The Administrative Review Tribunal (ART) has upheld the ATO’s position, confirming that the taxpayer, Mr Quy, maintained a domicile in Australia and was therefore a resident of Australia for tax purposes under section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). (Quy and Commissioner of Taxation (Taxation and business) [2025] ARTA 174 (28 February 2025))

Background

Mr Quy first arrived in Australia in 1978 and later became an Australian citizen. From around 1986, he worked as an engineer. In 1998, he relocated to Dubai for work, accompanied by his wife and three children. Around 2009, the family returned to Perth. Then, in 2015, Mr Quy moved back to Dubai for employment, while his wife joined him intermittently and their children remained in Australia.

During the income years 2016 to 2020, Mr Quy spent between 29 and 119 days each year in Australia, whereas his wife spent significantly more time in the country—between 183 and 343 days annually. Notably, Mr Quy maintained a residence in Perth and held two investment properties in Sydney. He also kept active bank accounts in Australia, private health insurance, and vehicle registrations.

The ATO issued tax assessments for those years on the basis that Mr Quy was a resident for Australian tax purposes. Mr Quy objected, primarily seeking a refund of PAYG amounts withheld.

Key Issues

The central issue was whether Mr Quy qualified as a resident under either the ordinary concepts test or the domicile test.

Mr Quy argued that he was not a resident under either test. He claimed that he did not reside in Australia and that, if he retained an Australian domicile, then his permanent place of abode had shifted to Dubai.

Initially, the Administrative Appeals Tribunal (AAT) sided with the Commissioner, concluding that despite his physical presence in Dubai, Mr Quy was still a resident under the ordinary concepts test. The AAT highlighted his strong ongoing ties to Australia—his wife’s residence in Perth, the maintained family home, his regular returns, and his apparent long-term connection to the country.

Mr Quy appealed this decision to the Federal Court. The Court found the AAT had incorrectly applied the test by focusing on whether he intended to reside in Australia “permanently or indefinitely,” rather than whether he treated Australia as his home “for the time being.” The matter was referred back to the ART.

Tribunal Decision on Remittal

Upon review, the ART found that Mr Quy was not a resident under the ordinary concepts test. The Tribunal pointed to objective indicators—such as the nature of his overseas employment and the length and consistency of his absences from Australia—as evidence that he did not regard Australia as his home during the relevant period.

However, under the domicile test, the Tribunal concluded that Mr Quy was still a tax resident. Despite his physical absence, his ongoing ties to Australia—including property ownership, financial interests, and family connections—demonstrated he had not severed his residential ties or established a permanent home abroad.

In contrast to the taxpayer in Harding v Commissioner of Taxation, who had shown a clear and sustained intent to live overseas indefinitely, Mr Quy’s relocations were primarily driven by short- to medium-term work assignments and lacked the permanence required to displace his Australian domicile.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Zoe Ma @ Pitt Martin Tax

The Full Federal Court overturned an earlier decision by the Federal Court in Commissioner of Taxation v Liang [2025] FCAFC 4. It ruled that unexplained cash deposits made into a trust should be treated as taxable income. This decision supported the Australian Taxation Office (ATO) in a dispute over whether the deposits should be taxed.

A married couple, Mr. Chen and Ms. Li (not their real names), operated several restaurant and takeaway businesses through two trusts. They also had a third trust for property investments. The couple controlled all three trusts, acted as trustees, and were the beneficiaries.

In 2017 and 2018, Ms. Li deposited $735,825 into the bank account of their property trust. This money was later used to buy real estate. When the ATO reviewed the deposits, it decided the funds should be included in the taxable income of the trust.

Since Mr. Chen and Ms. Li were entitled to receive income from the trust, the ATO also changed their personal tax assessments. This meant they had to pay tax on their share of the trust’s income. Additionally, the ATO imposed a 50% penalty for recklessness, arguing they failed to properly report the deposits.

