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Author: Vic Stevens

The new-look ATO Charter

Posted on by Vic Stevens

The ATO has launched its refreshed ATO Charter — previously known as the Taxpayers’ Charter. The ATO Charter explains what people can expect when they interact with the ATO, the ATO’s commitments to them, what the ATO asks of them, and steps people can take if they are not satisfied.

The community consultation leading to the revision of the Charter was ‘inaccessible, dense and did not reference the ATO’s support for people with vulnerabilities or those impacted by difficult times’.

The refreshed Charter has been streamlined but contains links to detailed information on specific topics. The PDF version — as a chapter of the ATO’s ‘Commitments and reporting’ document — is around five pages long.

The new Charter also contains a specific commitment for ‘support and assistance’ in dealing with vulnerabilities and crises, and makes more prominent information about the steps people can take if they are not satisfied.

Note that ATO interactions with tax agents — through which almost two-thirds of individuals lodge — and other professional intermediaries are not comprehensively covered in the Charter, although there is a commitment that the ATO will work with taxpayers’ representatives.

Further, to reflect the ATO’s digital strategy, the Charter commits to providing services digitally except where an alternative approach is more appropriate, and there is a commitment to ensure cyber security over taxpayers’ digital data.

The web-based ATO Charter is available here — at Our Charter. It has been translated into 25 languages and there is also an ‘easier to read’ version. In addition, a downloadable three-page PDF pamphlet is available here.

This article summarises the contents of the new Charter.

Note: the below summary uses the terminology in the Charter — i.e. ‘we’/’us’ refers to the ATO and ‘you’ refers to the taxpayer.

About our Charter

We want to ensure that every time you work with us your experience is ‘easy and professional’.

The Charter:

  • explains what you can expect when they interact with us
  • applies to everyone who works with us
  • is based on laws, codes and principles we both must follow.

There are also steps you can take if you disagree with a decision or believe we have not followed the Charter.

Our commitment to you

Fair and reasonable treatment

Our relationship with you is based on mutual trust and respect. We are committed to being fair, ethical and accountable in everything we do.

We will:

  • treat you with courtesy, consideration and respect
  • act with honesty and integrity
  • be impartial and act in good faith
  • treat you as being honest unless we have reason to think otherwise and give you an opportunity to explain
  • work with people you have chosen to represent you, such as a professional advisor.

Professional service

We know your rights and obligations under the law can be complex. We aim to provide you with reliable, accessible and useful information and service to help you understand your rights and meet your obligations.

We will:

  • be responsive and provide timely, accurate and easy-to-understand information
  • work with the community to design our products and services to be easy-to-use and inclusive
  • provide our services digitally except where an alternative approach is more appropriate.

Support and assistance

We understand people may need help in different ways, at different times. We know it may be harder for you to meet your obligations if you are experiencing vulnerability, difficult times or are impacted by crisis events. While we can’t remove your obligations in most cases, there may be ways we can assist you to meet them.

We will:

  • listen to your circumstances and take them into account where we can
  • provide support during crisis events and difficult times
  • provide assistance if you need help understanding or accessing our services.

Security of your data and privacy

We take the responsibility to protect your information and data very seriously. We know how important the privacy and security of your personal information is in the modern digital world.

We will:

Keep you informed

We are committed to being transparent and accountable in our interactions with you and the community.

We will:

  • explain our decisions
  • keep you informed of our progress
  • communicate and explain your rights, obligations and review options
  • give you access to your information, and information that helps us make decisions, where appropriate.

What we ask of you

You will have a range of obligations under the law depending on your circumstances.

  • Treat us with courtesy, consideration and respect.
  • Be truthful and act within the law.
  • Respond to our queries on time and provide us with all relevant information. We may ask you questions or gather more information to ensure what we understand is correct and current.
  • Let us know if someone is representing you. You are still responsible for ensuring the information given to us is accurate.
  • Meet your obligations including lodging and paying on time. If you can’t, let us know as early as possible before the due date so we can support you.
  • Keep good records and provide them to us when needed.
  • Take care to keep your identity information safe and let us know if your details change.

Steps to take if you would like a decision reviewed

If you believe we have made a mistake in our decisions, we will:

  • work with you to address your concerns as quickly and simply as possible
  • help you understand how it applies to your circumstances
  • outline your options including legal review rights and how to make a complaint.

As a first step, discuss your concerns with us. You can also request to have many of our decisions reviewed by an independent officer who was not involved in the original decision.

If you disagree with our internal review, you can ask for an external review. In most cases, you need to have requested an internal review with us and be dissatisfied with the outcome before seeking an external review.

Depending on the type of decision you are objecting to, you may have a variety of options for external review such as the courts or tribunals.

Steps to take if you are not satisfied with our service

There are several steps you can take if we have not met your expectations, or you think we have not followed our Charter:

  • As a first step, discuss your concerns with an ATO officer who will try to resolve your issue.
  • If you’re not satisfied, you may ask to talk to a manager.
  • If this still does not address your concerns, you can provide feedback to improve our processes or lodge a formal complaint.

We treat all complaints seriously and aim to resolve them quickly and fairly.

Making a complaint will not affect your relationship with us.

If you are not satisfied after making a complaint with us, you can contact the Inspector-General of Taxation and Taxation Ombudsman for an independent investigation.

You can also apply for compensation from us if you:

  • believe our actions gave rise to a legal liability
  • have financial losses caused by our defective administration.

About the former Taxpayers’ Charter

The previous Taxpayers’ Charter was introduced in July 1997 and was one of the first ‘service’ charters introduced by a Commonwealth agency. It set out the way the ATO was to conduct itself when dealing with taxpayers. It consisted of two overview booklet and ten supporting booklets. It explained 13 Charter principles (taxpayer rights) and outlined six taxpayer obligations.

The original Charter gave a commitment to be independently reviewed every three years. The inaugural review was delayed to incorporate the impact of tax reform (A New Tax System). A revised Charter was released in November 2003.

The Charter has undergone a number of internal and external reviews over the years. Interested readers may refer to the Inspector-General of Taxation’s thought-leadership paper A brief history of the Taxpayers’ Charter (released in November 2021) for a detailed account of the history and development of the Charter, including review findings and recommendations.

The most recent ATO review of the Charter commenced in July 2021 with a public consultation period in September-October 2022.

Taxpayers’ rights and obligations as set out in the former Taxpayers’ Charter are below.

Your rights

You can expect us to:

  • treat you fairly and reasonably
  • treat you as being honest unless you act otherwise
  • offer you professional service and assistance
  • accept you can be represented by a person of your choice and get advice
  • respect your privacy
  • keep the information we hold about you confidential
  • give you access to information we hold about you
  • help you to get things right
  • explain the decisions we make about you
  • respect your right to a review
  • respect your right to make a complaint
  • make it easier for you to comply
  • be accountable.

Your obligations — what we expect of you

We expect you to:

  • Be truthful
  • Keep the required records
  • Take reasonable care
  • Lodge by the due date
  • Pay by the due date
  • Be cooperative

ATO service commitments

While not forming part of the Charter, the ATO’s service commitments are relevant to this topic and also to the current Tax Time. Detailed information is available here.

The ATO’s 2023–24 service commitments are as follows:

Table 1

The ATO’s part year performance against its service commitments for 2022–23 is published here.

Tax time tools and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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We can also present tax updates or specialty topics at your firm or through a private online session, with content tailored to your client base. Call our BDM Caitlin Bowditch at 0413 955 686 to have a chat about your specific needs and how we can assist.

Learn more about in-house training >
Email us to have a chat >

 

Our mission is to provide flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.

