New Legislation Boosts Instant Asset Write-Off for Small Businesses Increased Threshold from $1,000 to $20,000 Provides Major Cash Flow Benefits for 2024 Income Year. Legislation increasing the instant asset write-off threshold from $1,000 to $20,000 for the 2024 income year passed Parliament just 5 days prior to the end of the financial year. Purchases of depreciable assets with a cost of less than $20,000 that a small business makes between 1 July 2023 and 30 June 2024 can potentially be written-off in the year of purchase. It’s a major cashflow advantage because the tax deduction can be taken in the year of purchase instead of over a number of years. To be eligible, the asset must be first used, or installed ready for use, for a taxable purpose between 1 July 2023 and 30 June 2024. For example, you cannot simply have a receipt for an industrial fridge, it must have been delivered and installed to be able to claim the write-off in 2024. The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets across the 2024 year as long as the cost of each asset is less than $20,000. A Bill to extend the instant asset write-off threshold increase to 30 June 2025 is currently before Parliament. We'll keep you posted. Call the Collins Hume team in Ballina on 02 6686 3000 if you have any instant asset write off questions in the meantime.

Will 2024-25 be another year of volatility or a return to stability? Personal tax and super As you would be aware (at least we hope so after a $40m public education campaign), the personal income tax cuts came into effect on 1 July 2024. At the same time, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%. For employers, it’s critically important to ensure that your payroll system, and all interactions with it, like salary sacrifice agreements, are assessed and updated. Your PAYG withholding will also be impacted. While we are on the topic of obligations, the ATO have recently warned employers to be vigilant about their super guarantee obligations: Are you paying super guarantee to the right people? The definition of an employee for SG purposes is broad and, in some cases, extends beyond typical classifications. Temporary residents, backpackers, and some company directors working in the business, family members working in the business, and some contractors must be paid SG. Check your classifications are correct for SG purposes. Check the fund details are correct for the employee and the employee’s tax file number has been provided to the super fund. It’s the employer’s obligation to ensure that SG for the employee is directed to the correct super fund account. Ensure SG is paid into the employee’s fund by the quarterly due date (next SG payments are due by 28 July). If your business misses the deadline, the super guarantee charge applies (even if you pay the outstanding amount quickly after the deadline). The SG charge (SGC) is particularly painful for employers because it is comprised of the outstanding SG, 10% interest p.a. from the start of the quarter, and an administration fee. And, unlike normal SG contributions, SGC amounts are not deductible. Wages On 1 July 2024, the national minimum wage increased by 3.75% ($24.10 per hour, or $915.90 per week). The increase applies from the first full pay period starting on or after 1 July 2024. Traditionally, there is no correlation between an increase in minimum wages and inflation. Annual wage growth in the private sector fell slightly to 4.1% in the March quarter 2024 from 4.2% in December 2023 - the first fall since September quarter 2020, suggesting that wages growth is starting to even out. Interest rates and cost of living Reserve Bank of Australia (RBA) Governor Michelle Bullock has stated on several occasions that inflation, not interest rates, are at the heart of cost of living pressures. Interest rates are the RBA’s “blunt instrument” to bring inflation under control. With inflation easing more slowly than anticipated, the RBA is not ruling anything out because the path of interest rates is determined by the actions required to bring inflation to target. Inflation has reduced from its peak of 7.8% in December 2022 to 3.6% in the March quarter, but increased again in May to 4% dampening expectations of an interest rate reprieve. Business confidence The latest NAB business survey is not happy reading with business confidence falling back into negative territory in May as conditions continued to gradually soften. Having experienced eight consecutive months of forward order declines, businesses are understandably circumspect over the outlook. GDP grew marginally in the March quarter and consumption per capita continued to decline. However, labour market conditions are strong with unemployment at 4% for May. Treasury forecasts that economic growth (GDP) will marginally improve to 2% in 2024-25. Not exciting but credible. Migration and labour Always a controversial topic. Post pandemic, Australia’s migration levels surged with the return of international students, working holiday makers, and an influx of temporary skilled labour to meet