October 2023 - Update

Author na1616mewedewd

Reporting rentals correctly


When preparing tax returns, taxpayers should make sure all rental income is included, including income from short-term rental arrangements, renting part of a home, and other rental-related income.

Rental income must be reported in the year the tenant pays, rather than when the taxpayer’s agent transfers it to them, and it must be reported as the gross amount received (i.e., before the property managers fees and other expenses they pay on the taxpayer’s behalf are taken out).

There are three categories of rental expenses, as follows:

  • Expenses where taxpayers cannot claim deductions – e.g., expenses arising from a taxpayer’s personal use of their property and capital expenses;
  • Expenses where taxpayers can claim an immediate deduction in the income year they incur the expense – e.g., interest on loans, council rates, general repairs and maintenance, and depreciating assets costing $300 or less; and
  • Expenses where taxpayers can claim deductions over a number of income years – e.g., 'capital works' deductions and borrowing expenses incurred when setting up a loan.

The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes, or the loan was re-financed for some private purpose.

Taxpayers should ensure they have the records to demonstrate they incurred expenses for their rental property and the extent to which the expenses relate to producing rental income.

 
Choosing the right PAYG instalment method
 

Pay as you go (‘PAYG’) instalments are calculated using either the instalment amount method or the instalment rate method.
Following two case studies illustrate the two methods:

Case study 1: Kelly the DJ

Kelly is a DJ, working at festivals from November to January. She chooses to use the instalment rate method, as it suits her seasonal business income. 

Using this method means she needs to work out her business income each period. 

It helps her manage cash flow because the amounts she pays will vary in line with her income.

When Kelly receives her BAS or instalment notice, she calculates the instalment based on her income for that period, multiplied by the rate provided.

Case study 2: David the plumber

David is a plumber with regular monthly business income, so he chooses the instalment amountmethod. He won’t need to work out his business income each period to use this method. David pays the instalment shown on his BAS. The amount is calculated from information in his last tax return.

If Kelly or David think the instalments they pay will add up to be more or less than their tax liability for the year, they can vary their instalments.

 
Remember the unused concessional contributions cap concession
 

As from 1 July 2018, individuals with a total superannuation balance of less than $500,000 as at 30 June of the previous income year may be entitled to contribute more than the general concessional contributions cap (i.e., and make additional concessional contributions to utilise any unused cap amounts).

For example, an individual who did not make any concessional contributions in the 2019 income year (and whose total superannuation balance was less than $500,000) would have been able to make up to $50,000 of concessional contributions in the 2020 income year.

Unused concessional contributions are available on a rolling basis and can be carried forward for up to five years, after which they will expire. The 2024 income year is the first year in which unused caps from all five previous years are potentially available to carry forward.

Please contact our office if you require assistance in relation to the above measure.

 
Deduction for contributions denied due to issues in notice of intent to claim a deduction
 

The Administrative Appeals Tribunal (‘AAT’) recently held that a claim for a deduction for personal super contributions should not be allowed, as the relevant 'notice requirements' were not satisfied.
 
In order to claim a deduction for personal super contributions, an individual must both notify the super fund of their intention to claim a deduction, and receive an acknowledgment from the fund that it received the notice.

During the 2021 income year, the taxpayer made a number of personal superannuation contributions to his super fund totalling $6,550, with the last of those contributions made on 30 June 2021.

Sometime before 9 June 2021, the taxpayer submitted to his fund a notice advising the fund that he intended to claim a personal contribution deduction for $6,550 for the 2021 income year.

However, on 9 June 2021, the fund advised that it was unable to accept the notice because the fund's records indicated that the amount of contributions listed in the notice was different to the amount of contributions received. This was because the fund received the notice before the taxpayer made his final contribution of $550 on 30 June 2021.
 

Sometime between 9 June 2021 and 16 July 2021 the taxpayer resubmitted a notice to the fund via post that he intended to claim a deduction for the amended amount of $6,000 (although the fund subsequently advised that it had not received this notice).

On 14 July 2021, the taxpayer lodged his 2021 income tax return, claiming a deduction for $6,000 of personal contributions.   
 

On 22 August 2021, the ATO notified the taxpayer that his claim for a personal contribution deduction had been disallowed, on the basis that the fund had not reported an acknowledged notice that matched his claimed deduction. 

The AAT held that, when the taxpayer completed the first notice, he had not made personal contributions of $6,550 (as referred to in the notice), but rather had made contributions of $6,000.
Therefore, the first notice could not be valid as it was not in respect of the contributions that the taxpayer had made.

The AAT also noted that the fund did not provide an acknowledgment of the taxpayer's second notice, as it had not received it.

