All the answers are online aren’t they…?
Another year rolls over and we know a lot of our clients are wanting quick answers about lots of tax questions and how they can get the most out of their annual tax position.
You could jump onto online forums, social media or AI sites (you know what they are called) for answers to any of the worlds problems. But this only really assists for general information, and most times the answers generated are just not right or even outdated, or too broad to really help.
Each and every client’s circumstances are unique, and answers generated using these sites could bring the totally wrong results. Trust us – we’ve tested it ourselves and clients using this may then omit income or even miss obvious deductions, and thus overpay a lot of taxes, or just outright get it all wrong.
At Lidgerwoods we will get to the bottom of your circumstances and correctly apply the tax law to your situation. We also ensure you fully understand your business structure and financial position, to then get the best taxation outcomes possible and to ensure you can sleep at night knowing we’ve got it in hand for you.
Some of your answers may be in the attached NINE articles dealing with a number of current tax issues. So please take the time to read over these and feel free to contact our office if you need to know how these relate to you personally – please don’t just search online!
You can always approach us here at the kitchen bench to take care of your tax issues.
The Team at Lidgerwoods
SOPHIE, MARC, KYLIE, LOUISE, DAVID, JACOB, DARCY, ROB and CATH
$20,000 instant asset write-off for 2024/25
Taxpayers who have purchased or are purchasing a business asset this financial year should remember that the instant asset write-off limit is $20,000 for the 2025 and now 2026 years.
If a taxpayer’s business has an aggregated annual turnover of less than $10 million and they use the simplified depreciation rules, they may be able to use the instant asset write-off to immediately deduct the business part of the cost of eligible assets, as follows.
- The full cost of eligible depreciating assets costing less than $20,000 (= $22,000 incl. GST for GST registered business) that are first used or installed ready for use for a taxable purpose before the end of the tax year in question.
- New and second-hand assets can qualify, although some exclusions and limits apply.
- If the taxpayer claimed an immediate deduction for an asset’s cost under the simplified depreciation rules in an earlier income year, they can also immediately claim a deduction the first time they incur a cost to make an improvement to that asset if it is incurred between 1 July 2024 and 30 June 2025 and less than $20,000.
- The $20,000 limit applies on a per-asset basis, so taxpayers can instantly write off multiple assets as long as the cost of each asset is less than the limit.
The usual rules for claiming deductions still apply. Taxpayers can only claim the business part of the expense, and they must have records to prove it. These rules do not apply to rental properties.
Editor: The government only passed this legislation vey late this tax year, but importantly the $20,000 limit has been extended to the following 2026 tax year.
Avoid a tax time shock
Individual taxpayers can take the following steps right now to ensure the correct amount of tax is being put aside throughout the year:
- let their employer know if they have a study or training support loan, such as a HECS or HELP debt;
- check they are only claiming the tax-free threshold from one employer;
- consider whether the Medicare Levy Surcharge may affect them this financial year (i.e., whether they have the appropriate private health insurance);
- check their income tier is correct for their private health insurance rebate; and
- consider voluntarily entering PAYG instalments and pre-paying tax throughout the year to avoid a large tax bill at tax time for investment or business income.
- keep records of the hours worked from home – can now claim at 70c per hour.
- know that any interest paid to the ATO after 1st July 2025 will be non-deductible, so consider refinancing debts.
Editor: If you would like to discuss or implement any of these steps and strategies in more detail, please feel free to contact our office.
ATO’s tips for correctly claiming deductions for rental properties
Taxpayers who have work done on their rental property should consider the following factors in determining claims for expenses.
Repairs and general maintenance are expenses for work done to remedy or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year the expense occurred.
Initial repairs include any work done to fix defects, damage or deterioration existing at the time of purchase. These are capital repair expenses and cannot be claimed as a deduction.
Capital works are structural improvements, alterations and extensions to the property, claimed at 2.5% over 40 years (with some exceptions). Deductions for capital works can only be claimed after the work has been completed.
Improvements or renovations that are structural are also capital works. Work going beyond remedying defects, damage or deterioration which improves the function of the property are improvements.
Repairs to an ‘entirety’ are also capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item (for example, replacing a whole fence vs fixing a few missing panels).
Depreciating assets must be claimed over time (as ‘capital allowances’) according to their ‘effective life’.
Editor: Rentals will be a key focus of the ATO – so please get this correct moving forward and discuss this with us when we do your next tax job.