Small Business Energy Incentive draft legislation released

Posted on by Vic Stevens

The Government has now released exposure draft legislation to implement the Small Business Energy Incentive (SBEI) first announced on 30 April 2023.

The SBEI is a temporary measure to support small businesses (with aggregated annual turnover of less than $50 million) in improving their energy efficient and save on energy bills. The incentive will take the form of a bonus deduction equal to 20 per cent of eligible expenditure, capped at a $20,000 deduction ($100,000 expenditure). The bonus deduction will only apply to eligible expenditure incurred from 1 July 2023 to 30 June 2024. While the legislation is still in exposure draft form, if and when it is enacted it will have retrospective application from 1 July 2023.

Note: all examples in this article are taken or adapted from the draft explanatory materials.

The draft legislation proposes to amend the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997). This table sets out a summary of the key elements of the SBEI.

Table 1

Eligible entities

An entity will be eligible for the bonus deduction if, in the income year in which the asset is first used or installed, or the improvement cost is incurred, it is:

  • a ‘small business entity’ under s. 328-110 of the ITAA 1997 — i.e. an entity that carries on business with an aggregated annual turnover of less than $10 million, or
  • an entity that would meet the definition of an SBE under s. 328-110 of the ITAA 1997 if the reference to $10 million was replaced by a reference to $50 million.

Eligible expenditure

The bonus deduction will be calculated based on eligible incurred expenditure which is:

  • for an eligible depreciating asset first used or installed or an eligible improvement to a depreciating asset
  • incurred between 1 July 2023 and 30 June 2024 (the bonus period)
  • deductible under another provision of the tax law.

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Depreciating assets

Expenditure on a depreciating asset is eligible for the bonus deduction in any of the following situations.

1.         Assets that use electricity instead of a fossil fuel

An asset is eligible for the bonus deduction if there is a new reasonably comparable asset that uses a fossil fuel available in the market, and the asset instead uses electricity.

Table 2

An asset will not qualify for the bonus deduction if the only reasonably comparable asset that uses a fossil fuel is a second-hand asset.

2.         Assets that use electricity more efficiently

If the asset is replacing another depreciating asset, it must be more energy efficient than the asset it is replacing.

If the asset is not replacing another asset, then it must be more energy efficient than a new reasonably comparable asset available in the market at the time it is first used or installed ready for use for any purpose. The comparable asset cannot be a second-hand asset.

Table 3

3.         Assets that facilitate energy storage, efficiency or demand management

Demand management and enabling assets may be eligible for the bonus deduction:

  • an asset that allows another asset to be more energy efficient (as long as the other asset is not an excluded asset)
  • an asset that enables the storage of electricity, or the storage of energy that is generated from a renewable source — e.g. a battery that stores electricity or a thermal storage system that can store heat or cold from a renewable source, such as a solar thermal hot water system
  • an asset that allows energy to be consumed at a different time — e.g. a time-shifting device that allows electric appliances to be operated at off-peak hours
  • an asset that enables energy use to be monitored — e.g. a data logging device attached to a regular utility meter that enables a business to better measure their energy consumption.

Improvements to existing depreciating assets

Expenditure on an improvement to a depreciating asset is eligible in the following circumstances.

1.         Improvements enabling electricity use

An improvement that allows an asset to only use electricity, or to use energy generated from a renewable source may be eligible for the bonus deduction if, prior to the improvement, the asset could use energy from a fossil fuel.

Example: an electric motor that replaces a diesel engine in an asset, allowing that asset to only use electricity.

2.         Improvements to energy efficiency

An improvement that allows the asset to be more energy efficient may be eligible for the bonus deduction, provided the asset being improved uses electricity or energy generated from a renewable source.

Example: a variable speed drive fitted to an existing electric motor.

3.         Improvements facilitating energy storage, demand management or monitoring

An improvement that allows for energy use by an asset to be monitored, reduced at specific times, or confined to specific times may be eligible for the bonus deduction, provided the asset being improved uses electricity or energy generated from a renewable source.

Example: a switchboard-mounted device that enables the shifting of loads from peak times to off-peak times.

Eligible cost for assets (first element of cost)

For assets first used or installed for any purpose during the bonus period, expenditure that is included in the first element of cost may be eligible for the bonus deduction to the extent the asset is used for a taxable purpose.

This means that, if an entity first uses or installs an asset before 1 July 2023, the entity cannot claim a bonus deduction for the first element of cost of the asset. This is the case even if the entity does not use the asset for a taxable purpose until after 1 July 2023.

Eligible cost for improvements (second element of cost)

Expenditure on the part of the second element of cost of an asset that is incurred during the bonus period may be eligible for the bonus deduction. The time that the improvement or the asset being improved is used or installed is not relevant.

The second element of cost of an asset can only be claimed if it allows the asset to be more energy efficient, able to store energy, monitor energy use, use energy at a different time, or enable the asset to run solely on electricity or renewable energy.

The cost of an improvement to an asset can be claimed for assets first used or installed before or during the bonus period. This means that if an entity first uses or installs an asset during the bonus period, and also improves the asset during the bonus period, it can claim the bonus deduction for the first element of cost of the asset and for the cost of the improvement.

Table 4

Cost must be able to be deducted under another provision

The entity must be able to deduct the eligible expenditure under another provision of the taxation law, regardless of which income year or income years in which they claim the deduction.

Generally, the cost of an asset can only be deducted to the extent that that asset is used for a taxable purpose.

Therefore, if expenditure is for a mix of private and business use, the bonus deduction will only apply to the proportion of the expenditure that is for a taxable purpose.

The bonus deduction will be considered a specific deduction under Div 25 of the ITAA 1997.

note iconNote

The proposed amendments include a clarification that the following existing provisions of the ITAA 1997 which prohibit various double deductions will not prevent a taxpayer from claiming the bonus deduction:

      • 8-10 — which specifies that when multiple provisions allow for deductions, the taxpayer can deduct only under the provision that is most appropriate
      • 40-215 — which provides that each element of the cost of a depreciating asset is reduced by any portion of that element of cost that is deducted, can be deducted, or will be taken into account when working out the amount that can be deducted, other than under Divs 40, 41 or 328
      • 355-715 — which specifies that where a taxpayer is entitled to a notional deduction under the R&D regime and another deduction, then the taxpayer is only entitled to the notional R&D deduction, and not the other deduction.

Excluded assets and expenditures

Ineligible assets and expenditures are:

  • assets, and expenditure on assets, that can use a fossil fuel
  • assets which have the sole or predominant purpose of generating electricity
  • capital works
  • motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles
  • assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool
  • financing costs, including interest, payments in the nature of interest and expenses of borrowing.

Assets that can use a fossil fuel

If an asset can use a fossil fuel, then that asset and any expenditure on that asset is not eligible for the bonus deduction, unless that use is merely incidental.

This is the case even if, in practice, the asset predominantly or solely uses electricity, or other energy that is generated from a renewable source.

The only exception to this exclusion is an improvement that allows an asset to only use electricity, or other energy that is generated from a renewable source.

Table 5

Balancing adjustment events

An entity cannot claim the bonus deduction for the cost of a depreciating asset, or an improvement to a depreciating asset, if any balancing adjustment event occurs to the asset — for example the entity sells the asset — while the entity holds it during the bonus period (i.e. 1 July 2023 to 30 June 2024), unless the balancing adjustment event is an involuntary disposal.

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Calculating and claiming the bonus deduction

The amount of the bonus deduction is calculated as 20 per cent of the total amount of eligible expenditure, up to a maximum bonus deduction of $20,000 across the bonus period.

This means that total expenditure eligible for the bonus deduction is effectively $100,000 over the bonus period.

