2021/22 Budget Update

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Individuals

Low and Middle Income Tax Offset extended to 2022

LMITO will be retained for one more income year, so that it will still be available for 2022. Under current legislation, the LMITO was due to be removed from 1 July 2021.

The LMITO will apply as follows for the 2022.

  • $37,000 or less Up to $255
  • $37,001 to $48,000 $255 + 7.5% of excess over $37,000
  • $48,001 to $90,000 $1,080
  • $90,001 to $126,000 $1,080 – 3% of excess over $90,000
  • $126,001 + Nil


Consistent with current arrangements, the LMITO will be applied to reduce the tax payable by
individuals when they lodge their tax returns for the 2022 income year.


Increased Medicare levy low-income thresholds

The Medicare levy low-income thresholds will be increased for singles, families and seniors and pensioners for the 2021 income year, as follows:

  • Singles will be increased from $22,801 to $23,226.
  • Families will be increased from $38,474 to $39,167.
  • Single seniors and pensioners will be increased from $36,056 to $36,705.
  • Seniors and pensioners will be increased from $50,191 to $51,094.


For each dependent child or student, the family income thresholds increase by a further $3,597, up from the previous amount of $3,533.


Update to individual tax residency rules

The individual tax residency rules will be replaced with a new, modernised framework.
The primary test will be a simple ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.

Individuals who do not meet the primary test will be subject to secondary tests that depend on a
combination of physical presence and measurable, objective criteria. The new framework will be easier to understand and apply in practice, deliver greater certainty, and lower compliance costs for globally mobile individuals and their employers. This measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.


Update to self-education expense deductions

The exclusion of the first $250 of deductions for prescribed courses of education will be removed.
This measure will have effect from the first income year after the date of Royal Assent of the
enabling legislation.


Employee Share Schemes – ‘cessation of employment’ to be removed as a taxing point

The ‘cessation of employment’ will be removed as a taxing point for tax-deferred Employee
Share Schemes (‘ESS’) that are available for all companies. This change will apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.

Currently, under a tax-deferred ESS, where certain criteria are met, employees may defer tax until
a later tax year (‘the deferred taxing point’). The deferred taxing point is the earliest of:

  • cessation of employment
  • in the case of shares, when there is no risk of forfeiture and no restrictions on disposal
  • in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal
  • the maximum period of deferral of 15 years.


This change will remove the ‘cessation of employment’ taxing point and result in tax being deferred until the earliest of the remaining taxing points.


Businesses

Temporary full expensing extension

In the 2020/21 Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than $5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022. In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses with aggregated annual turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.


Temporary loss carry-back extension

In the 2020/21 Budget, the Government announced amendments to introduce a temporary loss carry-back measure. Broadly, this initial measure allowed ‘corporate tax entities’ with an aggregated turnover of less than $5 billion to carry back tax losses made in the 2020, 2021 and 2022 income years to claim a refund of tax paid (by way of a tax offset) in relation to the 2019, 2020 and 2021 income years. In the 2021/22 Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies with aggregated turnover of less than $5 billion to carry back tax losses from 2023 to offset previously taxed profits as far back as 2019 when they lodge their tax return for the 2023 income year.

The tax refund available under this measure is limited by requiring that the amount carried back is not more than the earlier taxed profits and does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.


Digital economy

The Digital Economy Strategy includes the following:

  • Taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights and in-house software. This measure will apply to assets acquired from 1 July 2023, after the temporary full expensing regime has concluded. The tax effective lives of such assets are currently set by statute.
  • Digital Games Tax Offset to provide a 30% refundable tax offset for qualifying Australian digital games expenditure ongoing from 1 July 2022, with the criteria and definition of qualifying expenditure to be determined through industry consultation.
  • Develop and transition government services to a new, enhanced myGov platform, providing a central place for Australians to find information and services online


Debt recovery for small business

Small business entities with an aggregated turnover of less than $10 million per year to apply to
the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to
pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.


Tax treatment of qualifying storm and flood grants

Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021 to be income tax exempt. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000. The grants will be made non-assessable non-exempt income for tax purposes. This is subject to eligibility criteria.


Superannuation


Removing the work test for voluntary contributions

Individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
Currently, individuals aged 67 to 74 years (inclusive) can only make voluntary contributions (both
concessional and non-concessional) to their superannuation fund, or receive contributions from
their spouse, if they satisfy the work test (subject to a limited work test exemption). Generally, to
satisfy the work test, an individual must be working for at least 40 hours over a period 30 consecutive days in the income year the relevant contribution is made.


