Category: Accountants

The importance of “Tax Residency”

Whether you are a resident or non-resident of Australia for tax purposes has significant consequences for you.

Primarily, if you are a resident of Australia for tax purposes you will be liable for tax in Australia on income you derive from all sources – including of course from overseas (eg, an overseas bank account, rental property, an interest in a foreign business, etc).

On the other hand, if you are a non-resident of Australia for tax purposes, you will only be liable for tax on income that is sourced in Australia (including capital gains on certain property such as real estate in Australia).

And while there may be difficulty in determining the source of income in some cases, if you are a resident  for tax purposes, the principle of liability for tax in  Australia on income from all sources remains clear.

 

Resident of Australia for tax purposes  

So, what does it mean to be a resident of Australia for  tax purposes?  

Well, broadly, it means you “reside” in Australia (as  commonly understood), unless the Commissioner  is satisfied that your permanent place of abode is  outside Australia. 

However, a recent decision of the Federal Court has  shed some light on this matter – especially the often misunderstood presumption that “connections with  Australia” is all that counts. 

 

“Connections with Australia” 

The Federal Court case involved a mechanical  engineer who was posted to Dubai for a period of  six years, followed by a posting to Thailand, but who  had continuous family ties to Australia (in that he  financially supported his wife and daughters who  were living in Perth). 

Originally, the taxpayer was found to be a resident  of Australia for tax purposes essentially because of  his continuous ties to Australia and the fact that he did not establish personal ties overseas while he was living there (other than via his work commitments). 

However, the Court found that “connections with Australia” was not the key test but rather the key matter was where one intended to treat as home for the time being, but not necessarily forever, ie, not necessarily “permanently”. 

Likewise, it said that the matter of residency is worked  out on income year by income year basis (ie, one  particular year of income at a time) and it doesn’t  mean a person has to have the intention of living in  a particular location forever. 

Among other things, the case may have implications  for people who work overseas on a contract basis  for periods of time, but still maintain family ties to  Australia. 

It may also mean that closer scrutiny will have to be  paid to determine a person’s residency on a year by-year basis and not just “locking” them into a  residency or non-residency status from the beginning  of any relevant change in their circumstances. 

And of course, there is also the key issue of when in  fact your residency status may change! 

 

We are here to help 

Suffice to say, if you find yourself in any such  circumstances (eg, you undertake a foreign posting  for a period or you decide to move overseas for some  time but still maintain connections here), you will  need to speak to us about your residency status –  and the tax implications thereof.

 

Changes to preservation age

Since 1 July 2024, the age at which individuals can access their  superannuation increased to age 60.  So what does this mean for those planning on accessing their superannuation upon reaching this age? 

 

What is preservation age?  

Access to superannuation benefits is generally  restricted to members who have reached  “preservation age”, which is the minimum age at  which you can access your superannuation benefits.  

Prior to 1 July 2024, a person’s preservation age could  range from 55 to 60 as it depends on their date of  birth. Preservation age has been slowly increasing  over the years and has finally reached its legislated  maximum age limit of age 60, as shown in the table below:  

 

What does this change mean for me?  

Once you have reached preservation age, you may  receive your superannuation benefits as:  

■ A lump sum or as an income stream once you  have retired (or a combination of both), or 

■ A transition to retirement income stream while  you continue to work. 

Furthermore, once you turn age 60 your  superannuation benefits (ie, any lump sum  withdrawals and/or pension payments) will  generally be tax-free. 

This change simplifies the tax rules as previously  those between preservation age and age 60  were subject to tax on lump sum withdrawals  and pension payments. Now, the tax treatment  of superannuation benefits depends on whether  you are above or below age 60 – there is no need  to consider preservation age which is based on a  person’s date of birth.  

 

Need more information? 

If you’re wondering what your superannuation  withdrawal options are or how tax may apply  to your superannuation benefits, transition to retirement or superannuation income streams,  contact us today for a chat.

It’s important to note that preservation age is not the same as your Age Pension age. To get the Age Pension, you must be age 67 or over, depending on when you were born (and other rules you need to meet). So even if you reach preservation age, it could be some time before you are eligible to receive the Age Pension from Services Australia (ie, Centrelink).

CGT & foreign residents:  Complex rules apply! 

A person who is not a resident of Australia for tax purposes is nevertheless liable for capital  gains tax (CGT) on certain assets located in  Australia. And these assets are assets which have a  “fundamental” connection with Australia – and are  broadly as follows:  

■ real property (ie, land) located in Australia –  including leases over such land;  

■ certain interests in Australian “land rich” companies  or unit trusts; 

■ business assets used in carrying on a business in  Australia through a “permanent establishment”; and  

■ options or rights over such property. 

This means that such assets will be subject to CGT in  Australia regardless of the owner’s tax residency status.  

Importantly, in relation to real property, this also includes  a home that the foreign resident may have owned in  Australia. And this home will not be entitled to the CGT  exemption for a home if the owner is a foreign resident  when they sell or otherwise dispose of it.  

Furthermore, a purchaser of property from a foreign  resident will be subject to a “withholding tax”  requirement, whereby they have to remit a certain  percentage of the purchase price to the ATO as an  “advance payment” in respect of the foreign resident’s  CGT liability. However, this requirement is subject to  certain thresholds and variations. 

Importantly, a foreign resident will generally not  be entitled to the 50% CGT discount on any capital  gain that is liable to CGT in Australia – subject to an  adjustment for any periods when they owned the asset  when they were a resident of Australia. 

In relation to a foreign resident’s liability for CGT on  certain interests in Australian “land rich” companies or unit trusts, this rule broadly requires the foreign  resident to:  

■ own at least 10% of the interest in the company or  trust at the time of selling the interest (or at any time  in the prior two years); and 

■ at the time of sale, more than 50% of the assets  of the company or trust (by market value) are  attributable to land in Australia. 

This means that interest owned by foreign residents in  private companies and unit trusts can potentially be  caught by these rules.  

Moreover, the application of these rules can be very  difficult, particularly as a foreign resident can be  caught by them at certain times and not others. 

It is also worth noting that if someone ceases to be an  Australia resident and becomes a foreign resident for  tax purposes, then they will generally be deemed to  have sold such interests at that time and be liable for  CGT on them. However, this is subject to the right to opt  out of this deemed sale rule – but this “opt-out” has  other important CGT consequences. 

