ATO March 2024 Updates: Secure Access & Tax Tips

ATO March 2024 Updates: Secure Access & Tax Tips

Explore the ATO's Q1 2024 updates on secure online access and tax tips for maximising deductions and enhancing cybersecurity.

New controls for ATO Online

Following the use of stolen personal data to access ATO Online accounts, the federal government has tightened the access rules to online tax accounts as part of an increased focus on the vulnerability of small and medium businesses to cyber incidents.

ATO interest non-deductible

From 1 July 2025, taxpayers will no longer be able to claim tax deductions for ATO interest charges.i

Although not yet law, the government made the announcement in its 2023-24 Mid-Year Economic and Fiscal Outlook.

Since deductions for general interest charges (GIC) and shortfall interest charges (SIC) will not be permitted after July 2025, any GIC or SIC later remitted by the ATO need not be included in assessable income.

New fraud controls

Tighter controls for taxpayers’ ATO online accounts will make it more difficult for criminals to commit identity fraud using stolen personal information such as bank and ATO statements and tax file numbers.

The changes mean taxpayers who use their myGovID to log into the ATO will need to use myGovID for all future logins, leaving criminals unable to access the account without it.

The government is urging Australians to upgrade to myGovID when interacting with government agencies online and has released its new Cyber Security Strategy to support small and medium businesses vulnerable to cyber incidents.

Holiday home claims

The ATO is continuing its crackdown on tax deductions for holiday homes by encouraging tax professionals to check how clients are using their property and if they are correctly apportioning deductions in line with the time period the property is producing income.ii

Some holiday homeowners are not reducing deduction claims if they are reserving their property during peak periods or are placing unreasonable conditions restricting the likelihood the property will be rented.

We have been requested to check the number of days the property is blocked out for the owners, how and where the property is being advertised, whether family or friends used the property, and if any parts of the property are off-limits to tenants.

Checking R&D claims

Working in conjunction with the Department of Industry, Science and Resources, the ATO will be undertaking random reviews of companies taking advantage of the government’s R&D tax incentive.

The reviews will be assessing the eligibility of company’s R&D tax incentive activities and expenditure, with companies selected for review being contacted directly.

If common errors are identified during the review process, the ATO will share them with all program participants.

Tough times may mean a payment plan

With some small businesses facing difficult trading conditions, the ATO is reminding taxpayers in financial distress they may be eligible to set up a payment plan if they are unable to pay their tax bill in full and on time.

Eligible taxpayers who have a tax bill of up to $200,000, may be able to set up their own payment plan using the ATO online or self-help phone services.

Payment plan eligibility requires the business to be viable and able to make an up front payment with completion within the shortest possible timeframe to minimise accruing GIC (currently 11.15 per cent).

Medicare safety net thresholds increase

Thresholds for the Medicare safety nets rose from 1 January 2024, resulting in an increase taxpayers need to spend on out-of-hospital medical expenses before qualifying for a higher rebate.

The increase is in line with indexation based on inflation and rose to $560.40 on the original Medicare safety net for concessional and non-concessional individuals and families.

The extended Medicare safety net increased to $811.80 for concessional individuals and families and $2,544.30 for non-concessional.

Translated cybersecurity guides available

The government’s Australian Cyber Security Centre has released five popular cyber security guides in more than 20 languages to help business owners from non-English speaking backgrounds to improve their cyber security knowledge.

The five free guides include a small business cyber security guide, personal and top tips for cyber security, easy steps to securing devices and accounts, and a seniors guide to securely using the internet.

i https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/deny-deductions-for-ato-interest-charges
ii https://www.legacy.ato.gov.au/Tax-professionals/Newsroom/Income-tax/Do-your-clients-have-a-holiday-home-/

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


A Quick Guide to Navigating FBT Obligations in Australia.

A Quick Guide to Navigating FBT Obligations in Australia

Understand the essentials of FBT compliance for Australian businesses. This guide covers reporting duties, exemptions, and strategies to minimize liabilities.

Businesses looking to attract and retain staff often provide employee benefits, on top of salary, as a way to sweeten the deal.

Many of these benefits (but not all) can have potential tax consequences – known as fringe benefits tax (FBT) - so it is important to weigh up the effect on your business.

FBT is separate to income tax and is calculated on the value of the benefit provided to the employee. Employers must calculate the amount of FBT they owe each year and lodge a return with the ATO.

FBT doesn’t only apply to benefits provided to current employees. Any benefits provided to past or future employees, company directors and beneficiaries of trusts who work in the business are also subject to FBT.

It is worth noting that the FBT year is not the same as the financial year. It runs from 1 April to 31 March.

What to report

Most fringe benefits must be reported to the ATO. Some examples of benefits include: the use of a company car outside of work; free parking; gym membership; payment of school fees; tickets or vouchers for concerts, meals or movies; and living accommodation.

