Tag: TAx Compliance

2019 July/August – Page 6

Page 6
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With these broad indicators set down, the 

ruling defines carrying on a business quite 

widely, to the extent that where a taxpayer 

merely has a profit making purpose, it is 

accepted that it is likely the other above 

indicia will support a conclusion that the 

taxpayer is carrying on a business. In the case 

of limited, proprietary limited and no liability 

companies, the final ruling accepts that these 

companies would normally be carrying 

on a business in a general sense if they are 

established and maintained to make a profit 

for their shareholders, and invest their assets 

in gainful activities that have both a purpose 

and prospect of profit. As stated, this is a very 

broad interpretation.

EXAMPLES

With these broad parameters laid down, 

the final ruling then provides a number of 

useful examples, the first of which involves 

an inactive company which ceased trading 

in 2015/2016 with several hundred thousand 

dollars in retained profits in its bank account. 

In subsequent income years, the company’s 

income consisted solely of $12,000 interest 

per year. Despite having no intention of 

resuming trading, because the company’s 

income was consistently greater than its 

expenses (which consisted only of an ASIC 

company fee), it had a purpose and prospect 

of profit each year, and accordingly is deemed 

to be carrying on a business in subsequent 

years. As the following example from the final 

ruling illustrates, holding companies can also 

be carrying on a business:

The ruling then provides the following further 

examples, all of which constitute the ‘carrying 

on of a business’:
•  A company engaged in the preliminary 

activity of investigating the viability of 

carrying on a particular business, and 

invests its share capital of $300,000 in 

interest-bearing bank accounts, earning 

$9,000 per year. No decision has been 

made to carry on the business under 

investigation.

•  Property investment company owns a 

single commercial property which it rents 

out for profit to a third-party. It does not 

service the property, or conduct any other 

activities.

•  A share investment company solely set-up 

for this purpose. $400,000 of investments 

generating $20,000 per year after expens-

es. Even where a third-party manages the 

portfolio.

•  Leasing passenger boats to an unrelated 

party under a commercial lease agree-

ment. Three boat business. Even where 

a management company undertakes the 

chartering.

Perhaps one of the flaws of the final ruling is 

that – unlike the draft ruling it replaces - it 

fails to provide clear examples of what does 

not constitute the carrying on of a business. In 

the draft ruling, these included:
•  Dormant companies with retained profits 

and a bank account in which it earns 

small amounts of interest sufficient only 

to cover its ASIC fees (as opposed to a 

large amount of interest in the earlier 

example in the final ruling)

•  Companies engaged in the preliminary 

activity of investigating the viability of 

carrying on a particular business (by 

contrast, the final ruling – see earlier – 

the company invested its share capital, 

earning significant interest)

•  Family companies with an unpaid present 

entitlement (UPE) from a family trust 

that have not demanded payment from 

the trust and also not entered into any 

arrangement with the trust to receive any 

profit from the UPE 

•  Family companies whose only income is 

trust distributions from a discretionary 

trust which it distributes partly in cash 

to the shareholders with the balance held 

in a non-interest bearing bank account 

pending distribution to other share-

holders. The company also has no other 

assets.

By failing to provide such examples of what 

does not constitute the carrying on of a 

business, the parameters of the carrying on 

a business test are not as well fleshed out as 

they could be. 

TAKE-HOME MESSAGES

All told, the finalised ruling provides a very 

wide definition of ‘carrying on a business’ 

for Section 328-110 and Section 23 purposes. 

It applies to income years both before and 

after its date of issue. Business owners in 

consultation with their advisors should:
•  Review 2015/2016 and 2016/2017 tax 

returns (if within the amendment period) 

for eligibility for the lower corporate tax 

rate

•  If necessary, issue revised distribution 

statements for these years

•  Review eligibility for access to the Small 

Business Concessions for prior years, and 

moving forward.   

ACCOMPANYING DRAFT RULING

Released at the same time as TR 2019/1, was 

draft tax determination TD 2019/D4. This 

draft determination indicates that a company 

whose only business activity is renting out an 

investment property is not eligible to claim the 

CGT small business concessions in relation to 

the disposal of the property, notwithstanding 

that it may carry on a business in the general 

sense for TR 2019/1 purposes. 
The requirement to ‘carrying on a business’ is 

only one of a number of criteria to be able to 

access the CGT small business concessions. 

Importantly, the relevant asset also needs to 

be an ‘active asset’. However, an asset cannot 

be an active asset if its main use is to derive 

rent. As such, the draft determination states 

that the small business CGT concessions 

would not be available upon disposing of the 

investment property.

