Small Business Superannuation Clearing House is Closing
The Small Business Superannuation Clearing House (SBSCH) will close on 1 July 2026.
The SBSCH is a free online service provided by the Australian Government through the ATO. The SBSCH can be used by employers to pay superannuation for all their employees through a single payment. The SBSCH will then distribute the money to each employee's superannuation fund according to the employer's instructions.
To support small businesses to transition to alternative services prior to this time, new users will be unable to register to use the service from 1 October 2025.
Existing users are encouraged to take steps now to transition to alternative options.
These include reviewing their existing software and payroll packages (which may already include super functions), or looking at options offered by super funds, commercial dealing houses, or other payroll software or providers.
ATO Warns of Common Division 7A Errors
The ATO reminds shareholders of private companies that understanding how Division 7A of the tax legislation applies is crucial to avoiding costly tax consequences when accessing the company's money or other benefits.
While Division 7A can complex, most errors the ATO sees that result in its application are simple in nature, including:
Shareholders not recognising that a company's money is not their money, and they cannot access it for personal use without tax consequences;
Loans being made without complying loan agreements; and
Applying the wrong benchmark interest rate when calculating Division 7A loan repayments.
These errors are often the result of common myths about Division 7A and how it works.
To support taxpayers' understanding of their tax obligations when managing private company money, the ATO has launched new content 'Division 7A Myths Debunked' on its website.
Superannuation Guarantee Rate Increase
The superannuation guarantee (SG) rate will increase to 12% on 1 July 2025.
The 12% rate will need to be applied for all salary and wages paid to eligible workers on and after 1 July. This is even if some or all of the pay period it relates to is before 1 July.
General Transfer Balance Cap Will Be Indexedon 1 July 2025
Indexation of the general transfer balance cap ('TBC') will occur on 1 July 2025. This cap will increase by $100,000 from $1.9 million to $2 million.
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.
Individuals starting a pension for the first time on or after 1 July 2025 will be entitled to a personal TBC of $2 million.
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' before the 1 July 2025 indexation start date.
CGT Withholding Measures Now Law
The Government recently passed legislation making changes to the foreign resident capital gains withholding laws (among other changes).
The new legislation increases the foreign resident capital gains withholding rate to 15% (from 12.5%), and completely removes the threshold (currently $750,000) before which withholding applies.
This means that all disposals of taxable real property are potentially subject to foreign residents' capital gains withholding requirements regardless of the market value of the CGT asset.
These amendments take effect from 1 January 2025.
Note - foreign resident capital gains withholding is relevant for all vendors selling certain taxable real property (eg Australian land). Even Australian residents can be caught by these laws because, if they do not have a valid 'clearance certificate' issued by the ATO at, or before settlement, tax must be withheld from the sale proceeds by the purchaser and paid to the ATO.
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 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 keeping all records necessary to substantiate their claim.
Please be aware that you are required to keep relevant diaries or timesheets for this expense to be deductible.
ATO Interest Charges No Longer Deductible
On the 13th December 2023, as part of the 2023-24 Mid-Year Economic and Fiscal Outlook (MYEFO), the government announced it would amend the tax law to deny income tax deductions for ATO interest charges. The law change applies in relation to assessments for income years starting on or after 1 July 2025. An assessment for an income year is how your income tax is calculated, as explained in your Notice of Assessment.
This means that you can no longer deduct General Interest Charges (GIC) and Shortfall Interest Charges (SIC) incurred on or after 1 July 2025 in your income tax return for income years starting on or after 1 July 2025.
ATO Warning Regarding Prohibited SMSF Loans
Loans to members continue to be the highest reported contravention of the superannuation laws that the ATO sees in auditor contravention reports.
Self-Managed Super Funds (SMSF) trustees should remember that they cannot loan money or provide other forms of financial assistance to a member or relative, and if they do, they can incur a penalty of up to $18,780. They may also be disqualified as a trustee.
SMSF trustees also cannot loan money to a related party, such as a business, where the value of the loan exceeds 5% of the value of the fund's total assets, as this is a prohibited 'in-house asset' investment.
If the SMSF's in-house assets exceed 5% of the total value at the end of the financial year, the trustee must plan to reduce their in-house assets to less than 5%, which must be implemented by the end of the following financial year.
If a trustee has made a prohibited loan from their SMSF, the loan must be repaid as soon as possible.
Tax Issues for Businesses That Have Received a Support Payment
Taxpayers who have received a government support grant recently to help their business recover from COVID-19 or a natural disaster should check if they need to include the payment in their assessable income.