Not Yet Law 2Implications

An SBE taxpayer may be eligible to claim an immediate deduction for an asset costing under $1,000 under the instant asset write-off. Regardless of the method of depreciation deduction — i.e. whether immediate or over time — the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost.

Timing of claiming the bonus deduction

For depreciating assets first used or installed during the bonus period, entities must claim the bonus deduction in the income year in which the asset is first used or installed.

For improvements made to existing assets, entities must claim the bonus deduction in the income year in which the improvement cost is incurred.

For most taxpayers this will be the 2023–24 income year.

Early and late balancers may claim the bonus deduction across more than one income year — provided the eligible asset was first used or installed, or the improvement cost was incurred, during the bonus period. The $20,000 cap is a limit on the total bonus deduction that may be claimed, even if it is claimed across multiple income years.

Other implications

It is assumed that the entity will continue to hold the asset throughout its effective life; and:

  • if the bonus deduction is for the cost of an asset, the entity will use it for a taxable purpose to the same extent that it does in the income year it first uses or installs the asset for a taxable purpose, or
  • if the bonus deduction is for expenditure on an improvement, the entity will use it for a taxable purpose to the same extent that it does in the income year in which the expenditure is incurred.

The bonus deduction does not affect any other deductions.

The requirement that expenditure is deductible under a taxation provision means that there are certain exclusions to eligible expenditure. For example, if a business is registered for GST, the bonus deduction is calculated on the amount of expenditure less the GST amount claimable as an input tax credit. The GST component of expenditure that is claimed as an input tax credit is not deductible.

Tax time tools and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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We can also present tax updates or specialty topics at your firm or through a private online session, with content tailored to your client base. Call our BDM Caitlin Bowditch at 0413 955 686 to have a chat about your specific needs and how we can assist.

Learn more about in-house training >
Email us to have a chat >

 

Our mission is to provide flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.

ATO’s taxation statistics for 2020–21

Posted on by Vic Stevens

The ATO recently released its Taxation statistics 2020–21. This annual publication shows statistics from lodged tax returns and schedules for the relevant income year.

The publication covers:

  • individuals
  • companies
  • superannuation funds
  • partnerships
  • trusts
  • industry benchmarks.

The publication also covers the 2021–22 year relating to GST, FBT and excise and fuel schemes.

This article presents a selection of the statistics available in relation to individuals.

Individuals

Lodgment trends

For 2020–21, 63.7 per cent of individual tax returns were lodged by an agent, 35.8 per cent were lodged through myTax and 0.6 per cent were by other means of self-lodgment.

Chart 4: Individuals — top 10 postcodes, by average taxable income

Chart 1

Chart 5: individuals — top 10 occupations, by average taxable income

Chart 2

Table 5: Individuals — Selected income items, 2019–20 to 2020–21 income years
(A selection of items only — refer to ATO statistics for the full list of income items)

Table 1

Table 6: Individuals — Selected deductions, 2019–20 to 2020–21 income years
(A selection of items only — refer to ATO statistics for the full list of deduction items)

Table 2

Chart 10: Individuals — rental income and deductions, 2016–17 to 2020–21 income years

Chart 3

Chart 12: Individuals — median superannuation balance, by age and sex, 2020–21 financial year

Chart 4

Other statistics

Other 2020–21 statistics can be found at the following links:

Companies

Superannuation funds

Partnerships

Trusts

Industry benchmarks

GST

Excise and fuel schemes

FBT

Tax time tools and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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Upcoming webinars >

2022 Icons (1)Register for a workshop
Upcoming workshops by state >

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We can also present tax updates or specialty topics at your firm or through a private online session, with content tailored to your client base. Call our BDM Caitlin Bowditch at 0413 955 686 to have a chat about your specific needs and how we can assist.

Learn more about in-house training >

 

Our mission is to provide flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.

 

Small business technology boost and training boost now enacted — what it means for 30 June 2023

Posted on by Vic Stevens

The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 passed both Houses of Parliament on Thursday 22 June 2023 and received Royal Assent on Friday 23 June 2023.

The Act introduces the technology investment boost and the skills and training boost for small businesses (with aggregated annual turnover of less than $50 million). Both boosts allow eligible businesses to claim a ‘bonus’ tax deduction equal to 20 per cent of qualifying expenditure. This article outlines how the rules for both boosts work, and the practical implications for this final week of the 2022–23 financial year.

The Act amends the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997).

The following table is a handy summary:

Table 1 Blog

Small business skills and training boost

The skills and training boost provides a bonus deduction for small businesses that incur eligible expenditure on external training for their employees between 7.30 pm (AEDT) on 29 March 2022 and 30 June 2024.

The bonus deduction is calculated as 20 per cent of the amount of expenditure that is both eligible for the bonus deduction and deductible under another taxation law provision.

Eligible entities

An entity will be eligible for the bonus deduction if, in the income year the expenditure is incurred, it is:

  • a ‘small business entity’ under s. 328-110 of the ITAA 1997 — i.e. an entity that carries on business with an aggregated annual turnover of less than $10 million
  • an entity that would meet the definition of an SBE under s. 328-110 of the ITAA 1997 if the reference to $10 million was replaced by a reference to $50 million.

Eligible expenditure

The bonus deduction will be calculated based on eligible incurred expenditure which meets the following criteria:

  • the expenditure must be for training employees, either in-person in Australia, or online
  • the expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope of the provider’s registration
  • the registered training provider must not be the small business or an associate of the small business
  • the expenditure must already be deductible under the taxation law
  • the expenditure must be incurred within a specified period — between 7.30 pm (by legal time in the ACT) on 29 March 2022 and 30 June 2024
  • the expenditure must be for the provision of training, where the enrolment or arrangement with the registered training provider for the provision of the training occurs at or after 7.30 pm (by legal time in the ACT) on 29 March 2022. That is, payment made for an invoice received within the eligible timeframe is not eligible if the training was delivered prior to that timeframe.

The Explanatory Memorandum notes that the cost of in-house or on-the-job training is not eligible expenditure for the purpose of the bonus deduction.

The training provider must be registered with at least one of the following government authorities: Australian Skills Quality Authority (ASQA) (within the meaning of the National Vocational Education and Training Regulator Act 2011); Tertiary Education Quality and Standards Agency (TEQSA) (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); Victorian Registration and Qualifications Authority (within the meaning of the Education and Training Reform Act 2006 (Vic)); or Training Accreditation Council of Western Australia (within the meaning of the Vocational Education and Training Act 1996 (WA)).

Expenditure for training persons other than employees is not eligible — i.e. the bonus deduction is not available for the training of non-employee business owners such as sole traders, partners in a partnership and independent contractors.

Relevant time periods

Table 2

Calculating and claiming the bonus deduction

The amount of the bonus deduction is calculated as 20 per cent of the total amount of eligible expenditure. Unlike the technology investment boost, there is no cap on the bonus dedduction.

Tax return disclosures

The ATO’s 2023 tax return stationery includes new disclosures for the skills and training boost:

Table 3

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Summary of implications for 30 June 2023

The skills and training boost runs until 2023–24. An eligible entity will be able to claim the bonus deduction next year if they do not manage to incur the expenditure by 30 June 2023.

The expenditure may be incurred in a different year to the year in which the training is delivered. The bonus deduction is calculated in relation to the year in which the expenditure is incurred. There is no requirement that the training must have been delivered by the end of the income year in which the bonus deduction is claimed, i.e. if expenditure is incurred on 29 June 2023 but the training is provided on 3 July 2023, the boost is deductible in 2022–23. However the boost cannot be claimed where the training was provided before 7.30 pm (by legal time in the ACT) on 29 March 2022 even if the expenditure was not incurred until after that time.