Some benefits do not need to be reported and do not incur FBT.i These include a number of benefits provided to employees working in remote areas such as living assistance.

Other fringe benefits that are exempt from tax include work-related items such as a portable electronic devices, computer software, protective clothing and tools of trade.

If the taxable value of an employee’s fringe benefits for the FBT year (1 April to 31 March) is less than $2,000, no reporting is required.

In adding up the fringe benefits, the ATO says you will need to make sure you include the employee’s share of any benefits they share with other employees as well as the value of any benefits provided to the employee’s associates, such as their partner.

Doing the numbers

For each employee, you’ll need to calculate their ‘reportable fringe benefits amount’ (RFBA) by multiplying the total taxable value of the benefits provided by an ATO ‘gross-up rate’.

The Type 1 gross-up rate is used where a GST credit entitlement is applicable to the benefit. The Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. (For the FBT year ending 31 March 2023, the Type 1 rate is 2.0802 and the Type 2 rate is 1.8868.)

This calculation grosses up the pre-tax income the employee would have had to earn to buy the benefits themselves.

As an example, a fictitious company EFG Pty Ltd provides their employee Derek with car parking, valued at $450; a car, valued at $3,000; and home internet, worth $500.

The total taxable value of the fringe benefits is $3950 but the car parking benefit is not a reportable fringe benefit. So, the total taxable value of the reportable fringe benefits provided is $3,500.

To calculate the RFBA, the employer would multiply $3,500 by the Type 2 gross-up rate, 1.8868.

As a result, EFG Pty Ltd reports an RFBA for Derek of $6,603 through Single Touch Payroll for the year ending 30 June 2022.

FBT and salary sacrifice

Benefits provided to employees through salary sacrificing or salary packaging arrangements may also attract FBT.

Under a salary sacrificing arrangement, an employee agrees to forgo part of their salary in return for benefits of a similar value, such as more super or a car. As a result, the employee pays less income tax and the employer pays FBT on the benefits provided.

Extra super contributions made under a salary sacrificing arrangement are not subject to FBT and are treated differently. They are considered employer contributions and are taxed in the super fund.

Claiming deductions

Employers can claim income tax deductions for the FBT they are required to pay.

They can also claim an income tax deduction and GST credits for the cost of providing the fringe benefits.

The ATO provides a number of suggestions for reducing your FBT liability.ii These include:

  • Providing benefits that would be deductible for the employee. You do not incur an FBT liability if you give an employee a benefit they would have been able to claim as an income tax deduction if they had paid for it. This is called the 'otherwise deductible' rule.
  • Using employee contributions. Your FBT liability can be reduced if your employee contributes towards the cost of the fringe benefit.
  • Providing a cash bonus. You won’t have to pay FBT if you provide your employee with a cash bonus instead of a benefit. The employee will pay income tax on the amount.
  • Providing exempt or concessional benefits. Exemptions and concessions may apply to benefits including work-related items, benefits of less than $300, emergency
    assistance, retraining, taxis and public transport, work use of a vehicle, car parking and food or drink consumed on your business premises.

Fringe benefits can be a valuable and strategic tool in your recruitment and retention toolbox. We can help you understand and comply with the reporting requirements and be clear about the impact of FBT on your business.

Case study

FBT on a gym membershipiii
Jenni runs a small consulting firm. She provides her employee, Anton, with a gym membership that costs $1,100 (including $100 GST).

This is a fringe benefit. Jenni works out the FBT as follows:

Taxable value of the benefit ($1,100)

× the gross-up rate (for a GST-inclusive fringe benefit the rate is 2.0802)
× the FBT rate (47%)
= FBT of $1,075.46.

Jenni must prepare and lodge an annual FBT return, and pay her FBT liability.

She may also need to calculate and report Anton's reportable fringe benefits amount in his end-of-year payment information.

As the gym membership is subject to FBT, Jenni can claim:

  • an income tax deduction and GST credit for the cost of the gym membership
  • an income tax deduction for the FBT paid.

Source: Australian Taxation Office
i Fringe benefits tax - a guide for employers | Legal database (ato.gov.au)
ii https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/exemptions-concessions-and-other-ways-to-reduce-fbt/reducing-your-fbt-liability
iii How fringe benefits tax works | Australian Taxation Office (ato.gov.au)

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Are You Ready for Australia's 2024 Tax Adjustments?

Are You Ready for Australia's 2024 Tax Adjustments?

This guide will help you navigate the financial changes brought about by the 2024 tax cuts. We shine a light on their implications and the steps required to optimise your finances accordingly. And no, they're not good news for everybody.