shortages. In the year ending 30 June 2023, overseas migration contributed a net gain of 518,000 people to Australia's population - the largest net overseas migration estimate since records began. The 2024-25 Federal Budget estimates that net migration will fall to 260,000. While demand pressures from migration have been well publicised, particularly on housing, the positive impact was the impact on supply. Post COVID, Australia faced crippling labour shortages that impeded the return and growth of supply. From 1 January 2025, student visa numbers will be capped, and according to the University of Melbourne Deputy Vice-Chancellor Professor Michael Wesley, student visa grants are already down 34% in March 2024 compared to the same time in 2023. The Government’s focus is on skilled migration. Employer sponsored places will rise by 7,175, however skilled independent visas will reduce by 13,475. The minimum salary requirement to sponsor an employee (Temporary Skilled Migration Income Threshold) will also increase to $73,150 on 1 July 2024. What now? Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring within the business and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are, then it’s time to find out (we can help you with that). A lack of profit will erode your business, but not enough cash will kill it stone dead. Businesses often fail because they don’t manage their cash position. Plan, track, and measure your cashflow. This not only means closely monitoring your debtor collections and inventory but also running a rolling three month cash flow position. This should provide an early warning of any brewing problems. Cash flows, operating budgets, cost control and debt management all need to be part of your business management. The more in control you are the lower your risk position. Many small businesses also tend to absorb increasing costs. Putting up your prices during difficult times is not an act of social betrayal. If the cost of doing business has increased, you should flow these through unless you are comfortable making less for the same amount of effort, or you are in an industry that is so price sensitive you have no choice but to follow the lead of larger businesses. Need support or have questions? Call Collins Hume on 02 6686 3000.

Collins Hume named Ballina Business Award Winners We are thrilled to announce that Collins Hume has been honoured with multiple accolades at the Ballina Shire Business Excellence Awards in the following categories: Excellence in Large Business Excellence in Business & Professional Services Outstanding Business Leader (over 21 employees) — Christopher Atkinson Additionally, Collins Hume was also recognised as finalists in the Excellence in Sustainability category. The winners were revealed at the Ballina Shire Business Excellence Awards presentation night on the weekend. Both the Excellence in Large Business and Professional Services Awards highlight our growth and the strategies we implemented to achieve business success and resilience over the past year. The Outstanding Business Leader Award recognises our own Christopher Atkinson who has demonstrated exceptional dedication to our workplace, industry and community through his leadership and mentorship. Chris' diverse background in adventure racing and mountain biking, coupled with his status as a Fellow CPA Australia, reflects meticulous planning and adaptability in both his athletic and business pursuits. Upon receiving the award, Chris expressed his gratitude, stating, "I recently returned from a holiday to learn from my staff and team that they nominated me for an award.” “It doesn't seem that long ago that a 17-year-old trainee accountant started on the 17th floor of Adelaide Street in Brisbane and now, 31 years later, you have those bumps and bruises in business, make mistakes, get those scars, but you also develop as a leader with a team that believes in you. So that's really humbling, and I want to thank them very much." Chris was also unofficially recognised during a tongue in cheek moment for his impeccable style! Practice Manager Naomi Monk added, "It was a great night. Very exciting to bring back three awards given how much competition there was this year." “Congratulations to everyone who took part in the awards and for shining a light on the excellence and innovation within our region, including our clients Marcon Consultancy for winning the Best New Business category. And to Marty who made the shortest and most impactful speech ever!” The Ballina Shire Business Excellence Awards program recognises and rewards excellence in business, fosters innovation, and encourages a focus on sustainability, corporate citizenship and safe work practices. The awards also provide an opportunity for organisations to review and undertake improvements. We extend our thanks to our sponsors: Ballina RSL, Paradise FM, Cherry Street Sports, NAB Ballina, MOCO, Treasury Wine Estates, and Stone and Wood. All Business Excellence Award winners from the Ballina region will progress through Local and Regional Awards to the State Awards.

