2021/22 Budget Update

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Individuals

Low and Middle Income Tax Offset extended to 2022

LMITO will be retained for one more income year, so that it will still be available for 2022. Under current legislation, the LMITO was due to be removed from 1 July 2021.

The LMITO will apply as follows for the 2022.

  • $37,000 or less Up to $255
  • $37,001 to $48,000 $255 + 7.5% of excess over $37,000
  • $48,001 to $90,000 $1,080
  • $90,001 to $126,000 $1,080 – 3% of excess over $90,000
  • $126,001 + Nil


Consistent with current arrangements, the LMITO will be applied to reduce the tax payable by
individuals when they lodge their tax returns for the 2022 income year.


Increased Medicare levy low-income thresholds

The Medicare levy low-income thresholds will be increased for singles, families and seniors and pensioners for the 2021 income year, as follows:

  • Singles will be increased from $22,801 to $23,226.
  • Families will be increased from $38,474 to $39,167.
  • Single seniors and pensioners will be increased from $36,056 to $36,705.
  • Seniors and pensioners will be increased from $50,191 to $51,094.


For each dependent child or student, the family income thresholds increase by a further $3,597, up from the previous amount of $3,533.


Update to individual tax residency rules

The individual tax residency rules will be replaced with a new, modernised framework.
The primary test will be a simple ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.

Individuals who do not meet the primary test will be subject to secondary tests that depend on a
combination of physical presence and measurable, objective criteria. The new framework will be easier to understand and apply in practice, deliver greater certainty, and lower compliance costs for globally mobile individuals and their employers. This measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.


Update to self-education expense deductions

The exclusion of the first $250 of deductions for prescribed courses of education will be removed.
This measure will have effect from the first income year after the date of Royal Assent of the
enabling legislation.


Employee Share Schemes – ‘cessation of employment’ to be removed as a taxing point

The ‘cessation of employment’ will be removed as a taxing point for tax-deferred Employee
Share Schemes (‘ESS’) that are available for all companies. This change will apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.

Currently, under a tax-deferred ESS, where certain criteria are met, employees may defer tax until
a later tax year (‘the deferred taxing point’). The deferred taxing point is the earliest of:

  • cessation of employment
  • in the case of shares, when there is no risk of forfeiture and no restrictions on disposal
  • in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal
  • the maximum period of deferral of 15 years.


This change will remove the ‘cessation of employment’ taxing point and result in tax being deferred until the earliest of the remaining taxing points.


Businesses

Temporary full expensing extension

In the 2020/21 Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than $5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022. In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses with aggregated annual turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.


Temporary loss carry-back extension

In the 2020/21 Budget, the Government announced amendments to introduce a temporary loss carry-back measure. Broadly, this initial measure allowed ‘corporate tax entities’ with an aggregated turnover of less than $5 billion to carry back tax losses made in the 2020, 2021 and 2022 income years to claim a refund of tax paid (by way of a tax offset) in relation to the 2019, 2020 and 2021 income years. In the 2021/22 Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies with aggregated turnover of less than $5 billion to carry back tax losses from 2023 to offset previously taxed profits as far back as 2019 when they lodge their tax return for the 2023 income year.

The tax refund available under this measure is limited by requiring that the amount carried back is not more than the earlier taxed profits and does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.


Digital economy

The Digital Economy Strategy includes the following:

  • Taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights and in-house software. This measure will apply to assets acquired from 1 July 2023, after the temporary full expensing regime has concluded. The tax effective lives of such assets are currently set by statute.
  • Digital Games Tax Offset to provide a 30% refundable tax offset for qualifying Australian digital games expenditure ongoing from 1 July 2022, with the criteria and definition of qualifying expenditure to be determined through industry consultation.
  • Develop and transition government services to a new, enhanced myGov platform, providing a central place for Australians to find information and services online


Debt recovery for small business

Small business entities with an aggregated turnover of less than $10 million per year to apply to
the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to
pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.