On the other hand, the rule that applies to make a  deceased person liable for CGT in their final tax return for assets that are bequeathed to a foreign resident  beneficiary does not apply to certain assets – and  these assets are any of the above assets with a “fundamental” connection with Australia.  

And this may be further complicated by the fact  that, for example, at the time of making the will, the  beneficiary may not have been a foreign resident. 

The application of Australia’s CGT rules to foreign  residents can be very complex – especially given the  “variable” nature of some of the rules. Therefore, it is vital  to speak to us if you have a “foreign residency” issue.

 

Selling a small business  operated through a company Sell the shares or sell the assets? 

If you run a small business through a company and you decide to sell it, you have  the choice of either selling the business assets themselves (together with any  goodwill) or selling your shares in the company. 

 

Access to the CGT small business concessions 

Usually, such decisions are made on the basis  of relevant commercial considerations (eg, due  diligence and future liability issues). 

However, if you are seeking to access the CGT small  business concessions on any sale, then you should  also consider whether it is better to sell the business  assets per se or the shares in the company. 

While in principle there should be no difference in  terms of the CGT outcome in selling either, it may  well be easier to access the concessions by adopting  one approach over the other. 

For example, if you sell the business assets at the  company level you will need to find one or more  controllers of the company (ie, broadly someone  with a 20% or more interest in it at the relevant time)  in order to be able to access the concessions. 

And, depending on the circumstances, this can be  both easier and harder than it looks. 

Furthermore, in the case of the “retirement  exemption”, it is necessary to actually pay any  exempted capital gain to this controller in order to  be able to use the concession (or to put it into their  superannuation if they are aged under 55 at the  relevant time). 

On the other hand, if you can use the “15 year  exemption”, it is enough that such a person exists –  without the need to pay the exempted gain to them. 

 

“Assets used in carrying on a business” 

Most importantly however, if you choose to sell the  shares in the company, the company itself must have  certain attributes – the most important of which is  that 80% or more of its assets (by market value) must  be assets used in carrying on a business.

This, in turn, raises the thorny issue of how money in  the bank is to be treated – and there is often a fine  line between whether it is considered to be used in  carrying on a business or not. 

 

More hurdles to jump for eligibility 

Furthermore, if the company has “controlling  interests” in any other entity, then the assets of any  such entity also must be also taken into account in  determining if this test is met. 

And, of course, as with the application of the CGT  small business concessions in any circumstances,  the “taxpayer’’ must satisfy either the $2m turnover  test or the $6m maximum net asset value (MNAV)  test. 

And where shares or units are sold, the “taxpayer’’  is the individual who owns the shares and where  the business assets are sold the “taxpayer” is the  company or trust itself. 

In either case, the tests can be difficult to apply  because the “taxpayer’’ includes affiliates and  connected entities (ie, related parties).  

By way of example, if you sell the business assets of  a company and you use the $6m MNAV test, then any person who has a 40% or more shareholding  in the company will be a connected entity and  their assets (other than personal ones such as  superannuation and their home) will also have to  be taken into account. Importantly, this can include  investment properties and shares. 

And then there is the difficult task of determining  what liabilities relate to those assets for the  purposes of this test – especially where the business  assets are sold. 

Suffice to say, the issues surrounding the question  of whether you should sell the business assets of  a company or the shares in them when seeking  to apply the CGT small business concessions are  complex.  

Furthermore, the same issues arise in respect of  deciding whether to sell the units in a unit trust  that operates a small business or the assets of the  business itself. 

 

We are here to help 

In any of these scenarios we are here to help – as  this is a matter which clearly requires the expertise of a tax professional.

Spouse contributions splitting

Splitting superannuation contributions to your spouse can be a great way to boost your  combined superannuation balances which can  benefit you both in retirement.  

 

What is contribution splitting?  

Spouse contribution splitting allows a couple to  optimise their superannuation balances by splitting  up to 85% of concessional contributions (CCs) they  made or received in one financial year (ie, 2023/24)  into their spouse’s account the next financial year  (ie, 2024/25).  

Remember, CCs are before-tax contributions and  are generally taxed at 15% within your fund. This is  the most common type of contribution individuals  receive as it includes superannuation guarantee  (SG) payments your employer makes into your fund  on your behalf. Other types of CCs include salary  sacrifice contributions and tax-deductible personal  contributions. 

The maximum amount that can be split to your  spouse is the lesser of:  

■ 85% of CCs made in the previous financial year  (ie, 2023/24), and  

■ The CC cap for that financial year (ie, $27,500 in  2023/24).  

 

EXAMPLE 

Alex and Kat are parents to three young children. Kat  has taken time off work to care for their children and  has much less superannuation than Alex.  

After speaking to their financial adviser, they decide to  split the $20,000 in SG contributions that Alex received  from his employer last financial year (2023/24). In  August 2024, Alex applies to his superannuation fund  to transfer as much of his CCs as he can to Kat. 

Alex is able to split 85% of his CCs which provides a  much-needed boost of $17,000 to Kat’s retirement  savings. 

 

Rules for the receiving spouse  

An individual can apply to split their CCs at any age, but the receiving spouse must be either:  

■ Under preservation age (currently age 60 if born  on 1 July 1964 or later), or  

■ Aged between their preservation age and 65 years,  and not retired at the time of the split request.  

In other words, if the receiving spouse has reached  their preservation age and is retired, or they are 65  years and over, the application to split your CCs will  be invalid. 

 

Benefits of contribution splitting 

Contribution splitting is an effective way of building  superannuation for your spouse and can manage  your total superannuation balance (TSB) which can  have several advantages, including: 

■ Equalising your superannuation balances to  make best use of both of your “transfer balance  caps” (TBC) which can maximise the amount you  both have invested in tax-free retirement phase  pensions. Note, the TBC limits the amount that a  person can transfer to retirement phase pensions  in their lifetime – this limit is currently $1.9 million  in 2024/25.  

■ Optimising both of your TSBs to:  

■  Access a higher non-concessional (after-tax)  contribution cap (as the amount you can  contribute to superannuation depends on  your TSB) 

■  Access the carry-forward CC rules and make  larger CCs (note, the option to utilise these  rules is restricted to those with a TSB below  $500,000 on the prior 30 June) 

■  Qualify for a government co-contribution  

■  Qualify for a tax offset for spouse contributions  

■ Boosting your Centrelink entitlements by  transferring funds into a younger spouse’s  accumulation account if your spouse is under Age  Pension age. 

