ATO renewed focus on superannuation guarantee payments
Superannuation guarantee (SG) payments are firmly on the ATO’s radar so employers need to pay careful attention in this area.
The ATO recently reported that a total of $973 million in superannuation guarantee charge (SGC) liabilities were raised from ATO compliance actions and employer disclosures of unpaid super.
The ATO finalised approximately 14,000 SG cases during the 2023-23 financial year with around 90% of these initiated by employees. The ATO is obviously devoting plenty of resources in this area.
This is something that employers should be paying close attention given that the ATO has access to single touch payroll data and also there is a hotline that allows aggrieved employees to contact them.
The big sting in the tail for failing to comply is not only the SG liability, but the interest and penalties that apply, plus the loss of a tax deduction - The exposure arising from the underpayment of superannuation can amount to between five to seven times of the actual shortfall.
The additional superannuation that is paid to employees following an ATO review, will also increase the employer’s payroll tax and Workcover liabilities, with the potential of further interest and penalties imposed on the employer.
Government revises stage 3 tax cuts
On 25 January 2024, the Government announced changes to the previously legislated tax Stage 3 tax cuts that will apply from 1 July 2024.
Under the changes, the 19% tax rate that currently applies to incomes between the $18,200 tax-free threshold and $45,000 will be lowered to 16%.
Taxpayers earning between $45,000 and $135,000 will be taxed at 30%, while the 37% tax rate will be reinstated and apply to incomes between $135,000 and $190,000, after which the 45% will apply.
This now means that taxpayers earning $200,000 or more will receive a $4,529 tax cut, instead of the legislated $9,075 they were due to receive from 1 July.
As well, someone on $73,000 will receive a tax cut over $1,500, more than double the amount under the previous plan, while somebody on $100,000 will have their tax cut increased from $1,375 to $2,179.
Below are the "proposed" and revised marginal tax rates that apply from 1 July 2024:
|
Bracket
|
Taxable Income
|
Marginal Tax Rate
|
Tax Payable
|
|
1
|
$0-$18,200
|
0%
|
Nil
|
|
2
|
$18,201-$45,000
|
16%
|
16% of excess over $18,201
|
|
3
|
$45,001-$135,000
|
30%
|
$4,288 + 30% of excess over $45,000
|
|
4
|
$135,001-$190,000
|
37%
|
$31,288 + 37% of excess over $135,000
|
|
5
|
$190,001+
|
45%
|
$51,638 + 45% of excess over $190,000
|
Requirement to charge GST for on-costs charged to tenant
The payment of council rates, water rates, land tax and other government charges by a landlord is not subject to GST because of the operation of Division 81 of the GST Act.
If the tenant of a commercial property is required under the terms of the lease to reimburse the landlord for these type of expenses, Division 81 of the GST Act does not apply to the tenant's reimbursement as this is not the payment of an Australian tax or an Australian fee or charge by the tenant.
The water and council rates etc are the landlord’s liabilities and when they on-charged to the tenant they lose their character and accordingly form part of the consideration for the supply of the premises. If the supply of the premises is a taxable supply (i.e. a commercial lease), then GST needs to be charged by the landlord on these reimbursement amounts.
Key tax measures announced in 2023-24 mid-year economic and fiscal outlook
The Mid-Year Economic and Fiscal Outlook 2023–24 was released on 13 December 2023 which included the following key tax measures:
- A further increase in the amount of the Commonwealth penalty unit from $313 to $330. The increase is proposed to commence four weeks after the passage of the enabling legislation, with indexation expected to continue in line with the existing three-year schedule. This follows an increase from $222 to $275 on 1 January 2023 and indexation from $275 to $313 on 1 July 2023. The increases to the penalty unit result in higher penalties imposed by the ATO for late lodgement of tax and BAS documents and penalties imposed on trustees of self-managed superannuation funds.
- From 1 July 2025, taxpayers will no longer be able to claim a tax deduction for ATO interest charges. However, the Commissioner will continue to have the ability to remit these charges based on individual circumstances. ATO interest charges typically arise on late payment of tax debts so this change will force taxpayers to pay their tax debts sooner rather than treating the ATO as a bank.
- Changing the foreign resident capital gains withholding tax regime by increasing the rate from 12.5 per cent to 15 per cent and reducing the withholding threshold from $750,000 to zero. This change will apply to property disposals where the contract is entered into from 1 January 2025.
- Amending the definition of a fuel-efficient vehicle for luxury car tax purposes by reducing the maximum fuel consumption limit from 7 litres per 100 kilometres to 3.5 litres per 100 kilometres – this change applies from 1 July 2025.
Implications where a trustee company is de-registered by ASIC
It is common and advisable for family trusts and self-managed superannuation funds (SMSF) to have a company acting as trustee.
Accordingly it’s vitally important that all obligations with ASIC are kept up to date as failure to do so could result in the company being de-registered. This includes failure to pay the annual review fee on time and to respond to follow up notices.
If the trustee company is de-registered, then under section 601AD(1) of the Corporations Act 2001, the company ceases to exist as a legal entity and can no longer do anything in its own right. Legally the director (s) of the de-registered company cannot deal with the family trust or SMSF’s assets.
Under subsection (1A) all SMSF assets held on trust by the Company will vest in the Commonwealth, represented by ASIC.
It is possible to have the company reinstated by applying to ASIC, but this is a costly and time-consuming process. And once the company is reinstated, it will have to claw back the fund assets that were vested with ASIC.
Capital gains tax main residence exemption – adjacent land
When selling their family home, taxpayers can claim the capital gains tax main residence exemption for up to 2 hectares of land so long as the land (or any “adjacent land”) is used for private purposes. If this land is greater than 2 hectares, taxpayers can choose which 2 hectares are exempt.
The land doesn't have to share a common border or actually touch the dwelling to be eligible. However the further the distance between the land and the dwelling land, the less likely it is that the relevant land is 'adjacent land' for the purpose of the legislation. Example 2 of Tax Determination TD 1999/68 suggests two street blocks away will satisfy the adjacent land requirement.
Example 2 adapted from TD 1999/98
“Bob and Lyn own a house in a country town. Lyn owns a horse which she rides in local horse competitions. There is no room for the horse in the backyard of the house, so Bob and Lyn bought a block of land some two street blocks away on which to run the horse. The total area of the land on which the house is situated and the horse yard is less than 2 hectares. The horse yard, which is used by Lyn primarily for private or domestic purposes in association with her house, is considered to be adjacent land for the purposes of section 118–120.”
