TAX TIME 2021

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(Source Australian Taxation Office)

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       Tax time essentials 2021   (Click to navigate ATO website)

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COVID-19 and Govt support

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Frequently asked questions

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Table of contents

Individuals

Employers

Payments and reporting

Interest and penalties

Cancelled supplies and events

International business

Self-managed super funds

Pausing or ceasing your business

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Support for business and employers by NSW government.

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2021 COVID-19 business grant

The NSW Government has announced a COVID-19 business grant to aid businesses impacted by the current Greater Sydney COVID-19 restrictions.

Grants between $7500 and $15,000 will be available to eligible businesses depending on the decline in turnover they experienced during the restrictions.

Businesses will be able to apply for the grants through Service NSW from 19 July 2021. For more information, visit 2021 COVID-19 business grant.

Tourism support package

The NSW Government’s tourism support package includes measures to support jobs in the accommodation, entertainment and tourism sectors.

Eligible accommodation businesses with a physical location in the City of Sydney local government area can register for the Stay & Rediscover Accommodation Voucher Scheme.

Dine & Discover NSW Voucher Scheme

The NSW Government has launched a voucher scheme to encourage the community to support hospitality, arts and tourism businesses.

Eligible businesses can now register for the scheme. For more information, visit Dine & Discover NSW.

Sydney CBD Friday voucher program

The NSW Government has announced a new voucher program to encourage the community back into the Sydney CBD and support businesses impacted by COVID-19.

The program will offer 500,000 NSW residents 4 x $25 vouchers to spend at dining and entertainment venues in the Sydney CBD on Fridays. 

COVID-Safe dining and entertainment businesses in the 2000 postcode will be able to register from spring. Customer applications are expected to open soon after.

More information will be available soon.

Small business fees and charges rebate

As part of the NSW Government’s COVID-19 stimulus and recovery plan, small businesses may apply for a rebate worth $1500 to help them pay for government fees and charges.

For eligibility criteria and to apply, visit Apply for the small business fees and charges rebate.

Jobs Plus program

The Jobs Plus program provides support to Australian and international businesses that want to start or expand their operations in NSW. Program support will help reduce the costs and financial risks of growing a business or moving its operations to NSW.

To be eligible for the program, Australian businesses must currently employ at least 20 workers and overseas businesses must employ at least 80 workers. All businesses must be able to create at least 30 net new full-time equivalent (FTE) jobs in NSW before 30 June 2024. Further conditions apply.

For more information about eligibility criteria, as well as details about funding, visit Jobs Plus program.

Export assistance grant

An export assistance grant of up to $10,000 is available to eligible NSW businesses impacted by COVID-19, bushfires or drought, to help you access new global markets or re-enter old ones. 

Eligible exporting businesses can apply for 50% reimbursement of certain export-enabling expenses, such as marketing and e-commerce, for expenses already paid since 1 January 2020.  

For eligibility criteria and to apply, visit Apply for an export assistance grant.

Small and medium enterprise (SME) guarantee scheme

The Australian Government will guarantee 50% of the value of eligible business loans to small and medium enterprises impacted by COVID-19. Maximum loan value is $250,000 and there will be a repayment-free period of six months. For more information, visit the Australian Banking Association.

Financial institutions

The Australian Banking Association has outlined 3 key stages to repayments for eligible business owners who continue to experience financial difficulty as a result of COVID-19. This includes options to pay in full, make partial payments or further hardship assistance. Customers will need to contact their financial institutions to discuss the options available to them.

For details, visit Australian Banking Association or contact your banking institution directly.

Support for independent breweries

Government funding available through the Independent Brewers Association (IBA) will support NSW independent brewers by covering one year’s annual membership funds to eligible new and existing members. For more information, visit the IBA news.

Opportunity for NSW businesses to help fill the medical supply chain

The NSW Government is seeking expressions of interest from NSW businesses who can supply or make components of urgently needed medical equipment and sanitation aids, including:

• hand sanitiser

• examination gloves

• disinfectant and cleaning products

• handwash and soap

• masks

• eyewear

• gowns and protective overalls

• paper products, including toilet and tissue paper.

Note: Businesses do not currently have to manufacture the listed products, but should be capable of changing their production lines to supply these products.

Instant asset write-off and Temporary Full Expensing.

Overview of eligibility

You may be eligible for temporary full expensing if you are one of the following:

• a business with an aggregated turnover of less than $5 billion

• a corporate tax entity that meets the alternative income test.