Reducing the age limit for downsizer contributions

The downsizer contributions age will be reduced from 65 to 60.The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution.


Removing the $450 per month threshold for Superannuation Guarantee

The current $450 per month minimum income threshold, will be removed. i.e superannuation guarantee applies from the first $1 of wages paid to employees. The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Relaxing the residency requirements SMSFs

The Government will relax residency requirements for SMSFs and small APRA-regulated funds by:

  • extending the central control and management test safe harbour from two years to five years for SMSFs
  • removing the active member test for both types of funds.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Exiting legacy retirement products

The Government has announced that it will allow individuals the temporary option to exit and
convert from a specified range of legacy retirement products (together with any associated
reserves) into more flexible and contemporary retirement products, for a two-year period.
The products covered by this measure include market-linked, life-expectancy and lifetime products that were first commenced before 20 September 2007 from any provider (including an SMSF), but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

Currently, these products can only be converted into another like product and limits apply to the
allocation of any associated reserves without counting towards an individual’s contribution caps.
This measure will permit full access to all of the product’s underlying capital, including any reserves, as part of transitioning into a more flexible and contemporary retirement product.

Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds, and the commuted reserves will be taxed as an assessable contribution.


Changes to the First Home Super Saver scheme

The Government has announced that it will make the following changes to the FHSS scheme.

  • The maximum releasable amount of voluntary concessional and non concessional
    contributions under the FHSS scheme to be increased from $30,000 to $50,000. This change will apply from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022.
  • Four technical changes to the legislation underpinning the FHSS. These four changes will apply retrospectively from 1 July 2018.
  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSS scheme applications.
  • Allowing individuals to withdraw or amend their applications before receiving a FHSS scheme amount and allow those who withdraw to re-apply for FHSS scheme releases in the future.
  • Allowing the Commissioner of Taxation to return any released FHSS scheme money to superannuation funds, provided that the money has not yet been released to the individual.
  • Clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as a fund’s non-assessable non-exempt income and does not count towards the individual’s contribution caps.

The information provided in this update is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

Crawford News

June 2025 - Update

By Inzi Pethiyagoda • June 13, 2025
Time for Tax Planning The month of June is ideal for business owners and taxpayers to take some time to look at tax minimisation strategies, consider legislative changes and requirements, ensure compliance and review your financial position and aspirations. With ever changing legislative requirements, take some time to make sure your compliance obligations are fulfilled. This will allow you to steer clear of expensive penalties and also put you in an optimum position if you need to borrow funds. Reviewing your superannuation and making voluntary contributions, may achieve substantial tax savings, but you need a carefully prepared strategy. Employers may pay superannuation guarantee obligations early to take advantage of the deduction during the current financial year. Instant asset write-off may assist with business assets. Key areas for small and medium entities are: Trust distributions Dividends from private companies Super contributions Tax governance PAYG instalments STP requirements TPAR requirements Pensions and TBAR events A meeting with your accountant in June for a tax planning session may add value to your overall financial position and minimise tax. Please contact us if you wish to discuss this further. Getting ready for business These are the 'top 7 things' taxpayers need to know when starting a business. Use digital tools and maintain accurate records to help them manage daily activities and cash flow. There are some registrations you will need to complete when you start a business (for example, registering for an ABN or a business name). You can claim a tax deduction for most business expenses if the expense is directly related to earning income. Remember to keep records and only claim the business portion of mixed-use expenses. The type of business structure will affect the tax and registration requirements, so you need to choose the right business structure and understand its obligations. If you are an employer, you have extra responsibilities and obligations (e.g., super guarantee and Single Touch Payroll). You need to lodge and pay your taxes on time. You 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 charges but also become more resilient when facing challenges. Taxi service and ride-sourcing providers must be registered Taxpayers that provide taxi, limousine or ride-sourcing services must register for GST regardless of their turnover. They must collect and pay GST and income tax on all their rides and all other business income. The ATO is advising drivers in this industry who do not have a TFN, ABN or GST registration that they need to register now and collect, report and pay GST on all their future rides. They also need to report all their income from their rides in their next tax return. Penalties and interest may apply to drivers who do not register for GST. Drivers who have not declared all their income for ride-sourcing in prior years can amend a previous tax return. Partial release from tax debt on serious hardship grounds In a recent decision, the Administrative Review Tribunal held that a taxpayer should be released from payment of part of his tax debt on the grounds of serious hardship. As at the 2022 income year, the taxpayer had an accumulated tax debt of approximately $528,000, comprising income tax, late lodgment penalties, PAYG instalments, and the general interest charges on the PAYG and unpaid income tax. Much of the taxpayer's tax debt had arisen as a result of the taxpayer deriving income protection insurance payments from his insurer. These payments had been made since around 2002, and arose from a serious injury the taxpayer had suffered in a fire at his restaurant business. The ART noted that there were a number of factors which weighed against the taxpayer, including his failure to make payments to meet the tax debt and his 'extremely poor' tax compliance history. However, the ART decided that some relief was justified, given the extent of hardship, concerns about the taxpayer's health, and recoverability time for the tax debt. The ART accordingly reduced the total tax debt (including penalties) to $250,000. $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 income year. 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 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025. 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 improve 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. The information provided in this update is general in nature, and if you have any queries or require further information or assistance with the above, please contact our office.

