TAX TIME 2024

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(Source Australian Taxation Office)

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       Tax time essentials 2024   (Click to navigate ATO website)

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Frequently asked question​

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Individual Tax returns.

 

The ATO has clearly indicated across its various media channels that, this Tax Time, it will be focusing on the accuracy of claims for work-related expenses, rental properties and capital gains tax liabilities.

 

The following checklist may assist:

 

    The rate per kilometer for claiming car expenses is 85 cents per kilometer for 2023–24 and 88c for 2023-2024. The ATO’s draft administrative approach for electric vehicles in PCG 2023/D1 indicates 4.2 cents per km will be allowed for these vehicle using the logbook method and for FBT purposes for 2022–23 and 2024. You cannot claim both fuel and electric cents per kilometer rates together.

    Refresh your understanding of the limited circumstances in which claims for conventional clothing are allowable, such as occupation-specific clothing, protective clothing, compulsory work uniforms and registered non-compulsory work uniforms (plus the cleaning of such clothing).

    The $250 non-deductible threshold for self-education expenses was removed from 1 July 2022 and therefore is now deductable from the first cent.

    The fixed rate method (52 cents per hour) and the temporary shortcut method (80 cents per hour) for working from home (WFH) expenses both ended on 30 June 2022. From 1 July 2022, the ATO’s administrative approach in PCG 2023/1 indicates that the ATO will not apply compliance resources if taxpayers claim WFH expenses at the rate of 67 cents per hour. From 1 March 2023 to 30 June 2023 (and later income years), taxpayers must keep a record of the total number of actual hours WFH, while from 1 July 2022 to 28 February 2023 only, the ATO will allow taxpayers to keep a representative record of the total number of hours WFH. 67c cent rate is applicable for FY 2024.

    The ATO’s Occupation and industry specific guides are a useful reminder to tax payers about what they can and cannot claim.

    Ensure clients declare all rental income received, and do not declare net rent (instead of gross rent) then claim expenses (such as property management fees) again against the net rent.

    Ensure that interest expenses are correctly apportioned where the property is used for private use, the property is not genuinely available for rent or there is mixed use of borrowed funds.

    Correctly apportion borrowing expenses over the five-year period (but not on a straight line basis), or the term of loan if less.

    Correctly characterize building expenditure as a deductible repair, a non-deductible initial repair or capital works.

    The limitation on travel expenses and second-hand depreciate assets relating to residential rental properties applies from 1 July 2017. 

    Ensure all capital gains on cryptocurrency, shares and properties (as well as other CGT assets) are correctly calculated and reported. Record keeping is essential to this.

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Small (to medium) business boosts

 

Three boosts are on offer for businesses with an aggregated turnover of less than $50 million, covering eligible expenditure:

 

    Incurred on business expenses and depreciating assets that support the business’ digital adoption (technology investment boost);

    Incurred on external training courses provided to employees (skills and training boost); and

    On the cost of eligible depreciating assets that support electrification and efficient energy usage (energy incentive boost).

 

The first two boosts remain in a Bill before Parliament, while the energy incentive boost is yet to be introduced into Parliament. The concerning aspect of this is that the technology investment boost ends on 30 June 2023, and its status as (yet-to-be) enacted law may be confirmed only in the closing weeks of the incentive. The first and the third boosts are subject to a maximum cap of $20,000 (or $100,000 of eligible expenditure) per business The second and third boosts will end on 30 June 2024.

 

The delay in legislating time-sensitive measures, designed to encourage businesses to invest in their operations and sustainability, creates uncertainty that undermines the intent of the measures.

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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.

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Instant asset write-off and Temporary Full Expensing.

 

Overview of eligibility

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If the asset is not first used or installed ready for use until after 30 June 2023, the asset will be subject to the rules that apply for the 2023–24 income year:

 

For small business taxpayers:

     -   If the asset costs less than $20,000 (GST-exclusive), it will be able to be fully written off under the yet-to-be-legislated increase in the instant asset write-off threshold to $20,000 (only for 12 months); or

     -   If the asset costs $20,000 or more, the asset will need to be allocated to a general use pool and depreciated according to the pooling rules;

     -    Larger business taxpayers (aggregated turnover of $10 million or more) will need to depreciate the asset in accordance with the normal depreciation rules, noting the ATO has an administrative approach of allowing low-cost assets to be fully deducted in the year in which they were acquired, but only up to $100 (GST-inclusive).

 

Consider the tax treatment of any depreciating assets that were sold during 2022–23 and which had previously been fully expensed. The proceeds received on sale are generally assessable income.

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Loss carry back

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This COVID-19-era temporary measure also ends on 30 June 2023. Any corporate tax entity with an aggregated turnover of less than $5 billion that makes a tax loss in 2022–23 can choose to carry that loss back against taxed profits made from 2018–19 to 2021–22. The refundable income tax offset is available by lodging the 2023 income tax return.

      -     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 lodgement 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 lodgement 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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Private health insurance statements

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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 offset

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LMITO not available 2022–23 income year on wards.

Low and middle income tax offset (LMITO) ended on 30 June 2022. This means it doesn't apply for the 2022–23 income year.

Your tax return outcome may be different this income year. You may have a lower refund (less than when LMITO was available) or you may receive a tax bill. See Why your tax return outcome may change in 2023.

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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).

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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 my Gov, at any time. Employees will receive a notification from us in their my Gov 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 my Gov.

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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

 

Changes to the thin capitalization rules to prevent double gearing structures

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On 5 April 2019, legislation was passed to improve the integrity of the income tax law by modifying the thin capitalization 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.

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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.

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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

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

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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