 

Last word 

As always, there are eligibility requirements that  must be met and deciding what is best for you will  depend on your personal circumstances. For this  reason, you may want to seek personal financial  advice to determine whether contribution splitting is  right for you and your spouse.

 

Breaking up (by text) is hard to do

A recent decision by the Full Federal Court around a man’s tragic death by suicide clarified the standing of a defacto spouse in the context of a non-lapsing death benefit nomination on a life insurance policy made by the deceased person.

Just prior to C’s death in September 2019 the death benefit under his insurance policy was  valued at $1.1 million, with the death benefit  nomination in favour of his de facto spouse, N,  having been made in December 2018. 

On the night of his death, C sent a text message to  his sister, purporting to be his last will and testament  and indicating his wish that all his assets should  pass to his family, with N receiving nothing. The text  was not copied to N and it was later established  that it was sent while C was under the influence of cocaine and alcohol.

The trustee of the policy took the view that the defacto relationship had continued right up to the time of C’s death and that N was therefore entitled to the death benefit. This decision was challenged by C’s family before the Australian Financial Complaints Authority (AFCA), arguing the text was evidence that the relationship between C and N had ended before C’s death.

However, AFCA decided that relationships have their ups and downs and people say and write a lot of things they don’t mean all the time. This meant the trustee was right, the relationship remained ongoing just prior to C’s death and N was entitled to receive the death benefit.

The family then appealed to the Federal Court, where a single judge ruled that AFCA had erred in law in not construing the text message as proof that C’s relationship with N had come to an end, meaning that N was not a valid beneficiary after all.

Finally (one would think), N appealed to the Full Federal Court, which held unanimously that in the absence of communication from C to N, there needed to be some other course of conduct, such as a refusal to cohabitate, which would clearly be inconsistent with a continuation of the relationship.

Since there was no evidence about such conduct, the Full Court ruled in favour of N. The decision by AFCA was therefore upheld.

This case, with its own peculiar facts, highlights the importance of keeping things like binding death benefits nominations up to date and being clear about spousal relationships, especially when couples live apart.

 

Small business energy incentive

A little-known tax incentive that is aimed at encouraging businesses to improve energy efficiency is the small business energy incentive (SBEI).

You will have to jump through a few hoops to qualify, but depending on what sort of  depreciating assets you have acquired between 1 July 2023 and 30 June 2024 (the bonus  period), you may be entitled to a bonus deduction  of 20% of the cost of acquiring up to $100,000 of  eligible equipment. This is over and above what  you would ordinarily claim, so it’s bit like the old  investment allowance, but with a $20,000 cap. That’s  up to $9,400 extra in your pocket, which may make it  worth a look.  

The SBEI is available to businesses with an annual  turnover of less than $50 million, where they have  invested in certain eligible depreciating assets  during the bonus period and where one or more of  the following apply: 

■ there is a new reasonably comparable asset that  uses fossil fuel available in the market; 

■ the new asset is more energy efficient than the  one it is replacing; 

■ if not a replacement asset, it is more energy  efficient than a new reasonably comparable  asset available in the market. 

An asset can also be eligible if it is an energy storage,  time-shifting or monitoring asset, or an asset that  improves the energy efficiency of another asset. 

The bonus deduction is available on second hand  assets, although the comparable asset must be  available in the market as new. 

It only applies to businesses, so replacing gas  appliances with electric ones in a rental property  would not qualify. The bonus deduction does not  apply to solar panels or motor vehicles.

If you think you may have a claim, please feel free to contact us.

 

Click here to view our Glance Consultants August newsletter via PDF

 

 

 

 

 

Does your business pay wages to hired employees? If so, you may be obligated to pay payroll tax. Understanding this levy is vital if you want to operate legally. In this guide, we explain what payroll tax is and outline the variations in rates between different states. We also highlight why payroll tax is important for your business.

 

What is Payroll Tax in Australia?

Payroll tax is a levy that employers must pay if their business’s total wage bill exceeds a certain threshold. Payroll tax was introduced temporarily during World War II but was made permanent in 1947. Then, in the 1970s, each state gained control over its own payroll tax rates and thresholds.

 

Why Do Payroll Tax Rates Matter?

Payroll tax awareness matters if you want to optimise your business operations. Keeping informed of payroll tax rates and thresholds will help you budget more accurately and make more productive business decisions.

If you fail to report the correct payroll tax figures for a financial year, you risk attracting the attention of the Australian Tax Authority (ATO). You must improve your payroll governance to ensure you pay the right tax and remain a fully legitimate business.

 

Payroll Tax Rates & Thresholds

These are the current rates and annual thresholds of payroll tax for each state (as of 2024):

 

State	Rate	Annual Threshold
Australian Capital Territory	6.85%	$2,000,000
New South Wales	5.45%	$1,200,000
Northern Territory	5.5%	$1,500,000
Queensland	4.75% (< $6,500,000) 4.95% ($6,500,000+)	$1,300,000
South Australia	4.95% ($1,700,000+)	$1,500,000
Tasmania	4% ($1,250,001 – $2,000,000) 6.1% ($2,000,001+)	$1,250,000
Victoria	4.85% 1.2125% (regional employers)	$900,000
Western Australia	5.5%	$1,000,000

 

Payroll Tax Exemptions

Not all businesses need to pay payroll tax. Your company will be exempt from paying if your total wage bill falls below the threshold figures. Make sure you’re up-to-date with the weekly, monthly, and annual thresholds for payroll tax in your state.

 

Calculate Accurate Payroll Tax with Glance Consultants

Payroll tax awareness will help your business operate legally and fairly. But it can be challenging to figure out how much you need to pay, particularly since rates and thresholds vary between states. This issue is made even worse if your business operates in multiple states.

You should hire a specialist tax consultant to ensure your company operates inside the law. At Glance Consultants, we can remove the burdens of understanding payroll tax and help you navigate the complexities of calculating rates and exemptions. Get in touch today to optimise your business accounting.

 

Australia offers many great opportunities for property development. But when constructing new buildings, whether for residential or commercial purposes, you must file the right tax returns to ensure you can budget effectively and operate legally.

There are several tax implications on property development projects. In this guide, we’ll outline the key tax rules that could affect your new build and whether you need to register them in your tax return.