For the 2020–21 and 2021–22 income years, an eligible entity can claim in its tax return a deduction for the business portion of the cost of:

• eligible new assets first held, first used or installed ready for use for a taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2022

• eligible second-hand assets where both of the following apply

  • The asset was first held, first used or installed ready for use for a taxable purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

  • The eligible entity’s aggregated turnover is less than $50 million.

• improvements incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022 to

  • eligible assets

  • existing assets that would be eligible assets except that they are held before 7.30pm AEDT on 6 October 2020

• eligible assets of small business entities using the simplified depreciation rules and the balance of their small business pool.

You can make a choice to opt out of temporary full expensing for an income year on an asset-by-asset basis if you are not using the simplified depreciation rules.

You must tell us your choice to opt out:

• in your tax return

• by the day you lodge your tax return for the income year to which the choice relates.

Interaction of tax depreciation incentives

Eligible businesses may want to know which tax depreciation incentive is right for them.

We have prepared a high-level snapshot to help you work out how temporary full expensing, instant asset write-off or backing business investment may apply to you.

See also:

• Interaction of tax depreciation incentives

• Podcast Episode 32 – JobMaker Plan Part 2: Economic support measures

Next step:

• Eligibility for temporary full expensing

Loss carry back

You might make a tax loss in an income year as a result of claiming an immediate deduction under temporary full expensing. If you are a corporate tax entity, instead of carrying the tax loss forward and using it to offset your future income, you can consider if you are eligible for a refundable tax offset under loss carry back.

See also:

• Loss carry back tax offset

Companies with substituted accounting periods

If your company has an approved substituted accounting period (SAP) for an early balance date and is entitled to a refund, you can lodge your company tax return before the lodgment due date and receive a refund immediately if the company both:

• is a full self-assessment taxpayer

• has an approved SAP with a balancing period that has concluded.

For example, if you have an approved SAP with an early balancing period ending on 31 December 2019, your ordinary lodgment due date would be 15 July 2020. If you choose to lodge your 2020 tax return before that date, you can receive your refund immediately.

However, if you have a debt with us and you are due to receive a refund, we are required by law to use the refund, credit to reduce your debt. If you don’t want this to happen, contact us to discuss your circumstances.

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Changes announced in the  2019 Budget

The changes announced in the 2018–19 Budget that are now law, include:

• changes to income tax rate thresholds in the 2018–19, 2022–23 and 2024–25 income years

• a new low and middle income tax offset to reduce the tax payable by low and middle income earners in the 2018–19, 2019–20, 2020–21 and 2021–22 income years

• a new low income tax offset from the 2022–23 income year (to replace both the new low and middle income tax offset and the current low income tax offset).

The following table outlines the rates and thresholds that apply, along with the offset entitlements related to these changes.

Find out about the key changes this tax time, ATO service commitment, what you can do to prepare, and things to consider before lodging to ensure your clients' tax returns are correct and to help prevent delays in processing.

ATO will start full processing of 2018–19 tax returns on 5 July 2019 and expect to start paying refunds from 16 July 2019.

ATO aim to finalise the majority of electronically-lodged current year tax returns within 12 business days of receipt.

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Private health insurance statements

From 1 July 2019, health insurers are no longer required to send private health insurance statements. Previously they were required to send statements by 15 July each year, it is now optional to send this information.

Private health insurance information will be available in the pre-fill report, usually by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.

It is important to correctly report private health insurance information as we use it to calculate:

• private health insurance rebates taxpayers are entitled to

• the Medicare levy surcharge, if applicable.

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Low and middle income earner tax offsets.

Low and middle income earners may be eligible for the low income tax offset and the low and middle income tax offset. We work out the offset amounts when you lodge your tax return.

To be eligible for one or both of these tax offsets:

• you need to be an Australian resident for income tax purposes and pay tax on your taxable income

• your taxable income needs to be below certain income thresholds.

You don't need to complete a section in your tax return to get these tax offsets. If you meet the conditions above, your entitlement to any offset amount is added to your tax return. You can see the amount on your notice of assessment (you won't receive the offset as a separate payment).

On this page:

• What is a tax offset?

• How tax offsets affect the tax you pay

• Claiming income tax offsets

• Changes to the Personal Income Tax Plan

• Low income tax offset

• Low and middle income tax offset

What is a tax offset?

A tax offset reduces the tax you pay (known as your tax payable) on your taxable income. Your taxable income is your total income minus any deductions you claim.