Prime Minister Anthony Albanese has announced proposed changes to address ongoing cost of living pressures with all 13.6 million Australian taxpayers receiving a tax cut from 1 July 2024, compared to the tax they paid in 2023-24.i

Now is the time to assess what it means to your hip pocket and what implications it may have for end of financial year planning as a result of the new rules, due from 1 July 2024.

The Federal Government has recently announced changes to the third stage of a series of tax reforms introduced by the previous Coalition government almost six years ago which were designed to deliver tax cuts to most, simplify the tax system and protect middle income earners from tax bracket creep.

The proposed changes

The new rules will see the current lowest tax rate reduced from 19 per cent to 16 per cent and the 32.5 per cent marginal tax rate reduced to 30 per cent for individuals earning between $45,001 and $135,000.

The current 37 per cent marginal tax rate will be retained for those earning between $135,001 and $190,000, while the existing 45 per cent rate will now apply to income earners with taxable incomes exceeding $190,000.

In addition, the low-income threshold for Medicare levy purposes will be increased for the current financial year (2023-24).

A single taxpayer with a taxable income of $190,000 paid $59,967 tax in 2023-24. Under the revised rules, they will now pay $55,438 tax, a tax cut of $4,529. While still a reduction in tax paid, this compares with the $7,575 tax cut received if the original Stage 3 tax cuts had proceeded.

On the other hand, low-income earners will receive a bigger tax cut under the revised rules.

A single taxpayer with a taxable income of $40,000 who paid $4,367 in tax in 2023 24, would have received no benefit from the original Stage 3 tax plan, but will now receive a tax cut of $654 under the revised rules.

Implications for investment strategies

For high-income earners, the key take-away from the government’s new changes to the tax rules is you will now receive a lower amount of after-tax income than you may have been expecting from 1 July 2024.

This reduction makes it sensible to revisit any investment strategies you had planned to take advantage from your larger tax cut to ensure they still stack up.

For example, the smaller tax cut for some may impact the effectiveness of property investment.

Investment strategies such as negative gearing into property or shares, however, may become more attractive. Particularly for investors close to the new tax thresholds and looking for opportunities to avoid moving onto a higher tax rate.

Timing expenditure and contributions

Investors considering repairs or maintenance for an existing investment property should revisit when these activities are undertaken. Depending on your circumstances, this expenditure may be more suitable in the current financial year given the difference in tax rates starting 1 July 2024.

Selling an asset liable for CGT also needs to be reviewed to determine the most appropriate financial year for the best tax outcome.

Other investment strategies that may need to be revisited include those involving making contributions into your super account.

If you are considering bringing forward tax-deductible personal super contributions, making carry-forward concessional contributions, or salary sacrificing additional amounts before 30 June, you should seek advice to ensure the timing of your strategy still makes sense.

If you would like help with reviewing your investment strategies or superannuation contributions in light of the new rules, contact us today.

i https://treasury.gov.au/sites/default/files/2024-01/tax-cuts-government-fact-sheet.pdf

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


December 2023 Tax Alert: ATO's Renewed Enforcement Regime

December 2023 Tax Alert: ATO's Renewed Enforcement Regime

The ATO tightens its approach to tax collection and compliance. Learn about the significant updates and how they impact your business.

The lenient approach taken by the ATO during the pandemic is over, with its focus now returning to traditional debt collection. With several key areas under the spotlight, some small businesses should consider taking advantage of the current amnesty to get their reporting in order. Here’s some of the latest developments in the world of tax.

Reminder on late lodgement amnesty

If your small business is not up-to-date with its tax lodgement, it’s worth noting the government’s current Lodgement Penalty Amnesty ends on 31 December 2023.

The amnesty allows small businesses to lodge any outstanding income tax and FBT returns or business activity statements (BAS) due between 1 December 2019 and 28 February 2022 without lodgement penalties being applied (general interest charges still apply).

Businesses with an annual turnover under $10 million when the original lodgement was due are eligible for the amnesty.

Warning on ATO’s ‘back to business’ focus

In recent speeches, the ATO has put small business on notice that its lenient attitude during the pandemic is being replaced with a much tougher approach designed to re establish its traditional culture of ensuring taxpayers pay on time.

With collectable debt rising dramatically over the past four years, the ATO is returning to its normal debt collection stance and is taking firmer action with taxpayers.

Five areas the ATO is particularly focussing on are unpaid Super Guarantee Charge; debt arising from ATO audit adjustments; refund fraud; aged, high-value debts; and employers with new self-assessed debt.

Employer SG compliance under the microscope

The ATO is expanding its use of the information reported by employers through the Single Touch Payroll (STP) system in relation payment of employees’ Super Guarantee (SG).

Employers are required to make SG payments quarterly and the ATO is now using STP and Member Account Transaction Service information to check whether an employer has paid on time.

The new checks will help the ATO follow-up non-compliant employers and prepare for the introduction of the new rules requiring employers to make SG payments at the same time as wages, which commence on 1 July 2026.

