Stamp duty or an annual property tax for NSW first home buyers? First home buyers purchasing property in NSW of up to $1.5m will have a choice of paying stamp duty or an annual property tax from 16 January 2023. The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 are: $400 plus 0.3% of land value for properties whose owners live in them $1,500 plus 1.1% of land value for investment properties. Property tax assessments will be issued annually to home buyers who take the annual property tax option. As an example, a first buyer purchasing a $1.2m NSW property with a land tax value of $720,000, could pay stamp duty of $50,875 or opt to pay the annual property tax ($2,560 for 2022-23). The property tax rates will be indexed annually. Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will be eligible to opt into the property tax. If the property tax option is selected, first home buyers must move into the property within 12 months of purchase and live in it continuously for at least 6 months. The annual property tax is only applicable to the purchaser. If the property is sold, the property tax does not apply to subsequent purchasers. For eligibility details, see First Home Buyer Choice on the NSW Government website. Legislation enabling the property tax is expected before the NSW Parliament this month. If passed, eligible first home buyers who sign a contract of purchase between the passage of the legislation and 15 January 2023 will be eligible to opt into the property tax. These purchasers will pay land stamp duty but will be able to apply for and receive a refund of that duty if they opt into property tax. Queensland backs down on Australia-wide land tax assessment The Queensland Government has backed away from an amendment that would have seen the land tax rate for investment property in Queensland assessed on the value of the investor’s Australia-wide land holdings from 1 July 2023, not just the value of their Queensland property. The amendment passed the Queensland Parliament and became law on 30 June 2022. The amendment would see the value of all of the landholder’s Australian investment property assessed, the value of Queensland land tax calculated on taxable Australian-wide investments, then apportioned to the Queensland portion of the land. The amendment requires the landholder to declare their interstate landholdings and data from other sources to verify the landholdings. The end result is many investors being tipped into a higher land tax rate. The Bill states, “The land tax reform is intended to make Queensland’s land tax system fairer by addressing an inequity which can result in a landholder with all of their landholdings in Queensland paying more land tax than a landholder with a similar value of landholdings spread across jurisdictions.” Following the National Cabinet Meeting on 30 September, Premier Palaszczuk rescinded the reform as it relied on the “goodwill of other states, and if we can't get that additional information, I will put that aside.” How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000.

We're proud to announce that Collins Hume is officially Climate Neutral Certified! Science says we have just nine years to make the changes needed to tackle climate change. Overwhelming? Yes. But it’s also an opportunity. Collins Hume is now officially one of hundreds of companies committed to leading the way, right now. We've spent the last three months working with Climate Neutral to measure our carbon footprint. We calculated all of the emissions that it takes to do what our business does. We then offset all our carbon footprint by investing in climate change solutions. Collins Hume Partner Peter Fowler said, “Our recent partnership with 1% for the Planet is another crucial piece of our sustainability jigsaw.” “It’s important that we take action on the positive difference we can make as a business. We want to make a living legacy that will be timeless — one that’s about contribution as opposed to consumption.” Climate change requires immediate action There isn't a minute to waste when it comes to removing climate-changing emissions from our global economy. If every business were to measure, offset and reduce their emissions right now, we could accelerate this journey in a serious way. Look for the Climate Neutral Certified label to support the businesses that are taking immediate action on climate change. Tell your favourite ones that you want them to #beclimateneutral too. Together, we can solve the climate challenge. Let's get to work. Collins Hume is thrilled to be in good company with other Climate Neutral Certified brands. We believe in Climate Neutral’s mission of taking action now to solve a problem that we understand to be an urgent threat. Follow us on our journey — and let’s work together to tackle climate change faster. Solutions to climate change exist, they just need funding. If we can drive investment into these projects, we can cut our emissions and get on the right path to a zero-carbon future and a balanced, healthy climate. “We are thrilled that by coming to work every day, we can add value to our clients’ businesses and lifestyle, whilst doing our bit to make the planet a healthier and happier place,” Peter added. Read more at https://www.climateneutral.org/.