 

Income Tax

The first tax implication to consider is income tax. You must pay income tax if you are generating income from your development projects, such as through rental properties or capital gains. For any properties that you own as trading stock, you will be charged your marginal income tax rate.

 

Goods & Services Tax (GST)

GST is a common tax implication for property development projects. You must factor it into your budget and plan these costs accordingly. You will be liable for GST if:

• You build new residential properties for sale.
• The revenue from your property transactions exceeds the GST registration limit.
• You are considered an enterprise with regards to your property development activities.

You can claim GST credits for building costs related to the sale of your new properties. If you’re selling existing residential properties, you won’t be required to pay GST.

 

Capital Gains Tax (CGT)

You may be required to pay CGT on the profits you earn when you sell your developed properties. The total tax cost will depend on the property purchase price, its final sale price, and any eligible expenses that can be deducted.

 

Stamp Duty

Stamp duty, also known as transfer duty, is applicable when you acquire land for property development purposes. Tax rates and rules vary between states, so make sure you familiarise yourself with your region’s transfer duty regulations before buying property. For example, Victoria abolished the transfer duty for commercial premises in their 2023-24 State Budget, replacing it with an annual property tax.

 

Land Tax

If you own land as part of a property development project, you may be required to pay land tax. This is a simple charge that is taken annually from landowners across Australia, but the rates and exemptions vary between states. 

 

Seek Professional Tax Guidance Before You Build

Property development projects require substantial effort. Make sure you are fully aware of every potential tax implication before you begin, otherwise you could quickly find yourself over budget.

Hiring expert tax consultants will ensure you budget appropriately and submit your tax returns correctly. You’ll be able to build legally and transparently while claiming the right deductions. Get in touch with our team at Glance Consultants today for professional tax advice on property development projects.

You are entitled to tax deductions if you are renting out a property you own. However, many rental property owners file incorrect tax returns, as they are unaware of their landlord responsibilities and which costs they can claim. The major error most people make relates to property repairs and renovations.

In this guide, we outline the differences between repairs and capital improvements in the eyes of the Australian Tax Authority (ATO). Learn the definitions of each and how you can claim the right deductions come tax-filing season.

 

What are the Differences Between Repairs and Capital Improvements?

Repairs and capital improvements are not the same. When it comes to filing your tax return, it’s important you know the difference:

• Repairs: According to ATO guidelines, repairs include any work done to fix damage to your property that occurs as part of renting it out. Repairs are necessary to restore your property to how it was before the damage occurred and can be claimed as part of your end-of-year tax deductions.
• Capital Improvements: Capital works or improvements concern structural work that enhances your property for future tenants. This goes beyond simple repairs and maintenance and can include works such as roof replacements, extensions, and garden renovations.

 

Tax Rules for Claiming Deductions

There are different rules regarding how to claim expenses for rental property repairs vs. capital improvements:

• Repairs: The ATO rental expense rules state that you can only claim tax deductions for repairs and maintenance if your property is continually rented out or remains genuinely available to rent. Any claims for property repairs must be made in the financial year when you incurred the costs.
• Capital Improvements: You cannot claim capital improvements on your rental property as deductions in the same tax year. Instead, capital works must be claimed at 2.5% over 40 years only after the improvements have been completed. You can also claim capital works as depreciable assets.

 

Claiming Deductions on Initial Repairs

You may find that repairs are needed when you first buy a property. These are known as initial repairs and cannot be claimed as a tax deduction. Any defects or breakages that existed when you acquired the property are counted as capital repairs and form part of the acquisition cost.

 

Hire Experienced Tax Advisors to Claim the Right Property Deductions

There’s no point in second-guessing your tax return. If even a small part of you is unsure whether you can claim deductions for your rental property repairs and capital improvements, it’s worth hiring a specialist.

 

Don’t risk falling behind on your taxes or overpaying your fair share. At Glance Consultants, our team of trained chartered accountants can take care of your rental property taxes, helping you claim the right deductions and pay the correct tax obligations. Contact us today to optimise your tax payments.

 

We appreciate how complicated it can be when you’re trying to stay compliant with all of the ATO’s regulations, but you can also still be utilising various deductions and other tax benefits while doing this. You need to follow a plan when doing your tax returns as a business, so make sure you’re following this guide to give you a hand.

Maximise Deductions and Concessions

If it’s possible, you need to be utilising every possible deduction and concession that you’ve got available to you – the instant asset write-off, for instance, is something you should be looking into so you can immediately deduct the cost of certain assets. 

Aside from this, if you’re working remotely, you’ll also be able to make a few deductions on any of your home office expenses – just make sure you’ve kept proper documentation so you can substantiate some of these deductions.

Why Should I Plan for My Super?

If you want to avoid certain penalties, it’s paramount that you’re making timely contributions to your super – remember, these contributions (up to the concessional cap) are actually tax-deductible, so you’ll ultimately be reducing your taxable income by doing this.

The Difference Cash Flow Management Can Make

If your business records are fully accurate and you’re always on time with lodging your Business Activity Statements (BAS), you’ll be able to avoid some of the late fees and interest charges that stack up otherwise – we’d suggest using an accounting software to give you a hand with this.

What’s R&D?

We’d recommend looking into the tax incentive you get for any research of development your company does, as this’ll massively lower your taxable income – again, just make sure you’ve got detailed records of this.

Review and Adjust Your Tax Strategy Annually

You’re always going to need to make adjustments to your tax plans as your business continues to grow, so we’d recommend scheduling annual tax reviews with us in order to check how your current strategy is performing.

Understand the Latest Tax Legislation

The ATO is always updating their tax laws, so make sure you contact us to help figure out if there are any new tax incentives or deductions you could be taking advantage of.

Utilise Tax-Effective Business Structures

Every kind of business structure has distinct tax implications, whether you operate as a: 

• Sole trader
• Partnership
• Company
• Or a trust

So that you’re utilising the most tax-efficient structure for your business, don’t hesitate to get in touch with our team of tax professionals! We’ll help you determine what the best kind of structure is to get the most out of your taxes, along with a host of other services like bookkeeping and business advisory – get in touch today.

 

The Federal Treasurer, Dr Jim Chalmers, handed down the 2024–25 Federal Budget at 7:30 pm (AEST) on 14 May 2024.