Tax treatment of qualifying storm and flood grants

Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021 to be income tax exempt. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000. The grants will be made non-assessable non-exempt income for tax purposes. This is subject to eligibility criteria.


Superannuation


Removing the work test for voluntary contributions

Individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
Currently, individuals aged 67 to 74 years (inclusive) can only make voluntary contributions (both
concessional and non-concessional) to their superannuation fund, or receive contributions from
their spouse, if they satisfy the work test (subject to a limited work test exemption). Generally, to
satisfy the work test, an individual must be working for at least 40 hours over a period 30 consecutive days in the income year the relevant contribution is made.


Reducing the age limit for downsizer contributions

The downsizer contributions age will be reduced from 65 to 60.The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution.


Removing the $450 per month threshold for Superannuation Guarantee

The current $450 per month minimum income threshold, will be removed. i.e superannuation guarantee applies from the first $1 of wages paid to employees. The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Relaxing the residency requirements SMSFs

The Government will relax residency requirements for SMSFs and small APRA-regulated funds by:

  • extending the central control and management test safe harbour from two years to five years for SMSFs
  • removing the active member test for both types of funds.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Exiting legacy retirement products

The Government has announced that it will allow individuals the temporary option to exit and
convert from a specified range of legacy retirement products (together with any associated
reserves) into more flexible and contemporary retirement products, for a two-year period.
The products covered by this measure include market-linked, life-expectancy and lifetime products that were first commenced before 20 September 2007 from any provider (including an SMSF), but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

Currently, these products can only be converted into another like product and limits apply to the
allocation of any associated reserves without counting towards an individual’s contribution caps.
This measure will permit full access to all of the product’s underlying capital, including any reserves, as part of transitioning into a more flexible and contemporary retirement product.

Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds, and the commuted reserves will be taxed as an assessable contribution.


Changes to the First Home Super Saver scheme

The Government has announced that it will make the following changes to the FHSS scheme.

  • The maximum releasable amount of voluntary concessional and non concessional
    contributions under the FHSS scheme to be increased from $30,000 to $50,000. This change will apply from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022.
  • Four technical changes to the legislation underpinning the FHSS. These four changes will apply retrospectively from 1 July 2018.
  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSS scheme applications.
  • Allowing individuals to withdraw or amend their applications before receiving a FHSS scheme amount and allow those who withdraw to re-apply for FHSS scheme releases in the future.
  • Allowing the Commissioner of Taxation to return any released FHSS scheme money to superannuation funds, provided that the money has not yet been released to the individual.
  • Clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as a fund’s non-assessable non-exempt income and does not count towards the individual’s contribution caps.

The information provided in this update is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