ATO EXAMPLE 
 HoldCo is a company incorporated in 

Australia. HoldCo owns all the shares 

in SBE Co, which carries on a profitable 

trading business in Australia. 
Possibility A: holding company only 

holds shares in subsidiary
HoldCo's only asset is its shares in 

SBE Co. HoldCo's activities consist 

of investing in shares in SBE Co and 

managing the company group. HoldCo's 

activities are carried on with a purpose 

and prospect of profit and reflect a normal 

commercial business structure. HoldCo 

carries on a business. 
Possibility B: holding company 

holds shares in, and provides loan to, 

subsidiary
In addition to owning all the shares in 

SBE Co, HoldCo provides an interest-free 

loan to SBE Co and provides plant and 

capital equipment that SBE Co uses in its 

business rent free.

HoldCo's income consists of dividend 

income derived from the shares it holds 

in SBE Co. While it does not derive a 

direct return on the loan or provision 

of equipment, these enhance SBE Co's 

profitability and improve the return 

on Holdco's shares in SBE Co. The 

profits are distributed by HoldCo to its 

shareholders.
HoldCo's activities consist of investing in 

shares in SBE Co, managing the group, 

providing a loan to SBE Co and deriving 

interest income from the loan. HoldCo 

carries on a business. 

Election 

Wash-Up

With the Government being returned at the 18 May Federal Election, 
this article looks at what this may mean from a tax perspective. 

Resident Individuals – Proposed Tax Rates

2018/2019

2022/2023

Income threshold $

%

Income threshold $

%

0-18,200

0

0-18,200

0

18,201-37,000

19

18,201-45,000

19

37,001-90,000

32.5

45,001-120,000

32.5

90,001-180,000

37

120,001-180,000

37

180,001- above

45

180,001- above

45

6

www.mytaxsavers.com.au

My Tax Savers

PERSONAL INCOME TAX

INCREASED TAX OFFSET
The centrepiece of the recent Federal Budget was immediate tax relief 

for individuals earning up to $126,000. This is in the form of the Low 

and Middle Income Tax Offset (LMITO) which the Opposition also 

states that it supports. 
This will come into almost immediate effect, in that it will apply to 

upcoming tax returns lodged for 2018/2019. Under the changes, the 

reduction in tax provided by LMITO will increase from a maximum 

amount of $530 to $1,080 per year and the base amount will increase 

from $200 to $255 per year for the 2018/2019, 2019/2020, 2020/2021 

and 2021/2022 financial years. Those on incomes between roughly 

$48,000 and $90,000 per year will receive the full $1,080 offset, while 

for individuals with incomes of $90,000 to $126,000 the offset will 

taper off at a rate of 3 cents per dollar for every dollar over $90,000. 

Those who earn less than $37,000 will receive an offset of $255. 
This offset does not need to be claimed separately in tax returns. 

Rather it will automatically be processed and provided to taxpayers 

when they lodge their upcoming 2018/2019 income tax returns. If 

the legislation is not in place by 1 July 2019 when people first start 

lodging their tax returns, the ATO is at this stage proposing to process 

amended assessments to those who lodged before the law is passed to 

include the LMITO entitlement. 

TAX TIP

Once the law is passed (expected to be early July) you may wish 
to get your 2018/2019 records to your Tax Agent and instruct 
them to lodge early rather than in the first part of the 2020 
calendar year (which is the normal lodgement time if lodging 
with a Tax Agent). By doing so, all other things being equal, 
you will bring forward your LMITO entitlement with a potential 
additional refund of up to $1,080 (subject to the above income 
limits, and subject to not otherwise having underpaid tax during 
the year).  

DEFICIT LEVY
With the Opposition losing the election, the Deficit Levy will not 

be re-introduced. This was originally introduced by the Abbott 

Government in the form of a 2% increase to the top marginal tax rate 

which kicks in at $180,000, increasing that top rate from 45% to 47% 

(not including Medicare levy). With the Government being re-elected, 

the top marginal tax rate will remain at 45% going forward. 
INCOME TAX REDUCTION
On Budget night, the Government also proposed that from 1 July 

2022, it would increase the top threshold of the 19% personal income 

tax bracket from $41,000 (as currently legislated) to $45,000. The 

Federal Opposition announced that it supports this change, meaning 

that the following rates will likely apply from 1 July 2022:

MY TAX SAVERS

July/August 2019

5

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2019 September/October – Page 14

Page 14
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TAX TIP
Now the law has been passed, you may wish to get your 

2018/2019 records to your Tax Agent and instruct them to lodge 

early rather than in the first part of next year (which is the 

normal lodgement time if lodging with a Tax Agent). By doing 

so, all other things being equal, you will bring forward your 

LMITO entitlement with a potential additional refund of up to 

$1,080 (subject to the above income limits, and subject to not 

otherwise having underpaid tax during the year). 