Collins Hume would love to introduce you to David Seymour David is an expert finance broker who works closely with Collins Hume and our clients to achieve exceptional lending outcomes. David is passionate about finding the best value finance deals for our clients. As a valued client of Collins Hume, we would like to reiterate that you are eligible for a complimentary consultation regarding any borrowing you may currently have or are looking to undertake. David can review your current home loan, investment loans, business loans, new equipment finance loans and self-managed superannuation loans. He works closely with a pool of 30 lenders plus Collins Hume to ensure that the most suitable possible outcome is achieved for you. Common finance questions David can help with are: Can I get a better interest rate? Can I reduce my monthly repayment? Is my loan the best for my current circumstances? If rates were to increase again, how would that impact me? If I wanted to purchase a property, where do I start? What is the best way to structure my loans to save interest and tax? Can I get a better finance deal than the car dealership is offering? David is always happy to sit down for a discussion to help you achieve your financial goals. Call David today on 0418 785 747 or click below to send an email enquiry:

STP Finalisation for FY 2024 – due 14 July 2024 Did you know that a Single Touch Payroll 'STP' finalisation is required by employers to complete their STP reporting obligations for the financial year? This process involves reviewing, finalising and submitting the employee information, including year-to-date (YTD) amounts, that has been reported to the ATO throughout the financial year via your STP software. This is the process that provides the ATO with an income statement for your employees to be able to complete their income tax returns. The income statements outline the payments you have made to employees and the amounts you have withheld for tax purposes. The STP finalisation is required by 14 July every year. In case you fail to finalise by this deadline, you may be able to apply for an extension. However, extensions are only granted in exceptional circumstances, such as natural disasters or severe illness, and are not available for general business or operational reasons. Your chosen STP accounting software will have a step-by-step guide on how to finalise STP: Xero STP Finalisation MYOB STP Finalisation Super Due Dates Employee Superannuation is due every quarter by the 28th of the following month – not on the 28th but before the 28th! To meet your employer super obligations, it is recommended to have your super lodged via your chosen payment method two weeks before the due date. Super is needed to be in the super fund by the due date. It is considered late if, for example, it is processed on the due date and reaches the fund after the due date. It is critical to pay super before the due date, otherwise the super guarantee charge will apply. The ATO are cracking down on late super payments and it is one of their items they have been given budgetary funds to chase. The super guarantee charge is a penalty that you will be required to pay for not paying super on time. Even if have paid the super in full but late, the super guarantee charge form is required to be lodged. This form holds admin fees and interest charges which are all calculated based on when the form is lodged, not the date you paid the super in full. The ATO have the information to know when super is lodged late, so lodge the SGC form as soon as you have paid the late super. The ATO will still issue a penalty notice for late super if you haven’t lodged the super guarantee charge form. It is an ATO penalty that you don’t want to have to pay. Super Guarantee Rate Increase The super guarantee rate will also change from 1 July from 11% to 11.5%. Check your payroll settings to ensure the statutory rate is being used and not an entered rate that won’t automatically roll over. It applies to all income paid on or after 1 July 2024 (including backpay). Tax Table Changes – from 1 July 2024 The tax rate has changed which means employees will have more in their pocket and less tax withheld for them. If you have set amounts in your bank to pay employees, these may need updating. Please contact the team at Collins Hume on 02 6686 3000 if you're a business owner needing help or advice about getting your year-end payroll processes right.

Here’s a summary of the key changes coming into effect on 1 July 2024. For business $325 energy relief credit for small business commences (for small businesses that meet the relevant State or Territory definition of a ‘small customer’) $20k instant asset write-off extended to 30 June 2025 (subject to the passage of legislation). For taxpayers Tax cuts reduce personal income tax rates and change the thresholds Superannuation guarantee increases from 11% to 11.5% - check the impact on any salary package arrangements Superannuation caps increase from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions Luxury car tax threshold increases to $91,387 for fuel-efficient vehicles and $80,567 for all others Car limit for depreciation increases to $69,674 $300 energy relief credit for households comes into effect (credited automatically quarterly). Need support or have questions? Talk to us today about maximising your outcomes and reducing your risks. Call Collins Hume on 02 6686 3000.

