Budget Summary 2023-2023

Hi Folks,

Here is a quick summary of last night’s budget, focussing on the matters that affect individual taxpayers and small businesses. If you would like to discuss any of the items described below, please feel free to get in touch with me.

Individual Taxpayers

  • Personal tax rates are unchanged for 2023-2024. The changes scheduled to come in in 2024-2025 remain in place and will mean reduced tax for people earning over $45,000 per annum.
  • The temporary Low and Middle Income Tax Offset which has been in place since 2018 has ended, for those with a taxable income less than $126,000 there will be either a reduced refund or increased tax payable.
  • The Low Income Tax Offset of up to $700 for those earning $66,667 or less remains in place.
  • Medicare Levy thresholds have been raised, meaning fewer people on low incomes will pay the Medicare levy.

Small Business

  • Temporary Full Expensing for capital expenditure ends on 30 June 2023.
  • It will be replaced with an Instant Asset Write off for depreciating items less than $20,000 from 1 July 2023.
  • Items costing $20,000 or more will return to the simplified depreciation rules of 15% deducted in the first year and 30% in subsequent years.
  • A Small Business Energy Incentive will be brought in, allowing businesses to deduct 120% of the cost of more energy efficient assets used in the business. A total of $100,000 of expenditure will be eligible, meaning a total extra deduction of $20,000. Electric vehicles and renewable electricity generation assets will not be eligible. It is not clear at this stage whether those of us who run our businesses from home will be eligible.
  • From 1 July 2026, employers will need to pay their employees’ superannuation on their regular payday, rather than the current quarterly timing. Payroll software providers will need to upgrade their systems by then!
  • Small businesses will be eligible for the Energy Price Relief Plan, but eligibility criteria have not been released and again it is not clear whether those of us who run our businesses from home will be eligible.

Other Measures

  • Energy Price Relief Plan for those on government pensions, Commonwealth Seniors Health Card holders or recipients of Family Tax Benefit A and B.
  • Reminiscent of budgets past, Tobacco Excise will increase 5% every year for the next 3 years.
  • The temporary reduction in minimum super drawdowns for those with a superannuation pension as a result of Covid-19 has ended. Discuss with your Super Fund the amounts you will need to drawdown from 1 July 2023.

Welcome to the New Tax Year

So July is here once again and we have finished the 2021-2022 tax year, time to start preparing for your tax return. Below are tax time guides for different occupations and common deductions that can apply to those occupations. These can help you prepare your return. If you can’t see your occupation here, please contact me and I will be happy to send you a guide if one exists.

taxtimetoolkit_teacherDownload
taxtimetoolkit_paramedicDownload
taxtimetoolkit_retailDownload
taxtimetoolkit_officeworkerDownload
taxtimetoolkit_hairdresserorbeautytherapistDownload
taxtimetoolkit_itprofessionalDownload
taxtimetoolkit_nurseormidwifeDownload
taxtimetoolkit_doctorDownload
taxtimetoolkit_tradieDownload

Covid 19 Test Tax Deduction

From 1 July 2021 employees, sole traders and contractors may be able to claim the cost of Covid-19 testing.

You would need to meet the following criteria:

  • You used the test to determine if you can attend or remain at work.
  • The brand and type of test was registered for use in Australia.
  • You paid for the test yourself and you were not reimbursed.
  • You kept a record of your expense.

You cannot claim if you:

  • Use a test for private purposes, including to test your children or before attending a sporting event.
  • You work from home and don’t intend to attend your workplace.

Evidence you will need to make a claim:

  • A receipt or invoice for the purchase of the tests after 31 March 2022.
  • Bank or credit card statements will be acceptable for purchases before 31 March 2022
  • Correspondence from your employer stipulating the requirement to test.

2021-2022 Budget Summary

On Tuesday, 11 May 2021, Treasurer Josh Frydenberg handed down the 2021-22 Federal Budget, his 3rd Budget.

The major tax-related measures announced in the Budget included:

  • Personal tax rates – no changes were made to personal tax rates, the Government having already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
  • LMITO retained for 2021-22 – the Government will retain the low and middle income tax offset for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080.
  • Temporary full expensing extended – the Government will extend the 2020-21 temporary full expensing measures for 12 months until 30 June 2023. This will allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
  • Loss carry-back extended – the loss years in respect of which an eligible company (aggregated annual turnover of up to $5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will be extended to include the 2022-23 income year.
  • Individual residency test reformed – the Government will replace the existing tests for the tax residency of individuals with a primary “bright line” test under which a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
  • Employee share schemes – the Government will remove the cessation of employment as a taxing point for the taxdeferred employee share schemes.
  • ATO debt recovery – the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses.
  • Self-education expenses – $250 threshold to be removed.