In the first sitting of Parliament following the May 2019 Federal Election, the Federal 
Government legislated personal income tax reductions in full, without amendment. 
The reductions come by way of an increase to the low and middle income tax offset 
(LMITO) as well as reductions to the actual tax rates and thresholds. 

LOW AND MIDDLE INCOME TAX OFFSET

The reduction in tax provided by LMITO will increase from a 

maximum amount of $530 to $1,080 per annum and the base amount 

will increase from $200 to $255 per annum for 2018/2019, 2019/2020, 

2020/2021 and 2021/2022 income years. Specifically: 
•  The LMITO will now provide a reduction in tax of up to $255 for 

taxpayers with a taxable income of $37,000 or less.

•  Between taxable incomes of $37,000 and $48,000, the value 

of the offset will increase at a rate of 7.5 cents per dollar to the 

maximum offset of $1,080.

•  Taxpayers with taxable incomes between $48,000 and $90,000 

will be eligible for the maximum offset of $1,080.

•  From taxable incomes of $90,000 to $126,000 the offset will 

phase out at a rate of 3 cents per dollar.

The LMITO will be received on assessment after individuals 

lodge their tax returns for 2018/2019, 2019/2020, 2020/2021 and 

2021/2022 income years. This is designed to ensure that taxpayers 

receive a benefit when they lodge returns from 1 July 2019. It will be 

automatically processed by the ATO and does not need to be claimed 

separately. 

TAX CUTS 

NOW LAW

LOW AND MIDDLE INCOME TAX OFFSET  

FOR 2018/2019 TO 2021/2022)

Taxable income (TI)

LMITO

$0 – $37,000

$255

$37,001 - $48,000

$255 + ([TI - $37,000] × 7.5%)

$48,001 - $90,000

$1,080

$90,001 - $125,999

$1,080 - ([TI - $90,000] × 3%)

$126,000 +

Nil

MY TAX SAVERS

September/October 2019

13

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2019 July/August – Page 17

Page 17
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unless the amount is repaid or made subject 

to a complying Division 7A loan agreement 

(with minimum interest and principal 

repayments) before the company’s lodgement 

day for its 2018/2019 tax return. Thus, before 

you lodge your company’s return (or before it 

is due) you will need to assess whether a loan 

has been indeed been made and, if so, how 

you wish to deal with that loan. 
UNPAID PRESENT  

ENTITLEMENT (UPE)
Where a private company and a discretionary 

trust are in the same group of entities and 

the private company is an unpaid presently 

entitled income beneficiary of the trust in 

2018/2019, you will need to consider how to 

deal with this amount. Division 7A may apply 

to these unpaid present entitlements unless:

 

»

The present entitlement has been paid out 

by the lodgement day of the 2018/2019 

tax return

 

»

The funds are held on sub-trust by the 

lodgement day of the 2018/2019 tax return, 

or

 

»

A complying Division 7A loan agreement 

is entered into by the lodgement day of the 

2018/2019 tax return. 

Therefore, whatever course you choose, if 

you fail to take action by the lodgement day 

for the company’s 2018/2019 tax return, then 

pursuant to Division 7A the company will be 

deemed to have paid an unfranked dividend 

to the trust. This can be a complex area, and 

accordingly advice should be sought from 

your Accountant. 

TAX AGENT

If, like many taxpayers, you use the services 

of a Tax Agent to prepare your personal 

Income Tax Return you should ensure you are 

on their lodgement list by 31 October 2019. If 

you are not on a Tax Agent’s Lodgement List, 

your tax return will be due on this date, and 

you will not enjoy the extended due date that 

you usually would when you lodge with a Tax 

Agent. Other points to be mindful of when 

using a Tax Agent include:
•  Ensure they are registered with the Tax 

Practitioners Board (go to 

//www.tpb.gov.au/search-register) 

•  Ensuring that you provide the Tax Agent 

with all of your relevant tax records for 

2018/2019 (receipts etc.). Failure to do 

may result in delays in lodging your 

return, and you possibly paying more 

tax than you are liable for. Ask your Tax 

Agent for a checklist of the records that 

you need to provide. 

•  Tax return preparation fees are tax 

deductible, so ensure that you retain 

evidence of your payment. 