Crawford News

May 2025 - Update

May 16, 2025
Minimum pension drawdown reminder An SMSF must pay a minimum amount each year to a member who is receiving an account-based pension. This minimum amount is calculated by applying the relevant percentage factor based on the member's age by the member's pension account balance calculated as of 1 July 2024, or on a pro-rata basis if the pension commenced part way through the 2025 financial year. If the minimum payment is not made by 30 June, this could result in adverse taxation consequences for the member. How to avoid common CGT errors The ATO wants taxpayers to know that having a foreign resident capital gains withholding clearance certificate does not mean they do not have any further CGT obligations. If taxpayers have sold property, they still need to include capital gains, losses or an exemption or rollover code in their tax return. Keeping not-for-profit records up to date Taxpayers should remember that they are legally required to keep certain records for their not-for-profit. All organisations including NFPs are required to keep accurate and complete records of all transactions relating to their tax and superannuation affairs. Generally, for tax purposes, taxpayers must keep their records in an accessible form for five years . Records that NFP taxpayers are required to keep include: governing documents; financial reports; documentation relating to grants; and registrations and certificates. A good record-keeping system will help taxpayers run their NFP successfully and manage their tax and super obligations. If a taxpayer's NFP is endorsed as a deductible gift recipient, they must keep records that explain all transactions and other acts relevant to their organisation's status as a DGR. This requirement applies to both endorsed DGRs and listed by name DGRs. Increase to rate for working from home running expenses PCG 2023/1 outlines the ATO's new method ('the fixed-rate method') for calculating additional running expenses while working from home, which has applied from 1 July 2022. The fixed-rate method allows taxpayers to claim at a rate of 70 cents per hour for the following additional running expenses for working from home: energy expenses (electricity and gas) for lighting, heating, cooling, and electronic items used while working from home; internet expenses; mobile and home phone expenses; and stationery and computer consumables. However, PCG 2023/1 does not cover occupancy expenses relating to a home, such as rent, mortgage interest, property insurance and land tax. Taxpayers are not required to use the above fixed-rate method - as from 1 July 2022, they can instead continue to claim the actual expenses they incurred as a result of working from home and keep all records necessary to substantiate their claim. Truck driver entitled to claim meal expenses In a recent decision, the Administrative Review Tribunal upheld a truck driver's claim for meal expenses, notwithstanding that those expenses had not been fully substantiated. The taxpayer was employed as a long-haul truck driver in Western Australia. He was away from home for considerable periods each year. The taxpayer sought a deduction for meal expenses of $32,782 in the 2021 income year, apparently calculated by multiplying the number of days he was away from home (310) by the maximum reasonable daily allowance under Taxation Determination TD 2020/5 . The ATO only allowed the taxpayer a deduction for meal expenses of $5,890 based on a review of his logbook, fatigue diary and bank statements. This was an average of $19 per day multiplied by 310. The ART found on the balance of probabilities that the taxpayer incurred the claimed expenditure, and it found that the taxpayer had met his burden of proof. In this regard, the ART determined that the taxpayer incurred the disputed expenses in gaining or producing his assessable income, and it did not agree with the ATO that there was an insufficient linkage between the expenditure on bank statements and the taxpayer's work. The ART held that the exception to the substantiation provisions applied to the taxpayer, as: a travel allowance was paid by the taxpayer's employer which covered the expenses; the taxpayer incurred the expenditure in gaining or producing his assessable income; and the expenditure fell within the ATO's reasonable travel amounts set out in TD 2020/5. The ART accordingly allowed the taxpayer's claim for travel expenses in full. The information provided in this Newsletter is general in nature, and if you have any queries or require further information or assistance with the above, please contact our office.

April 2025 - Update

April 9, 2025
ATO's new focus for small business The ATO is currently focusing on the following 'specific risk areas', where it is concerned "small businesses are getting it wrong": Contractors omitting income — with a focus on data matching to ensure all income is reported. Quarterly to monthly BAS reporting for GST purposes — The ATO will move around 3,500 small businesses with a history of non-compliance to monthly reporting from 1 April 2025. The ATO will also continue its focus on non-commercial business losses, small business CGT concessions, business income that is not personal income, incorrect claims for 'small business boosts', GST registration and income of taxi, limousine and ride-sourcing services. Reminder of March 2025 Quarter Superannuation Guarantee Employers are reminded that employee super contributions for the quarter ending 31 March 2025 must be received by the relevant super funds by Monday, 28 April 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component. The SG rate is 11.5% for the 2025 income year. FBT record keeping and plug-in hybrid exemption changes With the 2025 FBT year having just ended on 31 March, the ATO is reminding employers of some changes that might impact their FBT obligations. Alternative record keeping changes For the 2025 and succeeding FBT years, employers can use existing records instead of travel diaries and declarations for some fringe benefits. If using existing corporate records, employers need to meet the minimum required information at the time of lodging the FBT return. Keeping the right records ensures employers can correctly calculate the taxable value of the benefit and support their FBT position. Plug-in hybrid electric vehicle changes The FBT exemption for plug-in hybrid electric vehicles ('PHEVs') broadly ended on 31 March 2025, so the 2025 FBT year may be the last year that employers can claim the exemption. However, an employer can continue to apply the exemption if that PHEV was used, or available for use, before 1 April 2025 (and that use was exempt), and they have a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025. Taxable payments annual report lodgment reminder Businesses that pay contractors for Taxable payments reporting system services may need to lodge a Taxable payments annual report by 28 August each year. This includes businesses paying contractors in the building and construction, cleaning and IT industries. From 22 March, the ATO will apply penalties to businesses that have not lodged their TPAR from 2024 or previous years. General transfer balance cap will be indexed on 1 July 2025 The transfer balance cap will increase from $1.9 million to $2 million on 1 July 2025. The general TBC amount is used for a number of purposes, including to determine the total capital amount that can be transferred to the pension phase, and to determine eligibility for making non-concessional contributions. This increase has flow through impacts for individuals who have started a retirement phase pension, as they will be entitled to an increase to their personal TBC if they have not previously been at, or exceeded, their cap. The ATO will calculate an individual's personal TBC based on the information reported to and processed by the ATO. To help individuals have a clear understanding of their position, the ATO encourages funds to report all 'TBC events' when they occur and as early as possible before the 1 July 2025 indexation start date. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