Described as a “responsible Budget that helps people under pressure today”, the Treasurer has forecast a second consecutive surplus of $9.3 billion. The main priorities of the government, as reflected in the Budget, are helping with the cost of living, building more housing, investing in skills and education, strengthening Medicare and responsible economic management to help fight inflation.

The key tax measures announced in the Budget include extending the $20,000 instant asset write-off for eligible businesses by 12 months until 30 June 2025, introducing tax incentives for hydrogen production and critical minerals production, strengthening foreign resident CGT rules and penalising multinationals that seek to avoid paying Australian royalty withholding tax.

The Budget also includes various amendments to previously announced measures, as well as a number of income tax measures that have already been enacted prior to the Budget announcement, including:

• the revised stage 3 personal income tax cuts (enacted by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (Act No 3 of 2024))
• Medicare levy and surcharge threshold changes (enacted by the Treasury Laws Amendment (Cost of Living—Medicare Levy) Act 2024 (Act No 4 of 2024)), and
• a specific exemption for Australian plantation forestry entities from the new earnings-based rules introduced as part of thin capitalisation reforms (enacted by the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Act 2024 (Act No 23 of 2024)).

These enacted measures have not been discussed in detail in this report.

The government anticipates that the tax measures put forward will collectively improve the Budget position by $3.1 billion over a 5-year period to 2027–28.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

The tax, superannuation and social security highlights are set out below.

 

Income tax

• The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025.
• The foreign resident CGT regime will be strengthened for CGT events commencing on or after 1 July 2025.
• A critical minerals production tax incentive will be available from 2027–28 to 2040–41 to support downstream refining and processing of critical minerals.
• A hydrogen production tax incentive will be available from 2027–28 to 2040–41 to producers of renewable hydrogen.
• The minimum length requirements for content and the above-the-line cap of 20% for total qualifying production expenditure for the producer tax offset will be removed.
• A new penalty will be introduced from 1 July 2026 for taxpayers who are part of a group with more than $1 billion in annual global turnover that are found to have mischaracterised or undervalued royalty payments.
• The Labor government’s 2022–23 Budget measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions is being discontinued.
• The start date of a 2023–24 Budget measure to expand the scope of the Pt IVA general anti-avoidance rule will be deferred to income years commencing on or after assent of enabling legislation.
• Income tax exemptions for World Rugby and/or related entities for income derived in relation to the Rugby World Cup 2027 (men’s) and Rugby World Cup 2029 (women’s).
• Deductible gift recipients list to be updated.

 

Social security

• Social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025.
• Carer payment recipients will have greater flexibility with their participation requirements.
• Eligibility for the higher rate of Jobseeker payment will be extended to single recipients with a partial capacity to work of zero to 14 hours per week.
• The maximum rates of the Commonwealth Rent Assistance will increase by 10% from 20 September 2024.
• Funding will be provided to implement a social security means test treatment for military invalidity payments affected by the Full Federal Court’s decision of FC of T v Douglas 2020 ATC 2020 ATC ¶20-773;[2020] FCAFC 220.
• Funding will be provided to enable Australia to enter into a bilateral social security agreement with Uruguay.
• Foreign investors will be allowed to purchase established build-to-rent properties with a lower foreign investment fee.

 

Superannuation

• Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025.
• The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

 

Tax administration

• The ATO will be given a statutory discretion to not use a taxpayer’s refund to offset old tax debts on hold.
• Indexation of the Higher Education Loan Program (and other student loans) debt will be limited to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023.
• A pilot program of matching income and employment data of migrant workers will be conducted between the Department of Home Affairs and the ATO.
• A new ATO compliance taskforce will be established to recover tax revenue lost to fraud while existing compliance programs will be extended.
• The ATO will have additional time to notify a taxpayer if it intends to retain a business activity statement refund for further investigation.
• The 2019–20 Budget measure “Black Economy — Strengthening the Australian Business Number system” will not proceed.

 

GST

• Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme.

 

Excise and customs duty

• Tariffs identified as a nuisance across a range of imported goods will be removed from 1 July 2024.
• The start dates for certain components of a measure to streamline excise administration for fuel and alcohol announced in the Coalition government’s 2022–23 Budget will be deferred.

 

Please check the following link for our PDF report on the 2024-2025 Budget:

Federal Budget PDF 2024-2025

 

Six super strategies to consider before 30 June

With the end of financial year fast approaching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2024.

 

1. Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation, you may be able to use the carry forward concessional contribution (CC) rules (otherwise known as “catch-up concessional” rules) to make large CCs this year without exceeding your CC cap.

This strategy can allow you to carry forward any unused CC cap amounts that have accrued since 2018/19 for up to five financial years and use them to make CCs in excess of the general annual CC cap (currently $27,500 in 2023/24).

You can then make a CC using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) at 30 June 2023 was below $500,000.

 

2. Make a personal deductible contribution

Carry-forward contributions may also provide you with an opportunity to make higher amounts of personal deductible contributions in financial years where you may have a higher level of taxable income, for example, due to assessable capital gains.

But if you’re not eligible to use the carry forward rules to make a larger contribution, you can still boost your superannuation by making a personal deductible contribution up to the general CC cap.

It’s important to note that personal deductible contributions are only deductible if you meet all of the following conditions:

■ You make the contribution to a complying superannuation fund

■ You are at least age 18 when the contribution is made (unless you derived income from carrying on a business or from employment-related activities)

■ You make the contribution within 28 days after the month in which you turn 75

■ You notify your superannuation fund trustee in writing of your intention to claim the deduction

■ The notice must be given by the earlier of:

• when you lodge your income tax return for the year the contributions were made, or
• the end of the financial year following the year the contributions were made

■ The trustee of your superannuation fund must acknowledge receipt of the notice, and you cannot deduct more than the amount stated in the notice.

 

3. Spouse contribution splitting

You can split up to 85% of your 2022/23 CCs before 30 June 2024 to your spouse’s superannuation if your spouse is:

■ Under preservation age (currently age 60 if born on 1 July 1964 or later), or

■ Aged between their preservation age and 65 years, and not retired at the time of the split request.

This is an effective way of building superannuation for your spouse and can manage your TSB which can have several advantages, such as:

■ Equalising your balances to maximise the amount you both have invested in tax-free retirement phase income streams, or

■ Optimising both of your TSBs to access a higher NCC cap,º etc.