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


Crawford News

November 4, 2026
ATO will accept credit cards until 30 June 2027 Despite Reserve Banks credit card surcharge terms, ATO will continue to accept credit card payments for tax obligations until 30 June 2027. After 30 June 2027, taxpayers who wish to use credit cards to pay ATO will have to use third-party payment providers. Early Release of Super Schemes The ATO is concerned that some health practitioners and third-party facilitators are using predatory practices to get individuals to inappropriately access their super. Red flags include practitioners or third parties advertising early access to super for cosmetic or dental procedures on social media, or asking for myGov sign-in details so they can apply for you. Other common red flags include: practitioners conducting telehealth appointments, rather than in-person examinations for ‘compassionate release of super’; recommending more expensive treatments when cheaper options may be available; encouraging the use of super to pay for treatment, rather than other payment options, such as a payment plan; requiring the use of a specific provider to prepare the second ‘compassionate release of super’ medical report, or a specific third party to submit the application; requiring upfront payment for treatments and withholding information about the ongoing costs of the treatment; and charging fees to assist with preparing or submitting a ‘compassionate release of super’ application without being a tax agent. Work cars: Are employers overlooking private use? The ATO is calling on employers to check how their employees use work cars, as FBT may apply where a car is used or made available for private use by an employee or their family members or associates. Private use can include: school pick-ups or drop-offs personal trip garaging the car at or near the employee's home taking the car on weekend recreational trips. 2026 Budget Announcements Common rental property deduction errors The ATO has recently published the three most common rental property deduction errors it sees. Not apportioning interest expenses correctly Broadly, rental property owners can only claim deductions for interest they pay on a loan used to: buy the rental property; buy a depreciating asset for the property pay for deductible expenses that arise from renting out the property finance renovations and extensions to the rental property Interest on any part of the loan used for private purposes is not deductible. Where the loan is refinanced or redrawn to pay private expenses, such as school fees or a holiday, a deduction cannot be claimed for the interest on that portion. Incorrect claims of repairs vs capital works The ATO continues to see errors in claims for repairs, maintenance and capital works expenses. Generally speaking: repairs, such as fixing wear and tear, or damage to a property that occurred while renting it out, can be claimed as a deduction in the year they occur; improvements, such as renovating or replacing an entire structure, are capital expenses which can be claimed over time (generally 40 years); and adding or replacing something that’s not part of the structure is a depreciating asset and the cost is generally claimed over the asset's effective life. Separating private use of a property The ATO is also seeing rental expenses not being apportioned for any private use. Generally speaking, if a rental property owner: only uses part of the property to earn rent, they must apportion the expenses based on the area of the property rented; rents out the entire property, but for only part of the year, they must apportion the expenses based on the number of days it was rented or held to produce rental income; or charges below market rates of rent, and the expenses incurred are more than the amount of rent received, the ATO expects them to apportion the expenses by limiting them to the amount of rent derived from the property. Where the rental property owner uses the property as a holiday home, they cannot claim ownership and use expenses, such as interest, rates and repairs, unless they 'used or held it for use mainly for producing rental income'. 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.
October 5, 2026
ATO focus on PAYG instalments variations The ATO is writing to taxpayers who have varied their PAYG instalments to nil over multiple years, reminding them that the general interest charge may apply where their instalments have been significantly understated. Where varied instalments are less than 85% of the total tax payable, the ATO may impose GIC on the difference and, depending on the circumstances, penalties may also be applied. Taxpayers are advised to maintain appropriate records to support their variation decisions, and review variations where circumstances change. FBT changes for salary sacrificed work-related benefits From 1 April 2027, employers will no longer be able to use the ‘otherwise deductible rule’ to reduce the taxable value of an expense payment fringe benefit provided to an employee where the expense is: work-related; covered by the new $1,000 standard deduction; and provided under a salary sacrifice arrangement. This includes where an employer pays for, or reimburses, work-related expenses, such as home office expenses, home phone or internet expenses, or self-education expenses. However, the otherwise deductible rule can continue to apply where the expense is: not covered by the standard deduction; or covered by the standard deduction but the benefit is not provided under a salary sacrifice arrangement. Further, from 1 April 2027, certain work-related items will no longer qualify for the FBT exemption where they are provided under a salary sacrifice arrangement. These include: portable electronic devices; computer software; protective clothing; and briefcases and tools of trade. Eligible work-related items may still qualify for the exemption where they are not provided under a salary sacrifice arrangement. Further, under the changes, employers may be able to provide an employee with more than one eligible work-related item in an FBT year, even where the items have the same or substantially identical function, and continue to receive the exemption where the items: are mainly used for work purposes; and are not provided under a salary sacrifice arrangement. This repeals the general 'one-item' restriction applying to this work-related item exemption from 1 April 2027. Cents per kilometre method Motor Vehicle claims There are several misconceptions that commonly lead to incorrect claims under the cents per kilometre method for claiming deductions for car expenses. Common errors include: Claiming travel between home and work, which is generally private and non-deductible; Automatically claiming 5,000 kilometres without the appropriate records (for example, being unable to show how the business kilometres were worked out); Claiming car expenses for a vehicle provided under a novated lease through a salary sacrifice arrangement; Separately claiming the decline in value of a car and other expenses when using the cents per kilometre method; and Using