ATO’s ‘main residence exemption tips’
The main residence exemption needs to be considered in a variety of situations when a taxpayer sells a property they have lived in. The ATO hopes that the following tips will help in this regard:
- Taxpayers should consider if they have started earning income from their home (in which case they may need to get a market valuation for CGT purposes).
- When renting out a property that was their main residence, taxpayers need to consider whether to use the 6-year absence rule when they sell their property.
- Taxpayers can only have one property as their main residence at a time. The only exception is the 6-month period when they move from one home to another.
- Has the taxpayer’s residency changed? If so, this may affect eligibility for the exemption.
Editor: The ATO will advise our office if you have sold any property thanks to the state titles offices forwarding this information to them each year – even for you own tax free home.
Study/training loans — What’s new
The indexation rate for study and training loans is now based on the Consumer Price Index (‘CPI’) or Wage Price Index — whichever is lower.
This change has been backdated to indexation applied from 1 June 2023 for all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other study or training support loan accounts.
Consequently, indexation rates for 2023 and 2024 have changed to:
- 3.2% for 1 June 2023 (reduced from 7.1%); and
- 4% for 1 June 2024 (reduced from 4.7%).
Individuals who had a study loan that was indexed on 1 June 2023 or 1 June 2024 do not need to do anything.
Individuals whose study loan is in credit after the adjustment may receive a refund for the excess amount to their nominated bank account, if they have no outstanding tax or Commonwealth debts.
Editor: Many clients already have these refunds in hand, and many existing debts will already be reduced by the above amounts. An additional reduction and/or refund of 20% was also a key election promise of our new Labour government, so watch this space for more news.
How to master employer obligations
Taxpayers who employ staff should remember the following important dates and obligations:
Pay as you go (‘PAYG’) withholding
Taxpayers need to withhold the right amount of tax from payments they make to their employees and other payees, and pay those amounts to the ATO.
Single touch payroll (‘STP’)
Employers should finalise their STP data by 14 July 2025 for the 2024/25 financial year (there may be a later due date for any closely held payees).
Super guarantee (‘SG’)
- 28 January, 28 April, 28 July and 28 October are the quarterly due dates for making SG payments;
- The SG rate is currently 11.5% of an employee’s ordinary time earnings. From 1 July 2025, it will increase to 12%.
- Taxpayers should ensure SG for their eligible employees is paid in full, on time and to the right super fund, otherwise they will be liable for the SG charges (incl. admin levy and interest).
Editor: Our team is here to help you if you need assistance with all employment ATO compliance matters.
Taxable payments annual report lodgment reminder
Businesses that pay contractors for ‘Taxable payments reporting system services’ may need to lodge a ‘Taxable payments annual report’ (‘TPAR’) by 28 August each year.
Editor: This includes businesses paying contractors in the
- building and construction,
- cleaning, and
- IT industries.
From 22 March, the ATO will apply penalties to businesses that have not lodged their TPAR from 2024 or previous years, and/or have been issued three reminder letters about their overdue TPAR.
Businesses that do not need to lodge a TPAR can submit a ‘non-lodgment advice (‘NLA’) form’. Businesses that no longer pay contractors can also use this form to indicate that they will not need to lodge a TPAR in the future.
Editor: You must compy with this if you operate in the above highlighted industries. The ATO will begin to enforce this with penalties this year – whilst being quite lenient in prior years.
Getting ready for business
The ATO advises new business owners that they need to understand their obligations to ensure they are “getting it right from the start.”
These are the ‘top 7 things’ taxpayers need to know when starting a business.
- They should use digital tools and maintain accurate records to help them manage daily activities and cash flow (eg MYOB, Quickbooks or Xero).
- There are some registrations they will need to complete when they start a business (for example, registering for an ABN or GST, or registering a business name with ASIC).
- They can claim a tax deduction for most business expenses if the expense is directly related to earning their income. Taxpayers should remember to keep records and only claim the business portion of mixed-use expenses.
- The type of business structure they set up will affect their tax and registration requirements, so they need to choose the right business structure and understand their obligations.
- If they are an employer, they should realise that they have extra responsibilities and obligations (e.g., super guarantee and Single Touch Payroll).
- They need to lodge and pay their taxes on time. They can prepay their estimated income tax liability through PAYG instalments.
- Businesses that maintain accurate records, lodge and pay on time and avoid errors not only steer clear of penalties and general interest charge but also become more resilient when facing challenges.
Editor: If you need assistance with any of these issues, please contact our office.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Lastly we welcome your feedback. If you found this E-Newsletter very useful (or not?),
we’d appreciate your feedback either way.
‘The Team’ at Lidgerwoods Accountants