 

4. Superannuation spouse tax offset

If your spouse is not working or earns a low income, you may want to consider making a NCC into their superannuation account. This strategy could benefit you both by boosting your spouse’s superannuation account and allowing you to qualify for a tax offset of up to $540.

You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer superannuation contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.

 

5. Maximise non-concessional contributions

Another way to boost your superannuation is to make a NCC with some of your after-tax income or savings. The general NCC cap for 2023/24 is $110,000 and eligibility to utilise the cap depends on your TSB.º

Although NCCs don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that is paid on superannuation on investment earnings. This tax rate may be lower than what you might pay if you held the money in other investments outside superannuation.

 

6 Receive the government co-contribution

If you’re a low or middle-income earner earning less than $58,445 in 2023/24 and at least 10% is from your job or a business, you may want to consider making a NCC to superannuation before 1 July 2024. If you do, the Government may make a ‘co contribution’ of up to $500 into your superannuation account.

The maximum co-contribution is available if you contribute $1,000 and earn $43,445 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $43,445 and $58,445 pa.

Like the superannuation spouse tax offset, the definition of total income for the purposes of the co-contribution includes assessable income, reportable fringe benefits and reportable employer superannuation contributions.

You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. Contact us before 30 June if you’re thinking about investing more in superannuation so we can help you decide which strategies are most appropriate to your circumstances.

º: Refer to Super contribution caps to increase on 1 July in last month’s Newsletter (March 2024) for more information.

 

Important tax residency issues to consider

What happens from a tax point of view when a person leaves Australia part- way through the income year? How is the income they derived before that time taxed? And how is any income they derived after that time taxed (whether from Australian or foreign sources)?

Well, the answer will primarily depend on whether the person ceases to be a “resident of Australia” for tax purposes at the time they leave Australia.

This can be one of the most difficult issues in tax law to determine. Not only will it depend on the precise facts and the intention of the taxpayer, but it can also involve what often seems to be a “judgement-call” at the relevant time. This is especially the case as a taxpayer’s residency status is worked out on an income year basis, and this can change from one income year to another.

But putting aside all the issues involved in determining whether a person ceases to be a resident of Australia for tax purposes part-way through an income year, let us assume this is the case.

So, what are some of the general tax consequences associated with such part-year residency?

For a start, the person’s tax threshold for the relevant income year will be adjusted downwards (pro-rated) to reflect the fact that the person ceased to be a resident for tax purposes part-way through the income year. As a result, this pro-rated threshold will apply to the person’s assessable income:

■ from all sources both within and outside Australia for the period they are a resident of Australia, and

■ from sources within Australia while they are a foreign resident.

Importantly, this in effect means that the resident tax rates do not change on the basis of a person’s part-year residency – but only the relevant tax-free threshold.

It should also be noted that assessable income derived from sources outside Australia during the period in the income year that the person is a “foreign resident” will not be subject to tax in Australia as it will be outside the Australian taxing jurisdiction.

And, of course, for the following income years the person will be assessed as a foreign resident and therefore only pay tax in Australia on Australian-sourced assessable income at foreign resident rates.

Another consequence that is often overlooked is that a person ceasing to be a resident of Australia for tax purposes will be deemed to have disposed of all their Australian-sourced CGT assets for their market value at that time. However, this is subject to an exception for “taxable Australian property” (which always remain subject to CGT regardless of the taxpayer’s residency status) and any “pre-CGT” assets of the taxpayer.

Furthermore, a person can instead choose to opt out of this “deemed disposal” rule – in which case all their Australian-sourced CGT assets will be treated as taxable Australian property until they are actually disposed of or the taxpayer becomes a resident of Australia again for tax purposes.

So, these are some of the tax considerations to be taken into account on a person ceasing to be a resident of Australia. But the key question of determining a person’s residency for tax purposes remains – and this is not always an easy issue.

For example, in a recent tax decision, the Administrative Appeals Tribunal held that a person was a resident of Australia for tax purposes even though they were working outside the country for substantially more than half the year and even though this occurred over a four-year period.

The AAT found that because the taxpayer’s wife and family remained in Australia and because he had other connections to Australia such as the ownership of property and motor vehicles here, then he was a resident for tax purposes – as he had no “plans to abandon Australia”.

The case illustrates something of the difficulty of determining a person’s residency for tax purposes. It is clearly a “case-by-case” matter.

And it is clearly something on which professional advice should always be sought.

 

Family companies and the many tax traps

If you own a family company, then it is very important how you receive and treat any payments made from the company to you (or your associates – for example, your spouse). And this is simply because any payment from a company (other than a return of the original capital) is, in most cases, prima-facie a dividend in the hands of the recipient – however it may otherwise be classified.

In particular, if you arrange for your company to provide you (or your associate) a loan, then it will be deemed to be a taxable dividend (and an unfranked one at that) – unless you comply with the requirements for it to be a “complying loan’’ (which includes imposing a market rate of interest on it).

Likewise, any forgiveness by the company of the loan made to you will be treated as a deemed dividend in your hands also – again unless certain requirements are met.

This area of treating loans by the company to a shareholder (or associate) as a deemed “Div 7A dividend” is a fundamental issue in tax law – and has been for many, many years.

And it is a matter that you should always speak to your adviser about.

Importantly, it also extends to the case where your family trust makes a resolution to distribute trust income to a beneficiary company (usually a so-called “bucket company”) and the amount is never actually paid to the company but is kept in the trust.

In this case, the ATO treats this as a deemed dividend made by the company to the trust – albeit, it is a hot button issue in tax at the moment as to whether the ATO is correct in its approach to this.

Again, this is a matter that you MUST always speak to your adviser about – especially with the current uncertainty and changes in the air in relation to Div 7A.

With family companies there is also the issue of loans made by shareholders or directors to the company and any subsequent forgiveness of them.

On the face of it a complete forgiveness of the debt owed without any repayment of the loan should trigger a capital loss in the hands of the shareholder or director.

However, the tax laws are more sophisticated than this – and a capital loss will only arise to the extent that the debt is incapable of being repaid by the company. There is also an argument as to whether any capital loss should be available at all even if the company could not repay the debt.

Likewise, there will be consequences for the company.

While no immediate taxable gain will arise to the company from the release of its obligation to repay the debt, there may be a restriction on its ability to claim tax deductions in the future for such things as carry forward tax losses and/or depreciation.