The couple objected to the ATO’s decision and challenged it in the Administrative Appeals Tribunal (AAT). They argued that the deposits were either loans or financial help from their parents. However, the Tribunal was not convinced. There were no loan agreements or documents proving the funds came from their parents. Because of this, the Tribunal ruled the couple had not provided enough evidence to show the ATO’s tax assessments were incorrect.

The couple then appealed to the Federal Court, which ruled in their favor. The judge decided the deposits did not count as taxable income. The ruling explained that the money was not earned through business activities, investments, or profit-making ventures. Since the exact nature of the deposits was unclear, the judge concluded they should not be treated as taxable income.

However, the ATO appealed to the Full Federal Court, which overturned the earlier decision. The Full Federal Court explained that if a taxpayer wants to prove money is not taxable, they must provide clear evidence of its source and purpose. It is not enough to simply claim the funds were gifts or loans without documentation.

In this case, the couple only showed that Ms. Li physically deposited the cash into the trust’s bank account. They failed to explain where the money originally came from or provide a legal reason why the trust received it. Because of this, the Full Federal Court ruled the couple had not proven that the ATO’s tax assessments were incorrect.

As a result, the deposits were treated as taxable income, and the couple remained responsible for paying the additional tax and penalties.

This case highlights the importance of keeping proper financial records, especially when dealing with family or large cash transactions. Without clear documentation, taxpayers may struggle to prove the true nature of financial dealings, leading to unexpected tax liabilities.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax

Tariffs function as taxes on imported goods, increasing their prices and discouraging trade. Historically, they have been used to shield domestic industries from foreign competition. By making imports more expensive, tariffs reduce demand for foreign products.

During his first term, President Trump introduced a 25% tariff on steel and a 10% tariff on aluminum. While Australia negotiated an exemption in exchange for supply limits, the broader effect in the U.S. was a reported 2.4% rise in aluminum prices and a 1.6% increase for steel. Though tariffs may seem like penalties for overseas suppliers, their costs are often borne domestically through higher prices and trade reductions. The U.S. economy, however, is less reliant on international trade (24% of GDP) than countries like Canada, where trade accounts for 67% of GDP.

The Latest U.S. Trade Tariffs

Within his first two weeks back in office, President Trump invoked emergency powers to impose new tariffs:

• Canada: An additional 25% tariff on imports, with energy resources facing a reduced 10% tariff. Canada responded with its own 25% tariffs on agricultural and household goods. Given that 77% of Canada’s exports went to the U.S. in 2023, the economic impact is significant.
• Mexico: A 25% additional tariff on imports from Mexico. In response, Mexico imposed an equivalent tariff on U.S. goods.
• China: A 20% additional tariff on Chinese imports. In 2024, the U.S. trade deficit exceeded $900 billion, with China accounting for $270 billion of that total. China has responded with countermeasures, including a 15% tariff on key agricultural imports like chicken, wheat, and cotton, as well as a 10% tariff on dairy, beef, and fruit. Additionally, China has restricted exports of critical minerals and lodged a complaint with the World Trade Organization.

Industry-Specific Tariffs and Investigations

• Steel: The original 25% tariff on steel imports will fully resume on March 12, 2025, ending previous exemptions negotiated with countries like Australia.
• Copper: While no tariffs have been imposed on copper, an investigation has been launched into potential national security risks associated with copper imports.
• Timber and Paper Products: No trade restrictions have been enacted yet, but the administration has ordered an inquiry into the security implications of timber, lumber, and related products.
• U.S. Tech Companies: The administration has voiced concerns over digital services taxes (DST) imposed on American tech firms by foreign governments. While Australia does not implement a DST and aligns with OECD digital tax reforms, other countries’ DST policies could trigger U.S. retaliatory tariffs.

Could Australia Face Tariffs?

Although Australia enjoys a trade surplus with the U.S., specific industries could be affected—particularly steel and aluminum. Major U.S. imports into Australia include financial services, telecommunications, travel services, royalties, and vehicles. Meanwhile, Australia exports financial services, gold, meat, transport services, and vaccines to the U.S.

Implications for Australia

Australia’s economy could feel the indirect effects of escalating trade tensions. China, Australia’s largest trading partner, accounted for 26% of the country’s total trade in 2023. If China’s economy slows due to the trade war, Australia’s growth could suffer.

