included in income tests for family assistance, child support assessments, and some other government benefits and obligations.

🟠 Further eligibility age change for downsizer contributions

The recent change in legislation has further reduced the age eligibility for making downsizer contributions into a person's superannuation. The age has now been reduced to 55 years, effective from January 1, 2023. This change follows the previous amendment made in July 2022, which reduced the age from 65 to 60 years.

Starting from January 1, 2023, individuals who are 55 years or older and meet the eligibility criteria can make a downsizer contribution of up to $300,000 per person ($600,000 per couple) into their super fund. The contribution must come from the sale proceeds of their home, which must have been held for at least 10 years and qualify for a partial main residence exemption.

It's important to note the key dates for downsizer contributions: for contributions made between July 1, 2022 and December 31, 2022, the eligible individuals must be 60 years or older, while prior to July 1, 2022, the eligibility age was 65 years and over. Individuals have 90 days from receiving the sale proceeds of their home to make the downsizer contribution.

Another important aspect to consider is that there is no upper age limit for making a downsizer contribution, even someone who is 95 years old could make one. Also, there is no need to satisfy the work test, unlike other contributions into superannuation.

🟠 Builder unable to obtain refund of incorrectly charged GST

The Administrative Appeals Tribunal recently ruled that a builder was unable to obtain a refund of Goods and Services Tax (GST) that was charged in error on the sale of a residential property that was rented for over five years after construction was completed.

The builder claimed that the GST charged on the unit was charged by mistake and therefore, sought a refund of the GST that was previously remitted to the Australian Taxation Office (ATO).

To fall outside the definition of "new residential premises" and therefore be considered an input taxed supply instead of a taxable supply, the residential property must meet the requirements specified in section 40-75(2)(a) of the GST Act. Essentially, to meet these requirements, the property must have been used exclusively for rental purposes for a continuous period of five years.

However, in this case, the unit was also marketed for sale a few months prior to the completion of the five-year period, and as a result, the builder was unable to obtain a refund of the incorrectly charged GST.

This decision serves as a reminder that if a residential property is both rented and available for sale, it will not meet the requirements of being used exclusively for input taxed supplies and therefore, cannot be considered towards the five-year continuous period.

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