16

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My Tax Savers

2019 September/October – Page 4

Page 4
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MY TAX SAVERS

September/October 2019

3

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SEPTEMBER 2019

21 SEPTEMBER 

August monthly Activity Statements – due for 

lodgement and payment

30 SEPTEMBER

Annual TFN Withholding Report for closely-held 

Trusts where a Trustee has been required to withhold 

amounts from payments to beneficiaries during 

2018/2019 – due date for lodgement

OCTOBER 2019

1 OCTOBER

Smaller employers (less than 20 employees) expected 

to be Single Touch Payroll compliant – unless an 

exemption applies

21 OCTOBER

September monthly Activity Statements – due for 

lodgement and payment

21 OCTOBER

September monthly Activity Statements – due for 

lodgement and payment

28 OCTOBER 

Final date for eligible quarterly GST reporters to elect 

to report GST annually 

28 OCTOBER

Due date for Superannuation Guarantee contributions 

for July-September to be made to employee funds 

31 OCTOBER

PAYG Withholding Where ABN Not Quoted – Annual 

Report These amounts are also reported at W4 on 

your Activity Statement 

31 OCTOBER 

Due date for 2018/2019 individual tax returns (unless 

you are lodging via a Tax Agent and are on their 

lodgement list by this date) 

Where the due date falls on a weekend or public 

holiday, it is deferred until the next business day 

(except in the case of Superannuation Guarantee 

deadlines).

Many lodgement and payment deadlines are 
looming for business including those relating to 
Activity Statements, superannuation, and more.  

KEY DATES

2019 July/August – Page 7

Page 7
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Election 

Wash-Up

With the Government being returned at the 18 May Federal Election, 
this article looks at what this may mean from a tax perspective. 

Resident Individuals – Proposed Tax Rates

2018/2019

2022/2023

Income threshold $

%

Income threshold $

%

0-18,200

0

0-18,200

0

18,201-37,000

19

18,201-45,000

19

37,001-90,000

32.5

45,001-120,000

32.5

90,001-180,000

37

120,001-180,000

37

180,001- above

45

180,001- above

45

6

www.mytaxsavers.com.au

My Tax Savers

PERSONAL INCOME TAX

INCREASED TAX OFFSET
The centrepiece of the recent Federal Budget was immediate tax relief 

for individuals earning up to $126,000. This is in the form of the Low 

and Middle Income Tax Offset (LMITO) which the Opposition also 

states that it supports. 
This will come into almost immediate effect, in that it will apply to 

upcoming tax returns lodged for 2018/2019. Under the changes, the 

reduction in tax provided by LMITO will increase from a maximum 

amount of $530 to $1,080 per year and the base amount will increase 

from $200 to $255 per year for the 2018/2019, 2019/2020, 2020/2021 

and 2021/2022 financial years. Those on incomes between roughly 

$48,000 and $90,000 per year will receive the full $1,080 offset, while 

for individuals with incomes of $90,000 to $126,000 the offset will 

taper off at a rate of 3 cents per dollar for every dollar over $90,000. 

Those who earn less than $37,000 will receive an offset of $255. 
This offset does not need to be claimed separately in tax returns. 

Rather it will automatically be processed and provided to taxpayers 

when they lodge their upcoming 2018/2019 income tax returns. If 

the legislation is not in place by 1 July 2019 when people first start 

lodging their tax returns, the ATO is at this stage proposing to process 

amended assessments to those who lodged before the law is passed to 

include the LMITO entitlement. 

TAX TIP

Once the law is passed (expected to be early July) you may wish 
to get your 2018/2019 records to your Tax Agent and instruct 
them to lodge early rather than in the first part of the 2020 
calendar year (which is the normal lodgement time if lodging 
with a Tax Agent). By doing so, all other things being equal, 
you will bring forward your LMITO entitlement with a potential 
additional refund of up to $1,080 (subject to the above income 
limits, and subject to not otherwise having underpaid tax during 
the year).  