2025/26 Budget Update

April 4, 2025
New tax cuts for individual taxpayers in 2027 and 2028 The individual tax rates will reduce effective 1 July 2026. The current 16% tax rate will be reduced to 15% from 1 July 2026 and will be further reduced to 14% from 1 July 2027. The personal income tax rates (excluding the Medicare levy) for the 2025 and 2026 income years are in the following table, along with the proposed changes to the tax rates for the 2027 and 2028 income years: Australian resident individual tax rates Income threshold Tax Rate 2025 & 2026 2027 2028 $ 0 - $ 18,200 0% 0% 0% $ 18,201 - $ 45,000 16% 15% 14% $ 45,001 - $ 135,000 30% 30% 30% $ 135,001 - $ 190,000 37% 37% 37% $ 190,001+ 45% 45% 45% A taxpayer earning between $18,201 and $45,000 will get a tax cut of up to $268 in the 2027 income year and up to $536 from the 2028 income year. I ncreased Medicare levy thresholds The Medicare levy thresholds were increased from 1 July 2024 per below: No Medicare levy payable below 2024 2025 Individuals $ 26,000 $ 27,222 Families not eligible for SAPTO $ 43,846 $ 45,907 Single individuals eligible for SAPTO $ 41,089 $ 43,020 Families eligible for SAPTO $ 57,198 $ 59,886 For each dependent child or student, the family income thresholds will increase by a further $4,216 up from $4,027. Student loan amendments The government will reduce all outstanding Higher Education Loan Program and other student debts by 20%, subject to the passage of legislation. The 20% reduction is in addition to the recent indexation reforms. The repayment threshold will be increased from $54,435 in the 2025 to $67,000 in the 2026. Energy bill relief Eligible households and small businesses will receive two $75 bill rebates directly off their electricity bills until 31 December 2025. Expansion to Help to Buy scheme for first home buyers Under the Help to Buy scheme, the Government will provide an equity contribution of up to 40% to support eligible home buyers to purchase a home with a lower deposit and a smaller mortgage. The income caps for the scheme will be increased from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents. Small Business and Franchisee Support and Protection The ACCC and ASIC will be funded to: Strengthen regulatory oversight of the Franchising Code of Conduct. Improve its data analytics capability to better target enforcement activities to deter illegal phoenixing activities, particularly in the construction sector. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

