If you or your business is in an Australian Government Disaster Recovery Payment declared local government area, you don’t need to request a deferral for certain obligations.
You won’t be penalised if you lodge by the later date but remember to pay by the original due date. If you can’t pay by the due date, contact the ATO to discuss payment options and request a remission of general interest charge.
If you need help, even if you haven’t been directly affected by the floods, the ATO may be able to:
Tip! If you are having problems in lodging a return or an activity statement or paying a tax bill, talk to your tax adviser.
There may be tax consequences if you take or use money or assets from your private company or trust for personal purposes.
For example, it is quite common for the company or trust to make a loan to a shareholder or an associate of a shareholder (e.g. the shareholder’s spouse or child). When a private company lends money or assets to a shareholder, the shareholder may be taken to have received a Division 7A deemed dividend if certain conditions are not met.
If this happens, the shareholder will need to report an unfranked dividend as part of their assessable income in their individual tax return. This has no impact on the company’s balance sheet, tax return or franking account.
To avoid a Division 7A deemed dividend, before the company tax return is due or lodged (whichever comes first), the loan must:
To put a loan on complying terms, the loan must:
You (the shareholder):
It is important to keep accurate records of any such transactions and ensure they are reported correctly for tax purposes.
Unpaid present entitlement
An unpaid present entitlement (UPE) arises where a beneficiary of a trust is presently entitled to a share of trust income but it remains unpaid. If the beneficiary is a private company and the trust is a shareholder of the company or an associate of a shareholder of the company, the ATO considers that the unpaid amount is a loan from the company to the shareholder (or associate) and is therefore subject to the operation of Division 7A.
The ATO considers that Division 7A may apply where a private company beneficiary has knowledge of a UPE and does not demand payment of that amount.
Tip! Division 7A is very complex – particularly the UPE rules – so talk to your tax adviser to make sure you don’t take steps that result in a Division 7A unfranked dividend.
If you are a sole trader, now is a good time to check that your PAYG instalments still reflect your expected end of year tax liability.
If your business’ circumstances have changed and you think you will pay too much (or too little) in instalments for the 2022–23 income year, the instalments can be varied on the next activity statement (due on 28 April 2023). Instalments can be varied multiple times throughout the year. The varied amount or rate will apply for the remaining instalments for the 2022–23 income year or until another variation is made.
If your business is affected by COVID-19 or a natural disaster, the ATO has said it will not apply penalties or charge interest to varied instalments if you have made your best attempt to estimate your end of year tax liability.
If an amount or rate is varied online, activity statements and instalment notices will be issued electronically and not in paper form. You will need to consider this when deciding how to lodge, revise and vary future activity statements and instalment amounts.
Tip! Your tax adviser or BAS agent can help you with your activity statements and tax returns.
If more than half the income you’ve received from a contract is a reward for your personal efforts or skills (rather than from the use of assets, the sale of goods, or from a business structure), then your income is classified as personal services income (PSI).
You can receive PSI in almost any industry, trade or profession. For example, as a financial professional, IT consultant, construction worker or medical practitioner.
The PSI rules are designed to prevent PSI from being diverted or split with other individuals or entities in an attempt to pay less tax.
If you earn PSI, it’s important to check whether these rules apply to you. If you’re conducting a personal services business (PSB) for a particular income year, then the PSI rules won’t apply for that year, although you’ll still need to report your PSI in your income tax return and keep certain records.
You can self-assess as a PSB if you either:
The other PSB tests are the Unrelated clients test, the Employment test and the Business premises test. If you can’t self-assess as a PSB, then the PSI rules will apply. The PSI rules can affect the deductions you claim and how you report your PSI in your tax return.
Tip! If you are uncertain how the PSI rules apply to you, talk to your tax adviser.
If you are a sole trader, there are a number of small business tax concessions that you may be able to utilise. A small business entity is broadly a business that has an aggregated turnover of less than $10 million.
Income tax concessions
Start-up costs – you may be entitled to deduct certain costs when starting up a business, including professional, legal and accounting advice and government fees and charges.
Simplified trading stock rules – this concession allows you to choose not to account for changes in the value of trading stock at the end of the financial year for tax purposes. You will need to record how the value of the stock was estimated, but there is no need to tell the ATO you have chosen to use an estimate.
You can choose not to conduct a stocktake (and account for changes in the value of trading stock) if there is a difference of $5,000 or less between:
If you choose not to use an estimate, you will need to conduct a stocktake and account for the changes in the value of your stock.