DEFICIT LEVY
With the Opposition losing the election, the Deficit Levy will not 

be re-introduced. This was originally introduced by the Abbott 

Government in the form of a 2% increase to the top marginal tax rate 

which kicks in at $180,000, increasing that top rate from 45% to 47% 

(not including Medicare levy). With the Government being re-elected, 

the top marginal tax rate will remain at 45% going forward. 
INCOME TAX REDUCTION
On Budget night, the Government also proposed that from 1 July 

2022, it would increase the top threshold of the 19% personal income 

tax bracket from $41,000 (as currently legislated) to $45,000. The 

Federal Opposition announced that it supports this change, meaning 

that the following rates will likely apply from 1 July 2022:

6

www.mytaxsavers.com.au

My Tax Savers

2019 September/October – Page 15

Page 15
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INCOME TAX REDUCTIONS

STAGE 1
From 1 July 2022, the Government will increase the top threshold of the 19% personal income tax bracket from$41,000 to $45,000.
Also from 1 July 2022, the Government will increase the low income tax offset (LITO) from $645 to $700 with the following impact:
•  Taxpayers with a taxable income which does not exceed $37,500 will receive a LITO of $700
•  Taxpayers with a taxable income which exceeds $37,500 but is not more than $45,000 will receive a LITO of $700, less an amount equal to 5 

per cent of the excess

•  Taxpayers with a taxable income which exceeds $45,000 but is not more than $66,667 will receive a LITO of $325, less an amount equal to 

1.5% of the excess.

Expanded tables reflecting the changes are below:

STAGE 2
From 2024/2025, the 32.5% marginal tax rate will be reduced to 30%. The Government states that this will more closely align the middle tax 

bracket of the personal income tax system with corporate tax rates. In 2024/2025 an entire tax bracket, the 37% tax bracket will be abolished under 

the Government's already legislated plan. With these changes, by 2024/2025, approximately 94% of Australian taxpayers are projected to face a 

marginal tax rate of 30% or less.
Therefore, with legislated changes, from 2024/2025, there would only be 3 personal income tax rates – 19%, 30% and 45%. From 1 July 2024, 

taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%. The changes are reflected in the table below:

TAX RATES AND INCOME THRESHOLDS 

Rate

2017-18

2018-19 to 2021-22

2022-23 to 2023-24

Nil

$0 - $18,200

$0 - $18,200

$0 - $18,200

19%

$18,201 - 37,000

$18,201 - 37,000

$18,201 - 45,000

32.5%

$37,001 - $87,000

$37,001 - $90,000

$45,001 - $120,000

37%

$87,001 - $180,000

$90,001 - $180,000

$120,001 - $180,000

45%

$180,001 +

$180,001 +

$180,001 +

Low and middle income tax 

offset

-

Up to $1,080

-

Low income tax offset (LITO)

Up to $445

Up to $445

Up to $700

Rate

2022-23 and 2023-24

2024-25 onwards

0%

$0 - $18,200

$0 - $18,200

19%

$18,201 - 45,000

$18,201 - $45,000

32.5%

$45,001 - 120,000

$45,001 - $200,000

37%

$120,001 - $180,000

N/A

45%

$180,001 +

$200,001+

14

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My Tax Savers

2019 July/August – Page 18

Page 18
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From 1 July, two first-time superannuation opportunities present 
themselves. The first allows older, retired Australians to potentially 
make additional contributions to super, while the second may allow 
additional after-tax and salary sacrifice contributions to be made 
during this financial year. 

CATCH-UP CONTRIBUTIONS 

From 1 July 2018, if you have a total super balance of less than 

$500,000 on the previous 30 June and you make or receive  

concessional contributions of less than the concessional contributions 

cap of $25,000 pa, you may be able to accrue unused amounts for use 

in subsequent financial years.
2018/2019 is the first financial year you can carry forward unused cap 

amounts and these amounts can be used from 1 July 2019. Unused cap 

amounts can be carried forward for up to five years.
Before this change to the law, the concessional operated on a year-by-

year basis – any unused amounts from a previous year could not be 

carried forward and used in subsequent years. You either used it, or 

you would lose it! Practically speaking, the first year that you can take 

advantage of this reform is 2019/2020 (for any unused 2018/2019 cap).

EXAMPLE – Carry-Forward Concessional Cap
Catelyn is a lawyer who earns $95, 000. As a result her employer 

would normally contribute $9, 025 in Superannuation Guarantee 

on her behalf. From 1 July 2018, she was on unpaid Maternity 

Leave, and returned to work exactly 12 months later. 
Under the old rules, unable to carry-forward her unused 

concessional caps from previous years, in 2019/2020, Catelyn’s 

concessional cap would be $25 000 and not take into account her 

unused 2018/2019 cap. 
Assuming she made no contribution while on Maternity Leave, 

under the new rules Catelyn would be able to make a personal 

contribution of up to $40 975 in 2019/2020 (the unused $25 

000 cap + $15 975 of the unused 2019/2020 cap, taking into 

account the $9 025 in Superannuation Guarantee paid by her 

employer). This would give her extra capacity to catch-up on her 

superannuation contributions that were not made during her time 

off work – either by salary sacrificing, or making an after-tax 

contribution for which she could claim a tax deduction. The 

maximum amount of the tax deduction allowed in 2019/2020 

would also increase by $25 000 (being the unused cap amount 

from the previous year). 