For Australian businesses, the primary concerns are uncertainty and volatility. Economic instability can stifle growth while increasing costs. Companies reliant on Chinese manufacturing or supply chains should prepare for potential price hikes and logistical challenges.

Moreover, if U.S. export markets contract, other nations may seek alternative buyers, leading to potential market saturation and downward pressure on prices. Businesses must remain vigilant and adaptable in the face of these shifting trade dynamics.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Yvonne Shao @ Pitt Martin Tax

We take insight here of the mainly tax related changes in the Federal Budget 2025-26 announced on Tuesday this week, in relates to the topics of Individual & Families, Business & Employers, Government & regulators, & The Economy.

Individuals & Families

Modest Personal Income Tax Cuts

Effective Date: 1 July 2026

The government has announced a phased reduction in personal income tax rates. Taxpayers will see a decrease in rates starting from 1 July 2026, with another reduction from 1 July 2027.

• The tax rate for earnings between $18,201 and $45,000 will drop from 16% to 15% in 2026 and further decrease to 14% in 2027.
• The estimated cost of these reductions is $648 million over four years.
• Maximum annual savings per taxpayer:
  • $268 in 2026-27
  • $536 in 2027-28

Revised Personal Income Tax Brackets

Income Brackets ($)	Rates in 2024–25 & 2025–26 (%)	Rates in 2026–27 (%)	Rates in 2027–28 (%)
0 – 18,200	Tax-free	Tax-free	Tax-free
18,201 – 45,000	16	15	14
45,001 – 135,000	30	30	30
135,001 – 190,000	37	37	37
>190,000	45	45	45

Increased Medicare Levy Thresholds for Low-Income Earners

Effective Date: 1 July 2024
The government has raised the income threshold for exemption from the Medicare levy, reducing costs for low-income earners.

Category	2024-25 Threshold ($)	2025-26 Threshold ($)
Singles	26,000	27,222
Families	43,846	45,907
Single Seniors & Pensioners	41,089	43,020
Family Seniors & Pensioners	57,198	59,886
Additional Child/Student	4,216	4,027

This measure is estimated to cost $648 million over five years.

$150 Energy Bill Relief

Effective Date: 1 July 2025
Eligible households and small businesses will receive a $150 automatic credit on their energy bills, disbursed in quarterly instalments between 1 July and 31 December 2025.

• Estimated cost: $1.8 billion over two years.

Changes to Foreign Resident Capital Gains Tax (CGT)

Effective Date: Delayed to 1 October 2025 (earliest)
Proposed amendments to foreign resident CGT rules, initially scheduled for 1 July 2025, have been delayed. These amendments will expand the assets subject to CGT for foreign residents and require them to report high-value transactions with a value of at least $20 million to the ATO before completion.

Temporary Ban on Foreign Ownership of Established Homes

Effective Date: 1 April 2025
A two-year ban will prevent foreign and temporary residents, along with foreign-owned companies, from purchasing established residential properties in an effort to combat ‘land banking.’

Changes to Managed Investment Trust (MIT) Taxation

Effective Date: Post-Royal Assent
The extension of the cleaning building Managed Investment Trust (MIT) withholding tax concession, initially scheduled for 1 July 2025, has been postponed. It will now commence on the first 1 January, 1 April, 1 July, or 1 October after the Act receives Royal Assent.

Additionally, the government will amend tax laws to clarify MIT arrangements, ensuring that legitimate investors continue to benefit from concessional withholding tax rates. These changes will apply to fund payments made from 13 March 2025 and align with the ATO’s increased scrutiny in this area to prevent potential misuse

‘Help to Buy’ Program Expansion

The government has expanded the ‘Help to Buy’ program, which reduces the upfront cost of purchasing a home by providing an equity contribution through Housing Australia. Under the program:

• Eligible participants can receive up to 30% of the purchase price for an existing home.
• For new homes, the Commonwealth equity contribution increases to 40%.
• The income eligibility thresholds have increased from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applicants.
• Additional conditions apply, and the program remains unavailable for new applications at this time.