The October 2022 Federal Budget and what it means for business Last month the Treasurer, Dr Jim Chalmers, handed down Labor’s first Federal Budget (an updated Budget for the 2022/23 financial year). The good news is there were virtually no tax or superannuation changes that affect small or medium size businesses. This is very much welcomed. The bad news is with interest rates and labour costs rising, as well as high inflation, businesses looking for assistance from the Government will be very disappointed by this interim Budget. Based on our analysis, the big winners appear to be: Families – Childcare subsidies extended, increased benefits with the Paid Parental Leave scheme Pensioners – Deeming rates are frozen at current rates until 30 June 2024, new measures to incentivise pensioners to downsize their homes, and income levels lifted significantly for eligibility for the Commonwealth Seniors Health Card Retirees – Downsizer superannuation contribution eligibility age is reduced from 60 to 55 years, starting from first quarter after this legislation is passed. This allows each eligible person to contribute up to $300,000 into their super at a much earlier age, benefiting from super’s low tax rates. Our concerns for future years This wasn’t the usual Federal Budget held in May where tax, super and other changes that affect business owners are announced. Instead, it was a Budget to wind back what the previous Government said they would do and to “fix” things and put in place new policies from the new Government. Based on the negative economic expectations discussed by the Government after releasing this Budget, it appears highly likely that significant tax increases will occur in the 2023 or future Budgets. Additionally, the ATO is clamping down further on business owners and ramping up audit activity in an attempt to raise tax revenue to support the new Government’s spending. We need to start planning for this now. 1. New ATO Ruling affects “Professionals” and profit allocations New ATO guidance changes the way that professional firm profits can be allocated (or split) among a family group from 1 July 2022 onwards. As a result, most professionals will end up paying larger amounts of tax from the 2023 financial year onwards. A professional firm is one that offers customised, knowledge-based services to clients which include medicine (doctors, dentists, medical specialists, etc), lawyers, architects, engineers, accountants, financial advisors and consultants. 2. Business cash flow may be “crunched” With inflation running the highest it has been in decades, interest rates rising, labour costs increasing and power costs exploding, you need to closely monitor your profit margins and ensure your prices are set at a level that keeps your business profitable. We believe it is ESSENTIAL for you to plan for the next 18 months by preparing a monthly Profit and Cash Flow Forecasts to prove to yourself that your business model (i.e. your way of running your business to succeed) is sustainable, or to alert you to the fact that you need to consider immediate changes to your pricing and operations to keep your cash flow positive. Collins Hume can help you with this essential work. 3. Big changes affecting Family Trusts (also known as Discretionary Trusts) We need to alert you to two key changes that will affect people using Family Trust in this 2023 financial year: This process will take time and will need to start taking place from the beginning of May 2023. Next steps For peace of mind, let’s meet for an initial review of how these key changes may affect you: 1. Professional Firm Profit Allocations 2. Cash Flow “Crunch” 3. Family Trusts – S100A and Distributions to Family Members 4. Family Trusts – “Owies” Case and Consideration of Beneficiaries When are you available to meet with us? Make a time with us here and let’s get started.

National Cabinet agreed to end the mandatory isolation requirements for COVID-19 effective from 14 October 2022 Each state and territory has, or will, implement the end of the isolation rules. The Pandemic Leave Disaster Payment, the payment to workers who have lost income they needed to self-isolate or care for someone with COVID-19, also end on 14 October. The Pandemic Leave Disaster Payment was extended beyond its 30 June end date but restricting the number of times claims can be made in a 6-month period. While the Pandemic Leave Disaster Payment will end, National Cabinet agreed to continue targeted financial support for casual workers, on the same basis as the disaster payment, for workers in aged care, disability care, aboriginal healthcare and hospital care sectors. Final details of this new payment are yet to be released. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000.