The key superannuation and related measures announced in the Budget include:

  • Superannuation contributions work test – to be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75. However, the work test will still apply for personal deductible contributions by those aged 67-74.
  • SMSF residency rules – to be relaxed by extending the central management and control test safe harbour from 2 to 5 years, and removing the active member test for both SMSFs and small APRA funds.
  • Conversions of legacy income streams – individuals will be permitted to exit certain legacy retirement income stream products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any associated reserves, for a 2-year period. Any commuted reserves will not be counted towards an individual’s concessional contribution cap. Instead, they will be taxed as an assessable contribution for the fund.
  • Super Guarantee $450 per month threshold – to be removed from 1 July 2022.
  • Downsizer contributions – eligibility age to be lowered from 65 to 60.
  • First Home Super Scheme – to be extended for withdrawals up to $50,000, plus some technical changes for tax and administration errors in applications.
  • Victims of domestic violence – the Government will not proceed with its previous proposal to extend the early release of super to victims of family and domestic violence.
  • Pension Loans Scheme – will be expanded to allow access up to 2 lump sums in any 12-month period (up to a total of 50% of the maximum annual Age Pension); together with a Government guarantee that “No Negative Equity” will apply.
  • At the same time, the Budget did not contain any change to the legislated Super Guarantee rate increase from 9.5% to 10% for 2021-22.

As previously announced, the Budget confirmed:

  • 30% Digital Games Tax Offset – for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure (excluding gambling) from 1 July 2022.
  • Intangible assets depreciation – option to self-assess effective life for certain intangible assets (eg intellectual property and in-house software).
  • Brewers and distillers – the excise refund cap for small brewers and distillers will increase to $350,000 from 1 July 2021.
  • Venture capital – a review of the venture capital tax concessions will be undertaken in 2021.
  • Child care – increased subsidies from 1 July 2022.

Covid-19 Stimulus Voucher Scheme

The State government of NSW is launching its Dine & Discover voucher scheme in March. Every NSW resident will be given 2 x $25 vouchers to use at dining venues and 2 x $25 vouchers to be used for entertainment and recreation. You will be able to access your vouchers via the Service NSW app on your phone (the same one you use for all the QR code check ins).

Which Businesses Are Eligible?

NSW businesses will need to have an active ABN and be registered for GST. Your business will also need to be registered as Covid-safe and have a Covid Safety Plan in place. Businesses in the following industries can register:

  • cafes and restaurants
  • pubs, taverns, bars, wineries and clubs
  • scenic and sightseeing transport
  • cinemas
  • museums, galleries and historic sites
  • zoos, botanic gardens, wildlife parks and nature reserves
  • performing arts operations, theatres and entertainment centres
  • amusement, theme and water parks
  • recreational activities such as go-karting, indoor climbing, mini golf, billiards, bowling or ice rinks
  • outdoor adventures
  • travel agencies and tours.

How Do You Treat the Vouchers In Your Accounting System?

A government payment to assist a business is included in its assessable income.

If you are operating on an accruals basis you enter the voucher information into your accounting system as soon as you receive it from the customer.

If you are operating on a cash basis (most small businesses) then you include the amounts when you receive the voucher amount from the NSW government.

The same principles apply to your GST, if you account for GST on accruals, you recognise the GST on the day the customer uses the voucher, if you account for GST on a cash basis, you recognise the GST on the day you receive the money from the NSW government.

The Rental Property Deductions You Might Be Missing Out On!

If you purchase or own a rental property, there are some large deductions you are able to claim against the income from this rental property that you might be missing out on. This guide gives a brief explanation of the rules and eligibility for both the Capital Works (construction) and Capital Allowances (depreciating assets) deductions.

Capital Works Deductions

Capital works deductions (also known as Div 43 Deductions from the division of the 1997 Tax Act) are deductions you can claim for construction expenditure on your rental property, structural improvements, extensions and alterations. Examples listed by the ATO are:

  • Building construction costs.
  • Alterations such as adding or removing internal walls.
  • Major renovations to a room.
  • Adding a fence.
  • Building extensions – adding a garage or patio.
  • Structural improvements – gazebo, carport, sealed driveway or retaining wall.

Rules for capital works deductions have changed since being introduced in 1979. As a general rule, if your capital works on your rental property occurred after 15th September 1987, you may still be eligible for a capital works deduction. You can only claim a deduction if the property is being rented or is genuinely available for rent.