Business & Employers

Ban on Non-Compete Clauses for Workers

Effective Date: 2027
The government will prohibit non-compete clauses for employees earning below the high-income threshold ($175,000). Additional measures will:

• Prevent businesses from fixing wages through anti-competitive agreements.
• Ban ‘no-poach’ agreements restricting employee mobility.

Paused Beer Tax and Benefits for Alcohol Producers

Effective Date: August 2025 (beer excise) & 1 July 2026 (other measures)

• The indexation of draught beer excise duty will be paused for two years starting August 2025.
• The excise remission cap for brewers, distillers, and wine producers will rise to $400,000 annually from 1 July 2026 (up from $350,000).

Extension of Trade Tariffs on Russia & Belarus

The government has prolonged an additional 35% tariff on imports from Russia and Belarus as part of ongoing support for Ukraine.

Government & Regulators

$999M Boost to ATO Tax Compliance Efforts

Effective Date: 1 July 2025
Funding of nearly $1 billion over four years will expand key tax compliance programs, expected to recover $3.2 billion in revenue. Programs include:

• Tax Avoidance Taskforce
• Shadow Economy Compliance Program
• Personal Income Tax Compliance Program
• Tax Integrity Program (targeting medium and large businesses, as well as wealthy groups)

$700M Cut in Government Outsourcing

The government aims to reduce reliance on external contractors, estimating savings of $718 million by 2028-29.

The Economy

Growth

Australia’s economy is projected to grow at a modest pace, with GDP expected to expand by 2.25% in 2025-26 and 2.5% in 2026-27. The direct economic impact of Ex-Tropical Cyclone Alfred is estimated to reduce GDP by up to 0.25%.

Budget Deficit

The underlying cash balance is forecasted to be a deficit of -$42.1 billion in 2025-26, with gradual improvements over subsequent years, though remaining in deficit.

Government Debt

Debt is projected to increase from 18.4% of GDP in 2023-24 to 21.5% in 2025-26, reaching 23.1% by 2028-29.

Employment

The unemployment rate remains low, with strong workforce participation. Since May 2022, employment has increased by over one million people, with around 80% of new jobs created in the private sector. Unemployment is expected to peak at 4.25%.

Wages

Annual real wages have grown for five consecutive quarters and are projected to rise by 0.5% in 2024-25. The Wage Price Index (WPI) grew by 3.2% through the year to the December quarter 2024 and is forecast to grow by 3% to June 2025 and 3.25% to June 2026.

Inflation

Inflation is expected to be 2.5% through the year to the June quarter 2025. The decline in inflation has been supported by cost-of-living relief measures, a reduction in petrol prices towards the end of 2024, and rebates on electricity and rental assistance. These factors collectively reduced headline inflation by 0.75% through the year to December 2024.

Global Economic Tensions

Trade tensions continue to contribute to global uncertainty. The indirect impact of tariffs is estimated to be nearly four times greater than the direct effect on Australia, reflecting significant trade relationships with China and the United States. Any retaliatory tariffs would further amplify potential losses in real GDP.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax

The Australian Taxation Office (ATO) is reminding not-for-profit (NFP) organisations of the approaching deadline for lodging their NFP self-review return. Non-charitable NFPs that self-assess as income tax exempt for the 2023-24 income year must complete and submit their return by 31 March 2025.

Eligibility for Income Tax Exemption

Non-charitable NFPs may qualify for an income tax exemption if their core activities align with one of the eight categories specified in Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997). Although the eligibility criteria for this exemption remain unchanged, the requirement to submit the NFP self-review return is a new compliance obligation. This marks the first instance in which NFPs must formally notify the ATO of their eligibility.

Maintaining Governing Documents

To maintain eligibility for income tax exemption, NFPs must ensure that their governing documents (such as constitutions, rule books, deeds of trust, or articles of association) clearly reflect their NFP status. These documents must explicitly state that the organisation cannot distribute profits or assets to members or private individuals, except in cases of legitimate reimbursements for services rendered or expenses incurred on behalf of the organisation.