Executive Assistant Lucy Flanagan When Executive Assistant Lucy Flanagan (then Alcock) joined Collins Hume in 2020 little did we know how much of a positive impact she’d make on our business! According to Lucy, though, she fell into the accountancy profession. Having grown up and spent all her working time in the Northern Rivers, a friend mentioned that a position had opened up and she took on her first role as an accounting firm receptionist. When the office manager left, she quickly filled those shoes. While she was there she also managed to get two traineeships done and dusted (one as a TAFE Award Recipient). Wanting to get back into a more specialised role, Collins Hume was a great fit for Lucy and she changed firms. Lucy revels in routine, order and helping others to have her organisation skills rub off on them. Two different styles; two different hats In her role as one of only two Executive Assistants at Collins Hume, Lucy rolls with everything Partner Chris Atkinson sends her way in his fast-paced manner. However, she also loves being able to support Partner Kelly Crethar in order to free up capacity and make room in her busy client schedule. And Lucy has no problem understanding the nuances of accounting jargon. On any given day, she can find herself making appointments, helping clients, or liaising, communicating and preparing to make Kelly’s and Chris’ working lives easier. “I’m very comfortable relating to people just as much as I love ticking things off and getting stuff done,” says Lucy. “I enjoy being at Collins Hume. Everyone cares about the next person and the Partners look after us and take an interest in our professional and personal lives.” Outside the office, Lucy and her husband love nothing more than packing up their 4WD and going camping. Being in the middle of a major house renovation, the times they get to do that are precious, but there is light at the end of the tunnel. “COVID-19 has put us in the right mindset and reminded us of our priorities,” Lucy added. “We have some big travel plans on the horizon which we hope will broaden our minds and allow us to gain some perspective and balance.” She is also an avid reader adding, “I’ve always got my head shoved in a book. I love getting lost in the stories and different worlds.” Lucy Flanagan holds a Cert III (TAFE Award Recipient) and also a Cert IV Business Admin. She is also a Justice of the Peace. Copyright 2022. Collins Hume Accountants and Business Advisers. Ballina and Byron Bay NSW

Shuffling the Deck — 2022-23 Budget 2.0 There is nothing in the 2022-23 Federal Budget 2.0 that will create a UK-style crisis: the stage 3 tax cuts legislated to commence on 1 July 2024 are not mentioned, and most funding initiatives appear to be a reallocation of previous Government initiatives. With seven months before the 2023-24 Budget released in May 2023, this Budget is a shuffling of the deck, not a new set of cards. Key measures include: Childcare subsidy increase Added flexibility and an expansion of Paid Parental Leave Aged care reforms Change to the taxation of off-market share buy-back by listed companies The scrapping of the initiative to self-assess the effective life of intangible assets Scrapping of the announced but not legislated 3-year audit cycle for SMSFs Energy grants for SMEs (but no detail yet) Read our full summary: Cost of living pressures will continue. While some initiatives such as the increase to childcare subsidies will help, the Budget flags some fairly bracing economic expectations. Tight labour market conditions are expected to see annual wage growth pick up to 3.75% by June 2023. Even so, high inflation is expected to see real wages fall over 2022-23 before rising slightly over 2023-24. That is, your wages might increase but the gains will be eaten away by the increasing cost of living. The ATO gets an extra $80m to extend its personal income tax compliance program, with $674m anticipated in increased receipts and over $80m in increased payments as a result. Tax deductions will be looked at closely. As expected, multinationals are a target. New measures will limit opportunities to shift taxable profits offshore. And, the ATO’s Tax Avoidance Taskforce is expected to deliver a whopping $2.8bn in additional tax receipts and $1.1bn in payments over the 4 year period. How to contact us If we can assist you to take advantage of any of the Budget measures, or to risk protect your position, please let us know. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000.

We’re often asked about the best way to sell a business There are two key components at play in the sale of a business: structuring the transaction; and positioning the business to the market. Both elements are important and can significantly impact your result. Structuring the transaction covers areas such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising the vendor’s position. Positioning the business for sale is all about ensuring that you achieve a sale and maximise your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be. Positioning is about doing everything needed to maximise the probability of a sale occurring, whereas structuring is about getting the best outcome from a transaction once it has occurred. A lot of people make the mistake of spending most of their energy on the structuring of the transaction. It is important but only becomes important if the sale is achieved. Structuring should be addressed first to help identify any key decisions that need to be made but put most of your effort into positioning the business for sale. To do this, you need an objective assessment of how the business compares in its market, its competitive position, and what if any impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer’s market and will try to drive down price expectations. Whether or not you are in a buyer’s market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business to similar businesses but also opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this well in advance of putting your business on the market. Thinking of selling your business? Talk with Collins Hume in Ballina or Byron Bay today about preparing your business for sale.