Immediate deductions for prepaid expenses – you may be able to claim an immediate deduction for prepaid expenses incurred in an income year where the payment covers a period of no more than 12 months that ends by the end of the following income year.
Two-year amendment period for individuals – the Commissioner generally has a two-year period, starting after the day on which the ATO issued a notice of assessment, to amend the assessment. However, the two-year amendment period does not apply if you are in a ‘high risk’ category, have complicated tax affairs or are subject to an anti-avoidance provision.
Small business restructure roll-over – you can change the legal structure of your business without incurring an income tax liability. This roll-over applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.
There are four CGT concessions available to eligible small businesses:
The small business CGT concessions are available where one of the following conditions is satisfied:
Importantly, the asset in question (i.e. the capital gain from the CGT event that happened to the asset that will benefit from the CGT concessions) must be an active asset. This means that the asset must be used in the course of carrying on a business (whether alone or in partnership) or must be an intangible asset (for example, goodwill) inherently connected with a business.
There are certain exceptions. For example, an asset that is used mainly to derive rent, interest or royalties is generally not an active asset.
The active asset test is satisfied if the asset was an active asset:
If the asset is a share in a company or an interest in a trust, additional conditions must be met.
Tip!Talk to your tax adviser to make sure you are utilising any available concessions.
Good record keeping helps you manage your business and cash flow, and ensures you get the right outcome with your tax return.
The ATO’s top 4 tips for record-keeping are:
There are advantages in keeping business records digitally. If, for example, you use a commercially-available software package, it may help you:
If you use cloud storage, either through accounting software or a separate service provider, for example, Google Drive, Microsoft OneDrive or Dropbox, you should ensure:
Regardless of your eInvoicing software or system, you are responsible for determining the best option for storing business transaction data. You should:
If you wholly or partly operate your business from home, you may be able to claim the business-use portion of expenses you incur. For example:
The temporary shortcut method (80 cents per hour) ended on 30 June 2022 and the fixed-rate method has been revised.
For the 2022–23 income year, the revised fixed rate is 67 cents per hour. You no longer need to:
You can also separately claim the decline in value of depreciating assets and equipment, including any repairs and maintenance costs.
If you want to use the revised fixed rate method, you need to keep a record of all hours worked from home for the entire income year (for example, on a timesheet, roster or in a diary).
If you haven’t kept a record of all hours worked from home, you can use a representative record of your hours only from 1 July 2022 to 28 February 2023. You will need a record of the total number of your actual hours worked from home from 1 March 2023 to 30 June 2023.
Your business structure can also affect the method you can use and the expenses you can claim.
Tip!Talk to your tax adviser if you wholly or partly operate your business from home.
You can claim deductions only to the extent your holiday home expenses are incurred for the purpose of producing rental income.
Many Australians own a holiday home, but there are a small number of holiday home owners who, on average claim deductions that are six times higher than income earned from their property.
Here are a few questions to consider to make sure your claim for rental deductions is valid:
If you have one or more employees and you provided fringe benefits to them or their associates between 1 April 2022 and 31 March 2023, it’s now time to lodge the 2023 fringe benefits tax (FBT) return and pay any outstanding FBT. [An associate includes a spouse, child, parent, sibling and most other relatives (but not cousins).]
You should note the following dates:
If you don’t need to lodge an FBT return but you are registered for FBT, you should still let the ATO know by the date the return would have been due. You can do this by completing a Notice of non-lodgment – Fringe benefits tax form.
If you cannot lodge and pay on time, you should contact the ATO or speak with your tax adviser as early as possible.
Don’t forget to keep all records relating to the fringe benefits you provided during the 2022–23 FBT year, including how the taxable value of the benefits was calculated.
The FBT rate (47%) and the gross-up rates — 2.0802 where the benefit provider is entitled to a GST credit (type 1 gross-up rate) and 1.8868 where the benefit provider is not entitled to a GST credit (type 2 gross-up rate) — for the 2023–24 FBT year are unchanged from the 2022–23 FBT year.
The following have changed for the 2023–24 FBT year:
The cents per km rates for motor vehicles (other than a car) for the 2023–24 FBT year are:
It is important to value assets (or liabilities) correctly for tax purposes. Valuations may be required for a variety of purposes, such as:
But valuing an asset isn’t always easy. To help taxpayers, the ATO has updated its guidance on market valuation for tax purposes. The updated guidance sets out the ATO’s views on a range of matters, including:
Tip! Valuing an asset (or a liability) for tax purposes is complex. Talk to your tax adviser if you need to obtain a valuation for tax purposes.