May 2025 - Update

May 16, 2025
Minimum pension drawdown reminder An SMSF must pay a minimum amount each year to a member who is receiving an account-based pension. This minimum amount is calculated by applying the relevant percentage factor based on the member's age by the member's pension account balance calculated as of 1 July 2024, or on a pro-rata basis if the pension commenced part way through the 2025 financial year. If the minimum payment is not made by 30 June, this could result in adverse taxation consequences for the member. How to avoid common CGT errors The ATO wants taxpayers to know that having a foreign resident capital gains withholding clearance certificate does not mean they do not have any further CGT obligations. If taxpayers have sold property, they still need to include capital gains, losses or an exemption or rollover code in their tax return. Keeping not-for-profit records up to date Taxpayers should remember that they are legally required to keep certain records for their not-for-profit. All organisations including NFPs are required to keep accurate and complete records of all transactions relating to their tax and superannuation affairs. Generally, for tax purposes, taxpayers must keep their records in an accessible form for five years . Records that NFP taxpayers are required to keep include: governing documents; financial reports; documentation relating to grants; and registrations and certificates. A good record-keeping system will help taxpayers run their NFP successfully and manage their tax and super obligations. If a taxpayer's NFP is endorsed as a deductible gift recipient, they must keep records that explain all transactions and other acts relevant to their organisation's status as a DGR. This requirement applies to both endorsed DGRs and listed by name DGRs. Increase to rate for working from home running expenses PCG 2023/1 outlines the ATO's new method ('the fixed-rate method') for calculating additional running expenses while working from home, which has applied from 1 July 2022. The fixed-rate method allows taxpayers to claim at a rate of 70 cents per hour for the following additional running expenses for working from home: energy expenses (electricity and gas) for lighting, heating, cooling, and electronic items used while working from home; internet expenses; mobile and home phone expenses; and stationery and computer consumables. However, PCG 2023/1 does not cover occupancy expenses relating to a home, such as rent, mortgage interest, property insurance and land tax. Taxpayers are not required to use the above fixed-rate method - as from 1 July 2022, they can instead continue to claim the actual expenses they incurred as a result of working from home and keep all records necessary to substantiate their claim. Truck driver entitled to claim meal expenses In a recent decision, the Administrative Review Tribunal upheld a truck driver's claim for meal expenses, notwithstanding that those expenses had not been fully substantiated. The taxpayer was employed as a long-haul truck driver in Western Australia. He was away from home for considerable periods each year. The taxpayer sought a deduction for meal expenses of $32,782 in the 2021 income year, apparently calculated by multiplying the number of days he was away from home (310) by the maximum reasonable daily allowance under Taxation Determination TD 2020/5 . The ATO only allowed the taxpayer a deduction for meal expenses of $5,890 based on a review of his logbook, fatigue diary and bank statements. This was an average of $19 per day multiplied by 310. The ART found on the balance of probabilities that the taxpayer incurred the claimed expenditure, and it found that the taxpayer had met his burden of proof. In this regard, the ART determined that the taxpayer incurred the disputed expenses in gaining or producing his assessable income, and it did not agree with the ATO that there was an insufficient linkage between the expenditure on bank statements and the taxpayer's work. The ART held that the exception to the substantiation provisions applied to the taxpayer, as: a travel allowance was paid by the taxpayer's employer which covered the expenses; the taxpayer incurred the expenditure in gaining or producing his assessable income; and the expenditure fell within the ATO's reasonable travel amounts set out in TD 2020/5. The ART accordingly allowed the taxpayer's claim for travel expenses in full. The information provided in this Newsletter is general in nature, and if you have any queries or require further information or assistance with the above, please contact our office.