Sharing economy reporting expands

Businesses connecting customers with people who provide services or hiring personal assets through a website or app are increasingly being added to the Sharing Economy Reporting Regime (SERR).

Platforms providing taxi services (including ride-sourcing) and short-term accommodation were required to start collecting seller transaction information from 1 July 2023.

From 1 July 2024, all other sharing economy platforms will be required to start collecting and reporting personal and contact details, business information and financial identifiers related to transactions twice a year to the ATO.

Tax residency test updates

A new one-stop shop tax ruling to help people self-assess their residency for tax purposes has been released by the ATO to help people going to work overseas or moving to Australia.

Taxation Ruling TR 2023/1 replaces older tax rulings with more contemporary guidance reflecting modern global work practices and recent court decisions. It also contains information on the 183-day residency test for people arriving on short-term work and holiday visas.

The tax office uses different rules to the Department of Home Affairs, meaning it is possible to be an Australian resident for tax purposes without being a citizen or permanent resident.

SMSF promoter scheme warning

The ATO is once again reminding trustees of self-managed super funds (SMSFs) to be wary of people promoting illegal schemes for early access to super.

Warning signs of an illegal scheme can include claims you can access your super and put it towards anything you want, charging high fees and commissions, and requesting your identity documents.

Anyone approached about these types of schemes should not sign any documents or provide any personal details, and should immediately report the interaction to the ATO.

Keep your ABN details updated

Ensuring your ABN details are up-to-date on the Australian Business Register is an important requirement of being in business.

Without it, you could also miss out on valuable financial assistance or government information.

Emergency services and government agencies also use ABN details to identify businesses in areas affected by emergencies, so it’s important to keep your physical business and postal address current.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Creative Giving: Effective Ways to Contribute This Festive Season

Creative Giving: Effective Ways to Contribute This Festive Season

Discover effective ways to give back this festive season. Explore some creative approaches to philanthropy, from volunteering to unconventional donations.

“Everyone can experience the joy and blessing of generosity; because everyone has something to give.”
- Jan Grace

For many of us the festive season is a joyous time of hanging up decorations, wrapping presents and spending time with loved ones. For others it can be one of the hardest times of the year

So, amongst all the festive preparations, there are many ways you can make an impact and spread the joy this festive season to make a difference to the lives of others.

In fact, there are so many ways to help and so many wonderful causes, it can be easy to feel a little overwhelmed. Here are some ways you can help and a few things to keep in mind to maximise the outcome of your generosity.

Plan your giving

Just as you might make your festive shopping a little easier by making a list of what you are buying, it’s helpful to approach your gifting to others in the same way and make a plan.

It’s important to consider what cause (or causes) you want to contribute to.

Then evaluate how much you are comfortable contributing. Don’t just think about a cash donation - you can also donate goods, your time, or your expertise to worthwhile causes.

Selecting a recipient for your gift

When selecting worthy causes, it can be helpful to think about your interests and passions. Whether it’s protecting our environment, diversity and inclusion, supporting important medical research, overseas aid organisations, or those doing it tough in your local community, there is a lot to select from.

Find an organisation that aligns with your values, both in the cause it supports and the way it supports that cause. It’s worth confirming the status of the charity you are considering donating to as there are scams out there. Try Australian Charities and Not-for-profits Commission or for overseas charities, charitynavigator.org.

You can claim a tax deduction for donations of $2 or more, as long as these donations are made to an organisation that has been endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) so it’s worthwhile checking the DGR status of your selected charity - and keeping receipts for tax time.

Not just cash

If you would prefer to donate items rather than cash, the festive season offers lots of opportunities. Many department stores and supermarkets have food drives where you can purchase items to be distributed to those in need. You could consider inviting your family, friends, and neighbours to join you in donating non-perishable food items to a charity in your area - just make sure the goods you are donating are not expired or damaged.

If Christmas to you means happy memories of children’s smiles as they unwrap presents, it can be very satisfying to donate to a toy drive, either by donating gently used toys or purchasing new ones to be distributed to those who would otherwise be going without this Christmas.

If you’d like to help a furry friend over the festive season, you can donate pet food, treats, toys, collars, leashes, clean bedding, and other supplies to a local animal shelter or animal rescue group to help unhoused animals. You could even think about adopting a pet and adding a new member to your household this festive season.

Or you could also consider giving the gift of your time to a worthwhile cause.

Spend time to help others

Many charities need a little extra help during the festivities, and they rely on a legion of volunteers to help. If you aren’t in a position to make a financial contribution this year, consider volunteering your time and expertise if you have any special skills that would benefit a charitable organisation.