If you carried out the work yourself or hired tradespeople to carry it out on your behalf, you should be able to calculate your claim (GQ Tax will help in this process for our clients). To calculate your claim you need the following information:

  • Details of the type of construction (house, unit, apartment).
  • Date construction commenced.
  • Date construction was completed.
  • Costs of construction (not the purchase price and not including the cost of land).
  • Details of who carried out the construction work.
  • Details of the period the property was rented or genuinely available for rent.

If you are purchasing an existing rental property that was constructed after 26th February 1992, the vendor should provide you with details of capital works already claimed and this should allow you to calculate your claim. I have never seen this in practise!

If you purchase a property from a builder who has constructed it on speculation, you do not take into consideration the builder’s profit portion of the purchase price when calculating your capital works deduction.

If you do not have the details of the construction costs to work out your claim yourself, the ATO allows you to obtain a report from an appropriately qualified person:

  • Quantity surveyor.
  • Clerk of works, such as a project manager for major building projects.
  • Supervising architect who approves payments at project stages.
  • Builder experienced in estimating construction costs of similar building prohjects.

You can claim the cost of obtaining this report. If you engage a quantity surveyor, they can also provide you with the details needed to claim under the capital allowances rules (see next section).

You do not have to claim deductions for capital works, and any claim you do make reduces the cost base of your property, increasing any eventual capital gain. However, given the current discounts for capital gains tax, in most cases it will make sense to reduce rental income and increase capital gain by claiming your capital works.

Capital Allowances

Rules for capital allowances (Depreciating assets or Div 40) changed significantly on 9th May 2017. From that date you are not allowed to claim for second hand or used depreciation assets. There is one exception to this rule:

  • If the property was newly built or substantially renovated.
  • Substantial renovations are when the renovations are significant and directly affect most rooms in a building (such as you see in the TV renovation shows).
  • And either
    • No one resided at the property before you acquired it, or;
    • You acquired the property within six months of it being newly built or substantially renovated.

For eligible assets that you have the purchase details for, you can claim over the life of the asset at a rate determined by the ATO or your own rate, but you must keep a record of why you chose a different rate.

A quantity surveyor will be able to provide you with a report detailing pre-existing assets that you can still claim if you do not have these details from the previous owner.

You should agree with the previous owner the apportionment of the purchase price between the building structure and the depreciating assets contained within.

Methods of Claiming

There are two allowed methods for calculating your yearly deduction for capital works and capital allowances, which you choose will depend on your circumstances and GQ Tax will discuss which one will be best for you. The diminishing value method allows higher deductions in the early years and they gradually diminish (hence the name). The prime cost method shares the deduction evenly over the lifetime of the asset.

Back to School, what deductions can teachers claim?

Teachers and students have all headed back to the classroom for the 2021 school year, I thought I would do a blog post detailing the top 10 deductions teachers can claim on their tax, and the top 5 things most teachers shouldn’t be claiming!

As always, this post doesn’t take your personal circumstances into account. If you need advice on your tax return please call me on 0481 02 44 66 or email grant@gqtax.com.au

Grant.

Top 10 Deductions for teachers

1. Home Office Expenses

You can claim a deduction for the additional running expense of an office at home that you use in relation to your work (lesson preparation, marking, report writing).

This could include the decline in value of home office equipment, cost of repairing home office furniture and fittings, heating cooling, lighting and cleaning expenses related to the office.

You can claim on a cents per hour rate (52c/hour in 2020-2021) or calculate the actual expenses incurred. During the COVID-19 pandemic there is an additional shortcut method available until 30 June 2021, talk to me to discuss which is the best method for you.

2. Phone and Internet

You can claim for your work related use of your personal phone and internet. Claims over $50 must be supported by records based on itemised bills for a four week period and then averaged over the teaching year. If you have a subscriptions to streaming services I find that these take up most of the internet data usage and so work related percentages for internet are much lower than they used to be.

3. Self Education

If you pay for any professional development or study you do that is related to your current job, you can claim for expenses such as course fees, travel, accommodation, textbooks and equipment. Usually the first $250 of your education claim is not deductible. There are different rules for undergraduate study and post graduate study, please discuss with me your individual case.

4. Stationery

You can claim the cost of all stationery that you purchase for you to use in relation to your work.

5. Union and Professional Association Fees

You can claim a deduction for membership of any teachers’ union or professional association.

6. Tools and Equipment

You can claim for tools and equipment you purchase if you use them to perform your duties as a teacher. Examples include computers, tablets, briefcases or satchels or other items for carrying students’ work or teaching materials.