The low income tax offset and the low and middle income tax offsets can only reduce the tax you pay to $0 (zero). Any offset amount that remains once your tax payable is zero isn't refunded to you.

How tax offsets affect the tax you pay

The tax offset amount you receive depends on your taxable income and the amount of tax you need to pay on this income (your tax payable).

Offsets can't reduce your Medicare levy and Medicare Levy Surcharge (if any). The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income.

So, if your taxable income is $18,200 or less and you:

• have not paid any tax, an offset can't reduce the tax you pay – your tax payable amount is already zero

• have paid any tax on this income, you will generally receive all of this tax back as a refund – your tax payable amount is zero so no offset can be applied.

If your taxable income is $18,201 or more, we use your taxable income to work out how much tax you're required to pay. We then reduce the tax you need to pay with the offset amount you're entitled to.

If you are under 18 years old as at 30 June of the income year and you have unearned income, these offsets can't reduce the tax payable on this income.

Claiming income tax offsets

You don't need to complete anything in your tax return in order for us to work out your low income tax offset or the low and middle income tax offset. We work out the amounts of these tax offsets for you once you lodge your tax return.

Any offset you are entitled to is included when we work out the result of your tax return.

If you want to find out how much of an offset you were entitled to, you can see this amount on your notice of assessment. Look for the Less non-refundable tax offsets section.

If you lodge online, your notice of assessment will be sent to your myGov Inbox once your return has been finalised.

If you receive a tax refund it will be deposited into your nominated bank account. Any refund may also be reduced by any debt you have with us or any Australian government agency, the law requires us to use refunds or credits to pay debt.

Changes to the Personal Income Tax Plan

In the 2020–21 federal Budget, the Australian Government brought forward stage two of the personal income tax plan from 1 July 2022 to 1 July 2020. These changes are now law which means:

• the low income tax offset has been increased

• the low and middle income tax offset is available for the 2020–21 income year.

The government also announced in the 2021–22 federal Budget that the low and middle income tax offset will continue to be available for the 2021–22 income year. This change is now law.

See also:

• JobMaker Plan – bringing forward the Personal Income Tax Plan

Low income tax offset

The maximum low income tax offset is $700 for the 2020–21 and later income years. This has been increased from $445 as a result of the 2020–21 federal budget.

If your taxable income is:

• $37,500 or less, you will get the full offset of $700

• between $37,501 and $45,000, you will get $700 minus 5 cents for every $1 above $37,500

• between $45,001 and $66,667, you will get $325 minus 1.5 cents for every $1 above $45,000.

Low and middle income tax offset

The low and middle income tax offset amount is between $255 and $1,080.

The full offset is $1,080 per annum but you might not receive the full $1,080. The base amount is $255 per annum.

This offset is available for the 2018–19, 2019–20, 2020–21 and 2021-22 income years.

If your taxable income is between $37,001 and $126,000, you will get some or all of the low and middle income tax offset. This is in addition to the low income tax offset.

The amount of offset you receive depends on your circumstances, such as your taxable income and how much tax you have paid.

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Income statement

If an employer reports through Single Touch Payroll they are not required to provide a payment summary to their employees.

Income statements will replace payment summaries. Employees can access their income statements through ATO online services via myGov, at any time. Employees will receive a notification from us in their myGov inbox when their income statement is 'Tax ready', so they can complete their tax return.

Employees will be able to contact us for a copy of their income statement if they do not have access to myGov.

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• Accessing your income statement or payment summary information online

Research and development tax incentive amendments

On 8 May 2018, the government announced it would reform the research and development (R&D) tax incentive to encourage additional investment in R&D while ensuring the integrity and fiscal affordability of the incentive. These changes are expected to apply for income years commencing on or after 1 July 2018.

We will accept tax returns as lodged during the period up until the proposed law change is passed by parliament. After the new law is passed, taxpayers will need to review their position and, if required, seek an amendment.

See also:

• Better targeting the Research and Development Tax Incentive

Hybrid mismatch rules

On 24 August 2018, legislation was passed implementing the Organisation for Economic Cooperation and Development (OECD) hybrid mismatch rules. These rules apply to income years starting on or after 1 January 2019.

However, unless an importing payment is made under a structured arrangement, the imported mismatch rule will apply to income years starting on or after 1 January 2020.

The hybrid mismatch rules prevent entities that are liable to income tax in Australia from avoiding income tax or obtaining global double tax benefits through hybrid mismatch arrangements that exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.