The bonus deduction has no effect on the year in which the expenditure is deductible under another provision of the law. For example, a deduction under s. 8-1 may be claimable in 2021–22 while the boost is claimed in 2022–23.

If an eligible entity incurred qualifying expenditure in 2021–22, there is no need to amend the 2021–22 tax return — the bonus deduction is only to be claimed in the 2022–23 tax return.

Table 4

Table 5

Small business technology investment boost

The technology investment boost provides eligible businesses with access to a bonus deduction equal to 20 per cent of their eligible expenditure incurred on expenses and depreciating assets for the purposes of their digital operations or digitising their operations between 7.30 pm (AEDT) on 29 March 2022 and 30 June 2023.

To be eligible for the bonus deduction:

  • the expenditure must be eligible for a deduction under another provision of the taxation law
  • the expenditure must be incurred between 7.30 pm (by legal time in the ACT) on 29 March 2022 and 30 June 2023
  • if the expenditure is on a depreciating asset — the asset must be first used or installed ready for use by 30 June 2023.

In respect of each of the 2021–22 and 2022–23 income years, eligible businesses may claim a bonus deduction equal to the lower of:

  • 20 per cent of eligible expenditure incurred in that income year
  • $20,000.

Eligible entities

An entity will be eligible for the bonus deduction if, in the income year the expenditure is incurred, it is either:

  • a ‘small business entity’ under s. 328-110 of the ITAA 1997 — i.e. an entity that carries on business with an aggregated annual turnover of less than $10 million, or
  • an entity that would meet the definition of an SBE under s. 328-110 of the ITAA 1997 if the reference to $10 million was replaced by a reference to $50 million.

Eligible expenditure

To be eligible for the bonus deduction, expenditure must be incurred wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations. That is, the eligible expenditure must have a direct link to the entity’s digital operations for its business.

According to the Explanatory Memorandum, expenditure on digital operations or digitising operations may include, but is not limited to, business expenditure on:

  • 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 and 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.

note iconNote

To claim the bonus deduction for an amount of expenditure, the entity must be able to deduct the eligible expenditure under another provision of the taxation law, regardless of which income year they claim the deduction.

Depreciating assets

An entity can claim the bonus deduction for expenditure on a depreciating asset only if the asset is first used, or installed ready for use, before 1 July 2023. This rule does not apply to expenses incurred in the development of in-house software allocated to a software development pool, consistent with current pooling rules.

An entity cannot claim the bonus deduction for expenditure on a depreciating asset if any balancing adjustment event occurs to the asset while the entity holds it during the relevant time period, unless the balancing adjustment event is an involuntary disposal. This means, for example, that an entity cannot claim the bonus deduction if it sells the asset within the relevant time period.

Exclusions

Some types of expenditure are ineligible for the bonus deduction even where they would otherwise meet the requirements. These are:

  • salary and wage costs
  • capital works costs which can be deducted under Div 43 of the ITAA 1997
  • financing costs
  • training and education costs
  • expenditure that forms part of, or is included in, the cost of trading stock.

Relevant time periods

Table 6

Calculating and claiming the bonus deduction

The amount of the bonus deduction is calculated as 20 per cent of the total amount of eligible expenditure, up to a maximum bonus deduction of $20,000 per time period (i.e. income year).

This means that total expenditure eligible for the bonus deduction is effectively $100,000 over each time period, with a maximum bonus deduction of $20,000 per time period and an overall maximum total bonus deduction of $40,000.

Table 7

Claiming the bonus deduction for depreciating assets

For depreciating assets, the bonus deduction is equal to 20 per cent of the cost (within the meaning of Div 40 of the ITAA 1997) of an eligible depreciating asset that is used for a taxable purpose. This means that regardless of the method of deduction that the entity takes (i.e. whether immediate or over time), the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost.

When calculating the bonus deduction for expenditure on a depreciating asset, it is assumed that:

  • the entity will continue to hold the asset throughout its effective life
  • the entity will use the asset for a taxable purpose to the same extent that it does in the income year it first uses or installs the asset.

note iconNote

The temporary full expensing rules for Div 40 taxpayers and the uncapped instant asset write-off for SBEs, which both provide an immediate write-off for the cost of acquiring eligible depreciating assets in the year incurred, apply for 2022–23.

Table 8

Tax return disclosures

The ATO’s 2023 tax return stationery includes new disclosures for the technology investment boost:

Table 9

Summary of implications for 30 June 2023

The technology investment boost ends on 30 June 2023 (unlike the skills and training boost which runs for another year). Taxpayers with intentions to invest in the digitalisation of their business will only be able to benefit from the boost if they incur the expenditure by 30 June 2023 — i.e. the end of this week.

In addition, if the expenditure is incurred in the acquisition of a depreciable asset (other than in-house software), the asset must be first used, or installed ready for use, before 1 July 2023. This means that the business cannot place an order this week and take delivery next week, i.e. in July — the expenditure would not be eligible for the boost.

The bonus deduction has no effect on the year in which the expenditure is deductible under another provision of the law. For example, a deduction under s. 8-1 may be claimable in 2021–22 while the boost is claimed in 2022–23.

If an eligible entity incurred qualifying expenditure in 2021–22, there is no need to amend the 2021–22 tax return — the bonus deduction is only to be claimed in the 2022–23 tax return.

Tax time tools and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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Learn more about in-house training >

 

Our mission is to provide flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.

The ATO’s small business lodgment penalty amnesty program

Posted on by Vic Stevens

As part of the 2023–24 Federal Budget handed down on 9 May 2023, the Government announced a lodgment penalty amnesty program for small businesses to get their tax obligations up to date.

Here are the details of how the amnesty works.

Obligations to which the amnesty applies

The amnesty applies to overdue income tax returns, business activity statements and FBT returns that were originally due between 1 December 2019 and 28 February 2022.

For many small business taxpayers, these would equate to:

  • Income tax returns for the 2018–19 and 2019–20 income years
  • Business activity statements (quarterly) for the December quarter 2019 to the December quarter 2021
  • FBT returns for the 2019–20 and 2020–21 FBT years

The above assume standard agent-lodged returns. For self-lodgers and small business taxpayers with specific circumstances, the amnesty may apply to obligations for different periods — see the ATO’s full list of due dates here.

The amnesty period

The amnesty runs from 1 June 2023 to 31 December 2023. To be eligible for the amnesty, the overdue obligation must be lodged within that timeframe.

Eligible small business taxpayers

To be eligible for the amnesty, the small business must be an entity with an aggregated turnover of less than $10 million at the time the original lodgment was due.

The amnesty does not apply to:

  • private owned groups, or
  • individuals controlling over $5 million of net wealth.

Amnesty benefits

Eligible small business taxpayers that lodge eligible overdue forms within the amnesty period will have any associated failure to lodge (FTL) penalties remitted.

The remission will happen automatically and the taxpayer will not need to separately request a remission.

The amnesty does not apply to any interest charges which may apply to overdue payments or to other administrative penalties such as penalties associated with the Taxpayer Payments Reporting System.

Background — FTL penalties

The applicable FTL penalty depends on the size of the entity and the period of time since the due date for lodgment.

Generally, a penalty will not be applied to a late-lodged tax return, FBT return, annual GST return or activity statement if the lodgment results in either a refund or a nil result, with exceptions.

More information about FTL penalties is available here.

Small entities

For a  small entity, the FTL penalty is applied at the rate of one penalty unit for each period of 28 days (or part thereof) that the obligation is overdue, up to a maximum of five penalty units.