You may also consider giving the gift of life and donating blood or plasma. During the holiday season, donations of blood products tend to decrease due to more people travelling and being unable to donate so it’s the perfect time of year to donate if it’s not something you do regularly.

However you choose to spread joy and support others that are not so fortunate this festive season, know that you are making a difference to the lives of others.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Navigating Personal Deductions: A Guide for Australian Taxpayers

Navigating Personal Deductions: A Guide for Australian Taxpayers

Maximise your tax returns without crossing the ATO: Learn the nuances of personal, business, and SMSF deductions in Australia with this simple guide.

The ATO’s Small Business Random Enquiry Program found around 16 per cent of small businesses were either carelessly or deliberately overclaiming expenses in their tax returns.

If business assets are used for a mix of business and private use – such as vehicles and phones - the amount claimed must reflect only the business-related portion of the expense.

The ATO is urging taxpayers to remember this rule when claiming business-related deductions, including those for work-from-home expenses (such as internet and mobile phone usage), and work vehicles.

Some of the examples the ATO has noted include:

  • personal expenses claimed as a business expense (for example, rent, travel, fines, meals, alcohol, home/office expenses such as mortgage interest)
  • excessive business expenses claimed for things used both personally and for business purposes (for example, home office expenses)
  • director's fees or drawings not recorded correctly.

Rental properties under the spotlight

Holiday home rentals are also an area where many taxpayers are failing to follow the tax rules.

Deductions for holiday home expenses can only be claimed to the extent they relate to producing rental income, so you need to apportion your expenses if the property is only genuinely available for rent part of the year.

Apportionment is also required if you use the property for private purposes during the year, only use part of it to earn rent, or if it is used by family or friends at various times during the year.

Expenses relating solely to the rental of the property (such as agent commissions and advertising costs), don’t need to be apportioned.

Avoiding mistakes

To ensure you don’t invite attention from the ATO, review your treatment of business asset expenses annually, in case your private usage has changed.

New or additional private usage of the asset means you need to recalculate the percentage of business used to determine the correct deduction claim.

Proper business records explaining all relevant transactions (including payment to and receipts from employees, shareholders and associates) need to be kept to support your claims.

Common taxpayer errors

The ATO says there are some common errors when it comes to claiming deductions.

Taxpayers are not permitted to claim any deductions against business income for expenses relating to an asset entirely used for private purposes.

An example is an asset (such as a boat or plane) purchased and used for private purposes.

Deductions can only be claimed for the relevant percentage of business use. For example, if the private use component represents 60 per cent, only 40 per cent of the expense amount can be claimed in your return.

Good recordkeeping is essential to keep track of personal and business spending.

The ATO points out that poor recordkeeping habits make it difficult for tax professionals to make sure their clients are reporting accurately.

Some of the problems noted by the ATO include expenses claimed without the necessary substantiation, poorly maintained documentation (such as logbooks not kept up-to-date) and poor document storage (for example faded receipts).

The ATO says digital recordkeeping solutions are ideal but you will need to make sure that they’re accurate. There have been examples of transactions being miscoded and double counting of records.

FBT and deemed dividends

Another common mistake is claiming a deduction for an asset giving rise to a deemed dividend. This arises when an asset is purchased through a company and used for private purposes by a company shareholder or their associates.

Under the tax rules, both the company and the dividend recipient must record such dividends in their income tax returns, as the asset is being used for their personal benefit.

Some small businesses also misunderstand the implications of purchasing an asset (such as a motor vehicle), that is used by an employee or the associate of an employee for personal purposes.

When this occurs, the benefit must be reported in the business’s fringe benefit tax (FBT) return and the resulting FBT liability paid.

Fixing lodgement mistakes

To avoid finding your business in the ATO’s spotlight, check you have correctly apportioned all expense claims before lodging your business or SMSF return.

You also need to consider whether the rules for private company benefits and FBT apply to any of your business assets.

If you make a mistake with a deduction claim, you will need to amend or lodge an income tax or FBT return to correct your tax position. There are time limits on both business and super amendments.

We can help you to correct any mistakes and to deal with the ATO to ensure your tax reporting is smooth and worry-free.

Getting it right

The ATO says good business means getting the basics right. That includes:

  • good record keeping practices and regular reconciliation processes (such as ensuring cash deposits match total sales)
  • understanding tax obligations and seeking advice when you need it
  • having the support of someone who understands your business (for example, a registered tax or BAS agent, a bookkeeper or accountant)
  • using technology that is appropriate for the size and scale of your business such as point of sale software, cloud-based accounting systems and mobile apps

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Maximising Charitable Contributions in Australia: A Guide to Effective Giving

Maximising Charitable Contributions in Australia: A Guide to Effective Giving

Unlock the potential of your philanthropic efforts in Australia with this comprehensive guide. Learn the nuances of effective giving, from choosing the right charitable organizations to understanding the fiscal benefits, and make your contributions more impactful than ever.