FIRST-TIME

  

SUPER 

OPPORTUNITIES 

MY TAX SAVERS

July/August 2019

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2019 September/October – Page 5

Page 5
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SINGLE TOUCH 

PAYROLL FAQs

4

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My Tax Savers

Single Touch Payroll (STP) is a new 

Government initiative aimed at streamlining 

business payroll reporting obligations. It is 

now compulsory for larger employers (those 

with 20 or more employees) and has been 

since 1 July 2018. It becomes compulsory 

for most smaller employers from 1 October 

2019 (though there are exemptions in limited 

cases).
The STP regime revolutionises the way 

employers report payroll information to the 

ATO. In essence, STP is a new reporting 

mechanism whereby employers report 

employee payments (such as salary and 

wages, allowances, superannuation) and 

PAYG withholding to the ATO directly 

through their STP solution (typically, 

upgraded Standard Business Reporting-

enabled software) at the same time they pay 

their employees. To be clear, no additional 

reporting is required – just a new method of 

reporting.
A typical STP-compliant process involves:

 

 Adopt upgraded Standard Business 

Reporting-enabled software (this is 

essential to reporting under STP) and 

also software that provides ATO and 

Fair Work-compliant pay-slips each pay 

period, and also calculates and processes 

termination payments

 

 Enter employee details accurately in the 

software

 

 Complete standard field details in all 

the fields requested by your software 

(STP does not require any additional 

information to be reported)

 

 Provide ATO and Fair Work-compliant 

pay-slips to employees at the time of 

payment

 

 Calculate Superannuation Guarantee 

entitlements

 

 Consider all workarounds that may exist 

in your payroll processes and banking 

instructions to automate them within your 

software program.  

START DATES. DEFERRALS  

I was not ready by 1 July, is this a problem?  

1 July 2019 is a ‘soft’ STP start date for 

employers with less than 20 employees 

(smaller employers). The ATO encourages 

these employers to commence reporting via 

STP from this date, but they are not actually 

required to do so until 1 October 2019. Even 

then, as below, there may be deferral and 

exemption options available.

Are there any penalties for non-

compliance? 

The ATO Commissioner, Chris Jordan, 

released a statement in which he confirmed 

that there will be no penalties applied on 

smaller employers – for mistakes, missed 

reports, or late reports – for the first 12 

months of STP from 1 July 2019. The ATO is 

taking a flexible, reasonable, and pragmatic 

approach with the emphasis on getting 

employers into the system slowly.

Can I have a deferred start date? 

There are four deferral concessions available: 

1. All smaller employers – Deferrals will 

generally be granted to any smaller 

employer (less than 20 employees) who 

requests additional time to commence 

STP reporting. 

As noted above, there is a transition period to 

STP reporting, so you won’t need to apply for 

a deferral until the 1 October 2019 deadline 

passes. 

2. Quarterly reporting for micro 

employers – Employers with between 

1-4 employees (micro employers) may 

be eligible to report quarterly through 

BAS Agents or Tax Agents until 30 June 

2021. However, the employer generally 

must be either: 

•  A non-computerised business 
•  Have irregular employment patterns 

(e.g. seasonal employer), or 

•  Be an employer of closely-held payees 

(see later for this definition).

3. 

Smaller Employers (less than 20 

employees) of Closely-Held Payees –

Closely-held employees are those not at 

arm’s length from the employer (e.g. family 

members of a family-owned business, 

directors or shareholders of a company, 

or trustees or beneficiaries of a trust). The 

two available reporting options are: 

   (a)  Later start date – Exempt until 

2020/2021. No need to apply for the later 

start date. Note that employees of that 

same business who are not closely-held, 

must be reported via STP, and do not get 

this 12-month exemption. 

   (b)  Quarterly reporting – From 1 

July 2020 you will have the option to 

report closely-held payees’ information 

quarterly through STP. This report will 

be due at the same time as the quarterly 

Activity Statement. 

4. 

Exemptions – Small employers (less than 

20 employees) may be totally exempt from 

reporting if they have no or low digital 

capability, no or unreliable internet, 

irregular employment patterns, or “other 

extenuating circumstances” (not defined). 