To cut tax or not to cut? In September, amid a climate of startling interest rates, UK Chancellor Kwasi Kwarteng announced a series of tax cuts, including the reduction of the top personal income tax rate that applies to those earning more than £150,000 from 45% to 40%. Just ten days later, following market turmoil that saw the British Pound drop at one point to a low of $1.035 USD, its lowest level since 1985, the decision was reversed calling the cuts “a massive distraction.” Heading into the 2022-23 Federal Budget on 25 October, the question for the Australian Government is different. It is not whether to introduce personal income tax cuts but whether to keep, amend or repeal the cuts legislated to commence on 1 July 2024. In Australia, the 2018-19 Budget introduced the Personal Income Tax Plan. The plan implemented three stages of income tax cuts over seven years that will, by 2024-25, simplify the tax brackets and enable taxpayers to earn up to $200,000 before paying a new top marginal tax rate of 45%. Stages of the plan, bringing relief for low and middle-income earners, were brought forward in the 2019-20 Budget and again in 2020-21. Labor’s pre-election Lower Taxes policy states, “An Albanese Labor Government will deliver tax relief for more than 9 million Australians through the legislated tax cuts that benefit everyone with incomes above $45,000.” But this month, the Treasurer has subtly changed the narrative from simply “our policy has not changed on stage three tax cuts” to “We do need to ensure that spending in the Budget, particularly in these uncertain global times, is geared toward what's affordable and sustainable and responsible and sufficiently targeted. I think that's one of the lessons from the UK.” The public appeal of repealing the final stage three tax cuts is understandable. Back in 2018-19 when the plan was first introduced, the economy was in surplus and Australia was yet to feel the effects of a global pandemic, environmental extremities, and the Russian invasion of Ukraine. The tax cuts forego around $240bn of tax revenue over the next 10 years, and because it is percentage based, favours high-income earners. The public policy think tank, the Grattan Institute, previously warned that if the government progressed with the stage three cuts “Australia’s income tax system will be less progressive than it’s been since the 1950s”. Conversely, the rationale for reforming the current personal income tax regime where the highest marginal tax rate applies from around 2.5 times average full-time earnings (compared to around 4 times in Canada and 8 times in the US), is also understandable. When it comes to international competitiveness, New Zealand’s top marginal tax rate is 33% (from $180,000) and Singapore’s is 22%, increasing to 24% in 2023-24. If implemented, stage 3 of the income tax plan would see around 95% of taxpayers paying a marginal tax rate of 30% or less. The 1 July 2024 tax cuts Stage three of the Personal Income Tax Plan is legislated to take effect from 1 July 2024. What the tax stats say Personal income and withholding tax represents around 48% of the annual Commonwealth tax collections. Company tax, by comparison, is around 16%, and the goods and services tax (GST) just under 15% of total tax revenue collected. Australia has a progressive personal tax system. That is, those with higher incomes pay not only a higher amount of tax, but a higher proportion of their income in tax. As a result, the 3.6% of taxpayers with taxable incomes of over $180,000 pay 31.6% of the total. Where to from here? The second 2022-23 Federal Budget will be announced on 25 October 2022. If the Government make no mention of the stage three tax cuts, they have another opportunity to refine their position in the 2023-24 Federal Budget released in May 2023, more than a year before the 1 July 2024 tax cuts come into effect. Our best guess? The Government will announce a review of the stage three tax cuts, then open the issue to consultation, locking in the position, whatever it is, in the 2023-24 Federal Budget. We’ll keep you posted! Look out for our 2022-23 Federal Budget update on 26 October!

