Practice Updates 2024

It Wasn’t Me: The Tax Fraud Scam

You login to your myGov account to find that your activity statements for the last 12 months have been amended and GST credits of $100k issued. But it wasn’t you. And you certainly didn’t get a $100k refund in your bank account. What happens now?

In what is rapidly becoming the most common tax scam, myGov accounts are being accessed for their rich source of personal data, bank accounts changed, and personal data used to generate up to hundreds of thousands in fraudulent refunds. For all intents and purposes, it is you, or at least that’s what it seems. And, the worst part is, that you probably gave the scammers access to your account.

When is a Gift Not a Gift?

The Tax Commissioner has successfully argued that more than $1.6m deposited in a couple’s bank account was assessable income, not a gift or a loan from friends.

The case of Rusanova and the Commissioner of Taxation is enough for a telemovie. The plot features an Australian resident Russian couple ‘gifted’ over $1.6m in unexplained bank deposits, over $67,000 in interest, the Russian father-in-law seafood exporter, a series of Australian companies, and the generous friend loaning money in $20,000 tranches.

The crux of the case before the Federal Court is whether you can prove to the Australian Tax Office (ATO) that unexplained deposits should be treated as gifts or loans and what happens when the Tax Commissioner thinks otherwise. If the Commissioner suspects the deposits are income, he can issue a default tax assessment and decide what tax should be paid. The burden of proof is then on the taxpayer to prove the Tax Commissioner wrong.

What’s Ahead for 2024-25?

Will 2024-25 be another year of volatility or a return to stability?

Personal Tax & Super

As you would be aware (at least we hope so after a $40m public education campaign), the personal income tax cuts came into effect on 1 July 2024. At the same time, the superannuation guarantee (SG) rate increased by 0.5% to 11.5%.

For employers, it’s critically important to ensure that your payroll system, and all interactions with it, like salary sacrifice agreements, are assessed and updated. Your PAYG withholding will also be impacted.

The Essential 30 June Guide

The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.

For You

Opportunities

Take advantage of the 1 July 2024 tax cuts by bringing forward your deductible expenses into 2023-24. Prepay your deductible expenses where possible, make any deductible superannuation contributions, and plan any philanthropic gifts to utilise the higher tax rate.

Bolstering Superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes a superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction.

And, if your superannuation balance on 30 June 2023 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.

Company Money Crackdown

The ATO is cracking down on business owners who take money or use company resources for themselves.

It’s common for business owners to utilise company resources for their personal use. The business is often such a part of their life that the line distinguishing ‘the business’ from their life can be blurred.

While there are tax laws preventing individuals accessing profits or assets of the company in a tax-free manner, mistakes are being made and the Australian Taxation Office (ATO) has had enough.

The ATO has launched a new education campaign to raise awareness of these common problems and the serious tax consequences that can arise.

Warning on SMSF Asset Valuations

The ATO has issued a warning to trustees of SMSFs about sloppy valuation practices.

ATO data analysis has revealed that over 16,500 self-managed superannuation funds (SMSFs) have reported assets as having the same value for three consecutive years. With many of these assets residential or commercial Australian property, you can forgive the ATO for being incredulous.

For trustees of SMSFs, where asset values are consistently reported at the same value, it’s likely your SMSF will be flagged for closer scrutiny by the ATO.

The Fringe Benefit Tax Traps

The Fringe Benefits Tax year (FBT) ends on 31 March. We explore the problem areas likely to attract the ATO’s attention.

Electric Vehicles Causing Sparks

In late 2022, the Government introduced a concession that enables employers to provide some electric vehicles to employees without incurring the 47% fringe benefits tax (FBT) on private use.

Stage 3 Personal Income Tax Cuts Redesigned

The personal income tax cuts legislated to commence on 1 July 2024 will be realigned and redistributed under a proposal released by the Federal Government.

After much speculation, the Prime Minister has announced that the Government will amend the legislated Stage 3 tax cuts scheduled to commence on 1 July 2024. Relative to the current Stage 3 plan, the proposed redesign will broaden the benefits of the tax cut by focusing on individuals with taxable income below $150,000. If enacted, an additional 2.9 million Australian taxpayers are estimated to take home more in their pay packet from 1 July.