Grants are generally treated as assessable income, and taxpayers may be able to claim deductions if they use these payments to:
Purchase replacement trading stock or new assets;
Repair their business premises and fit out; or
Pay for other business expenses.
However, some grants are declared non-assessable, non-exempt ('NANE') income. This means taxpayers don't need to include them in their tax return if they meet certain eligibility requirements.
NANE grants include, but are not limited to:
COVID-19 business support payments;
Natural disaster grants; and
Water infrastructure payments.
Taxpayers can only claim deductions for expenses associated with NANE grants if they relate directly to earning their assessable income, including wages, dividends, interest and rent.
Taxpayers cannot claim expenses related to obtaining the grant, such as accountant's fees.
Christmas Parties & Gifts
Year End Staff Parties
With the holiday season underway, many employers will be planning to reward staff with a celebratory party or event. However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.
FBT and 'entertainment'
Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.
Using the actual method
Under the actual method, entertainment costs are normally split up between employees (and their families) and non-employees (eg clients). Such expenditure on employees is deductible and liable to FBT. Expenditure on non-employees is not liable to FBT and not tax deductible.
Using the 50/50 method
Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc, many employers choose to use the simpler 50/50 method. Under this method (irrespective of where the part is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible.
However, the following traps must be considered:
Even if the function is held on the employer's premises, food and drink provided to employees is not exempt from FBT;
The minor benefit exemption* cannot apply; and
The general tax travel exemption (for travel to or from the employer's premises) also cannot apply.
*Minor benefit exemption
The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (eg family) on an infrequent and irregular basis.
The ATO accepts that different benefits provided at, or about the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.
However, entertainment expenditure that is FBT-exempt is also not deductible.
Example: Christmas Party
An employer holds a Christmas party for its employees and their spouses - 40 attendees in total. The cost of food and drink per person is $250 and no other benefits provided.
If the actual method is used:
- For all 40 employees and their spouses - no FBT is payable (ie if the minor benefit exemption is available), however the party expenditure is not tax deductible.
If the 50/50 method is used:
- The total expenditure is $10,000, so $5,000 (ie 50%) is liable to FBT and tax deductible.
Christmas Gifts
With the holiday season here, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.
Again, it is important to understand how gifts to staff and clients are handled tax-wise.
Gifts that are not considered to be entertainment
These generally include a Christmas hamper, a bottle of whiskey or wine, gift vouchers, a bottle of perfume, flowers, a pen set, etc.
Briefly, the general FBT and income tax consequences for these gifts are as follows:
Gifts to employees and their family members - are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and
Gifts to clients, suppliers, etc - no FBT and tax deductible.
Gifts that are considered to be entertainment
These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.
Briefly, the general FBT and income tax consequences for these gifts are as follows:
Gifts to employees and their family members - are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
Gifts to clients, suppliers, etc - no FBT and not tax deductible.
Non-entertainment gifts at functions
What if a Christmas party is held at a restaurant at a cost of less than $300 per person attending, and employees are given a gift or gift voucher (for their spouse) to the value of $150?
Actual method used for meal entertainment
Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas part and the gift respectively) is less than $300 (ie the benefits are not aggregated). No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible.
50/50 method used for meal entertainment
Where the 50/50 method is adopted:
- 50% of the total cost of the food and drink is liable to FBT and tax deductible; and
- In relation to the gifts, the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300, and as the gifts are not entertainment, the cost is tax deductible.
Downsizer Contribution Measure Eligibility Has Been Extended
The downsizer contribution concession was introduced to allow older Australians selling an eligible dwelling to make additional contributions into their superannuation fund.
Broadly, the downsizer contribution concessional allows eligible individuals to make non-deductible contributions of up to $300,000 (or up to $600,000 per couple) from the sale of an eligible dwelling that was used as their main residence.
The downsizer contribution concession is an attractive option for eligible individuals to boost their superannuation entitlements, as it is not counted towards an individual's standard contribution caps.
Also, the total superannuation balance restriction does not apply in respect of a downsizer contribution (so an eligible individual can make a downsizer contribution into their superannuation fund, regardless of their total superannuation balance), and it is not included in the assessable income of the receiving fund.
However, there are various eligibility requirements that need to be satisfied in order for a downsizer contribution to be made, and professional advice should be sought in this regard as required.
Importantly, as from 1 January 2023, the Government has broadened access to the downsizer contribution concession by reducing the minimum age requirement for accessing this concession from age 60 to age 55. This means that individuals aged 55 to 59 years who were not previously eligible to make downsizer contributions due to their age are now eligible to make contributions if they satisfy all the eligibility requirements.