Able 1

Medium entities

A medium entity either:

  • is a medium withholder for PAYG withholding purposes (withholds $25,001 to $1 million per year), or
  • has assessable income or current GST turnover of more than $1 million and less than $20 million.

For a medium entity the penalty unit is multiplied by 2.

Table 2

What to do if taxpayer is not eligible for the amnesty

Where a taxpayer is not eligible for the amnesty because either the taxpayer does not meet the eligibility criteria, or the original due date of the late obligation falls outside of the relevant date range, or the late lodgment occurred before or after the amnesty period, the taxpayer may be able to reudce their FTL penalty under the standard rules.

A taxpayer may request a remission of the penalty in full or in part if there are extenuating circumstances, such as being impacted by a natural disaster or serious illness.

There is also a safe harbour exemption which applies where the taxpayer engaged a registered tax agent or BAS agent to lodge the return or statement and both of the following apply:

  • they can show that they provided the agent with all relevant tax information to enable them to lodge the return or statement by the due date
  • the agent’s failure to lodge the return or statement was not because they were reckless or intentionally disregarded the law.

Read more about remission and the safe harbour here.

Website IconATO resources:

Media release — Small businesses given unique opportunity to get back on track with tax

Do you have late lodgments?

Further resources and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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Learn more about in-house training >

 

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Tax Time 2023 focus areas

Posted on by Vic Stevens

The ATO has announced its three key focus areas for Tax Time 2023 for individuals:

1. Rental property deductions
2. Work-related expenses
3. Capital gains tax.

Rental property deductions

ATO data shows that 9 in 10 rental property owners are getting their tax return wrong. Common errors include rental income being omitted, overclaiming expenses and claiming for improvements to properties held for private use.

Around 87 per cent of individual rental property owners use a registered tax agent to prepare their income tax returns. While the ATO has not stated what proportion of identified errors were found in agent-prepared returns, in late 2019 the ATO claimed that incorrect claims for work-related and rental property expenses were more prevalent in agent-prepared returns than in self-prepared returns.

This Tax Time, the ATO is particularly focused on interest expenses and the correct apportionment of loan interest expenses where part of the loan was used for private purposes, or the loan was refinanced with some private purpose.

Reference Fade VariationReference

The ATO has released its 2023 tax time toolkit for investors, which includes a suite of fact sheets for rental property owners.

TaxBanter’s Tips — claiming rental property deductions

  • Expenses are only deductible to the extent that they relate to the period when the property is genuinely available for rent. For example, utilities, mortgage insurance and house insurance expenses are not deductible where they relate to a period of private use. However expenses are fully deductible if they solely relate to the derivation of rental income, e.g. fees paid to a rental property agent or to a short-term accommodation platform.
  • Where the taxpayer is renting out a part of their home, e.g. a spare room, rather than a separate property, the ATO is of the view that expenses can only be claimed for the days when the room is actually rented out. When the room is not being rented out, the ATO treats it as being used privately as part of the taxpayer’s home.
  • If the taxpayer is not carrying on a business in relation to the rental activity, they may be able to immediately claim the cost of a depreciating asset costing $300 or less in the year incurred.
  • Travel expenses to inspect, maintain or collect rent for a rental property are not deductible.

Work-related expenses

There have been some changes to how certain working from home deductions are calculated for 2023 (see below). In addition, a lot of people have returned to working at the office compared to last year. For these reasons, the ATO warns taxpayers not to be ‘tempted to just copy and paste’ their prior year’s claims.

This Tax Time, the ATO is particularly focused on ensuring taxpayers understand the changes to the fixed-rate method for claiming additional running expenses and are able to substantiate their claims.

The revised fixed-rate method

There are two categories of working from home expense deductions: running expenses and occupancy expenses. In calculating a deduction for additional running expenses incurred as a result of working from home, the ATO allows taxpayers to choose from the fixed-rate method and the actual cost method (a temporary shortcut method was also available to cover the period when many employees worked from home during the pandemic).

Until 30 June 2022, the fixed-rate method allowed a deduction of 52 cents per hour for each hour a taxpayer worked from home. From 1 July 2022, the rate has changed to 67 cents per hour, and the list of expenses covered by the fixed rate has changed.

Reference Fade VariationReference

See Banter Blog article The ATO’s new working from home deduction rules for an explanation of the revised fixed-rate method from 1 July 2022.

See the ATO’s webpage for information about the 2019–20 tax gap for individuals not in business population — with incorrect deductions for work-related and rental property expenses forming a significant part of the gap.

TaxBanter’s Tips — work-related deductions

  • Under the revised fixed-rate method, from 2023 taxpayers cannot claim separate deductions for mobile phone expenses and internet expenses anymore.
  • For taxpayers using the revised fixed-rate method, the ATO will allow them to keep a record which is representative of the hours they worked from home from 1 July 2022 to 28 February 2023 as a transitional concession. However, from 1 March 2023, the taxpayer must keep a record of the total number of hours they worked from home. The ATO will not accept an estimate based on a shorter period of time.
  • Generally the costs of travelling between home and work are not deductible — performing work-related tasks at home or whilst travelling as a matter of choice or convenience does not convert the travel to being part of the employment. Exceptions apply and some home-to-work travel is deductible.
  • The cost of conventional clothing is not deductible just because the employer requires or expects the taxpayer to wear it.
  • The $250 non-deductible threshold for work-related self-education expenses has been removed from 1 July 2022.
  • An employee cannot claim depreciation on an asset in relation to which the employer is eligible for the work-related item FBT exemption (e.g. laptops and tablets).

CGT considerations

The ATO is reminding taxpayers to consider the CGT implications of each asset they dispose of and the importance of record keeping.

For example, while generally a taxpayer’s main residence is exempt from CGT, if they had used their home to produce income — e.g. through Airbnb or running a home-based business — then CGT may be payable.

Further, the ATO can and does detect undeclared capital gains.

TaxBanter’s Tips — calculating and disclosing capital gains

  • The extent to which CGT is payable on a capital gain from the sale of a taxpayer’s main residence depends on both the amount of time that the property was used for income-producing purposes and the proportion of the property that was used for those purposes. The proportion of a capital gain that is taxable is broadly related to the proportion of mortgage interest that has been deductible.
  • If a taxpayer acquires cryptocurrency as an investment asset, CGT will apply to a gain on sale unless the taxpayer can substantiate that it is a personal use asset that is eligible for CGT exemption.
  • While the general rule is that CGT records must be kept for five years after the disposal of an asset, the substantiation of a calculation of a capital gain or capital loss — or the categorisation of a CGT asset as a pre-CGT asset — may require information dating back to the acquisition of the asset. Further, the five-year period is extended where a capital loss is carried forward and offset in a later year.
  • Keeping an asset register may allow the taxpayer to discard some records which would otherwise need to be kept for years. Once details have been entered into the register and the register has been certified by a registered tax agent or other approved person, the taxpayer will only need to keep the documents for five years from the date the register is certified.
  • The ATO is undertaking a number of data-matching programs through which it can detect undeclared or understated capital gains. These programs include:
    • Crypto assets 2014–15 to 2022–23
    • Lifestyle assets 2013–14 to 2022–23
    • Property management — 2018–19 to 2022–23
    • Real property transactions — 20 September 1985 to 2016–17
    • Residential investment property loan — 2021–22 to 2025–26
    • Share transactions — 20 September 1985 to 2017–18.

Further resources and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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Learn more about in-house training >

Our mission is to provide flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.

For further resources check out our February 2023 Monthly Special Topic recording on Main Residence Exemption:

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Budget announcement — $20,000 instant asset write-off: What does it mean for small business?