While this may not be an issue if the company is winding up, it will be if it continues to operate.

So, the moral of the story is just because you own the company doesn’t mean you can treat it as your own private bank to make withdrawals from it as you please or make loans to it (and forgive them) – without considering the serious tax consequences of such actions.

There will always be tax consequences – and you will always need professional advice on this matter.

 

Selling your home to a developer? Beware the tax consequences!

The NSW state Government is attempting to help with the housing affordability crisis by making areas around train stations and shopping centres eligible for rezoning for denser development. It will be important to see your tax adviser if you receive a generous offer from a property developer for your home (or rental property) as a result of this rezoning. And not just if you live in NSW.

This is because you will have to consider the capital gains tax (CGT) – or possible other income tax consequences – of selling your home or rental property in these circumstances – including where you may be forced to sell under some state compulsory acquisition rule (eg, in relation to strata units).

In relation to something that is your home you should be right as a home is exempt from CGT.

But if you have ever used your home to produce assessable income (eg, rented the whole or a part of it out or used it as a place of business) you will be subject to a partial CGT liability – and calculating the amount of this liability can be quite complex, depending on the exact situation.

For example, if you originally lived in the home and rented it for a period you will ordinarily be able to apply the “absence concession” to continue to treat it as your home and therefore sell it CGT-free.

But if you can’t, you will have to reset its cost for CGT purposes by reference to its market value at the time you first rented it and then recalculate its precise cost for the calculation of the partial gain. This includes knowing what range of expenses can be included in this cost!

Likewise, if you use part of your home as a place of business you will have to reset its cost for CGT purposes on the same basis – but in this case you may (and it’s a big “may”) be entitled to the CGT concessions for carrying on a small business.

But this is an area ripe with confusion – and controversy (unbeknown to many).

And then of course, there is the issue of whether you qualify for the generous 50% CGT discount to reduce any assessable capital gain – and this is often not as simple as it looks.

It may even be the case that you could be assessed on any gain you make on the sale of your property on the basis that it is like taxable business income (and not a concessionally taxed capital gain). And this can potentially happen if you carry out activities in a business-like manner to increase the value of your home in order to fetch a higher price from developers. There is even recent case law on this matter which confirms this view (albeit, this case law is only at a lower tribunal level).

So, if for better or worse, if you find yourself being approached by a developer to sell your home (or other real estate), go see your tax practitioner. Their advice will be invaluable in perhaps this one-off chance to make a significant gain on your main asset.

 

The tax treatment of compensation payments can be tricky

If you have had a rental or commercial property damaged by recent summer storms (or bushfires or floods) you may have received an insurance payout to cover the damage. You may be surprised to know that this payout is subject to capital gains tax (CGT) on the basis that it arises from your right to seek compensation (being a CGT asset itself). However, the tax law and the ATO will treat it concessionally depending on what exactly the payout is for and how it will be used.

For example, if the payout is for the “destruction or loss” of the whole or part of the property, the payout won’t be subject to CGT at that time – but only if it is used to acquire a replacement asset within the required time (generally two years). This is because a “concessional roll-over” applies in the circumstances.

However, there may be an immediate CGT liability (and/or other CGT consequences) if only some (or more) than the amount of the payout is used in acquiring a replacement asset.

On the other hand, if a payout is received for merely some “permanent damage” to the property then a different CGT concession will apply – namely, there will be a reduction in the cost base of the property for CGT purposes by the extent of the compensation received (and whether or not the proceeds are used to repair or restore the damaged property).

So, if you find yourself in this situation, it is vital to see your tax professional to help assess what situation you fall into – and furthermore how the compensation is exactly treated in that case.

In the different case where you receive compensation for wrongful dismissal from work and/or for injury suffered at work, it is also vital to seek professional advice. This is because such compensation can potentially be treated in one of several ways:

■ Firstly, it may be treated as assessable income to the extent it is a substitution for lost income – regardless of whether it is received in a lump sum form or not and however it is calculated.

■ Secondly, it can be treated as being exempt from being assessable income (and CGT) where it is received for injury, the loss of physical capacity, illness, pain, suffering or where it is paid under anti-discrimination legislation.

However, determining which category of compensation such a payment falls into is not always easy – especially where it may be an out- of-court settlement payment which comprises both types of payments. While generally such payments will not be taxable, if they are an out-of-court settlement and the whole or part of the payment can be identified as comprising compensation for lost income (by whatever means, such as the initial pleadings), then that component can be assessable.

So, suffice to say your professional adviser is invaluable in this situation – and in particular before agreeing on the receipt of any such settlement payment.

 

Mortgage vs super: Where should I put my extra cash?

Many of us wonder about the best vehicle to use for our extra savings. Is it better to direct extra savings to your mortgage or superannuation? As with most financial decisions, there is no one-size-fits-all approach as it depends on a number of factors for each individual.

 

Paying extra off the mortgage

The priority for most people is to pay extra off their mortgage. This is because extra repayments can reduce the amount of interest payable and will help you pay off your loan sooner, freeing you up from mortgage repayment commitments.

Furthermore, if your home loan has a redraw or offset facility, you can still access your money if your circumstances change.

However paying extra off your mortgage involves using after-tax money which is less advantageous than using pre-tax income to invest into superannuation which will eventually be used to pay off your mortgage.

 

Paying extra into superannuation

Paying extra to superannuation will usually involve pre-tax money by making salary sacrifice contributions. An effective salary sacrifice agreement involves an employee agreeing in writing to forgo part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar value, such as increased employer superannuation contributions.

As salary sacrifice contributions are made with pre-tax dollars and do not form part of your assessable income, this means these contributions are not taxed at your marginal tax rate and will instead be taxed at a maximum of 15% when received by your superannuation fund.

It is also worth noting that making pre-tax contributions such as salary sacrifice contributions count towards the concessional contribution (CC) cap which is currently $27,500 pa in 2023/24 (or $30,000 in 2024/25). As your employer superannuation guarantee (SG) contributions also count towards this cap, you will need to determine how much room you have left within your cap before you start salary sacrificing to superannuation. As discussed in Six super strategies to consider before 30 June on page 1, there is the ability to make larger CCs by utilising the carry forward concessional contribution rules if you meet certain eligibility criteria.

