Tag: tax

house key

Foreign residents selling property in Australia

Posted on | by Allan Hall

Foreign resident capital gains withholding (FRCGW) of 12.5% applies for all property sales of AUD$750,000 or more.

At a minimum, that is AUD$93,750 being withheld from the sale and paid to the Australian Tax Office, unless there is an approved variation.

The most common reasons why a seller may apply for a variation include:

  • making a capital loss
  • not having an income tax liability
  • foreclosure.

In 2023 over 60% of applications for variations were lodged late, affecting settlement. When clients are too late in applying, the conveyancer or solicitor has no choice but to withhold 12.5%.

Tips

  • Include the sales contracts with the variation application
  • Variations must be lodged online at least 28 days before property settlement to ensure processing time
  • The main residence exemption doesn’t apply to foreign residents
  • Australian residents for tax purposes must have a clearance certificate before settlement to prove their residency for tax purposes, so no withholding occurs.

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electric vehicle EV

Electric vehicle demand trending upwards

Posted on | by Allan Hall

Shift in Australian vehicle preferences

New Roy Morgan research findings highlight the evolving preferences of Australian consumers’ vehicle purchases.

This trend signals a changing landscape in the automotive industry:

  • Over the next four years, more than 4.3 million Australians plan to buy a new vehicle
  • A significant shift has emerged in the intention to purchase hybrid or fully electric vehicles, surpassing petrol cars
  • Interest in petrol vehicles, although still the leading choice for new car purchases at 39%, has decreased by 81,000 compared to the previous year.

In 2023, the automotive industry saw record-breaking sales, with Australians considering the purchase of a new vehicle in the coming years. The most notable increase in interest lies in hybrid vehicles, with 1,273,000 Australians (30% of new car intenders) planning to purchase one, marking a rise of 154,000 from the previous year.

Fully electric cars also gained traction, with 607,000 Australians intending to purchase an electric vehicle, up by 37,000 from the previous year.

Conversely, diesel cars are experiencing a decline in popularity, with only 498,000 Australians intending to purchase one in the next four years, down by 130,000 from the previous year, representing 12% of new car intenders.

The shifting trends towards hybrid and electric vehicles suggest that it’s essential for consumers to stay informed about the evolving automotive market.

As part of your due diligence when exploring the benefits of vehicle models and how they align with your needs and preferences, talk with the team at Allan Hall for financing advice and about the tax and FBT implications of owning electric or hybrid models.

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superannuation services

Implications of the proposed $3M Super Tax

Posted on | by Allan Hall

Understanding the Implications of the Proposed $3M Super Tax

As the proposed tax on superannuation balances exceeding $3 million draws nearer, individuals potentially affected by this measure are urged to assess its implications thoroughly.

While not yet enacted into law, the Division 296 tax warrants careful consideration in investment strategies, especially concerning end-of-financial-year contributions into super.

  • For those affected, a strategic reassessment may be necessary, considering whether high-growth assets should be held within superannuation, given the potential tax implications
  • Individuals may need to reconsider investment vehicles, balancing tax effectiveness with asset protection
  • Estate planning and succession plans for Self-Managed Superannuation Funds (SMSFs) will require revisitation post-implementation of Division 296 to mitigate unnecessary tax burdens on beneficiaries.

Division 296 legislation proposes an additional 15% tax on investment earnings of super accounts with total super balances (TSB) exceeding $3 million at the end of the financial year.

It’s important to note that this extra tax applies only to the portion exceeding $3 million.

Key aspects of the legislation include the concept of Adjusted Total Super Balance (ATSB), which determines the $3 million threshold. The ATSB calculation by the Australian Taxation Office (ATO) considers the market value of assets regardless of realisation, significantly affecting super funds holding property or speculative assets. Additionally, the legislation introduces a new formula for calculating ATSB for Division 296 purposes.

Under Division 296, deemed earnings exceeding the $3 million threshold will be apportioned and taxed accordingly. Negative earnings in such instances may be carried forward to offset future liabilities.

For those unaffected by Division 296, super remains an attractive option for retirement savings. Making additional contributions prior to EOFY presents an opportunity to maximise savings through various avenues such as concessional and non-concessional contributions, salary sacrifice arrangements, and downsizer contributions.

The draft Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, introduced to Parliament in 2023 is currently under scrutiny by the Senate Economics Legislation Committee, with a report expected next month. If passed and granted Royal Assent, Division 296 will come into effect from July 2025.

This forthcoming regulation represents a substantial change to superannuation rules, particularly impacting members with significant account balances. Given its complexity, seeking professional advice is crucial for informed decision-making concerning super and wealth creation strategies in the upcoming years.

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Further reading

SMSF Association stands against new tax as debate looms
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cash in a hessian sack

SMSF record-keeping best practices

Posted on | by Allan Hall

ATO reminds SMSFs to keep good records

How self-managed super fund (SMSF) trustees can meet their responsibility to keep accurate tax and super records.