2019 July/August – Page 8

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INVESTORS

CGT DISCOUNT UNCHANGED
The CGT discount will remain at 50% for assets held for 12 months or 

more. The Federal Opposition had proposed to reduce the discount to 

25% for assets purchased on or after 1 January 2020. 
Only the following taxpayers are eligible for the 12-month discount:
•  Individuals (50% discount)
•  Complying superannuation funds (33%)
•  Trusts – including non-complying superannuation funds and 

public trading trusts (50%)

•  Life insurance companies in relation to capital gains from a 

Pooled Superannuation Trust asset (33%).

On taxable capital gains where the asset is held for 12 months or 

more, the maximum effective tax rate payable for superannuation 

funds is 10% (the standard superannuation concessional tax rate of 

15% is reduced by 1/3rd). On the other hand, for both individuals 

and trusts, the discount halves your capital gain (50%). Therefore, 

even if you are on the top individual marginal rate of tax (currently 

47%) the maximum tax rate you will pay on the capital gain if you 

are an individual is 23.5% (i.e. 50% of the 47% marginal rate). The 

notable exclusion here are companies. They are not eligible for the 

discount, however they may be eligible for the CGT Small Business 

Concessions. 

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TAX TIP

If you are contemplating selling a CGT asset, you may wish to 
consider if possible delaying the sale until this 12-month mark is 
met and, in doing so, reduce any capital gain by 50%. To reiterate, 
for CGT purposes, the sale date is the contract date or change in 
ownership date - not the settlement date!

NEGATIVE GEARING
With the Government being re-elected, there will be no changes to the 

existing negative gearing rules.  
Negative gearing is an often-used and sometimes misunderstood 

phrase in relation to property and borrowings. When boiled down 

to its basics, negative gearing refers to the practice of accepting a 

loss from an investment with a view to trading that loss off against a 

capital gain. Therefore, for a negative gearing exercise to work, it is 

important to select an asset that will have capital growth – otherwise 

all those losses you have been absorbing while holding the negatively 

geared investment will not have been worthwhile.
An investment is said to be negatively geared if, after taking into 

consideration all of the income and expenses associated with holding 

the asset (i.e. property, shares), the investment shows a negative 

net return i.e. a loss. Whilst all taxpayers can negatively gear, it is 

typically more appealing to taxpayers with higher marginal rates of 

income tax. This is because the ATO allows an offset of the loss from 

the holding of a negatively geared investment against other income. 

Therefore, the higher a taxpayer’s marginal tax rate, the greater the 

benefit from a gearing strategy.
The Opposition had proposed to limit negative gearing to new 

housing from 1 January 2020. All investments made before this date 

were not to be affected by this change and would have been fully 

grandfathered. 

FRANKING CREDITS
Investors (including superannuation funds) will continue to be 

entitled to a refund of excess franking credits in circumstances where 

their own tax payable sits at zero.  

SUPERANNUATION

The Government committed to no new taxes on superannuation last 

month. However, it’s unclear how long this guarantee is in place for. 
Going forward, the Government intends to implement the following 

superannuation policies, most of which were proposed in the recent 

Federal Budget:
REMOVAL OF THE WORK TEST FOR SOME 

OLDER AUSTRALIANS
The Government proposes to remove the superannuation ‘work test’ 

for individuals aged 65 and 66 from 1 July 2020. This will align the 

work test with the eligibility for the Age Pension, which is slated to 

increase to 67 from 1 July 2023. The change will enable an additional 

estimated 55,000 individuals to make concessional and non-

concessional (after tax) voluntary contributions even if they are not 

working. The work test – which requires older Australians to work a 

minimum 40 hours over a 30-day period in order to make a voluntary 

superannuation contribution – will remain in place for those aged 

67-74. 
The suspension of the work test, will enable taxpayers aged 65 and 66 

who are no longer working, or only working a few hours per week, 

to contribute to superannuation and enjoy the tax concessions that it 

provides. Taxpayers in this age bracket will also have automatically 

met a condition of release (i.e. turning 65), and therefore will be able 

to withdraw these contributions as and when they please. 
We note that there is already a one-year exemption in place from 

the work test to allow recent retirees to boost their superannuation 

balances. That is, from 1 July 2019, individuals aged 65 to 74 years 

with total superannuation balances below $300,000 can make 

voluntary contributions to superannuation for 12 months from the end 

of the financial year in which they last met the work test. 
EXTENDING ELIGIBILITY FOR THE 