The rules operate to deny a deduction, or include an amount in assessable income for payments that give rise to a hybrid mismatch outcome.

See also:

• Implementation of the OECD hybrid mismatch rules

Increasing access to company losses

On 1 March 2019, legislation was passed that will supplement the current ‘same business test’ for losses with a more flexible 'similar business test'. The new test will expand access to past year losses when companies enter into new transactions or business activities.

The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to the:

• extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income

• extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income

• identity of its current business and the identity of its former business

• extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods of the former business.

As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.

The 'same business test' and the 'similar business test' will be collectively known as the 'business continuity test'.

See also:

• Increasing access to company losses

• LCR 2017/D6 The business continuity test – carrying on a similar business

Downsizer contribution into superannuation

From 1 July 2018, members aged 65 years old or older, and meet all the eligibility requirements may choose to make a downsizer contribution (a new contribution type) of up to $300,000 into superannuation from the proceeds of selling their primary residence. To be eligible, the contract for sale must be entered into on or after 1 July 2018.

If a member makes a downsizer contribution it is reported in the year it is made. The member will need to provide a Downsizer contribution into super form, either before or when they make their contribution.

Downsizer contributions should be made within 90 days of the change of ownership of the dwelling (usually the date of settlement). An extension of time may be granted where there is a delay, but will not be granted to allow the member to meet the age requirement.

Downsizer contributions can be made regardless of contributions caps and other restrictions (age and work test) that may apply when making voluntary contributions.

See also:

• Downsizing contributions into superannuation

First home super saver scheme

If a taxpayer requested the release of an amount under the First home super saver (FHSS) scheme during the 2018–19 income year, they must include in their 2019 tax return:

• any assessable FHSS amount

• the tax withheld amount.

They will receive a payment summary from us showing the assessable FHSS amount and tax withheld.

If they requested a release during the 2018–19 income year, they must include the amount in their 2019 tax return, even if they did not receive the amount until after 30 June 2019.

See also:

• First home super saver scheme

Changes to the thin capitalisation rules to prevent double gearing structures

On 5 April 2019, legislation was passed to improve the integrity of the income tax law by modifying the thin capitalisation rules to prevent double gearing structures. Double gearing structures involve the use of multiple layers of ‘flow-through’ entities (such as trusts and partnerships) to issue debt against the same underlying asset.

These changes apply to income years starting on or after 1 July 2018.

The changes will affect entities with interests in trusts (other than public trading trusts) and partnerships, as the threshold for the purposes of the associate entity debt, associate entity equity, and the associate entity excess amounts has been reduced from 50% to 10%.

The changes also affect how the arm’s length debt amount is calculated. To determine both the independent lender and independent borrower amounts of the test, an entity must consider the debt-to-equity ratios of any other entity in which it has an interest.

Foreign resident capital gains withholding payments - impacts on foreign and Australian residents.

Foreign resident capital gains withholding applies to vendors disposing of certain taxable Australian property. A 12.5% non-final withholding is applied to these transactions at settlement.

The assets subject to the withholding tax are:

• taxable Australian real property with a market value of $750,000 or more

• an indirect Australian real property interest

• an option or right to acquire such property or interest.

Where the seller of these Australian assets is deemed a foreign resident, the buyer must pay 12.5% of the purchase price to the ATO as a foreign resident capital gains withholding payment.

The foreign resident seller can claim a credit for the foreign resident capital gains withholding payment by lodging a tax return for the relevant year.

See also:

• Foreign resident capital gains withholding payments

• Taxable Australian property

Background

Broadly, where a foreign resident disposes of certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price (see note below) and pay that amount to the Australian Taxation Office (ATO).

Note: the legislation specifies that the withholding is actually on the "first element of the cost base". However, as purchase price is understood by vendors and purchasers, and in many instances will equate with the "first element of the cost base", we have used the term purchase price for simplicity.

Annual charge on foreign owners of under utilized residential property.

The vacancy fee is part of the Government's comprehensive housing affordability plan that was announced on 9 May 2017. This measure is intended to encourage foreign owners of residential dwellings to make them available for rent where they are not used as a residence and so increase the number of dwellings available for Australians to live in. The reporting and notification requirements are also expected to provide greater visibility of vacancy rates for foreign owned residential dwellings.