both the cents per kilometre and logbook methods for different periods during the same year. Loss carry back rules have returned The re-introduced loss carry back measure has also now become law, applying to income years starting on or after 1 July 2026. Where eligible, companies will broadly be able to carry back a tax loss (revenue in nature) and apply it against tax paid in either, or both, of the previous two income years, basically giving rise to a tax refund for the loss year. ATO extends data-matching programs The ATO is continuing its visa data-matching program, acquiring data from the Department of Home Affairs from the 2027 to the 2029 income years. Under this program, the data collected may include: address and contact history for visa applicants, sponsors and migration agents; histories of visas granted, including visa subclasses; an individual’s visa status at a point in time; details of migration agents, sponsors and education providers; and international travel movements undertaken by visa holders (arrivals and departures). The ATO is also continuing its passenger movements data-matching program for the same period. Under this program, the data collected by the ATO may include names, dates of birth, arrival and departure dates, passport information and status types (including visa status, residency and citizenship status). 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.
September 9, 2026
Payday Super and contractors Businesses generally need to pay super where they engage an independent contractor mainly for their labour, personal effort, skills or time. This can apply even if the contractor: has an ABN; invoices the business for their work; or is described as a contractor in a written agreement. It is not mandatory to report payments made to independent contractors through Single Touch Payroll. However, if a business reports them voluntarily, it must meet the STP reporting requirements, including reporting qualifying earnings and super liability information. Where an independent contractor is entitled to super, the contribution must be paid for each payday and reach their super fund within seven business days after payday. Payday Super timeframe Under Payday Super, contributions must be received by an employee’s super fund within seven business days after payday. To keep on track, the ATO recommends that employers: use the new member verification request to verify that an employee’s super fund details are valid and that the fund can accept a contribution before it is made; check with the relevant payroll provider or clearing house that the fund is responding to MVRs; monitor payments, as funds have three business days to allocate or reject a payment; and if a payment is rejected or returned, act quickly to correct any errors and resubmit to the correct fund. For new employees, or where an employee changes their fund, employers generally have 20 business days to make the initial contribution. $21 billion in lost super The ATO is urging individuals to check whether they have lost or unclaimed super, with more than $21 billion waiting to be reunited with its owners. Super can become lost when an account is inactive and the fund cannot contact the member, often following a change of job, address or phone number. In some cases, the balance may be transferred to the ATO to hold until it can be reunited with the individual. The ATO reports that last year, more than $1.1 billion was returned through consolidations and direct payments to eligible individuals. ATO motor vehicle registries data-matching program The ATO acquires motor vehicle registries data from state and territory authorities from the 2026 to the 2030 income years. The information will be matched against ATO records to identify taxpayers who are not meeting their registration, lodgment, reporting, or payment obligations. The data will also be used to support ATO compliance activities through modelling, risk profiling and case selection. The data collected may include identification details for purchasers, sellers and other relevant parties, together with transaction dates and types, sale prices, market values, vehicle garage addresses, intended use, vehicle specifications and registration details. $1,000 deduction for work expenses From 1 July 2026, employees may choose either the standard deduction for work-related expenses of up to $1,000, or a deduction for the actual work-related expenses they incur. You should continue keeping records for deductible work expenses incurred from 1 July 2026. If, at the end of the 2027 income year, you choose to claim actual expenses, you must have the required written evidence for those expenses. 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.
August 4, 2026
Government extends the $20,000 instant asset write-off The Government has recently introduced legislation to extend the $20,000 instant asset write-off for small businesses. If enacted, the changes would set the instant asset write-off threshold at $20,000 for eligible depreciating assets first used, or installed ready for use, for a taxable purposes from 1 July 2026. The changes would also further suspend the 'lock-out rule' until 30 June 2027. Loss carry back rules to be reintroduced The Government has introduced legislation to re-introduce the loss carry back measure for companies from 1 July 2026. If enacted, this will allow most companies to carry back a tax loss and apply it against tax paid in either, or both, of the previous two income years, basically giving rise to a tax refund for the loss year. New restrictions on LRBAs New legislation imposes restrictions on the use of limited recourse borrowing arrangements by SMSFs. LRBAs entered into on or after 10 August 2026 to purchase real property can now only be used to acquire business real property. These changes do not apply if an SMSF: has already entered into an LRBA to finance a real property acquisition before 10 August 2026; or maintains or refinances that LRBA on or after 10 August 2026. 'Business real property' generally means land and buildings used wholly and exclusively in one or more businesses. Division 7A benchmark interest rate The ATO has published a Division 7A benchmark interest rate of 8.77% for the income year ending 30 June 2027, up from 8.37% for the previous income year. The benchmark interest rate is applied when calculating minimum yearly repayments for complying Division 7A loans. ATO scam warning The ATO has received reports of a new email impersonation scam claiming to be from the ATO. The email states that a phone appointment with the ATO has been scheduled and includes appointment details such as the date and time. The email claims that recipients must open an attachment included in the email to securely access relevant services or reschedule the appointment. The attachment contains a link to a legitimate looking myGov sign-in page designed to steal usernames, passwords and other personal information. The ATO has advised recipients not to respond to the email or interact with it in any way. 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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