Tax News and Updates September 2024

Be careful with PAYG instalment variations

Taxpayers who vary their PAYG Instalments to $0 (or another low amount) as a way of deferring payment of their tax bill until the end of the year take note. The ATO could charge interest on the amounts that should have been paid, which in some cases can end up being a substantial amount given the ATO interest rate is currently 11.36% per annum.

You may be liable to pay the general interest charge (GIC) if you vary your PAYG instalment rate or instalment amount downwards and the following conditions apply:

• your varied instalment amount is based on an estimate that is less than 85% of the actual tax payable on your business and/or investment income for the income year; or
• your varied instalment rate is less than 85% of the instalment rate that you should have applied for the income year.

It’s important that the varied instalments for the year equal at least 85% of the actual tax payable for the year otherwise the ATO may impose a general interest charge on the shortfall. Interest incurred by a taxpayer is currently tax deductible.

On 13 December 2023, as part of the 2023–24 Mid-Year Economic and Fiscal Outlook (MYEFO), the Government announced it will amend the tax law to deny deductions for ATO interest charges. This measure is not yet law.

This measure will mean that taxpayers will no longer be able to claim deduction for general interest charges (GIC) and shortfall interest charges (SIC) incurred on or after 1 July 2025.

Increase in preservation age for superannuation purposes

Your preservation age is the age you must reach before you can access your super and depends on when you were born. Since 2015, an individual’s preservation age has varied between 55 and 60 years of age, depending on their date of birth.

On 1 July 2024, the gradual increase in the preservation age reached the legislative maximum age of 60. This means individuals born after 30 June 1964 will attain preservation age when they turn 60 years of age.

Some of the positive superannuation aspects of turning 60 include the following: 

• an individual will satisfy the 'retirement' condition of release if an arrangement under which they were gainfully employed ends;
• an individual who has reached their preservation will generally be eligible to commence a transition to retirement income stream ('TRIS') without having to retire; and
• the 'taxed element' of the taxable component of benefits drawn down from the TRIS will be tax-free as the member is at least 60 years of age.

ATO online selling data-matching

The ATO has recently announced that it will acquire Australian sales data from online selling platforms for 2023–24 through to 2025–26. The data items include:

• client identification details – individuals (given and surname, date of birth, account holder’s addresses, Australian business number, email address, contact phone number);
• client identification details – non-individuals (business name, address, Australian business number, contact name, email address, contact phone number); and
• account details (account name, account identification number, account registration date, account registration type, store type, seller status, IP address, number of annual sales transactions, value of annual sales transactions, number of monthly sales transactions, value of monthly sales transactions).

It is estimated that the total number of account records obtained will be between 20,000 to 30,000 each financial year with 10,000 to 20,000 of these records matching to individuals. 

Rental property – repairs or capital expenses

The ATO is reminding tax agents to consider the following factors when determining claims for repairs and improvements made to a client's rental property:

1. 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;
2. initial repairs include any work done at the time they acquired the property. These are capital repair expenses and can't be claimed as a deduction. Instead, initial repairs are part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are capital works or depreciating assets;
3. capital works are structural improvements, alterations and extensions to the property claimed at 2.5% over 40 years (with some exceptions), or can only be claimed after the work has been completed;
4. improvements and renovations that are structural are also capital works. Work going beyond remedying defects, damage or deterioration and improves the function of the property are improvements;
5. repairs to an 'entirety' are capital and can't be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item, for example, a depreciating asset; and
6. depreciating assets (capital allowances) must be claimed over time according to their effective life.

Record keeping myth busters

The ATO is seeking to bust some common myths when it comes to records, deductions, and work-related expenses. The ATO would like tax agents to reiterate to their clients that having records to substantiate claims is essential to prove the deductions. The ATO refers to the following matters:

• a bank or credit card statement on its own will not be enough evidence to support a work-related expense claim. Taxpayers will need written evidence that shows the supplier, the cost, date of purchase, date the document or receipt was produced, and the nature of the goods or services being claimed;
• if the total claim for a work-related expense is more than $300, the taxpayer must have written evidence to support those claims. Where the work-related expense is under $300, the taxpayer must be able to show that they spent the money and how they calculated the amount being claimed;
• to claim a deduction for a work-related expense:

          - the taxpayer must have spent the money and not have been reimbursed;

          - the expense must directly relate to earning of the taxpayer's income; and

          - the taxpayer must have a record to prove it. 

• tax agents are encouraged to read and share the ATO's guide titled 'Keeping records for work-related expenses' covers all the different types of records required for car expenses, working from home deductions, travel, self-education, and others.