Whenever there is a disaster here or overseas, Australians rush to donate their time, household goods and cash. However, we still lag New Zealand, the US, Canada and the United Kingdom when it comes to giving money.

According to Philanthropy Australia, our total financial giving as a percentage of Gross Domestic Product is just 0.81 per cent, compared with 0.96 per cent for the UK, 1 per cent for Canada, 1.84 per cent for New Zealand and 2.1 per cent for the US.i

Only 53 per cent of Australians with an income of more than $1 million give to charity and receive a tax deduction. In the United States that figure is 90 per cent. So, Australians have some catching up to do.ii

Currently the number of Australians making tax deductible contributions is at its lowest levels since the 1970s.iii Despite this, the Australian Tax Office reports that deductible donations claimed by individuals rose from $0.74 billion in 1999-2000 to $3.85 billion in 2019-20.iv

Given that an estimated $2.6 trillion will pass between generations over the next 20 years, the opportunities for increasing our financial giving abound. Philanthropy Australia wants to double structured giving from $2.5 billion in 2020 to $5 billion by 2030.v

The five main reasons people like to give are that they want to make a difference, they want to give back to the community, they like the personal satisfaction it gives them, they have philosophical beliefs, or they just want to set an example.

Many ways to give

There are many ways of being philanthropic from the $2 donation to someone who knocks on your front door, to regular donations of five or six figures plus.

In between, people give direct donations to charities, not-for-profit organisations and community groups, participate in crowd funding and giving circles and/or volunteer.

Giving circles are more prevalent in the US but they are growing in Australia. Basically, people with shared values come together to pool their money for a particular cause.

Structured giving

Donating large sums of money regularly is known as structured giving.

You can choose a number of ways to establish a structured giving plan including through a public or private ancillary fund (PAF), a private testamentary charitable trust or giving circles.

Whichever way you choose, there are attractive tax incentives to encourage the practice.

The type of vehicle will depend on:

  • the timeframe of your giving
  • the level of engagement you want
  • whether you want to raise donations from the public
  • whether you want to give in your lifetime or as a bequest
  • whether you want to involve your family to create a family legacy.

Private ancillary fund

A private ancillary fund is a standalone charitable trust for business, families and individuals. It requires a corporate trustee and a specific investment strategy. Once you have donated, contributions are irrevocable and cannot be returned. To be tax deductible, the cause you are supporting must be a body identified as a Deductible Gift Recipient by the Australian Tax Office.

The benefits of a PAF are that contributions are fully deductible, and the deductions can be spread over five years. The assets of the fund are exempt from income tax.

The minimum initial contribution to a PAF is at least $20,000. The costs of setting up a PAF are minimal and ongoing costs are usually about 1-2 per cent of the value of the fund.

Each year you must distribute 5 per cent of the net value of the fund to the designated charity.vi

Testamentary charitable trust

An alternative to a PAF is a testamentary charitable trust, which usually comes into being after the death of the founder. The governing document is either a trust deed or the founder’s Will.

With a testamentary charitable trust, trustees control all the governance, compliance, investment and giving strategies of the trust. The assets of the trust are income tax exempt. The minimum initial contribution for such a fund is usually $500,000 to $2 million.vii

Philanthropy through structured giving still has a long way to go in Australia. The latest figures for total giving in Australia is $13.1 billion, of which $2.4 billion is structured giving. Currently the number of structured giving entities stands at just over 5400.viii

As the baby boomers pass on their wealth to their families, there is a wide opening for some of this money to find their way into charities and causes through structured giving.

If you want to know more about structured giving and what is the right vehicle for you to help the Australian community at large, then give us a call to discuss.

How Australians give

Value of non-structured and structured giving in Australia, 2018-19ix

i, ii, iv https://www.philanthropy.org.au/wp-content/uploads/2022/11/7480-PHA-Giving-Trends-and-Opportunities-2023-1.2.pdf
iii https://www.socialventures.com.au/sva-quarterly/insights-to-grow-philanthropic-giving-for-not-for-profits/
v https://www.philanthropy.org.au/our-impact/a-blueprint-to-grow-structured-giving/
vi, vii https://www.philanthropy.org.au/guidance-and-tools/ways-to-give/choosing-the-right-philanthropic-structure/
viii A Blueprint to Grow Structured Giving 2021 - Philanthropy Australia
ix Insights to grow philanthropic giving for not-for-profits - Social Ventures Australia

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Tax-Smart Aussie SMEs: Stay on Track

Tax-Smart Aussie SMEs: Stay on Track

Learn the ATO's top strategies for Australian small businesses to manage taxes and superannuation effectively.