April 2025 - Update

April 9, 2025
ATO's new focus for small business The ATO is currently focusing on the following 'specific risk areas', where it is concerned "small businesses are getting it wrong": Contractors omitting income — with a focus on data matching to ensure all income is reported. Quarterly to monthly BAS reporting for GST purposes — The ATO will move around 3,500 small businesses with a history of non-compliance to monthly reporting from 1 April 2025. The ATO will also continue its focus on non-commercial business losses, small business CGT concessions, business income that is not personal income, incorrect claims for 'small business boosts', GST registration and income of taxi, limousine and ride-sourcing services. Reminder of March 2025 Quarter Superannuation Guarantee Employers are reminded that employee super contributions for the quarter ending 31 March 2025 must be received by the relevant super funds by Monday, 28 April 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component. The SG rate is 11.5% for the 2025 income year. FBT record keeping and plug-in hybrid exemption changes With the 2025 FBT year having just ended on 31 March, the ATO is reminding employers of some changes that might impact their FBT obligations. Alternative record keeping changes For the 2025 and succeeding FBT years, employers can use existing records instead of travel diaries and declarations for some fringe benefits. If using existing corporate records, employers need to meet the minimum required information at the time of lodging the FBT return. Keeping the right records ensures employers can correctly calculate the taxable value of the benefit and support their FBT position. Plug-in hybrid electric vehicle changes The FBT exemption for plug-in hybrid electric vehicles ('PHEVs') broadly ended on 31 March 2025, so the 2025 FBT year may be the last year that employers can claim the exemption. However, an employer can continue to apply the exemption if that PHEV was used, or available for use, before 1 April 2025 (and that use was exempt), and they have a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025. 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 by 28 August each year. 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. General transfer balance cap will be indexed on 1 July 2025 The transfer balance cap will increase from $1.9 million to $2 million on 1 July 2025. The general TBC amount is used for a number of purposes, including to determine the total capital amount that can be transferred to the pension phase, and to determine eligibility for making non-concessional contributions. This increase has flow through impacts for individuals who have started a retirement phase pension, as they will be entitled to an increase to their personal TBC if they have not previously been at, or exceeded, their cap. The ATO will calculate an individual's personal TBC based on the information reported to and processed by the ATO. To help individuals have a clear understanding of their position, the ATO encourages funds to report all 'TBC events' when they occur and as early as possible before the 1 July 2025 indexation start date. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

2025/26 Budget Update

April 4, 2025
New tax cuts for individual taxpayers in 2027 and 2028 The individual tax rates will reduce effective 1 July 2026. The current 16% tax rate will be reduced to 15% from 1 July 2026 and will be further reduced to 14% from 1 July 2027. The personal income tax rates (excluding the Medicare levy) for the 2025 and 2026 income years are in the following table, along with the proposed changes to the tax rates for the 2027 and 2028 income years: Australian resident individual tax rates Income threshold Tax Rate 2025 & 2026 2027 2028 $ 0 - $ 18,200 0% 0% 0% $ 18,201 - $ 45,000 16% 15% 14% $ 45,001 - $ 135,000 30% 30% 30% $ 135,001 - $ 190,000 37% 37% 37% $ 190,001+ 45% 45% 45% A taxpayer earning between $18,201 and $45,000 will get a tax cut of up to $268 in the 2027 income year and up to $536 from the 2028 income year. I ncreased Medicare levy thresholds The Medicare levy thresholds were increased from 1 July 2024 per below: No Medicare levy payable below 2024 2025 Individuals $ 26,000 $ 27,222 Families not eligible for SAPTO $ 43,846 $ 45,907 Single individuals eligible for SAPTO $ 41,089 $ 43,020 Families eligible for SAPTO $ 57,198 $ 59,886 For each dependent child or student, the family income thresholds will increase by a further $4,216 up from $4,027. Student loan amendments The government will reduce all outstanding Higher Education Loan Program and other student debts by 20%, subject to the passage of legislation. The 20% reduction is in addition to the recent indexation reforms. The repayment threshold will be increased from $54,435 in the 2025 to $67,000 in the 2026. Energy bill relief Eligible households and small businesses will receive two $75 bill rebates directly off their electricity bills until 31 December 2025. Expansion to Help to Buy scheme for first home buyers Under the Help to Buy scheme, the Government will provide an equity contribution of up to 40% to support eligible home buyers to purchase a home with a lower deposit and a smaller mortgage. The income caps for the scheme will be increased from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents. Small Business and Franchisee Support and Protection The ACCC and ASIC will be funded to: Strengthen regulatory oversight of the Franchising Code of Conduct. Improve its data analytics capability to better target enforcement activities to deter illegal phoenixing activities, particularly in the construction sector. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

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