Posted on by Vic Stevens

Proposed $20,000 threshold for 2023–24

As part of its 2023–24 Federal Budget handed down last Tuesday night, the Government announced that it will temporarily increase the instant asset write-off (IAWO) cost threshold to $20,000. The threshold will apply to eligible small business entity (SBE) taxpayers in respect of eligible assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

The outcomes outlined in this article assumes that:

  • the amending legislation will not introduce changes to existing aspects of the IAWO rules other than the increase to the threshold to $20,000 and the suspension of the lockout rule until 30 June 2024
  • the legislation will be enacted in time for businesses to lodge their 2023–24 tax returns.

At the time of writing the Government has not released draft legislation.

Overview of the instant asset write-off

An entity is an SBE if:

  • it carries on a business in the current year
  • its aggregated turnover for either the previous income year and/or the current income year (actual or an estimate) is less than $10 million.

An SBE can choose to use the small business capital allowance rules in Subdiv 328-D of the ITAA 1997. The rules allow:

  • accelerated depreciation for SBE assets costing less than the prescribed threshold
  • a taxpayer to effectively treat these assets as if they were a single asset using the one pool rate of 30 per cent (15 per cent in the income year in which the asset is acquired).

The prescribed threshold has varied over the past nine years and is currently uncapped as part of the temporary full expensing measures in place since 6 October 2020. Under current law, the threshold is due to revert to $1,000 from 1 July 2023.

The IAWO is available for the income year in which the taxpayer starts to use the asset, or have it installed ready for use, for a taxable purpose. This may not be the same year in which the expenditure is incurred or in which the taxpayer committed to the purchase.

Table

Table2

What is the effect of the proposed temporary threshold?

SBEs 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.

As per the current operation of Subdiv 328-D:

  • the $20,000 threshold will apply on a per asset basis
  • assets valued at $20,000 or more (which cannot be immediately deducted) will continue to be placed into the small business depreciation pool and depreciated at 15 per cent in the first income year and at 30 per cent each subsequent income year.

The ‘lockout rule’ that prevents small businesses from re-entering the small business capital allowance regime for five years if they opt out of Subdiv 328-D for a particular year will continue to be suspended until 30 June 2024.

This means that if the taxpayer opts out in 2022–23, they can choose to re-enter for 2023–24 (disregarding the five-year lockout period). This may be beneficial where the taxpayer intends to make capital investments that are eligible for the temporary $20,000 write-off in 2023–24 but they had opted out in any of the five preceding years. However, if a taxpayer chooses not to use Subdiv 328-D in 2023–24, they will not be able to re-enter until 2020–30.

Interaction between the IAWO and the proposed technology investment boost

About the technology investment boost

Legislation currently before the Senate proposes amendments to provide eligible businesses with access to a bonus deduction equal to 20 per cent of their eligible expenditure incurred on expenses and depreciating assets for the purposes of their digital operations or digitising their operations between 7.30 pm (AEDT) on 29 March 2022 and 30 June 2023. This is known as the technology investment boost.

An entity is eligible if it meets the definition of an SBE if the reference to $10 million was replaced by a reference to $50 million.

To be eligible for the bonus deduction:

  • the expenditure must be eligible for a deduction under another provision of the taxation law
  • the expenditure must be incurred between 7.30 pm (by legal time in the ACT) on 29 March 2022 and 30 June 2023
  • if the expenditure is on a depreciating asset — the asset must be first used or installed ready for use by 30 June 2023.

Taxpayers with a 30 June year end must claim the bonus deduction for expenditure incurred in both their 2021–22 and 2022–23 income years in their 2022–23 tax return.

The total eligible expenditure is effectively $100,000 for each of the 2021–22 and 2022–23 income years such that entities can claim a maximum bonus deduction of $20,000 per year, and an overall maximum total bonus deduction of $40,000. Certain expendires are ineligible for the bonus deduction.

note iconNote

The Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 was introduced into Parliament on 23 November 2022 and is before the Senate at the time of writing.
This article proceeds on the assumption that the amendments will be enacted as proposed.

An entity can claim the bonus deduction for expenditure on a depreciating asset only if the asset is first used, or installed ready for use, before 1 July 2023. This rule does not apply to expenses incurred in the development of in-house software allocated to a software development pool, consistent with current pooling rules.

An entity cannot claim the bonus deduction for expenditure on a depreciating asset if any balancing adjustment event occurs to the asset while the entity holds it during the relevant time period, unless the balancing adjustment event is an involuntary disposal. This means, for example, that an entity cannot claim the bonus deduction if it sells the asset within the relevant time period.

The proposed law has no effect on the year in which the expenditure is deductible under another provision of the law. That is, it may be that depreciation on an asset is deductible in 2021–22 under the existing rules while the corresponding bonus deduction is claimable in 2022–23.

Example — interaction between the technology investment boost and the instant asset write-off

An SBE, T Co, has opted into Subdiv 328-D for 2021–22, 2022–23 and 2023–24. T Co has purchased the following depreciating assets in the digitalisation of its business:

Table 3

Assume that all of the depreciating assets are eligible assets for the technology investment boost and that the taxable use proportion of each asset is 100 per cent.

What are the IAWO and technology investment boost consequences for T Co?

Asset 1 — $10,000

T Co can deduct the entire $10,000 in 2021–22 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose during that year.

T Co cannot claim the technology investment boost as it incurred the expenditure before 7.30 pm (by legal time in the ACT) on 29 March 2022. It does not matter than it started to use, or had it installed ready for use, for a taxable purpose during the qualifying period of time.

Asset 2 — $5,000

T Co can deduct the entire $5,000 in 2021–22 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose during that year.

T Co can claim the technology investment boost in 2022–23 in respect of the asset. The amount of the bonus deduction is $5,000 × 0.2 = $1,000. Even though T Co started to use the asset, or had it installed ready for use, for a taxable purpose in 2021–22, it can only claim the boost deduction in 2022–23.

Asset 3 — $20,000

T Co can deduct the entire $20,000 in 2022–23 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose during that year. This is the case even though T Co incurred the expenditure in 2021–22.

T Co can claim the technology investment boost in 2022–23 in respect of the asset. The amount of the bonus deduction is $20,000 × 0.2 = $4,000.

Therefore in 2022–23 T Co can deduct $20,000 (IAWO) + $4,000 (boost) = $24,000 in respect of Asset 4, which costed $20,000.

Asset 4 — $15,000

T Co can deduct the entire $15,000 in 2022–23 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose during that year.

T Co can claim the technology investment boost in 2022–23 in respect of the asset. The amount of the bonus deduction is $15,000 × 0.2 = $3,000.

Therefore in 2022–23 T Co can deduct $15,000 (IAWO) + $3,000 (boost) = $18,000 in respect of Asset 4, which costed $15,000.

Asset 5 — $12,000

T Co can deduct the entire $12,000 in 2022–23 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose during that year.

T Co cannot claim the technology investment boost as it started to use, or had it installed ready for use, for a taxable purpose after 30 June 2023. It does not matter that it had incurred the expenditure during the qualifying period of time.

Asset 6 — $25,000

T Co cannot deduct the $25,000 cost of the asset in 2022–23 under the uncapped IAWO as it started to use the asset, or had it installed ready for use, for a taxable purpose after 30 June 2023, when the threshold reduced to $20,000. This is the case even though T Co incurred the expenditure during 2022–23 when the threshold was uncapped.