On 30 November 2017 the Treasury Laws Amendment (Housing Tax Integrity) Act 2017 received royal assent. The Act amends the Foreign Acquisitions and Takeovers Act 1975 to require foreign owners of residential dwellings to annually inform the ATO whether the dwelling is residentially occupied or genuinely available on the rental market as a residence for at least six months per year. If the person fails to notify the ATO or notifies the ATO that the dwelling is not residentially occupied or genuinely available on the rental market as a residence for at least six months per year they will be liable for a fee. The fee will be equivalent to the relevant foreign investment application fee for the property at the time it was acquired by the foreign investor.

The obligations under the Act apply to foreign persons who make a foreign investment application for residential property from 7:30PM (AEST) on 9 May 2017. The obligations also apply to foreign purchasers who acquire residential dwellings utilising a New Dwelling Exemption Certificate where the certificate was applied for from 7.30PM (AEST) on 9 May 2017.

Legislation and supporting material

The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017

Limit plant and equipment depreciation deductions to outlays actually incurred by investors.

Income tax deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation are no longer allowed. The changes are now law.

The changes apply from 1 July 2017 to:

• previously used plant and equipment acquired at or after 7.30 pm on 9 May 2017 unless it was acquired under a contract entered into before this time

• plant and equipment acquired before 1 July 2017 but not used to earn income in either the current or previous year.

Investors who purchase new plant and equipment will continue to be able to claim a deduction over the effective life of the asset.

The changes do not affect deductions that arise in the course of carrying on a business, or for:

• corporate tax entities

• superannuation plans other than self-managed superannuation funds

• public unit trusts

• managed investment trusts

• unit trusts or partnerships whose members are the above listed entities.

Legislation and supporting material

The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017.

See also:

• Media release No. 86External Link issued on 7 September 2017 by the Treasurer and the Assistant Minister to the Treasurer

• Media release No. 46External Link issued on 9 May 2017 by the Treasurer and the Assistant Minister to the Treasurer

Disallow the deduction of travel expenses for residential rental property.

From 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as deductions by investors. The changes are now law. The travel expenditure is also not recognised in the cost base of the property for CGT purposes.

You can continue to deduct travel expenditure if:

• the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income; or

• you are an excluded class of entity.

An excluded class of entity is:

• a corporate tax entity;

• a superannuation plan that is not a self-managed superannuation fund;

• a public unit trust;

• a managed investment trust; or

• a unit trust or a partnership, members of which are entities of a type listed above.

Legislation and supporting material

The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017.

See also:

• Media release No. 86External Link issued on 7 September 2017 by the Treasurer and the Assistant Minister to the Treasurer

• Media release No. 46External Link issued on 9 May 2017 by the Treasurer and the Assistant Minister to the Treasurer

Expanding tax incentives for investments in affordable housing.

On 9 May 2017 the Government announced that from 1 January 2018, it will provide an additional ten percentage point capital gains tax (CGT) discount for resident individuals who invest in qualifying affordable housing.

This will increase the CGT discount to 60%.

To qualify for the 60% discount, housing must be provided to low to moderate income tenants, and rent charged at a discount below the private market rental rate.

The Government has undertaken consultation and confirmed that qualifying affordable housing must be managed through a registered community housing provider (CHP) and the investment held for a minimum of three years in aggregate.

CHPs will determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.

Legislation and supporting material

Legislation is being developed for this measure.

Improving the integrity of GST on property transactions.

On 9 May 2017 the Government announced that it will strengthen compliance with the GST law by requiring purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the ATO as part of settlement.

Under the current law (where the GST is included in the purchase price and the developer remits the GST to the ATO), some developers are failing to remit the GST to the ATO despite having claimed GST credits on their construction costs. As most purchasers use conveyancing services to complete their purchase, they should experience minimal impact from these changes.

This change takes effect from 1 July 2018.

Lowering of repayment thresholds for higher education and training loans.

On 1 May 2017 the Government announced a range of higher education reforms. This proposal included expanding the current repayment rates and thresholds for higher education and training loans from 8 to 18, commencing 1 July 2018. As part of the proposal, the minimum repayment threshold will be lowered to $42,000 with a one per cent repayment rate.

This measure was further detailed on 9 May 2017 as part of the Government's Federal Budget announcement.

Black Economy Task force - prohibition on sales suppression technology and software.

On 9 May 2017, the Government announced that the manufacture, distribution, possession, use or sale of electronic point of sale (POS) sales suppression technology and software will be prohibited.

Sales suppression technology and software allows businesses to understate their incomes by untraceably deleting selected transactions from electronic records in POS equipment.

Source: Australian Tax office - www.ato.gov.au

Online Tax Returns. Call 0421 791926