The ATO’s Self-managed super fund quarterly statistical report – December 2022 contains some interesting statistics on the self-managed superannuation fund (SMSF) sector. For example, as at 31 December 2022:
Defer assessable income
To reduce the tax you will pay for the 2022–23 income year, you might want to consider deferring assessable income to the next income year.
For example, you could delay issuing an invoice so you won’t be paid until after 30 June – that way, the income will be taxed next year. It is trickier if you account for income on an accruals basis – you might have to delay issuing the invoice until after 30 June.
If you are in the process of selling property and the profit will be taxable as a capital gain, you could defer the sale until the next income year – but remember that the taxing point of a capital gain arises on the date that you exchange contracts and not on settlement.
Of course, these tips are always subject to cash flow requirements.
Another way to reduce your tax bill for the 2022–23 income year is to increase your deductions. For example, you could bring forward the purchase of one or more depreciating assets (new assets are currently immediately deductible under the temporary full expensing regime). An immediate deduction is also available for start-up costs and certain prepaid expenses.
Don’t forget that temporary full expensing – which allows an immediate deduction for the full cost of depreciating assets – ends on 30 June this year. To take advantage of temporary full expensing, you must acquire and start to use an asset (or have it installed ready for use) by 30 June 2023.
Charitable donations are a good way to increase your deductions. If you are not sure whether a donation will be deductible, you can check the deductibility status of charities at https://www.abn.business.gov.au/Tools/DgrListing. Every now and again, new charities are added to the list, while others drop off (usually because the time limit for making a tax deductible donation has expired).
In certain circumstances, you can claim a deduction if you donate trading stock.
Don’t forget to obtain and keep receipts.
Tip! As the end of the 2022–23 income year approaches, talk to your tax adviser about ways to minimise your tax bill.
If you pay private health insurance premiums, you may be entitled to a rebate. The rebate percentage is based on the age(s) of the person(s) covered by the policy and the adjusted taxable income of the person paying the premiums and their spouse (if they have one).
The rebate can also be claimed monthly by way of a reduction in the premiums.
The rebate percentages may be adjusted every 1 April by the ‘rebate adjustment factor’ (RAF). However, the percentages won’t be adjusted on 1 April this year because the RAF was 1. This means that the rebate percentages for premiums paid from 1 April 2023 to 31 March 2024 will be the same as for premiums paid during the period from 1 April 2022 to 31 March 2023.
In a case that attracted a lot of publicity, a Sydney lawyer has been sentenced to 12 years’ jail for his role in knowingly dealing with the proceeds of crime, being amounts blackmailed from offenders participating in a syndicate that defrauded the Commonwealth of more than $105 million of unpaid tax over three years. Five people have now been found guilty in the Supreme Court of NSW for their roles in the syndicate.
The lawyer was found guilty of dealing in proceeds of crime worth $1 million or more. He received a non-parole period of 7 years and 6 months. Assets in a trust account controlled by the lawyer were also restrained.
This was the eighth sentencing outcome for Operation Elbrus, which was an investigation led by the Australian Federal Police (AFP), with significant assistance from the ATO as part of the Serious Financial Crime Taskforce, into a large-scale and organised tax fraud conspiracy.
Operation Elbrus, which began in 2016, exposed a large-scale and organised tax fraud and money laundering conspiracy that used Plutus Payroll Australia Pty Ltd and other payroll service entities to divert for the conspirators’ benefit amounts of money payable to the ATO as PAYG withholding and GST.
The Sydney lawyer provided the mechanism for disguising that more than $24 million received into and then transferred out of his legal practice’s trust account was the proceeds of crime derived from other persons blackmailing the Plutus tax fraud conspirators of some of the proceeds of their fraud.
All matters were prosecuted by the Commonwealth Director of Public Prosecutions.
A South Australian woman has been sentenced to 4 months’ imprisonment after being convicted of falsely claiming almost $10,000 in income tax deductions. The woman lodged 22 original and amended income tax returns for the income years from 2015 to 2018. Each tax return contained overstated work-related expenses and understated her income.
While being audited and subsequently investigated, she continued to lodge original and amended tax returns containing the same false claims.
The woman was released from imprisonment immediately on the condition that she enter into an 18-month good behaviour bond. She was ordered to repay $1,599.45 for the tax refunds she unlawfully obtained.
Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.