Keeping good records

Keeping good records is more than just knowing which records to keep and for how long. It involves having a system for organising and maintaining records that makes it easier for you, and any SMSF professional you use, to:

  • complete the fund’s independent audit each year
  • lodge your fund’s annual return.

It may also help reduce audit and administration costs for your fund.

To help keep your records organised, you may want create separate files for your fund’s more permanent records, and for records that relate to a specific financial year.

For example, in your permanent file you may want to keep:

  • the fund’s trust deed
  • the fund’s investment strategy
  • details of the regular reviews of the fund’s investment strategy, including the consideration of insurance for members of the fund
  • reasons for decisions on the storage of collectables and personal use assets
  • minutes of trustee meetings
  • all signed trustee declarations
  • records of trustees consenting to their appointment as a fund trustee
  • records of all changes in fund members and trustees.

As each SMSF is unique, with its own investment strategies to achieve its objectives, you should consult with a professional licensed adviser when setting up a record-keeping system that suits your fund.

Keeping all relevant records together will simplify the process of compiling the records you need to give to your fund’s independent auditor. If your fund regularly holds trustee meetings, you could create a separate folder for them, and sort them by date.

Take minutes of all investment decisions

You should take minutes of all investment decisions, including:

  • why a particular investment was chosen
  • whether all trustees agreed with the decision.

This is because if you, as one of the fund’s trustees, invest the SMSF’s money in an investment that fails, the other trustees could take action against you for failing to be diligent in your duties.

However, if your investment decision was recorded in meeting minutes signed by the other trustees, you will have a record to show that they agreed with your actions.

Signature requirements for financial statements

Under Australia’s super laws, SMSF trustees must sign their SMSF’s financial statements before finalising their annual audit. This includes an operating statement and a statement of financial position which must be signed by the required number of trustees or directors of the corporate trustee.

Minimum record-keeping requirements

The most important reason for keeping good records is that it’s a legal requirement for you to do so. You may also need to provide accurate records to us if we ask to see them.

You need to keep any SMSF records for a minimum of 5 years.

Despite what you may have heard or read elsewhere, you cannot access your super before you retire unless you meet one of the very few exceptions to this fundamental rule of super law. Read more »

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fuel pumps

Register for fuel tax credits

Posted on | by Allan Hall

Check if you can claim for fuel tax credits

You can claim credits for the fuel tax (excise or customs duty) included in the price of fuel used in business activities.

You can claim for taxable fuel that you purchase, manufacture or import. Just make sure it’s used in your business. Taxable fuels include liquid fuels, fuel blends and gaseous fuels.

Check what activities you can claim for

You can claim for business activities in:

  •  machinery
  •  plant
  •  equipment
  •  heavy vehicles over 4.5 tonnes
  •  light vehicles on private roads (not on public roads)

To be able to claim, you must be registered for goods and services tax (GST) and fuel tax credits.

Register for fuel tax credits (and other taxes)

Register for fuel tax credits through the Business Registration Service. You can use the same form to register for other taxes at the same time.

Before you apply:

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hyperlink

Removal of ATO SMS hyperlinks

Posted on | by Allan Hall

ATO announces the removal of hyperlinks in SMS

The ATO is in the process of removing hyperlinks from all outbound unsolicited SMS by Tax Time 2024.

Removing hyperlinks is a scam-preventative measure. It will help protect the community by making it easier to identify legitimate ATO SMS interactions and provide trust and confidence in the ATO’s tax, superannuation and registry systems. 

There has been significant growth in the use of SMS by cybercriminals.

Throughout the 2022–23 financial year, SMS scams impersonating the ATO brand, products, services and employees increased by over 400%. 

Cybercriminals often use hyperlinks in targeted SMS phishing scams. The hyperlinks take individuals to highly sophisticated fraudulent websites (such as a fake myGov sign-in page) designed to steal their personal information or install malware.  

The ATO  may use SMS  to contact you, but will never include links to log-in pages. If you want to access the ATO’s online services, always type my.gov.au or ato.gov.au into your internet browser yourself. 

This change also serves as a timely reminder to protect your information. Do not give out your TFN, date of birth or bank details unless you trust the person you are dealing with, and they genuinely require these details. 

If you think communication such as a phone call, SMS, voicemail, email or interaction on social media claiming to be from the ATO is not genuine, do not engage with it. You should either: 

  • go to Verify or report a scam to see how to spot and report a scam 
  • phone the ATO on 1800 008 540 if you have divulged information or remitted a payment to a scammer. 

For information and examples of ATO impersonation scams see Scam alerts »

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Covid 19 Relief

Land Tax changes to principal place of residence exemption

Posted on | by Allan Hall

Land tax principal place of residence exemption changes

From 1 February 2024, persons who purchase and occupy a property but own less than 25% interest (either solely or combined) will not be entitled to the principal place of residence exemption from the 2025 land tax year onwards, transitional provisions may apply until the 2026 land tax year for existing homeowners and those who purchase a property and claim the exemption by 31 January 2024.