Each individual item equal to or less than $300 (unless part of a larger set) can be claimed in full. Items over $300 must be claimed gradually over the expected life of the item (depreciated).

Any repairs to items you purchased in previous years can be claimed as well.

7. Professional Library

You can claim for any books or journal subscriptions you purchase for work. Subscriptions that run for more than a year need to be split over the term of the subscription. Books or sets of books costing more than $300 need to be depreciated over the expected useful life of the book(s).

8. Travel Expenses

When you travel for work, you stayed overnight and were not reimbursed by your employer, you can claim for accommodation, meals and incidentals. The ATO sets reasonable limits for these items, but these relate to the evidence you need to retain, there is not automatic deduction for money you haven’t spent!

9. Sun Protection

Teachers who spend time outdoors either as part of their teaching or playground duty can claim for sun protection costs such as sunglasses, sunhat and sunscreen. Items that are used outside of work should have their cost split between work and private use.

10. First Aid Courses

If you are a designated first aid person, you can claim the cost of your first aid training unless your employer pays for your course or reimburses you.

Top 5 Expenses Teachers Probably Shouldn’t Be Claiming.

1. Clothing and Laundry

You can’t claim for single items of clothing such as a staff polo or rugby top, even if it does have the school logo embroidered unless it is compulsory to wear that item every day.

Teachers that require protective clothing (TAS, Agriculture) may be able to claim for these purchases.

2. Student Expenses

You can’t claim for expenses for students’ need that you pay for, whether it is stationery or the occasional lunch. Neither can you claim for gifts purchased for students.

3. Social Functions

Expenses relating to attending staff or school functions are not deductible.

4. Prescription Eyewear

You can’t claim for general use prescription glasses or contact lenses. If your role requires safety equipment or sun protection, you may be able to claim for these specialised items.

5. Fitness Expenses

Fitness expenses such as gym memberships are not deductible for teachers, even if you are a PDHPE teacher.

Environmental Sustainability

GQ Tax is committed to being an environmentally friendly accounting practice.

We are paperless as first choice (but understand our clients needs).

All our on site electricity is from renewable energy.

Our software suppliers are committed to being carbon neutral or carbon negative by 2030-2035.

And I really look forward to buying a battery electric vehicle for my next car!

Budget 2020-2021

Here is a simple, jargon free summary of the budget measures that affect individuals and small businesses:

Individuals

Tax Cuts

Tax cuts that were due to come into effect in 2022 have been brought forward to 1 July 2020. How much you will save depends on your level of income:

IncomeTax Savings
$25,000$245
$50,000$1,080
$100,000$1,530
$150,000 +$2,430

If you are an employee your employer will reduce the amount of tax withheld from your regular salary or wage. If you are self employed your PAYG Instalments will reduce.

Granny Flat Arrangements

A capital gains tax exemption will be enacted for arrangements where elderly or disabled Australians transfer title of a residential property to a family member in exchange for the promise of ongoing housing and care. Previously the existence of a formal agreement resulted in CGT consequences. This meant many agreements remained informal and left the elderly or disabled person open to financial or other abuse. The family member who receives the property may still be liable for CGT when they dispose of the property at some time in the future. Both parties should consult with their tax advisors.

Small Business

Instant Asset Write Off

Businesses can now claim an immediate deduction for any depreciable asset purchased after 7:30 pm on 6 October 2020 until 30 June 2022. There is no limit on the value of the asset for small businesses (turnover less than $50 million).

The asset can be new, an improvement to an existing asset or a second hand asset.

Small businesses with a turnover less than $10 million will be able to claim the entire balance of their small business pool as at 30 June 2021 and 30 June 2022.

JobMaker Hiring Credit

Employers who create new jobs and hire eligible young people will receive weekly credits for up to 12 months:

  • $200 a week for workers aged between 16 and 29
  • $100 a week for workers aged between 30 and 35.

The young people must have been recipients of either JobSeeker, Youth Allowance or Parenting payment in one of the three months prior to them being hired.

The credit will be claimed quarterly in arrears.

Fringe Benefits Tax

An exemption for FBT will apply to employers who pay for retraining and reskilling of redundant or soon to be redundant employees.

The government is also relaxing the record keeping requirements for FBT from 1 April. If the ATO considers that a business has adequate existing records they will no longer need to create specific records for FBT purposes.

Loss Carry Back

This measure only applies to corporate tax entities. Companies that make losses in the 2020, 2021 or 2022 tax years will be eligible for a refund of tax paid in the 2019 tax year onwards.