Running a small business in Australia is no small feat, especially when it comes to staying on top of your tax and superannuation responsibilities. With the economic landscape ever-changing, it's crucial to ensure that your business isn't just surviving, but thriving. Here's how you can stay tax-smart and keep your business on the right track.

ATO Compliance: The Foundation of Efficiency

The Australian Taxation Office (ATO) suggests that effective cash flow management and accurate separation of private and business expenses are fundamental to running your business efficiently. On the flip side, a lack of understanding of tax responsibilities and not seeking professional advice are pitfalls of poorly managed small businesses.

Getting Business Habits Right

A well-operating small business nails the basics. According to the ATO's Small Business Random Enquiry Program, successful businesses maintain excellent records and have robust reconciliation processes. They also invest time to understand their tax and super obligations.

Embracing Digital Tools

In today's digital era, technology is a boon for businesses, helping to streamline processes and cut costs. Digital tools can bolster your business systems, product offerings, and customer and employee data management. Remember, some costs associated with digital adoption, like hardware purchases and subscription fees, are tax-deductible.

Strategic Cash Flow Management for Australian SMEs

The ATO has observed that savvy business owners utilise cash flow projection or budgeting tools. With cash flow issues being a common downfall for small businesses, a clear view of your financial status is vital. Effective cash flow management allows you to meet obligations like tax and employee super payments and assess if you're trading profitably or merely covering bills.

Careful Tax Management

A hallmark of a well-run business is the declaration of all income, including cash transactions. Missteps like ommiting income, not declaring cash sales, or incorrect recording of director's fees can lead to ATO scrutiny, especially as they return to a more stringent stance post-COVID.

Lodging Paperwork on Time

Timeliness in lodging tax returns is a good indicator of a business's engagement with the tax system. Currently, there's a tax amnesty for small businesses with overdue returns, applicable to documents originally due between 1 December 2019 and 28 February 2022.

Seeking Trusted Advice

Regular contact with a tax professional often correlates with correct tax reporting. The ATO provides tools and information, but professional advice is invaluable, especially in uncertain times.

10 Tips for Keeping Your Business Records

  • Keep comprehensive records for all business stages.
  • Document business and personal expenses separately.
  • Ensure GST tax invoices are valid.
  • Record all transactions, including cash and electronic.
  • Maintain unaltered records for five years.
  • Separate business from personal records.
  • Ensure records support BAS and tax return claims.
  • Digitise paper receipts to prevent fading.
  • Back up electronic records.
  • Ensure accuracy when changing record-keeping software.

Seeking advice from trusted sources like House of Wealth can significantly improve your business operations. Feel free to reach out; we'd love to help. We offer a free half-hour consultation to explore how we can assist you.1

1 This article is intended as an information source only and should not be relied upon as financial or tax advice. All readers should seek advice from a professional adviser regarding their particular situation.


This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Navigating Rental Property Tax Returns in Australia

Navigating Rental Property Tax Returns in Australia

With Treasury estimating the government misses out on billions in potential tax revenue from rental property deductions and the ATO recently warning extra care is needed when lodging returns with this type of income, rental investors can consider themselves well and truly in the tax man’s sights. This article takes a look at ways to navigate some of the common challenges in getting your property tax returns right.

In fact, the ATO’s Random Enquiry Program (REP) showed 9 out of 10 returns reporting net rental income needed adjustment, leading ATO second commissioner Jeremy Hirschhorn to note: “This is startling and clearly something we need to address”.

So, if you’re a rental property investor, it’s time to ensure you’re getting your deductions right.

Understanding Key Deductions

Rental property investors can claim a wide range of deductions for expenses associated with maintaining and financing their property interests. These include interest expenses, capital works and other deductions required to maintain the property.

It’s clear from the REP, however, many rental property investors need to learn a little more about what is deductible and also when they can claim a deduction for the amount.

Although some expenses can be claimed immediately (such as management fees and council rates), other expenses (such as borrowing costs and capital works) must be claimed over a number of years.

Red flags for the ATO

Common mistakes rental property investors are making include failing to include rental income for short-term arrangements and insurance payouts, overclaiming deductions, and claiming for improvements to private properties.

Rental income must be the gross amount received and must be reported in the same financial year the tenant pays.

It's essential to be meticulous with your records, ensuring all income is accurately reported to avoid potential discrepancies.

Another common mistake is claiming an immediate deduction for initial repairs when purchasing. Existing damage must be claimed over several years as a capital works deduction and is also used to work out your capital gain or loss on selling.

Improvements such as renovating a bathroom, are a building cost and must be claimed at 2.5% annually2.5 per cent annually over 40 years from completion, while damaged detachable items costing more than $300 should be claimed as a depreciating asset.

Essential Guidelines for an Accurate Tax Return

When completing your return, it’s essential to apportion both your rental income and deductions in line with your ownership share of the property.