BRING-FORWARD CAP
In a measure designed to complement the above removal of the 

work test, from 1 July 2020, access to the bring-forward cap will be 

extended from taxpayers aged less than 65 years of age to those aged 

65 and 66. This will enable these individuals to make up to three 

years’ worth of non-concessional contributions, normally capped at 

$100,000 per year, to superannuation in a single year (but no more 

than $300,000 over the three-year total period). This will give older 

taxpayers increased flexibility to save for retirement. Taxpayers in 

this age bracket will be able to contribute lump sums that they have 

on hand into superannuation more quickly; bringing forward the 

accompanying tax concessions – rather than a maximum of $100,000 

per year under the current rules that apply.
INCREASE TO AGE LIMIT ON SPOUSE CONTRIBUTIONS
From 1 July 2020, the Government proposes to increase the age limit 

for spouse contributions from 69 to 74 years. Currently, individuals 

aged 70 and over cannot receive contributions made by another 

person on their behalf. Therefore, individuals up to and including age 

74 will be able to receive spouse contributions, with those aged 65 and 

66 no longer needing to meet a work test. As has been the case in the 

past for recipient spouses aged between 65 and 70, a recipient spouse 

aged 67 to 74 will need to satisfy the work test in order for the super 

fund to accept the contribution. Providing taxpayers with greater 

2019 September/October – Page 16

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Most taxpayers will at some point incur travel expenses – such as accommodation, airfares, hire cars, 
taxi/Uber fares, tolls etc. Given the broadness of this topic, this article is confined to travel expenses 
incurred by employers or their employees in the course of running a business - from the perspective 
of the business owner. This is as distinct from employees, sole traders or partners of a partnership 
incurring travel costs (as these are typically dealt with very differently, and are covered by the 
substantiation rules). 

TAX TREATMENT 

The primary legislation applicable to travel costs 

incurred by employers is:

1. Section 8(1)(b) of the Income Tax 

Assessment Act (1997) which provides 

an income tax deduction for travel costs 

necessarily incurred in carrying on a 

business

2. The Fringe Benefits Tax (FBT) rules that 

apply to any component that confers a 

personal, non-cash benefit on employees 

or their associates (e.g. spouses), and

3. The entertainment provisions which 

may apply to components that comprise 

entertainment (such as certain meals while 

travelling).

Broadly, the treatment of these three components 

is respectively as follows:

1. 

Travel with no private component – 

deductible and GST creditable as per any 

business expense. Overseas travel costs 

however generally will not have any GST 

including (a) passenger transport to or 

from Australia or between destinations 

outside Australia; (b) domestic air travel 

where the passenger is a non-resident 

and the travel was purchased while the 

passenger was outside Australia; (c) some 

domestic travel within Australia connected 

with international transport; (d) transport 

insurance connected with the international 

transport of passengers; and (e) purchasing 

a service which is used or enjoyed outside 

Australia. 

2. 

Travel that confers a private benefit 

on an employee (including that which 

constitutes meal entertainment) – 

deductible and GST creditable. However, 

you then need to deal with FBT and payroll 

consequences (see later).

3. Travel that constitutes entertainment: 

provided to non-employees e.g. clients, 

suppliers etc. (or that is provided to 

employees and constitutes a Minor 

Fringe Benefit i.e. under $300) – not 

deductible and no GST credit. For example, 

accommodation or airfares connected with 

providing entertainment by way of food, 

drink, or recreation (i.e. weekend away for 

a Christmas party at a restaurant).

TRAVEL VERSUS LIVING 

AWAY FROM HOME

As established, travel costs in respect of work 

(including accommodation, meals etc.) are 

deductible and GST creditable. By contrast, if an 

employer pays for the expenses of an employee 

who is deemed to be “living away from home” 

for work purposes (rather than travelling) by 

way of a Living Away From Home Allowance 

(LAFHA) for instance, then such payments are 

dealt with under the FBT provisions. 
LAFHAs are taxable fringe benefits (which may 

be exempt from FBT in certain circumstances) 

whereas travel allowances may form part of an 

employee’s assessable income against which 

deductions may be allowed for the cost of 

meals, accommodation and incidental expenses. 

LAFHAs should not be reported via Single 

Touch Payroll (or on the Payment Summary as 

the case may be) as it is exempt income. 
LAFHAs are paid where an employee has moved 

and taken up temporary residence away from 

their usual place of residence, so as to be able to 

carry out employment duties for a time at the new 

(but temporary) workplace. A travel allowance, 

on the other hand, is paid because the employee 

is travelling in the course of performing their 

job and has not relocated. Other distinguishing 

factors are set out in the following table:

ACCOUNTING 

FOR TRAVEL

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