Do you think you can spot a cyber threat? Cyber security is more important than ever. Protecting your and your customers’ data from cybercriminals should be one of your top business priorities. Now is the time to ensure you know how to identify and respond to cyber threats. Increasing your knowledge and awareness is the best way to protect your business. Luckily, you don't have to be an IT expert to step up your cybersecurity. Protect your business now with these five ways to increase your online account security: 1. Make 2 Factor-Authentication Mandatory 2 Factor-Authentication (2FA) helps prevent a hacker from getting into your account, even if they steal your password. To avoid common phishing techniques associated with text message codes, choose to apply 2-Factor Authentication. Alongside the traditional password, 2FA enabled users are required to enter a one-time security code that they receive via text which is the best way to authenticate the user. You don’t have to make 2FA mandatory in your business, but we strongly recommend it as do most good cloud computing platforms. Related reading: Changes to multi-factor authentication are coming for Xero customers » 2. Close shared login accounts Shared logins mean multiple people in your business know a password and can make it harder to track any work or issues you may have. 3. Remove risky access to your data Consider removing account access for any staff who are no longer with you. 4. Update your software If your browser operating system or apps are out-of-date, the software might no longer be safe from hackers. Keep your software updated to help protect your account. 5. Use unique, strong passwords It’s risky to use the same password on multiple sites. If your password for one site is hacked, it could be used to access your accounts on multiple sites. Instead, consider using a password manager. If you’re ever unsure about a phone caller, SMS, voicemail or email claiming to be genuine but seems suss, do not reply. You can also follow the latest scams and advice on how to protect yourself on the ATO website or at Scamwatch. Contact Collins Hume in Ballina or Byron Bay »

To assist local residents to navigate their aged care options, Family Aged Care Advocates will be holding a local community event — Ageing Well At Home: Your definitive guide to growing older and getting help at home. Aged care specialists Shane Hayes and Whenua Oner will be joined by various Northern NSW organisations that will come together to share facts, tips and advice and answer any questions you may have. When: Sunday 30 October, 1.30 pm to 4.30 pm Where: Ballina Surf Club Entry: By gold coin donation with limited seating so bookings are essential. RSVP at familyagedcareadvocates.com.au/events/ageing-well-at-home or call Shane on 0411 264 002. Family Aged Care Advocates work to keep people living in their homes as long as possible. Through individual and family consultation their aim is to provide support and close the gap in understanding what options are available to people when they require additional care. "We meet with people and their families who are uncertain of the actual steps to take or who have simply given up because it’s all just too hard," said Shane. "We want people to know what is possible, how to go about it and who can help them achieve their ideal outcome." "We also know that living at home longer is not just about services that we can wrap around people. It’s about being proactive in managing health, understanding the implications of certain conditions, thinking about available resources and planning," Shane added. It sounds like a lot of work and it can be, but it can also empower people to really own how they want to live their lives in this time."