Principal place of residence

You can claim an exemption for land that you use and occupy as your principal place of residence (your home).

The general requirements of this exemption are that you must:

  • only claim one exemption per family
  • only claim one principal place of residence worldwide
  • have continuously used and occupied the property solely for residential purposes before the taxing date
  • have used the land for residential purposes
  • be a natural person — the exemption does not apply to land owned partly or wholly by a company or held in a Special Trust.

The 2023-24 NSW State Budget announcement introduced an amendment to Schedule 1A of the Land Tax Management Act 1956. Following the amendments, a principal place of residence exemption will only be available to a person/s occupying the property as their principal place of residence who owns an interest of at least 25% in the property, either solely or combined.

The transitional provision provides that, those who claim the principal place of residence exemption from land tax but own less than a 25% interest in the land may continue to claim the exemption for the 2024 and 2025 land tax years. The minimum 25% ownership requirement will then apply to these owners from the 2026 land tax year onwards. The principal place of residence exemption must be claimed by 31 January 2024 for the transitional provisions to apply.

For persons who purchase a property on or after 1 February 2024 and own less than a 25% interest in the land will not be entitled to the principal place of residence transitional provisions, making them liable from the 2025 land tax year.

When applying for the exemption you may need to provide supporting documents such as but not limited to:

  • electricity bill showing usage
  • gas bill showing usage
  • home and contents insurance policy

Council land rates and water rates are not acceptable documents as these do not demonstrate you reside in the property.

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stopwatch countdown to deadline

Small business lodgement penalty amnesty deadline

Posted on | by Allan Hall

Clock ticking on small business lodgement penalty amnesty

Small businesses have until the end of December 2023 to get back on track with overdue forms via the small business lodgement penalty amnesty.

Late lodgement penalties will be remitted under the amnesty which ends on 31 December 2023 for small business income tax returns, fringe benefits tax (FBT) returns and business activity statements (BAS) originally due between 1 December 2019 and 28 February 2022.

More than 14,000 small businesses have taken advantage of the amnesty since it kicked off on 1 June 2023, with more than $48 million in failure to lodge (FTL) penalties remitted.

Directors who bring their company lodgements up to date can also have FTL penalties remitted if they rely on company lodgements to finalise their tax affairs. This applies to eligible lodgments made between 1 June and 31 December 2023.

The amnesty provides an opportunity for small businesses to re-engage with their tax affairs and get back on track with their lodgement obligations without penalties.

If a small business has ceased trading, they need to advise their registered tax professional or contact the ATO directly to seek assistance with finalising their tax obligations, which may include lodging overdue returns, cancelling their ABN and paying any amounts overdue.

While penalties will be remitted under the amnesty, if a business finds themselves with a tax debt after their overdue forms are lodged, they must pay in full to avoid further interest charges or check the ATO website to see if they are eligible for a payment plan.

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cryptocurrency

GST and using or receiving digital currency

Posted on | by Allan Hall

What to do when you receive and use digital currency as payment for goods and services

Digital currency as payment for goods and services

Receiving or using digital currency to pay for goods and services in your GST-registered enterprise is the same as using money, but it is different to trading digital currency.

Receiving digital currency

If you make a taxable supply and you receive digital currency as payment, the GST amount for that payment included in your business activity statement must be in Australian dollars.

Your tax invoice must meet the normal tax invoice requirements and include either:

  • the GST payable in Australian dollars
  • sufficient information to work out the GST payable in Australian dollars.

Examples of sufficient information includes the:

  • price expressed in Australian dollars
  • value expressed in Australian dollars, or
  • conversion rate used by the supplier, or a statement, to work out the GST payable if it is not in Australian dollars.

Using digital currency

If you use digital currency to make a purchase for your GST-registered enterprise and claim a GST credit, the GST amount of the credit in your business activity statement must be in Australian dollars.

To work out your GST credits, your tax invoice will include either:

  • the GST amount in Australian dollars
  • sufficient information to determine the GST amount in Australian dollars.

How to convert digital currency

To work out the value of your digital currency for your business activity statement, you must use the exchange rate on the conversion day that applies to you.

Exchange rate

If the exchange rate is in Australian dollars, you may choose to use the exchange rate:

  • from a digital currency exchange or website, or
  • agreed on between the supplier and the recipient.

If the exchange rate is in a foreign currency, you must convert the amount expressed in foreign currency to Australian dollars.

Conversion day

The conversion day is the date you use to convert your digital currency into Australian dollars.

If you account for GST on a non-cash basis, your conversion day is determined by whichever happens first of either the:

  • day you receive any of the payment
  • transaction date or invoice date.

If you account for GST on a cash basis, your conversion day can be the transaction date, invoice date or the day you receive any of the payment.

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