Personal tax & super
What lies ahead in 2024-25? On 1 July 2024, personal income tax cuts were implemented, and the superannuation guarantee (SG) rate increased to 11.5%. Employers need to update their payroll systems and check salary sacrifice agreements. The ATO reminds employers to pay SG to all eligible workers, including temporary residents and some contractors. Make sure super fund details and tax file numbers are correct, and pay SG on time to avoid penalties. The next SG payment is due by 28 July.
Wages
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.
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.
Super: Opportunities and Risks
Opportunities
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.
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).
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.
Risks
Working from home has become common, and while certain expenses like coffee and toilet paper are not claimable, others are.
The ATO scrutinizes work from home expenses, allowing claims through two methods: the short-cut method and the actual method.
The short-cut method offers a fixed rate of 67c per hour for costs like energy, internet, and stationery, requiring precise records of work hours. The actual method involves claiming incurred expenses beyond normal running costs, needing expense copies and a four-week diary. Investment property owners can only claim deductions for expenses incurred while earning income, not when properties are used personally or listed at unreasonable rates.
The ATO targets issues such as refinancing loans for personal use, differentiating between repairs (immediate deductions) and capital improvements (spread over years), and ensuring rental income and expenses are claimed according to legal ownership interests.
Earned an income from the sharing economy?
It’s essential that any income earned from sharing economy platforms such as Airbnb, Stayz, Uber, etc., is declared in your tax return.
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.
2023-24 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.
This reporting regime, combined with the ATO’s data matching programs, mean that if income is not declared, it’s likely you will receive a “please explain” request from the regulator.
ATO’s notice of Medicare levy exemption data-matching program
The ATO will acquire Medicare Exemption Statement data from Services Australia for the
2024 to 2026 income years, including the following:
- full name, date of birth, and residential address; and
- entitlement status and approved entitlement details.
The ATO estimates that records relating to approximately 180,000 individuals will be
obtained each financial year.
The obectives of this program are to:
- ensure individuals are correctly claiming exemption from payment of the Medicare levy and Medicare levy surcharge;
- undertake verification activities where the information obtained indicates a taxpayer may not be entitled to claim the exemption, either partly or in its entirety;
- help ensure that individuals and businesses are fulfilling their tax and super registration, lodgment, reporting and payment obligations; and
- promote voluntary compliance by communicating how the ATO uses external data with its own, to help encourage taxpayers to comply with their tax and super obligations.
ATO may cancel ABNs that are not used
The ATO understands that people do not always remember to cancel their ABNs when they no longer need them. That is why the ATO regularly reviews, and sometimes cancels, inactive ABNs
The ATO may review a taxpayer’s ABN if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information.
If the ATO thinks a taxpayer is no longer using their ABN, it will contact them by email, letter or SMS. If the taxpayer is:
- still running a business, the ATO will tell them what they need to do to keep their ABN; or
- no longer in business, they do not need to do anything — the ATO will cancel their ABN.
Taxpayers who think they are still entitled to an ABN that has been cancelled need to reapply for it.
Taxpayers who restart their business activities may be able to reapply for the same ABN, depending on whether their business structure changes.
For example, they can reapply for the same ABN if they were a sole trader and they want to restart their business activities as a sole trader (whereas they would need a new ABN if they wanted to restart their business activities as a company).
Taxpayers with an ABN need to tell the ATO about any changes to their business details within 28 days. This includes cancelling their ABN if their business is no longer operating.
Tax Time Scams: Be on guard
Despite preventative approaches by the ATO and the National Anti-Scam Centre (NASC) to take down fraudulent websites and block scam text messages, ATO impersonation scams are on the rise as tax time approaches.
Using unsolicited contact via SMS, email or on social media, ATO impersonators frequently offer refunds or assistance in resolving tax issues or suggest suspicious activity on a taxpayer’s account. The ATO recommends not engaging with unsolicited contact and instead looking up the ATO’s contact numbers to verify the genuine nature of the communication.
The creation of NASC, funding for the Australian Securities and Investments Commission (ASIC) and the Australian Communications and Media Authority (ACMA) to take down fake investment websites, and establishing the SMS Sender ID register to stop scammers from spoofing trusted brand names have already had some success: over 5,000 website takedowns occurred and 100 million scam text messages were blocked in the final quarter of 2023. However, the lead-up to tax time still poses a risk – updated figures for May 2024 show a 31% increase in reports of ATO impersonation scams across SMS, email, phone contact and social media channels.
The ATO is working on preventative measures to help the community to recognise legitimate ATO SMS interactions, including removing hyperlinks from all its outbound unsolicited SMSs. Cybercriminals often use hyperlinks in SMS phishing scams, directing individuals to highly sophisticated websites – for example a fake myGov login page – in order to steal personal information or install malware.
The ATO has a dedicated team to monitor for scams and to assist taxpayers who have fallen prey to scammers, and provides detailed information about email and SMS scams, phone scams and social media scams on the ATO website. The ATO also offers a reporting service where people can report an ATO impersonation scam if they encounter one.