Clients with self-managed superannuation funds (SMSF) often ask what assets the SMSF can acquire ‘Why’? The golden rule for acquiring assets inside your SMSF is why? To be compliant, your fund must be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement. The sole purpose test (section 62 of the Superannuation Industry (Supervision) Act 1993), is your starting point. If the collectable you are looking to acquire does not fulfil this purpose, then you have an immediate problem. Let’s assume you are looking to acquire vintage cars. The question to ask is, is the acquisition a viable investment or simply a desire of the members to own vintage cars. Does the investment ‘stack up’ relative to other forms of investment to build/protect the retirement savings of members? The sole purpose test extends to how the collectable is managed once acquired. Given the asset is for the sole purpose of the member’s retirement benefits, the members (or their associates) cannot use or enjoy the asset in any way. This means: Storage of the collectable cannot be at the trustee’s residence or displayed at their office. The ATO says, “You can store (but not display) collectables and personal use assets in premises owned by a related party provided it is not their private residence. They can’t be displayed because this means they are being used by the related party. For example, if your SMSF invests in artwork it can’t be hung in the business premises of a related party where it is visible to clients and employees.” Leasing or use of the collectable can only be undertaken with an unrelated party. The collectable must have its own insurance policy owned by the SMSF (multiple items can be listed on the same policy i.e., wines of different brands). The insurance policy must be in place within 7 days of acquisition. Like all other assets, if a collectable is sold to a related party, then it must be sold at market value. Collectables also require a qualified independent valuation if sold to a related party. This means you cannot stay in a holiday home owned by your SMSF, you cannot drive a vehicle owned by the SMSF, and you cannot enjoy artwork held by the SMSF. And, those bottles of Penfolds Grange owned by the SMSF that broke (wink, wink) are likely to trigger an audit as they should have been properly stored in a way that prevents breakage. Your investment strategy An SMSF investment strategy should articulate the plan trustees have for a fund and the investments they choose to hold. It should drill down into the reasons why certain assets will be acquired (or sold) and how these choices align to the retirement goals of the members. If your SMSF is considering purchasing collectables, it is essential that your investment strategy is aligned to these types of investments and articulates why the asset fits within the strategy. This is particularly important if the collectible/s will dominate the types of assets held by the fund, its liquidity, and diversity. A common question is, can my SMSF purchase, let’s say artwork, from a member or a related party of the fund? The answer is no. SMSFs are not allowed to purchase assets, other than listed shares and business real property, from related parties. But, the SMSF could transfer the artwork to a member as an in-specie lump sum payment if the member meets a condition of release, or sell the asset to the member but only if the transaction is at arms length, and an independent valuation confirms the market value of the asset. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »

The Government has reinvigorated the 120% skills training and technology costs deduction for small and medium businesses. An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in recent exposure draft by Treasury. Timing Two investment ‘boosts’ will be available to small and medium businesses with an aggregated annual turnover of less than $50 million: Skills & Training Boost Technology Investment Boost The Skills and Training Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to start claiming the bonus deduction until the 2023 tax return. That is, for expenditure incurred between 29 March 2022 and 30 June 2022, the additional 20% ‘boost’ deduction will not be claimable until the 2022-23 tax return (assuming the announced start dates are maintained if and when the legislation passes Parliament). The Technology Investment Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return. The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred. When it comes to expenditure on depreciating assets, the bonus deduction is equal to 20% of the cost of the asset that is used for a taxable purpose. This means that, regardless of the method of deduction that the entity takes (i.e., whether immediate or over time), the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost. Technology Investment Boost The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services. The boost is capped at $100,000 per income year with a maximum deduction of $20,000. To be eligible for the bonus deduction: The expenditure must be eligible for deduction (salary and wage costs are excluded for the purpose of these rules) The expenditure must have been incurred between 7.30pm (AEST), 29 March 2022 and 30 June 2023 If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023. To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example: digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks; digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and e-commerce – supporting digitally ordered or platform enabled online transactions. Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria. Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose. The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to: Assets that are sold while the boost is available Capital works costs (for example, improvements to a building used as business premises) Financing costs such as interest expenses Salary or wage costs Training or education costs Trading stock or the cost of trading stock For example: A Co Pty Ltd (A Co) is a small business entity. On 15 July 2022, A Co purchased multiple laptops to allow its employees to work from home. The total cost was $100,000 (GST-exclusive). The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use. As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the full purchase price of the laptops ($100,000) as a deduction under temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return. The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies. Skills and Training Boost The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees. External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia. To be eligible for the bonus deduction: The expenditure must be for training employees, either in-person in Australia, or online The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration The registered training provider must not be the small business or an associate of the small business The expenditure must be deductible Enrolment for the training must be on or after 7.30pm, 29 March 2022. The training must be necessarily incurred in carrying on a business for the purpose of gaining or producing income. That is, there needs to be a nexus between the training provided and how the business produces its income. Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation. Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The training boost is not available to: Sole traders, partners in a partnership, or independent contractors (who are not employees) Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person. For example: Cockablue Pets Pty Ltd is a small business entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 (GST exclusive) for the employee to undertake external training in veterinary nursing. The training is delivered by a registered training provider, whose scope of registration includes veterinary nursing. The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible under section 8-1 of the ITAA 1997 as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700. In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »