As the 2024 end of tax year approaches, the Australian Tax Office (ATO) is sharpening its focus on several key areas to ensure compliance and integrity within the tax system. This year, the ATO is particularly vigilant about claims for rental property deductions, work-related expenses, and undeclared income from the sharing economy. If you’re preparing for tax time, understanding and ensuring you’re fully compliant in these areas can help ensure you get your lodgment right the first time. Let’s take a look at the ATO focus areas for 2024 in a bit more detail.

ATO Crackdown: 3 Key Areas To Get Right For Tax Time 2024

1. Rental Property Deductions

Investment properties were a firm focus at tax time in 2023 and the ATO continues to scrutinise rental property deductions closely, ensuring that claims are legitimate and accurately reflect expenses incurred. Recent audits from the tax office indicate that 90% of rental property owners are getting their tax returns wrong.

According to ATO Assistant Commissioner, Robert Thomson: “People aren’t apportioning correctly between interest relating to private use and the interest that relates to the income they’re generating from their investment property.”

Common areas where taxpayers might encounter issues include:

  • Repairs vs. Improvements: It is crucial to differentiate between repairs and improvements. Repairs, which restore an item to its original condition, are immediately deductible. In contrast, improvements, which enhance the property’s value, must be depreciated over time.
  • Interest Deductions: Only the interest on loans used to purchase or renovate a rental property is deductible. Loans used for personal expenses or to purchase a property that is not rented out cannot be claimed.
  • Private Use: Expenses related to periods when the property is used for private purposes are not deductible. It is essential to apportion expenses accurately if the property is only rented out part of the year or used by the owner at any time.

The ATO employs sophisticated data-matching techniques and collaborations with financial institutions to identify discrepancies and ensure compliance. Rental property owners should maintain detailed records and seek professional advice to ensure their claims are accurate and justifiable.

2. Work-Related Expenses

Work-related expenses are another area under the ATO’s microscope. This was another key focus from last year that remains a priority for the ATO. Changes were made last year to the fixed rate method of calculating a working from home deduction and taxpayers were required to keep more detailed documentation. However, this is the first full year of these changes being in effect so the expectation is that you must have comprehensive records to substantiate your claims.

“Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.” Mr Thomson said.

To avoid issues, taxpayers should adhere to the following guidelines:

  • Substantiation: Ensure all claims are supported by receipts and detailed records. Estimates or round figures can raise red flags.
  • Direct Connection: There must be a direct connection between the expense and earning income. Personal or unrelated expenses are not deductible.
  • Occupation Costs: Deductions for costs like rent, rates or mortgage interest are not allowable unless you’re running a business from home.

Accurate record-keeping and adherence to ATO guidelines are essential to ensure compliance and avoid audits or penalties.

3. Undeclared Income from the Sharing Economy

The rise of the sharing economy has introduced new challenges for tax compliance. Platforms like Airbnb, Uber, and various freelancing sites have made it easier for individuals to earn income that may go undeclared.

The ATO is particularly focused on:

  • Rental Income: Income earned from short-term rental platforms must be declared. This includes not only the rent received but also any related fees and charges.
  • Ride-Sharing and Delivery Services: Income earned from ride-sharing, food delivery, or other gig economy jobs must be reported. This includes tips and bonuses in addition to standard earnings.
  • Online Freelancing: Earnings from online freelancing platforms must be declared. This includes income from both domestic and international clients.

The ATO collaborates with sharing economy platforms to access data and identify undeclared income. These sophisticated data matching systems mean that if you decide to not report your income from these platforms then you are much more likely to trigger a review by the ATO. Participants in the sharing economy should maintain comprehensive records of their earnings and report them accurately to avoid penalties.

The advice is also to not rush to submit your tax return, particularly if you received income from multiple sources. “By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO.”

As the ATO intensifies its focus on rental property deductions, work-related expenses, and undeclared income from the sharing economy, it is more important than ever for taxpayers to be diligent and compliant. By understanding these key areas and maintaining accurate records, taxpayers can navigate their obligations confidently and avoid the risk of audits and penalties. If in doubt, seeking professional advice from the tax experts at MGI can provide the necessary guidance to ensure compliance and peace of mind in the 2024 tax year.

For more information or personalised advice on your tax obligations, feel free to reach out to the experts at MGI South Qld. We’re here to help you navigate the complexities of the Australian tax system with ease and confidence.

The Business Basics grants program provides support to businesses to increase core skills and adopt best practice. This round of Basics is focused on fostering resilience. The program is administered by the Department of Employment, Small Business and Training (DESBT).

This program is applicable for businesses with less than 20 employees. Applicants can apply for funding for grant funded activities under the following priorities:

  • Business continuity and succession
  • Security planning and solutions
  • Sustainability

Eligible activities

Business continuity and succession planning (including disaster preparation)
  • Develop and implement a business continuity plan to ensure operations can continue in the event of disruptions.
  • Develop an incident response plan, risk management plan and/or recovery plan.
  • Develop a succession plan tailored to the business’s needs and goals.
  • Develop an emergency evacuation plan or training program.
  • Purchase emergency kit equipment and related software, such as first aid kit, flashlights, batteries, and portable radio for an emergency kit.
  • Implement new or upgrade existing online or cloud-based accounting systems.
Security planning and solutions
  • Plan and/or implement physical security measures, such as surveillance cameras, alarms, or access control systems.
  • Conduct cyber security risk assessments and implement mitigation systems.
  • Implement cyber security measures to protect data and systems, for example, anti-malware, antivirus, backups, data migration, encryption, firewalls, and modems/routers with enhanced security.
Sustainability
  • Conduct sustainability assessments or audits to identify areas for improvement and develop action plans.
  • Develop or revise a tailored business plan aligned to the business’s specific needs and goals.
  • Implement energy-efficient practices or technologies to reduce operational costs and environmental impact.
  • Develop a plan to localise the suppliers of your businesses.

Opening Date: Stage 1: Registration of Interest (ROI) opens at 9am, Wednesday 29 May 2024

Funding available is $5,000 excl GST per grant

Closing Date: Stage 1: Registration of Interest (ROI) closes at 5pm, Tuesday 11 June 2024

Access to supporting documentation and eligibility criteria is available on the Queensland Government Business website.

Please reach out to the team at MGI, if you need support in preparing your application.

Launched by The Department of Industry, Science and Resources, participants in the Industry Growth Program Advisory Service may apply for Commonwealth Commercialisation and Growth Grants to support specific commercialisation and/or growth projects. The commercialisation and growth stages may include developing marketplace strategies for entry to market, accelerating growth and scaling up into national and international markets.

Grant Opportunities are open for SME’s to apply for grants of $100,000 to $5,000,000 to support commercialisation and growth. To be eligible you must:

  • have a combined annual turnover of less than $20 million for each of the three financial years prior to the lodgement of the application
  • have received a report through the program’s Advisory Service
  • own or have access to any Intellectual Property (IP) you need to undertake your commercialisation and growth project and own or have the exclusive right to commercialise any IP generated from it
  • can provide evidence of your ability to fund at least your share of eligible project expenditure, such as funding strategy and a bank statement or loan agreement. You must provide an accountant declaration that confirms your ability to fund the project.

Eligibility and instructions on how to apply can be found on the Australian Government’s Grant Connect website.

Please contact the team at MGI if you have any questions or require further information.

Launched by the Department of Industry, Science and Resources, the objective of the early-stage commercialisation grants is to help businesses to undertake the steps necessary to establish the commercialise viability of an innovative product, process or service, including steps to undertake feasibility and proof-of-concept through to prototyping.

These Early-Stage Commercialisation grants can be used to undertake projects and business activities that progress a business toward the following outcomes:

  • improve the commercialisation capabilities of participating businesses
  • further develop innovative products, processes or services in preparation for commercialisation (e.g. prototypes, early testing)
  • improve capability to seek and attract investment for the participating business.

SME’s can apply for grants of $50,000 to $250,000 to support early-stage commercialisation projects.

Eligibility and instructions on how to apply can be found on the Australian Government’s Grant Connect website.

Please contact the team at MGI if you have any questions or require further information.

The Business Growth Fund Program (BGF) targets high-growth businesses who can accelerate growth, drive Queensland’s economy and employ more Queenslanders. The program is administered by the Department of Employment, Small Business and Training (DESBT).

Eligible Business Size?

Small and medium-sized businesses that employ 5-49 people (headcount).

Interested businesses will be invited to submit an expression of interest from 9am on Wednesday 1 May.

Businesses with high-growth plans should review the guidelines and eligibility criteria for the upcoming round of the Business Growth Fund program.

This program offers grants of $50,000 to $75,000 to support the purchase of specialised equipment as a co-contribution with eligible businesses.

Successfully funded businesses are expected to:

  • increase confidence for growth, transitioning from small to medium-sized
  • increase productivity, turnover, profit and/or employment by 20%
  • improve confidence to automate, scale up, increase market share, diversify and/or exploit exporting opportunities.

Expressions of Interest (EOI) are now open.

The application process involved 3 stages:

  • Stage 1 – Expression of interest (EOI)
  • Stage 2 – Full application
  • Stage 3 – Pitch

Expressions of Interest close: 5pm Tuesday 14 May 2024.

Please contact the team at MGI if you have any questions or require further information.

Following on from our post a couple of months ago about tax and superannuation deadlines the following are the upcoming contribution cap and superannuation changes.

1. Contributions – cap increase

From 1 July 2024 a number of rates and thresholds will increase, including the contribution caps. There has been no further indexing of the transfer balance cap so there will be changes to the eligibility to use the 3 year bring forward non-concessional contributions (see table below).

A reminder to review any salary sacrifice agreements to avoid excess concessional contributions with the increase in super guarantee to 11.5% from 1 July 2024.

table showing Superannuation Cap Changes

2. Defined benefit interest (CSS/PSS) calculation for Division 296 – in relation to superannuation balances above $3million

From 1 July 2025 tax concessions will be reduced for certain earnings for superannuation balances above $3 million. On 28 February 2023, the Australian Government announced from 1 July 2025 a 30% concessional tax rate will be applied to future earnings for superannuation balances above $3 million, known as Division 296.

If you are wondering how the balance of your CSS or PSS pension will be calculated for the purposes of the proposed Division 296 tax you will need to wait a little longer.

While draft legislation has been released, the calculations for determining the balance of defined pensions will be contained in the regulations which no one has seen (or possible written).

3. Reminder about the changes in Small Business Super Clearing House

From 15 March 2024, the ATO will introduce SMSF bank account validation in the Small Business Superannuation Clearing House (SBSCH). This will require any small employer using the SBSCH to ensure that their employees’ SMSF bank accounts match the bank account details registered with the ATO for contributions.

If you are receiving contributions via SBSCH or using the SBSCH to pay employer contributions, it is important to contact employees to confirm that the SMSF bank account that superannuation contributions are paid to, is the same as the SMSF bank account registered against the superannuation role, with the ATO. A mismatch will mean that their superannuation contributions can’t be processed through the SBSCH.

This also applies for any member roll-in and roll-out requests.

Please contact us if you need to check the details of the bank account registered with the ATO for your SMSF.

Proactive steps are essential to ensure any SG obligations for the March 2024 quarter can be met by 28 April 2024.

4. Non-Arm’s Length Income/Expense (NALI/NALE) Bill Passed Through Parliament

An important reminder to the trustees and the members of the fund, that NALI/NALE bill has now passed through both houses of Parliament and it is essential to review all general expenses incurred/not-incurred within the fund.

It is crucial to understand and review transactions within the superfund that there is no expenditure at non-arm’s length that will trigger the rules concerning non-arm’s length income.

This rule specifically dives into general expenses such as discounted accounting or adviser fees, legal fees or any other general expenses which are non-arm’s length.

If you have any queries or concerns or need further advice and support about superannuation changes please don’t hesitate to reach out to the team at MGI.

Personal Services Income can be a confusing topic, particularly if you’re a sole trader. However, it’s vital to understand what it is so you know what tax deductions you can claim. Personal Services Income (PSI) is a concept introduced by the Australian Taxation Office (ATO) to govern how income from personal services is reported and taxed. PSI is particularly relevant for independent contractors, freelancers, and consultants who provide their professional or technical expertise. The ATO’s guidelines around PSI help ensure that individuals who earn a significant portion of their income from their personal efforts or skills pay the appropriate amount of tax. So what is personal services income? In this blog we’ll explain the PSI rules, outline how it is calculated and explore its impact on tax deductions.

What is Personal Services Income (PSI)?

Personal Services Income refers to income that is primarily generated from your personal skills or efforts as an individual. According to the ATO, income is classified as PSI if more than 50% of the amount you received for a contract was for your labour, skills or expertise. The concept is usually applicable to knowledge-based services such as:

However, it doesn’t apply if your income is generated from the use or sale of a product, the use of an income-producing asset or other business structures involving more than just personal effort.

Examples of PSI and Non-PSI Income

Jayne is a marketing consultant operating as a sole trader. She has two clients who she has recently completed work for.

Client 1: Jayne delivered a Marketing Strategy training session for her client. She charged the client $1,500 for the session which included materials that cost $150. That means that $1,350  or 90% of the work was for her personal skills and knowledge and should be classified as PSI.

Client 2: Jayne provided email marketing software for a client for which she charged $5,000. The cost of the software licence was $4,000 and the remainder was for her skills and expertise in setting up the software for the client. Since only 20% of the cost was for her expertise, this is not classified as PSI.

While your taxable income can be a mix of PSI and non PSI you should establish whether you are a personal service business (PSB) in the year that you received the PSI income as this affects the deductions you can claim.

PSI Rules

The PSI rules are in place to determine how income is reported and what deductions are permissible. The purpose of these rules is to prevent individuals from diverting their income through companies, partnerships or trusts to exploit lower tax rates. Essentially, if the PSI rules apply, the income is treated as personal income and taxed at individual tax rates.

To determine if the PSI rules apply to you, the ATO applies a series of tests:

  • The Results Test: You must be paid for producing a specific result, use your own equipment, and be liable for rectifying any defects in your work.
  • The 80% Rule: No more than 80% of your PSI can come from one client, unless the unusual circumstances exemption applies.
  • The Unrelated Clients Test: You must provide services to two or more unrelated clients who are not associated with each other.
  • The Employment Test: Your business must employ others who do at least 20% of the principal work.

If you fail these tests, you need to treat your income as PSI and comply with the relevant tax implications.

Why Were The Personal Service Income Rules Introduced?

The Personal Services Income (PSI) rules were introduced by the Australian Taxation Office (ATO) to address tax avoidance issues associated with the income earned primarily from the personal skills or efforts of an individual. Essentially the rules ensure that contractors pay similar amounts of tax as those who are employed, preventing them from gaining tax advantages by diverting their income through companies, trusts, or partnerships. The PSI rules now prevent the misuse of business structures for the purpose of tax minimisation.

Before the PSI rules, individuals could reduce their tax liability by channeling their income through such entities. These entities would then potentially claim deductions that would not normally be available to an individual, or split income among various members to reduce the overall tax rate. This approach could substantially lower the tax obligations compared to what an individual might pay if taxed at personal income rates.

Calculating PSI and Tax Implications

Calculating your PSI involves identifying all income received from personal efforts and applying the relevant PSI rules to determine your taxable income. If the PSI rules apply, you will need to attribute all income and deductions to yourself, regardless of whether your business structure involves other entities.

The PSI determination directly influences how you claim deductions. Generally, deductions are allowed for expenses incurred in generating PSI, including:

  • Salaries and wages for individuals directly engaged in producing PSI.
  • Operating expenses related to performing the services.
  • Equipment used directly in performing the services.

However, certain deductions, typically available to businesses, may not be claimable if they do not directly relate to the earning of PSI. These may include rent, occupancy expenses, or salaries paid to associates who do not contribute directly to contract fulfilment.

Key Takeaways

For professionals and freelancers, understanding PSI is crucial to ensuring compliance with ATO guidelines and optimising tax obligations. Here are the main points to remember:

  • Determine if your income qualifies as PSI based on the nature of your work and how it is earned.
  • Understand the PSI rules and apply them to ascertain if your income is treated as PSI.
  • Be mindful of how PSI is calculated and ensure accurate reporting.
  • Know what deductions are permissible under the PSI rules to avoid potential audits or penalties.

By understanding and adhering to the PSI rules, individuals can better navigate their tax obligations and plan their financial affairs accordingly. For further guidance, consulting a tax professional or visiting the ATO’s website can provide additional clarity and personalised advice.

This overview should serve as a starting point for anyone dealing with PSI and aiming for a compliant and optimised tax handling of their personal services income in Australia.

If you require assistance with understanding your tax obligations and ensuring you claim the correct tax deductions, our team of expert business tax accountants can help.

Today at MGI, we celebrated International Women’s Day 2024 with this year’s theme ‘Inspire Inclusion’. As we know, March 8th is an annual focal point in women’s rights around the world to focus on important issues including gender equality, reproductive rights, violence and abuse against women.

To inspire others to understand and value women’s inclusion is to forge a better world for their belonging, relevance and empowerment. MGI embraced this years’ theme colours purple (justice & dignity), green (hope) and white (purity) and took time to reflect on the achievements of our female staff and their important contributions to the success of our firm with a scrumptious morning tea.

Iwd 2024 Table Images

 

To help you plan, we have included the important upcoming superannuation and tax deadlines and dates as a reminder.

31 March 2024Large tax payers (Turnover > $2Million) 2023 Tax Return lodgement and payment due date

For Companies or Superfunds that had a turnover of more than $2Million in their prior year’s tax return, your 2023 Tax Return is due for lodgement and payment 31st March 2024. If you feel that you will have any difficulty in making your 2023 tax return payment, please contact MGI to discuss your payment options.

15 May 2024 –2023 Tax Return lodgement and payment due date

For the majority of tax payers, the 2023 Income Tax Return is due for lodgement and payment by 15th May 2024.

If you are an MGI client and have not yet provided us with your 2023 tax work information, please don’t hesitate to contact us to discuss what information we require to complete your annual tax work, alternatively please don’t hesitate to send through your information directly to your MGI contact and we will let you know what further information we may require. MGI will be touching base with our clients to request your annual tax work. This due date is still a few months away, however if your 2023 tax work has not yet been started, please reach out to us to get your work scheduled for completion within the next few months.

If we have already completed your 2023 annual tax work, can you please ensure that you have returned the signed documentation back to our office for filing so that we can lodge your returns by this due date. If you unfortunately have to make a payment to the Tax Office, that payment due date is also 15 May 2024. If you feel that you will have any difficulty in making this payment by this due date, please don’t hesitate to touch base with us to discuss your payment options.

31 March 2024 – 2024 FBT year-end date

The FBT year runs 1 April – 31st March, if you are an FBT client we will be touching base with you in late March 2024 to discuss your FBT requirements and to start on requesting information with respect to the completion of your annual FBT returns. Don’t forget to record your vehicle speedo readings as at 31 March 2024, which is a requirement from the ATO for business clients to keep records of.

The 2024 FBT Return payment and lodgement due date is 25 June 2024, however to ensure we have ample time to complete our client’s returns before this due date we will be touching base as early as possible so please keep an eye out for correspondence from our office with respect to your FBT lodgement requirements.

April – June 2024 – End of Year & Tax Planning

We will be touching base with our Tax Planning clients in early April to get started on our annual tax planning process. Tax Planning is very important as it can help make you aware of you upcoming tax liabilities and also gives you an opportunity to implement strategies that can help you reduce your tax implications. The earlier we are able to complete your tax planning the better, as this gives you ample time to review your options and implement any strategies before 30 June. As such, we do ask our Tax Planning clients to have their year-to-date information (1 July 2023 – 30 April) up to date in their accounting software so that we can complete our tax planning calculations when the time comes.

30 June 2024 – Deadline for Employee Superannuation Payments

Employee Superannuation is tax deductable when it is paid and only if paid on time. Superannuation must be paid at least quarterly by the following due dates:

  • 1 July – 30 September DUE 28th October
  • 1 October – 31 December DUE 28th January
  • 1 January – 31 March DUE 28th April
  • 1 April – 30 June DUE 28th July

If you are wanting to maximise your Superannuation deduction for the 2024 Financial Year, you will need to make any June 2024 quarter payments before 30 June 2024.

The above tax deadlines are only general reminders, but if you have any queries or concerns, please don’t hesitate to reach out to the team at MGI.

Storm-ravaged tourism businesses on the Gold Coast will receive a further $2.5 million in support funding from the Queensland government. 50,000 vouchers, each worth $50 will be available for use at Gold Coast tourism businesses.

Some tourism businesses are still closed due to damage caused during the deadly Christmas and Boxing Day storms. Deadly storms battered south-east Queensland on Christmas Day and Boxing Day, claiming seven lives and leaving tens of thousands of homes and businesses without power. Tourism attractions across the region were heavily impacted, with some still closed due to the storm damage.

Premier Steven Miles has announced that 50,000 vouchers, each worth $50, would go on offer to stimulate the Gold Coast’s tourism economy.

How do the vouchers work?

If you spend $50 on a day tour or attraction taking part in the scheme you will receive an extra $50 credit. It means a $100 experience will put you out of pocket by $50.

Tourism and Events Queensland chief executive Patricia O’Callaghan said vouchers had been proven as a way of helping tourism businesses across the state during the COVID pandemic. She said they had proven benefits in the short- and long-term.

How do I get a tourism voucher?

Premier Steven Miles said south-east Queenslanders could access one of the 50,000 vouchers through the GC Summer FUNds website but it is yet to go live.
The vouchers, when you can sign up, will be available for use until the end of March.

For more information about the stimulus, visit the Queensland Government website.

If you have any questions or need assistance with your application, please contact the team at MGI South Qld.

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