T Co also cannot deduct any part of the cost in 2023–24 under the IAWO as it exceeds the $20,000 threshold. Therefore it will add the asset into the small business general pool. It will be able to claim $25,000 × 0.15 = $3,750 in 2023–24 as part of the total pool deduction. In subsequent years the depreciation deduction for Asset 6 will form part of the 30 per cent of the opening balance of the pool.

T Co cannot claim the technology investment boost as it started to use, or had it installed ready for use, for a taxable purpose after 30 June 2023. It does not matter that it had incurred the expenditure during the qualifying period of time.

Instant asset write-off and temporary full expensing for larger businesses

As part of its economic stimulus strategy, the previous Government also temporarily extended the ability to immediately write-off the full cost of an eligible asset to larger businesses over the past few years:

Table 4

In addition, the backing business investment incentive accelerated depreciation measure allowed eligible businesses with aggregated turnover of less than $500 million to deduct an additional 50 per cent of the asset cost in an income year where the taxpayer started to hold the asset and started to use it, or have it installed ready for use, for a taxable purpose in the period from 12 March 2020 to 30 June 2021. There was no cost limit other than the car limit.

From 1 July 2023, businesses with aggregated turnover of $10 million or more will not be able to access an immediate write-off for the cost of new assets. Such businesses will need to consider whether they should move forward any planned asset investments to make use of the TFEDA by 30 June 2023. To claim an immediate write-off in 2022–23, the taxpayer must start to use the asset, or have it installed ready for use, for a taxable purpose, on or before 30 June 2023 — it is not sufficient to only hold the asset at year end.

These larger entities are also ineligible for the technology investment boost.

What else was in the Budget for small business?

While there were no measures for fundamental tax reform, there was a range of announcements which will affect the tax liabilities and compliance obligations of small businesses. Proposed changes include the following:

The small business energy incentive

Businesses with annual turnover of less than $50 million will be able to access a bonus 20 per cent deduction on up to $100,000 of eligible expenditure that supports electrification and more efficient use of energy, for eligible assets or upgrades first used or installed ready for use between 1 July 2023 and 30 June 2024.

Incentives for build-to-rent housing

The Government announced several initiatives to increase the supply of rental housing, including an increase in the capital works deduction rate from 2.5 per cent to 4 per cent per year for eligible new build-to rent projects where construction commences after 7.30 pm (AEST) on 9 May 2023.

Varying the GDP uplift factor for PAYG and GST instalments

The GDP uplift factor will be set at six per cent — rather than the statutory 12 per cent — for 2023–24 for PAYG and GST instalments. The uplift rate will apply to eligible SMEs which have aggregated turnover of up to $10 million for GST purposes and $50 million for PAYG purposes.

note iconNote

The Treasury Laws Amendment (2023 Measures No. 2) Bill 2023 was introduced into the House of Representatives on 10 May 2023.

Payday super

From 1 July 2026, employers will be required to pay their employees’ superannuation guarantee (SG) on the same day that they pay salary and wages.

Extension of Part IVA — international tax considerations

The general anti-avoidance rule in Part IVA of the ITAA 1936 will be expanded so that it can apply to schemes that:

  • reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents
  • achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.

Reducing small business compliance

The Government will provide $21.8 million over four years from 2023–24, and $1.4 million per year ongoing, to the ATO to lower the tax administration burden for small businesses. The intiatives include:

From 1 July 2014

An 18-month trial of an expansion of the ATO independent process to small business, with aggregated turnover between $10 million and $50 million, subject to an ATO audit.

Small businesses will be permitted to authorise their tax agent to lodge multiple Single Touch Payroll forms.

Faster, safer and cheaper tax refunds by reducing the use of cheques.

From 1 January 2025

Five new tax clinics to improve access to tax advice and assistance for small businesses.

From 1 July 2025

Small businesses will be permitted up to four years to amend their income tax returns.

ATO funding to tackle non-compliance

The Government has committed to providing extra funding to the ATO for a range of compliance programs:

Four-year extension for the GST compliance program

The Government will provide $588.8 million over four years from 1 July 2023 for the ATO to:

  • continue a range of GST compliance activities
  • develop more sophisticated analytical tools.

Extending and expanding the Personal Income Tax Compliance program

The Government will provide $89.6 million to the ATO and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years from 1 July 2025. The scope of the program will also be expanded from 1 July 2023 to address emerging areas of risk, e.g. deductions relating to short-term rental properties to ensure they are genuinely available for rent.

SG non-compliance

The ATO will receive additional resourcing to help it detect unpaid SG.

Lodgment penalty amnesty

A lodgment penalty amnesty is being provided for small businesses with aggregated turnover of less than $10 million. Under the amnesty, failure-to-lodge penalties will be remitted for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.

Further resources and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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Federal Budget 2023-24 measures already announced

Posted on by Vic Stevens

The Treasurer, Dr Jim Chalmers, will hand down the Albanese Government’s Federal Budget 2023–24 tomorrow Tuesday 9 May 2023 at 7.30 pm. This article summarises the tax and superannuation Budget measures which the Government has confirmed ahead of Budget night.

Tax measures

The Small Business Energy Incentive

The Small Business Energy Incentive will provide businesses with annual turnover of less than $50 million a bonus 20 per cent deduction on expenditure that supports electrification and more efficient use of energy.

Eligible investments may include electrifying heating and cooling systems, upgrading to efficient fridges and induction cooktops, and installing batteries and heat pumps.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

Eligible expenditure will be capped at $100,000, with the maximum bonus deduction being $20,000 per business.

Reference Fade VariationRead the Treasurer’s media release.

Incentives to invest in build-to-rent accommodation

The Government will offer two tax incentives to increase the supply of rental housing by changing arrangements for investments in build-to-rent accommodation:

  • the capital works deduction rate will increase from 2.5 per cent to 4 per cent per year for eligible new build-to-rent projects where construction commences after 9 May 2023
  • the withholding tax rate for eligible fund payments from managed investment trusts to foreign residents on income from newly constructed residential build-to-rent properties after 1 July 2024 will be reduced from 30 per cent to 15 per cent.

Reference Fade VariationRead the Minister for Housing’s media release.

Superannuation measures

Payday superannuation payments

From 1 July 2026, employers will be required to pay their employees’ superannuation guarantee (SG) at the same time as their salary and wages.

Reference Fade VariationRead the Treasurer’s media release.

ATO resourcing to tackle SG non-compliance

The ATO will receive additional resourcing to help it detect unpaid SG payments earlier and the Government will set enhanced targets for the ATO for the recovery of payments.

The ATO estimates $3.4 billion worth of super went unpaid in 2019–20.

Reference Fade VariationRead the Treasurer’s media release.

Additional tax on earnings on superannuation balances over $3 million

From 1 July 2025, earnings on an individual’s total superannuation balance exceeding $3 million will be taxed at a headline rate of 30 per cent (up from the current 15 per cent). The Government previously announced this measure and has released a consultation paper.

Reference Fade VariationRead the TaxBanter Blog article Proposal to tax super fund earnings on balances over $3m — Consultation paper released

Other tax measures

Other tax measures which have been reported in the media include:

  • changes to the petroleum resource rent tax (PRRT) to collect an extra $2.4 billion over four years by limiting the proportion of PRRT assessable income that can be offset by deductions to 90 per cent
  • tax on tobacco to increase by 5 per cent per year over the next three years to raise an additional $3.3 billion over four years
  • support for an OECD push for a minimum 15 per cent tax rate for multinationals and limiting debt-related deductions.

The Government has confirmed that it will not extend the low and middle income tax offset beyond 2021–22.

Other measures

Other economic measures which have been announced include:

  • an additional $2 billion funding for the National Housing Finance and Investment Corporation to support more social and affordable rental housing
  • an expansion of the three categories of the Home Guarantee Scheme from 1 July 2023 — including that friends, siblings and other family members will be eligible for joint applications, and Australian Permanent Residents and people who have not owned a property in Australia in the last 10 years will become eligible
  • an additional $3.7 billion for a five-year National Skills Agreement with the states and territories from 1 January 2024, and $400 million for another 300,000 TAFE and VET Fee-Free places, to address Australia’s acute skill shortage
  • the age cut-off for the single parenting payment to be lifted from eight to 14 from 20 September 2023
  • a $14.6 billion cost of living relief package, including $1.5 billion in electricity bill relief — of up to $500 — for more than five million households and one million small businesses
  • a package of support to roll out electrification to businesses and households, including helping low income households and renters switch from gas to electricity
  • a Sovereign Green Bonds Program to enable investors to back public projects to drive Australia’s net zero transformation
  • an additional $4.3 million next year for ASIC to continue its focus on greenwashing
  • a further $48.3 million to fight fraud against the NDIS
  • a funding boost of almost $10 million to increase financial assistance to young carers aged 12-25 so they can continue their education while taking on caring responsibilities
  • an indication that there will be an increase in the daily jobseeker rate.

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We’ll review key implications and hold a Q&A session at the conclusion.

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Federal Budget 2023–24: Tax bills status

Posted on by Vic Stevens

The last sitting of Parliament ended on 30 March 2023. It will reconvene next Tuesday 9 May when the Government’s Budget is introduced into the Parliament as a collection of appropriation bills and the Treasurer makes a speech to the House of Representatives at 7.30 pm to introduce the bills.

Both houses of Parliament will sit from Tuesday 9 to Thursday 11 May 2023. Parliament will debate and consider the appropriation bills in the same way as other proposed legislation.

The Government has already announced some tax and superannuation measures which will be included in the Budget — on Monday we will be releasing a Banter Blog article setting out a round-up of the tax and superannuation announcements on the eve of the Budget.

Before Budget night comes around with a swathe of expected and unexpected new measures, now is a good time to take stock of the measures which were announced by the current or previous government.

Commitments in the 2022–23 October Federal Budget

The following tables set out the status of the measures announced by the Government in the October 2022–23 Federal Budget handed down on 25 October 2022.

Tax measures announced in the October Budget — enacted

Table 1

Tax measures announced in the October Budget — not yet law

Table 2.1

Table 2.2

Superannuation measures announced in the October Budget — enacted

Table 3

Related measures announced in the October Budget

Table 4

Measures announced by the previous government

The following is a status update of measures announced by the previous government which had not been enacted by the time the Albanase Government took office.

Tax measures announced by the previous government — enacted

Table 5.1

Table 5.2

Tax measures announced by the previous government — not yet law

Table 6.1

Table 6.2

Get our free Federal Budget resources

In the lead-up to Budget night next Tuesday, 9 May, this article is a stocktake of the status of tax and superannuation measures announced by the Albanese Government in their October 2022 Budget and the unenacted measures they inherited from the former Morrison Government.

Want to get free access to our comprehensive Federal Budget summary and Timeline when we release it?

Join our weekly newsletter through this link!

We’ll send everything out first thing on 10 May, leading up to our Budget presentation.

Join our 2023 Federal Budget webinar

Join us for our annual Federal Government Budget webinar, delivered the morning after the Government hands down the Federal Budget. What changes are in store, and what does it mean for you and your clients?

We’ll review key implications and hold a Q&A session at the conclusion.

This is one of TaxBanter’s most popular sessions; one you don’t want to miss.

All attendees will receive a copy of the recording, along with the slide pack.

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The ATO’s new investment property loan data-matching program

Posted on by Vic Stevens

Last week, the ATO released details about its new Residential investment property loan data-matching program for the 2021–22 to 2025–26 financial years. The ATO will acquire residential investment property loan (RIPL) data from financial institutions and use this information to identify individuals who may not be correctly reporting rental property interest deductions and net capital gains.

Why is the ATO conducting the data-matching program?

Sample audits across the ‘individuals (not in business’) population informed an estimate of the net tax gap for the 2019–20 financial year as being $9 billion, or 4.6 per cent.

A significant driver of the gap is the incorrect reporting of rental property income and expenses, with the net tax gap for rental property expenses contributing $1 billion, or 14 per cent of the total individuals gap. A common reason driving the incorrect reporting of rental expenses is individuals incorrectly apportioning loan interest costs where the loan was refinanced or redrawn for private purposes.

One of the ATO’s strategies to reduce the tax gap is to increase the quantity and quality of the data it collects.

What will the ATO use the data for?

RIPL data will be compared with claims a taxpayer makes in their rental property schedules and rental tax return labels. The ATO will use this data to identify, assess and treat several taxation risks, including:

  • lodgment — confirming taxpayers with a rental property are lodging a tax return and their rental property schedule on or before the relevant due date
  • income tax — confirming taxpayers with a rental property are correctly reporting interest on loan and borrowing expense deductions in their rental property schedules and associated income tax return labels
  • CGT — confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.

The ATO will use the data to execute strategies to:

  • identify relevant cases for compliance and educational activities
  • inform rental property owners of their tax obligations
  • avoid unnecessary contact with taxpayers who are correctly reporting and claiming rental property income or expenses.

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Will the data be used to pre-fill tax returns?

RIPL data may be available to tax professionals through pre-filling reports in Online services for agents, and PLS through SBR.

The data may also be available to individual self-preparers through myTax, in particular the rental property schedule interest on loans and/or borrowing expense labels, and the rental income tax return label.

Who will provide the data?

Inclusion of a data provider is based on the a number of principles, including that the entity operates a business in Australia and provides residential investment property loans to individuals. The ATO has identified that it may obtain data from the following financial institutions and their subsidiaries:

  • Adelaide Bank
  • ANZ
  • Bank of Melbourne
  • Bank of Queensland
  • Bank of South Australia
  • Bendigo Bank
  • Commonwealth Bank
  • Bankwest
  • ING
  • Macquarie Bank
  • ME Bank
  • National Australia Bank
  • RAMS
  • St George
  • Suncorp
  • Ubank
  • Westpac

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The selection of a data provider is principles-based. A financial institution that is not listed above may be included at a later time. The ATO will review the data providers annually against the eligibility principles.

The ATO will obtain the data under its formal information gathering powers in the tax law. As this is a coercive power, data providers are obligated to furnish the requested information.

What data will be collected?

Data of residential investment property loans held by individuals will be collected from financial institutions. The collected data may contain all or a selection of the fields listed below.

Loan account holder details

  • Unique client ID
  • First name, middle and surname(s)
  • Addresses (residential, postal)
  • Australian business number (if applicable)
  • Email address
  • Contact phone numbers
  • Date of birth

Loan account details

  • Unique account ID
  • Account number
  • BSB
  • Account name
  • Loan type
  • Loan commencement date
  • Expected loan end date
  • Term of the loan
  • Opening balance (start of loan)
  • Opening balance (start of financial year)
  • Closing balance (end of financial year)
  • Borrowing expenses

Property details

  • Unique property ID
  • Property address

Loan account transactions

  • Unique account ID
  • Transaction date
  • Transaction type
  • Transaction description
  • Transaction amount
  • Credit or debit

note iconNote

The ATO expects to collect data on approximately 1.7 million individuals each financial year.

Further information and training sessions

See the ATO’s data-matching program protocol here.

See the Gazetted notice here.

See the protocol for the ATO’s property management data-matching program here — the ATO is collecting property management data for residential and commercial properties for the 2018–19 to the 2022–23 financial years.

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 17 locations across Australia.

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