The ATO has made a call to help identify and manage illegal early access to superannuation by members of self-managed superannuation funds (SMSFs). In general, access to your super is only possible if: You retire and turn 60; or You turn 65 (regardless of whether you’re working). Early access to superannuation is only possible in very limited circumstances such as terminal illness, permanent incapacity, and severe financial hardship and there are very strict protocols to follow before any amounts are paid out. One of the benefits of an SMSF is the control that it provides to members. The flip side of full control is the temptation to dip into the super account and approve transfers without proper controls. There are two common ways illegal early access occurs: When the trustees (or their business) are in financial distress and they use the superannuation account for a short-term loan; or A promoter offers access through a scheme – often getting people to establish the SMSF and roll over their superannuation into the SMSF. Illegal access to the SMSF’s account or assets is not difficult to identify and generally will be picked up by your auditor. Where illegal access has occurred, not only is it likely that your retirement savings have been lost or impaired, but you are likely to face additional tax, penalties and interest, and be disqualified as a trustee. In addition, your name will be published online. One of the signs that there is a problem is when SMSF annual returns are not lodged on time or at all so ensure you are up to date with your SMSF compliance. Considering self-managed super? Unsure where to start? Ask to speak with Collins Hume's knowledgeable superannuation advisers to find out more on 02 6686 3000.

As a business owner, the path to increased profitability and a better lifestyle often parallels that of elite athletes striving for excellence. Just as top athletes rely on coaches to gain that crucial extra edge, you can benefit from expert guidance to elevate your business. The Power of Mentorship Mentorship bridges the gap between theoretical knowledge and practical application. Having a mentor for your business can be akin to an athlete having a coach, helping you achieve that extra one percent which can make the difference between success and mediocrity. Key Benefits of Working with a Mentor Skill Enhancement: Mentors can help your team develop critical skills necessary for navigating today’s complex business environment Employee Retention: A strong mentorship program enhances employee satisfaction and loyalty, reducing turnover and ensuring a stable, skilled workforce Leadership Development: Mentorship cultivates future leaders within your organisation, ensuring long-term stability and growth. Introducing Strategy360 for Business Owners Working with Collins Hume offers numerous benefits. We tailor our solutions to your precise needs, designed to improve business performance, minimise risks, boost business value, advance strategic initiatives and execute plans effectively. Our approach ensures that your business receives targeted support and guidance, ultimately leading to enhanced success and growth. We take the complexities of business and simplify them. Customising and collaborating with business owners, we help focus on achieving meaningful outcomes aligned with their specific objectives. We understand business. We have worked with hundreds of business owners covering all aspects of their business from set up to sale. We know that being a business owner can be difficult and often lonely. We offer helpful and holistic support for business owners and can be that sounding board you need to ensure you make informed decisions. Elevate your business to new heights. Contact Nathan McGrath on 02 6686 3000 for an obligation-free discussion on how Collins Hume can help you achieve greater profitability and a better lifestyle. Meet Nathan McGrath

The great wealth transfer from the baby boomer generation has begun and home ownership is the catalyst. The average price of a home in NSW is $1,184,500, the highest in the country. Canberra is next at $948,500, followed by Victoria at $895,000, with the Northern Territory the lowest at $489,200[1]. With the target cash rate expected to remain steady at a 12 year high of 4.35% over 2024, the pressure is on parents and family to help the younger generation become homeowners. Over the last 15 years, home ownership has fallen from 70% to 67% of the population. Over time, declining home ownership will increase the wealth gap in Australia as for many, home ownership is a significant factor in wealth accumulation. According to the Actuaries Institute, wealth inequality is significantly higher now than in the 1980s, with the wealthiest 20% of households currently having six times the disposable income of the lowest 20%[2]. The Domain’s First Home Buyer Report 2024 estimates the time for a couple aged between 25 and 34 to save a 20% deposit for an entry level home to be 6 years and 8 months in Sydney, and 5 years and 5 months in Melbourne (the Australian average is 4 years and 9 months). In that time, they are begrudgingly paying rent (or staying with Mum and Dad). So, should you help your children buy a home? If they can, many parents would prefer to assist their children when they need it most, rather than benefiting from an inheritance later in life. However, it’s essential that any support does not risk your financial security, and that means looking at what support you can afford to provide. The downside of cash gifts A cash gift towards a deposit or mortgage is a simple and effective method of helping a family member. However, there are a few downsides: Where the gift forms all or a significant portion of the deposit, lenders may want to ensure that the loan is serviceable and may require verification of the source of the funds to ensure the amount is not a loan and does not require repayment (i.e. a gift letter) In the event of a divorce or separation, the gift may not overtly benefit your child, and instead form part of the property pool to be divided. For income tax purposes, gifts from a family member out of natural love and affection are not normally taxed. The ‘bank of Mum & Dad’ If you provide a loan to your child to purchase a home, it’s essential that the terms of the loan are documented, preferably by a lawyer. There are many ways to structure the loan depending on what you’re trying to achieve. For example, the loan might mimic a bank loan with interest and regular payments, require repayment when the property is sold or ownership changes, and/or managed by your estate in the event of your death (treated as an asset of the estate, offset against the child’s share of the estate, or forgiven). There is a lot to think about before lending large amounts of money; what should happen in a divorce, if your child remortgages the property, if you die, if your child dies, if the relationship becomes acrimonious, etc. As always, hope for the best but plan for the worst. Providing security to lenders A family guarantee can be used to support a loan in part or in full. For example, with some lenders you can use your security to contribute towards your child’s deposit to avoid lender’s mortgage insurance (which ranges between 1% to 5% of the loan). When you act as a guarantor for a loan, you provide equity (cash or often your family home) as security. In the event your child defaults, you are responsible for the amount guaranteed. If you have secured your child’s loan against your home and you do not have the cashflow or capacity to repay the loan, your home will be sold. If you are contemplating acting as guarantor for your child, you need to look at the impact on your finances and planning first. Your retirement should not be sacrificed to your child’s aspirations. And, where you have more than one child, look at equalising the impact of the assistance you provide in your estate. Co-ownership There are two potential structures for buying property with your children: Joint tenants - the property is split evenly and in the event of your death, the property passes to the other owner(s) regardless of your will. Tenant-in-common – the more popular option as it allows for proportions other than 50:50 (i.e., 70:30). If you die, your share is distributed according to your will. Regardless of ownership structure, if the property is mortgaged and the other party defaults on the loan, the loan might become your responsibility. It is vital to consider this before loan arrangements are entered into. It’s also essential to have a written agreement in place that defines how the co-ownership will work. For example, what happens if your circumstances change and you need to cash out? What if your children want to sell and you don’t? Will the property be valued at market value by an independent valuer if one party wants to buy the other one out? It’s not uncommon for children to assume that they will only need to pay the original purchase price to buy your share with no recognition of tax, stamp duty or interest. And, what happens in the event of death or dispute? If you are not living in the home as your primary residence, then it is likely that capital gains tax (CGT) will apply to any increase in the market value of the property on disposal of your share (not the price you choose to sell it for). And, you will not benefit from the main residence exemption. In these situations, it is essential to keep records of all costs incurred in relation to the property to maximise the CGT cost base of the property and reduce any capital gain on disposal. Utilising a family trust A more complex option is to purchase a property in a family trust where you or a related company acts as trustee. This strategy is often used for asset protection purposes. Typically, at some point in the future, you would pass control of the trust to your child and it might be possible to do this without triggering material CGT or stamp duty liabilities, although this would need to be checked. On the eventual sale of the property, CGT will apply to any increase in value of the property and the main residence exemption cannot be used to reduce the tax liability, even if the child was living in the home. Be wary of state tax issues. For example, in some states, owning property through a trust will mean that the tax-free land threshold will not apply, increasing any land tax liability. Also, if the trust has any foreign beneficiaries, this could result in higher rates of stamp duty. Reduced or rent free property Buying a house and allowing your child to live in the house rent-free or at a reduced rent enables you to put a roof over their heads but adds no value to your child’s ability to secure a loan or utilise the equity of the property to build their own wealth. If you intend to treat the property your child is living in as an investment property and claim a full deduction for expenses relating to the property, then rent needs to be paid at market rates. If rent is below market rates, the ATO may deny or reduce deductions for losses and outgoings depending on the discount provided. Any rental income received is assessable to you. In addition, CGT will be payable on any gain when the property is sold, or ownership is transferred. If the intention is to provide this property to your child in your estate, ensure your will is properly documented to support this intent. Given the complexity, consult with Collins Hume’s specialists to ensure sound plans align with your wishes. Contact us in Ballina on 02 6686 3000.

As the end of the financial year (EOFY) approaches, businesses naturally turn their focus to the numbers — a crucial aspect for business owners and their accountants. However, amidst the hustle of balancing the books, it's imperative for businesses to not lose sight of the bigger picture: strategic planning for growth and long-term success. This transition from number crunching to strategic planning is what distinguishes mere accountants from true business advisers. It's about more than just meeting financial obligations; it's about charting a course for sustained growth and evolution. 3 questions to kickstart your planning By leveraging the insights and feedback from customers, colleagues and employees, businesses can identify areas for improvement and innovation: Do you have a well-defined plan for continual growth? Should you collaborate on establishing your business objectives with a roadmap for achieving them within specific timelines? Understanding and addressing your customer preferences and pain points are vital, as customer satisfaction is the cornerstone of sustainable growth. This collaborative approach not only enhances the current offerings but also informs the development of new solutions and services for the upcoming financial year. Far too often, businesses enter each new financial year without reflecting on past performance, perpetuating the cycle of bad habits. However, with careful planning and management, businesses can break free from this cycle and significantly enhance their performance. At Collins Hume, we offer a suite of strategies and tools designed to empower businesses in setting up a solid foundation for future growth and success. From strategic goal setting to customer-centric approaches, our expertise can guide businesses through the EOFY transition and beyond. As the curtains draw on another financial year, let's not just settle for balancing the books. Let's embrace strategic planning as the catalyst for driving sustainable growth and propelling businesses towards new heights of success. With a wealth of experience in top-level management, business consulting, mentoring and government advisory roles, Collins Hume Senior Business Adviser Nathan McGrath can bring his unique blend of skills and insights to your business. Don't wait for tomorrow; now is the time to start working on your business. In his role, Nathan urges businesses to seize the moment and prioritise their growth. Call Nathan today on 02 6686 3000 or click to send an email:

The end of the financial year is fast approaching! We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions. Opportunities for your business Bonus deductions There are a series of bonus deductions available to small business in 2023-24, these include the instant asset write-off, energy incentive, and the skills and training boost. Announced in the 2023-24 Federal Budget, the increase to the instant asset write-off threshold enables small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. In the 2024-25 Federal Budget, the Government extended this measure to 30 June 2025. Without these measures, the instant asset write-off threshold would be $1,000. However, legislation to enact the 2023-24 measure has not passed Parliament following a disagreement between the House of Representatives and the Senate about the amount of the threshold, and whether the measure should apply to medium businesses as well (up to $50m). Similarly, the $20,000 energy incentive that provides an additional 20% deduction on the cost of eligible depreciating assets or improvements to existing depreciating assets that support electrification and more efficient use of energy in 2023-24, is not yet law. Assuming both measures pass Parliament by 30 June 2024, any assets need to be first used or installed ready for use, or the improvement costs incurred, between 1 July 2023 and 30 June 2024 to be written off in 2023-24. What is certain is the bonus 20% deduction for eligible expenditure for external training provided to your employees. The ‘skills and training boost’ is available to businesses with an aggregated annual turnover of less than $50 million. To claim the boost, the training needs to have been provided by a registered training provider and registered and paid for between 29 March 2022 and 30 June 2024. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development. Write-off bad debts Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June. Ensure you document the bad debt on your debtor’s ledger or with a minute. Obsolete plant & equipment If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June. For companies If it makes sense to do so, bring forward tax deductions by committing to directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June. Risks Tax debt and not meeting reporting obligations Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf. Professional firm profits For professional services firms – architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action. Opportunities for taxpayers Take advantage of the 1 July 2024 tax cuts by bringing forward your deductible expenses into 2023-24. Prepay your deductible expenses where possible, make any deductible superannuation contributions, and plan any philanthropic gifts to utilise the higher tax rate. Bolstering superannuation If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction. And, if your superannuation balance on 30 June 2023 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate. To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and get an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 75, you can only make a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply). And, if your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset. If you are likely to face a tax bill this year, for example, you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe. Charitable donations When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts over $2 as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy). To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR. Philanthropic giving can be undertaken in a number of different ways. Rather than providing gifts to a specific charity, it might be worth exploring the option of giving to a public ancillary fund or setting up a private ancillary fund. Donations made to these funds can often qualify for an immediate deduction, with the fund then investing and managing the money over time. The fund generally needs to distribute a certain portion of its net assets to DGRs each year. Investment property owners If you do not have one already, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help to maximise your deductions. Risks Work from home expenses Working from home is a normal part of life for many workers, and while you can’t claim the cost of your morning coffee, biscuits or toilet paper (seriously, people have tried), you can claim certain additional expenses you incur. But, work from home expenses are an area of ATO scrutiny. There are two methods of claiming your work from home expenses; the short-cut method, and the actual method. The short-cut method allows you to claim a fixed 67c rate for every hour you work from home. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates. The alternative is to claim the actual expenses you have incurred on top of your normal running costs for working from home. You will need copies of your expenses, and your diary for at least 4 continuous weeks that represents your typical work pattern. Landlords beware If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property needs to be rented or genuinely available for rent to claim the expenses. Sounds obvious but taxpayers claiming investment property expenses when the property was being used by family or friends, taken off the market for some reason or listed for an unreasonable rental rate, is a major focus for the ATO, particularly if your property is in a holiday hotspot. There are a series of issues the ATO is actively pursuing this tax season. These include: Refinancing and redrawing loans – you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses. The difference between repairs and maintenance and capital improvements. While repairs and maintenance can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets). Co-owned property – rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses. Gig economy income It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, OnlyFans, youtube, etc., is declared in your tax return. The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. If you are a content creator for example, this is when your account is credited, not when you direct the money to be paid to your personal or business account. Squirrelling it away from the ATO in your platform account won’t protect you from paying tax on it. Since 1 July 2023, the platforms delivering ride-sourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report transactions made through their platform to the ATO under the sharing economy reporting regime. This is the first year that the ATO will have the income tax returns of taxpayers to match to this data. All other sharing economy platforms will be required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest. Need support or have questions? Talk to us today about maximising your outcomes and reducing your risks. Call Collins Hume on 02 6686 3000.

The ATO is cracking down on business owners who take money or use company resources for themselves. It’s common for business owners to utilise company resources for their personal use. The business is often such a part of their life that the line distinguishing ‘the business’ from their life can be blurred. While there are tax laws preventing individuals accessing profits or assets of the company in a tax-free manner, mistakes are being made and the Australian Taxation Office (ATO) has had enough. The ATO has launched a new education campaign to raise awareness of these common problems and the serious tax consequences that can arise. What the tax law requires Division 7A is an area of the tax law aimed at situations where a private company provides benefits to shareholders or their associates in the form of a loan, payment or by forgiving a debt. It can also apply where a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate. Division 7A was introduced to prevent shareholders accessing company profits or assets without paying the appropriate tax. If triggered, the recipient of the benefit is taken to have received a deemed unfranked dividend for tax purposes and taxed at their marginal tax rate. This unfavourable tax outcome can be prevented by: Paying back the amount before the company tax return is due (this is often done by way of a set-off arrangement involving franked dividends); or Putting in place a complying loan agreement between the borrower and the company with minimum annual repayments at the benchmark interest rate. The problem areas Division 7A is not a new area of the tax law; it has been in place since 1997. Despite this, common problems are occurring. These include: Incorrect accounting for the use of company assets by shareholders and their associates. Often, the amounts are not recognised Loans made without complying loan agreements Reborrowing from the private company to make repayments on Division 7A loans The wrong interest rate applied to Division 7A loans (there is a set rate that must be used). Like life, managing the tax consequences of benefits provided to shareholders and their associates can get messy quickly. Avoiding problems can often come down to a few simple steps: Don't pay private expenses from a company account Keep proper records for your company that record and explain all transactions, including payments to and receipts from associated trusts and shareholders and their associates, and If the company lends money to shareholders or their associates, make sure it's on the basis of a written agreement with terms that ensure it's treated as a complying loan – so the full loan amount isn't treated as an unfranked dividend. There are strict deadlines for managing Division 7A problems. For example, if the borrower is planning to repay the loan in full or put a complying loan agreement in place, this needs to be done before the earlier of the due date and actual lodgement date of the company’s tax return for the year the loan was made. Collins Hume's purpose is to inspire business owners to achieve success in powerful and meaningful ways. Let us know if any issues covered here are of particular interest to you. Call our team in Ballina on 02 6686 3000.