Minimum Annual Payments for Super Income Streams
The Australian Taxation Office (ATO) reminds taxpayers that a Self-Manager Superannuation Fund (SMSF) must pay a minimum amount each year to a member who is receiving a pension that commenced on or after 20 September 2007 (eg account based pensions). If the minimum payment is not made by 30 June, this can result in adverse taxation consequences for the member.
In response to COVID-19, the government temporarily reduced superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2020, 2021, 2022 and 2023 financial years.
However, for the 2024 financial year, the 50% reduction in the minimum pension drawdown rate will no longer apply.
That means that, from 1 July 2023, when taxpayers calculate the minimum annual payment for their pension, the 50% reduction will not apply to the calculated minimum annual payment.
Changes to Deductions This Tax Time
Taxpayers who are small business owners operating from home, or who use a vehicle for business purposes, need to be aware of some changes when claiming deductions this tax time, including the following:
Cents-per-kilometre method - the cents-per-kilometre method for claiming car expenses has increased from 72 cents to 78 cents per kilometre in the 2023 income year. For taxpayers using this method, the 78 cents per kilometre rate covers all their vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. Taxpayers using this method cannot claim these costs separately.
Car limit for business owners - the car limit has also increased to $64,741 for the 2023 income year. The car limit is the maximum value taxpayers can use to work out the depreciation of passenger vehicles (excluding motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers.
Work from home business expenses - for the 2023 income year, the 'fixed rate method' (for taxpayers operating their business from home) increased from 52 cents to 67 cents per hour worked from home, and taxpayers are no longer required to have a dedicated home office space. To claim work from home expenses, you must have a record of your hours that you have worked from home. The fixed rate method covers electricity, gas, stationery, computer consumables, internet, and phone usage.
Small Business and Charities Energy Bill Relief
The Small Business Development Corporation is administering and delivering the Small Business and Charities Energy Bill Relief program to eligible small businesses and charitable organisations that operate in embedded networks in WA. This will be in the form of a direct payment of $650 (GST Free) to the bank account of eligible businesses.
Embedded networks include examples such as shopping centres, businesses operating from airports, ports and industrial parks, businesses that have a sub-meter linked to a master meter controlled by the landlord, and circumstances where landlords purchase electricity from energy providers and on-sell the electricity to their small business tenants.
This relief excludes Energy Price Relief Rebates (rebates) for direct customers of Synergy and Horizon Power, who will credit the payments to electricity bills of these businesses. Eligible small businesses and charities that are billed by alternate private retailers, such as Alinta and Perth Energy, may apply for the Small Business and Charities Energy Bill Relief program.
The Small Business and Charities Energy Bill Relief program is part of the Energy Price Relief Rebates, an initiative co-funded by the Commonwealth and State Government to reduce the cost of electricity bills for eligible small businesses.
Applications for Small Business and Charities Energy Bill Relief close at 4pm on 30 November 2023.
More information on eligibility and how to apply can be found here.
New 15% Super Tax to Apply from 1 July 2025
The Government recently announced it will be imposing a 15% additional tax on individuals that have more than $3 million in superannuation. The new measure is expected to commence from 1 July 2025 (ie the 2026 income year).
The main takeaways from the information provided thus far include the following:
The additional 15% tax will broadly apply to the annual movement in the value of an individual's superannuation balance, adjusted for withdrawals and contributions. These 'earnings' are further adjusted to ensure only the proportion corresponding to the balance above $3 million will be subject to tax.
There will be no limit imposed on the size of the superannuation account balances.
Individuals will have the choice of paying the tax liability personally or from their superannuation fund.
In current terms, the Government expects the new tax will apply to 0.5% of people with money in superannuation (around 80,000 people). However, the proposal does not currently allow for indexation of the $3 million threshold, so more individuals may be impacted in the future.
Electric Vehicle Home Charging Rates: Cents per km
The ATO has recently released draft guidelines setting out a methodology for calculating the cost of electricity when an electric vehicle ('EV') is charged at an employee's or individual's home.
The draft guideline may be relied on by employers and individuals who satisfy the required criteria for FBT and income tax purposes respectively, as set out in the draft guidelines.
The employer or individual can choose if they want to use the methodology outlined in the draft guidelines or if they would like to determine the cost of the electricity by determining its actual cost.
The choice is per vehicle and applies for the whole income or FBT year. However, it can be changed by the employer or individual from year to year.
Cents-per-kilometre rate
The rate for the FBT tax year or income year commencing on or after 1 April 2022 is 4.2 cents per km (the "EV home charging rate"), which is multiplied by the relevant number of kilometres travelled by the electric vehicle in the relevant income year or FBT year.