If there is a mortgage over the property and the loan is also used for private purposes (such as a buying a new car or taking a holiday), your interest expenses must be apportioned. This needs to continue for the duration of the loan, even if you repay the personal expense.

Deductions also need to be split to reflect any private use. This also applies if you only use part of the property to earn rent.

Ensure your deductions are in order
Borrowing expenses (such as loan establishment fees and title searches costing over $100) must be deducted over five years. Being organised and understanding the timeframe for various deductions here can save you from potential pitfalls. In the first year, these expenses should be apportioned for the number of days of ownership.

Purchase costs (such as conveyancing fees and stamp duty outside the ACT) cannot be claimed but form part of your capital gains tax (CGT) calculations.

Ask the previous owner for details of any capital works deductions claimed so you can correctly calculate your own deductions. Alternatively, hire a qualified professional to estimate previous construction costs.

Although payments to a body corporate administration fund are fully deductible in the year incurred, payments to a special purpose fund for capital improvements or repairs are not immediately deductible.

Capital Gains Tax: What You Need to Know

It sounds obvious, but it’s essential to have evidence of all your rental income and expenses when lodging a claim. This needs to be retained while you own the property and for five years after selling.

Another tip is to ensure you calculate your capital gain (or loss) correctly when selling.A precise calculation not only ensures compliance but also maximises your financial benefits.

You are not permitted to include amounts already claimed as a deduction, including depreciation and capital works.

Capital gains must be included in your tax return for the income year the property is sold, while capital losses can be carried forward.

Please don’t hesitate to call if you have any questions regarding the preparation of documentation for your next tax return.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.


Tax Alert September 2023

Tax Alert September 2023

Lodgement amnesty and new landlord data matching program

While the government is boosting the tax deductions available for small business spending on staff training, other taxpayers such as landlords are facing closer scrutiny from the Australian Taxation Office. Here are some of the latest developments in the world of tax.

Amnesty for small business late lodgements

If your small business is not up-to-date with its tax lodgements, it could be a smart idea to take advantage of the government’s current Lodgement Penalty Amnesty.

The program is designed to encourage small businesses to re-engage with the tax system and fix any outstanding income tax, FBT returns and business activity statements due between 1 December 2019 and 28 February 2022.

Taxpayers have until 31 December 2023 to lodge their overdue forms without lodgement penalties being applied (general interest charges still apply).

Businesses with an annual turnover under $10 million when the original lodgement was due are eligible for the amnesty.

Insurance focus for latest data-matching

As part of its ongoing data-matching program, the ATO has announced it will require both income protection (IP) and landlord insurers to provide information on their customers for the period 2021-22 to 2025-26.

Insurers must provide detailed information on the policy and policy owner to help the ATO “identify and educate” taxpayers failing to meet their lodgement obligations.

The landlord data is expected to net records relating to around 1.6 million landlords, while the IP data will cover 800,000 individuals.

New skills and training boost starts

Small business owners keen to upskill their employees can now take advantage of the government’s new skills and training boost if they spend money on these activities before 30 June 2024.

If you have an aggregated annual turnover of less than $50 million, you can claim a bonus deduction equal to 20 per cent of qualifying expenditure on external training courses provided by eligible registered training providers.

You can also claim an additional 20 per cent bonus for expenditure on digitising your business operations and relevant assets such as portable payment devices, cyber security systems and subscriptions for cloud-based services.

Tax penalties increase again

The unit amount used by the ATO to calculate penalties it imposes has increased again, rising to $313 from 1 July 2023.

The government had already increased the penalty amount for the 1 January to 30 June 2023 period, making this the second increase this calendar year.

If the ATO decides to impose a penalty, the unit amount is used to calculate your actual fine. Activities such as giving false or misleading statements, or behaving with intentional disregard for example, result in a 60 penalty unit fine.

GST food and beverage list updated

If you supply or sell food and beverage products, it’s time to recheck the ATO’s detailed food list showing the GST status of major food and beverage product lines, as the tax regulator recently made around 30 updates to the list.

Although some changes corrected existing entries, new food and beverage lines have been added and some current entries deleted.

The ATO encourages businesses to review this list regularly to ensure they are meeting their GST obligations accurately.

Reminders about tax offsetting rules

The ATO is currently writing to businesses with a debt on hold of more than $10 to explain its tax offsetting process.

Under the offsetting rules, any tax refund and credit entitlements are automatically used to pay off an existing tax debt.

If you have an outstanding tax debt, you can choose to pay all or part of it at any time, including through a payment plan.

New-look ATO Charter

Taxpayers could find their interactions with the ATO improving following the release of its revised Taxpayers’ Charter, now called the ATO Charter.

The Charter explains what you can expect when interacting with the ATO, the regulator’s commitments to taxpayers, and the steps you can take if you’re not satisfied.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.