March 2025 - Update

March 6, 2025
Employer obligations in 2025 Taxpayers who employ staff should remember the following important dates and obligations: Fringe benefits tax 31 March 2025 marks the end of the 2024/25 FBT year. Employers should remember the following regarding their FBT tax time obligations. They should identify if they have provided a fringe benefit. If they have, they should determine the taxable value to work out if they have an FBT liability. They should lodge an FBT return and pay any FBT owed by 21 May 2025. If their registered tax agent lodges electronically for them, they have until 25 June 2025. They should keep the right records to support their FBT position. PAYG withholding Taxpayers need to withhold the right amount of tax from payments they make to their employees and other payees, and pay those amounts to the ATO. Single touch payroll Employers should finalise their STP data by 14 July 2025 for the 2024/25 financial year (there may be a later due date for any closely held payees). Super guarantee 28 January, 28 April, 28 July and 28 October are the quarterly due dates for making SG payments; The SG rate is currently 11.5% of an employee's ordinary time earnings. From 1 July 2025, it will increase to 12% Taxpayers should ensure SG for their eligible employees is paid in full, on time and to the right super fund, otherwise they will be liable for the SG charge. ATO's tips to help taxpayers stay on top of their BAS If lodging online, or through a registered tax or BAS agent, you may be able to get an extra 2 or 4 weeks to lodge and pay. If you have nothing to report for the period, you must lodge a nil BAS. If you made a mistake on your last BAS, instead of lodging a revision, you may be able to use your current BAS to fix it. You can also use their BAS to vary an instalment amount. Claiming fuel tax credits when rates change Fuel tax credits changed on 3 February, and taxpayers could receive more savings for fuel they have acquired on and from this date. Different rates apply based on the type of fuel, when it was acquired and what activity it is used for. The ATO has the following tips for taxpayers to ensure they are claiming correctly. You can use the ATO's 'eligibility tool' on its website to find out if they can claim fuel tax credits for fuel they have acquired and used. You can use the ATO's online fuel tax credit calculator to work out their claim. ATO "busts" NFP myths As the Not-for-profit self-review return is due in March, the ATO has recently published a document 'busting' various NFP 'myths'. Myth 1: All NFPs are income tax exempt ATO response: This is not true. Some NFPs are income tax exempt and some are taxable. Myth 2: There is only one way to lodge the NFP self-review return ATO response: There are three ways, as follows: A 'principal authority' may be able to lodge using 'Online services for business'; It may be possible for the return to be lodged by phoning the ATO's automated self-help phone service on 13 72 26; and A registered tax agent can lodge the return through Online services for agents. Myth 3: Anyone can lodge the NFP self-review return online ATO response: If lodging via Online services for business, anyone authorised to access the return in Online Services can lodge. If a registered tax agent has been engaged, they can also prepare and lodge the return in Online services for agents. Myth 4: If a person is unsure whether their NFP has charitable purposes, then they do not need to lodge ATO response: The self-review return still needs to be lodged, even if it is not certain whether the NFP is charitable. Taxpayer's claim for input tax credits unsuccessful In a recent decision, the Administrative Review Tribunal rejected a taxpayer's claim for input tax credits on the basis that all the relevant GST returns (i.e., BASs) were lodged out of time. For the GST periods from 1 October 2015 to 31 March 2017, the taxpayer filed each of her GST returns more than four years after they were due. The taxpayer still claimed input tax credits totalling over $10,000 for this period. The ATO disallowed this claim, on the basis that none of the input tax credits were claimed within the four year period, as required by the GST Act. The ART upheld the ATO's decision, noting that, as the taxpayer did not file the GST returns within the four year period. ATO's appeal against decision that UPEs are not "loans" The Full Federal Court recently dismissed the ATO's appeal against an AAT decision that unpaid present entitlements ('UPEs') owing by a trust to a corporate beneficiary were not "loans" for Division 7A purposes. A corporate beneficiary had become entitled to a share of the income of a trust for the 2013 to 2017 income years. Parts of these entitlements remained outstanding, resulting in UPEs. The ATO treated these UPEs as loans from the corporate beneficiary back to the trust and, in consequence, as "deemed dividends" made to the trust. The AAT held at first instance that a loan had not been made in this case. The Full Federal Court upheld the AAT's decision, noting that a loan for Division 7A purposes requires an obligation to repay an amount, not merely the creation of an obligation to pay an amount such as when a trust distributes income to a beneficiary. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

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