In a nutshell, once the money is in superannuation it is invested and will grow. The power of compounding returns along with the concessional tax nature of superannuation means that even small contributions can boost your retirement savings in the future. When the time is right and you are ready to retire, you can either withdraw a tax-free lump sum to clear your remaining mortgage or commence a superannuation pension and draw tax-free pension payments to meet your mortgage repayments from the age of 60 onwards.

 

Example – pre vs post tax money

Bill earns $150,000 per year and has a savings capacity of around $1,000 – $1,500 per month. Bill can either:

• Direct this amount to his mortgage, or
• Salary sacrifice $1,587 into superannuation as this contribution occurs before tax (ie, the after-tax cost of $1,587 is $1,000).

Bill decides to salary sacrifice to superannuation. Bill’s contribution is taxed at 15% when it is received by his fund so his end contribution is $1,349. For the same out-of-pocket cost to Bill, his superannuation fund receives an extra $349 each month.

This example shows the difference between Bill’s marginal tax rate (37%) and the tax rate on contributions (15%) constitutes the benefit of salary sacrifice contributions. As mentioned above, Bill will need to ensure he does not exceed his CC cap by making extra salary sacrifice contributions to superannuation.

 

Final thoughts

So which option is better? Well it depends. The answer boils down to a number of factors that need to be considered, such as your mortgage interest rate, your income and marginal tax rate, your superannuation investment strategy, and your age to retirement. If you need extra information or advice on what you should do, make sure you speak to your financial adviser before you make any financial decisions regarding your mortgage or superannuation.

 

 

Click to view Glance Consultants April 2024 Newsletter via PDF

 

 

 

 

For businesses, staying vigilant about fluctuating interest rates is crucial for financial stability and longevity.

As a business owner, you’re well aware of how changes in interest rates can impact various aspects of your operations. From loan repayments to consumer spending habits, the ripple effects can be significant. If you find yourself grappling with cash flow challenges during periods of high interest rates, here are some actionable tips to help you weather the storm.

 

Build a Financial Safety Net

During periods of increased financial performance,, proactively set aside funds in a separate account to serve as a financial buffer. This ensures that you have a safety net to fall back on when revenue streams fluctuate. Consult with financial experts, like our team of chartered accountants, to determine the best approach for your business.

 

Tackle High-Interest Debt Head-On

Prioritize paying off debts with high-interest rates to minimize overall interest expenses. Whether it’s overdrafts, mortgage payments, or tax obligations, allocating extra funds towards these payments can save you money in the long run. Stay proactive with your tax planning to avoid accruing additional debt with authorities like the Australian Taxation Office.

 

Conduct a Comprehensive Spending Audit

Review your business expenditure meticulously to identify areas where costs can be trimmed. Whether it’s excess inventory or unnecessary overheads, optimizing your spending can free up much-needed capital. Consider outsourcing non-core functions to reduce operational expenses.

 

Negotiate Favorable Payment Terms

Explore opportunities to renegotiate payment terms with suppliers and vendors to better align with your cash flow cycles. This can help alleviate short-term financial strain and improve your overall liquidity position.

 

Seek Professional Guidance

Partnering with experienced accountants,, can provide invaluable insights and support in managing cash flow effectively. Their expertise can help you navigate complex financial landscapes and make informed decisions for the future of your business.

In conclusion, navigating cash flow challenges amidst rising interest rates requires proactive planning and strategic financial management. By implementing these tips and leveraging expert guidance, you can steer your business towards financial resilience and success.

 

In the volatile landscape of business finance, unexpected financial hardships can strike without warning. To provide a safety net, the Australian Taxation Office (ATO) extends a helping hand through payment plans, allowing businesses to manage and spread the burden of their debts.

If you find yourself approaching a tax deadline with inadequate funds, this comprehensive guide will walk you through the ins and outs of ATO payment plans, including eligibility, procedures, and the consequences of missed payments.

 

What Exactly Are ATO Payment Plans?

ATO payment plans offer a structured approach to settling outstanding tax debts or other tax-related obligations over an agreed-upon period. Whether you’re an individual taxpayer, a business entity, or a sole trader, you can utilise this option.

It’s important to note, however, that while these payment plans provide a crucial lifeline for meeting tax obligations, they should not be seen as a fallback or default method of payment. The best practice remains staying current with your bills, paying them in full and on time.

 

How Do ATO Payment Plans Operate?

As of 2024, individuals, sole traders, and businesses with debts amounting to $100,000 or less can conveniently set up their payment plans online.

The ATO encourages prompt repayment, allowing flexibility in determining a suitable repayment period—typically spanning six, 12, or 24 months—depending on the amount owed.

While a general interest charge (GIC) is typically applied to outstanding balances until they are cleared, opting for direct debits or voluntary payments can expedite the debt repayment process.

For debts exceeding $100,000, direct contact with the ATO via telephone is necessary to initiate the repayment process.

 

Key Points to Consider Before Committing to a Payment Plan

Before committing to an ATO payment plan, it’s essential to bear in mind the following:

• Fulfill Other Financial Obligations: Payment plans do not absolve you of ongoing financial responsibilities, such as upcoming PAYE instalments, payroll taxes, or business activity statement bills. Neglecting these payments could lead to further debt accumulation.
• Maintain a Positive Payment History: A history of timely payments and meeting financial obligations enhances your credibility with the ATO, potentially influencing the terms of your payment plan. Conversely, consistent defaults or insufficient funds may result in less favorable conditions.
• Explore Debt Reduction Options: Tax credits, refunds, and allowable expenses can help offset your outstanding debt. However, it’s important to note that these measures cannot substitute for regular instalments. The ATO may consider factors such as utility bills, wages, and superannuation contributions when determining your repayment schedule.

 

Consequences of Missed Payments

Failure to adhere to the terms of your payment plan, such as underpayment or missed instalments, can lead to default status. In such cases, the ATO may resort to debt enforcement measures, such as garnishee notices, to recover the outstanding amount.

It’s advisable to communicate openly with the ATO if you encounter difficulties meeting your payment obligations. Doing so may afford you the opportunity to negotiate revised terms and avoid more severe repercussions.

 

Take Charge of Your Financial Future with Glance Consultants

At Glance Consultants, our team of chartered accountants, administrators, and bookkeepers is dedicated to assisting small businesses in managing their debts and implementing effective budgeting and financial management strategies. We provide support tailored to your specific circumstances.

Contact us today to discuss your business’s financial situation and explore how we can help you regain control of your finances.