However, if electric vehicle charging costs are incurred at a commercial charging station, a choice has to be made:
The EV home charging rate can be used, but only if the commercial charging station cost is disregarded.
If the commercial charging station cost is used, the EV home charging methodology cannot be applied.
Further, all necessary records (such as receipts) must be kept to substantiate the claim, as per normal record-keeping rules.
Record-keeping
If a taxpayer wishes to rely on the EV home charging rate to calculate their electricity charging expenses, they will need to keep a record of the distance travelled by the car (i.e. generally odometer records) in either the applicable FBT year to 31 March or the income year to 30 June.
Also, if an employer chooses to apply the draft guidelines and the EV home charging rate for income tax purposes, to satisfy the record-keeping requirements, they must have:
A valid logbook to use the logbook method of calculating work-related car expenses (and it is recommended that a logbook is maintained to demonstrate work-related use of vehicles, regardless); and
One electricity bill for the residential premises in the applicable income year to show that electricity costs have been incurred.
Application
It should be noted that the draft guidelines can only be relied on in relation to zero emissions vehicles.
The draft guidelines cannot be relived on, and the EV home charging rate cannot be used, if, for example, the vehicle is a plug-in hybrid which has an internal combustion engine.
Once finalised, the draft guidelines will apply from:
1 April 2022 for FBT purposes; or
1 July 2022 for income tax purposes.
FBT Exemption for Electric Cars
Until recently, the FBT consequences for providing electric cars to employees were effectively the same as any other car. However, from 1 July 2022, FBT is no longer payable on benefits provided for eligible electric cars and associated expenses. Practically, this exemption will be relevant for the first time in the FBT year.
Broadly, benefits provided for electric cars will be exempt from FBT where the following criteria are met:
The car is a zero or low-emissions vehicle;
The first time the car is both held and used is on or after 1 July 2022;
The car is used by a current employee or their associate(s) (eg a family member); and
Luxury car tax has never been payable on the import or sale of the car.
Registration, insurance, repairs, maintenance, and fuel expenses provided for eligible electric cars are also exempt from FBT.
Note that, while the benefit is exempt from FBT, the taxable value of the benefit must still be determined when working out whether an employee has a reportable fringe benefits amount to be included on their income statement or payment summary.
Last Chance to Claim Deductions Under Temporary Full Expensing
Deductions under 'temporary full expensing' are only available in the 2021, 2022 and 2023 income years, and are coming to an end on 30 June 2023.
Under temporary full expensing, businesses with an aggregated turnover of less than $5 billion can generally claim a deduction for the full cost of the eligible new assets first held, used or installed ready for use between 6 October 2020 and 30 June 2023, as well as (in some circumstances) costs of improvements to those assets and also the cost of eligible second-hand assets.
Taxpayers can choose to opt out of temporary full expensing for an income year for some or all of their assets, and claim a deduction using other depreciation rules, but notifying the ATO in their tax return that they have chosen not to apply temporary full expensing to those assets.
Low and Middle Income Tax Offset Not Extended
The 2023-2024 Budget did not announce any extension of the low and middle income tax offset (LMITO) beyond the 2021-2022 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO).
With no extension of the LMITO announced in this Budget, 2021-2022 was the last income year that the offset was available.
As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.
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2023/24 Budget Update
On 9 May 2023, Treasurer Jim Chalmers handed down the 2023/24 Federal Budget.
Some of the measure announced by the Government (including some which were announced prior to the Budget), include:
From 1 July 2026, employers will be required to pay their employees' superannuation at the same time as their salary and wages;
Providing businesses with annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy (the 'Small Business Energy Incentive'); and
Increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year.
In addition to these, one of the most important aspects of this Budget was that the Government has provided some further depreciation relief for small businesses once temporary full expensing comes to an end on 30 June 2023.
Specifically, from 1 July 2023 until 30 June 2024, the Government will temporarily increase the instant asset write-off threshold for small businesses (with an aggregated annual turnover of less than $10 million) from $1,000 to $20,000. Assets valued at $20,000 or more (which cannot be immediately deduced) can continue to be placed into the small business simplified depreciation pool.
Also, the provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.
Other important measures the Government announced include:
Amending (and limiting) the non-arm's length income ('NALI') provisions which apply to expenditure incurred by superannuation funds;
Reducing the tax concessions available to individuals with a total superannuation balance exceeding $3 million; and
Exempting lump sum payments in arrears from the Medicare levy.