If an NFP’s current governing documents do not contain these provisions, the organisation has until 30 June 2025 to update them accordingly. Despite this grace period, NFPs may still self-assess as income tax exempt for the 2024 income year, provided they have not distributed any income or assets to members.

Addressing Common Myths and Misconceptions

The ATO has updated its website to clarify common misunderstandings regarding NFP tax exemption. Here are some key points:

1. Not all NFPs are income tax exempt – Only registered charities endorsed by the ATO and non-charitable NFPs that meet the self-assessment criteria qualify for an exemption.
2. Multiple ways to lodge the self-review return – NFPs have three options for submission: via the ATO online portal, the ATO phone service, or through a registered tax agent who can lodge on their behalf.
3. Only authorised individuals can lodge the return online – The NFP self-review return can only be lodged by individuals who have been granted authorised access in the ATO’s Online Services system.
4. Uncertainty about charitable status still requires lodgement – If an NFP is unsure whether it qualifies as a charity, it must still complete the self-review return and select either ‘Yes’ or ‘Unsure’ when responding to the charitable purposes question.

Further Guidance on Exempt Categories

The ATO has also provided updated information on specific categories of tax-exempt NFPs, including those involved in education, employment, and resource development. NFPs operating in these sectors should review the ATO’s latest guidance to ensure compliance with the relevant exemption requirements.

For more details, NFPs are encouraged to seek advice from tax practitioners for the latest updates regarding tax exemption criteria and compliance obligations.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Zoe Ma @ Pitt Martin Tax

As the end of the Fringe Benefits Tax (FBT) year (31 March) is approaching, this article highlights key areas that employers and employees should focus on.

FBT Updates and Common Issues

• Exemption of FBT for electric cars
• Providing equipment for working from home
• Does FBT apply to contractors?
• Reducing the paperwork burden for FBT
• The biggest risks related to FBT

Key FBT Issues

FBT Exemption for Electric Cars

Employers who provide electric vehicles (EVs) to their employees may not have to pay FBT. The exemption applies if:

• The car is electric, hydrogen fuel cell, or a plug-in hybrid.
• The car was first bought and used on or after 1 July 2022.
• The cost of the car is below the luxury car tax limit, which is $89,332 for the 2024-25 financial year.

Plug-in Hybrids Lose FBT Exemption

From 1 April 2025, plug-in hybrid cars will no longer qualify for the FBT exemption. The only exceptions are if:

• The exemption was already applied before 1 April 2025.
• There is a legally binding agreement to continue providing the car for private use after 1 April 2025.

If this agreement is changed or stopped after 1 April 2025, the exemption will no longer apply.

Managing the Exemption

Even though some electric cars are exempt from FBT, employers still need to calculate the taxable value of the benefit. This is because the value of the benefit is still included in the employee’s reportable fringe benefits amount. This amount does not count as taxable income, but it may affect things like:

• Medicare levy surcharge
• Private health insurance rebate
• Employee share scheme discounts
• Social security payments

Employees may need to track the electricity costs they pay when charging the EV at home. These costs can be treated as an employee contribution to reduce the FBT amount. However, it can be difficult to calculate these costs. To help, the Australian Taxation Office (ATO) has provided a shortcut rate of 4.20 cents per km for electric vehicles. This rate does not apply to plug-in hybrid vehicles.

Employers should also note that the FBT exemption for electric cars does not include home charging stations. If an employer provides a charging station for an employee’s home, FBT may apply.

Providing Equipment for Working from Home

Many businesses now allow employees to work from home. Employers often provide work-related items to help employees perform their jobs at home. In most cases, if these items are used mainly for work, FBT does not apply.

For example, if an employer provides laptops, mobile phones, or other portable electronic devices, no FBT should be charged as long as the devices are used mostly for work.

Employers with a turnover of less than $50 million can provide multiple similar items during the FBT year without extra tax. This means a business can provide more than one laptop to an employee if needed.

If an employee uses the employer-provided equipment for personal use, FBT may apply. However, the FBT liability can be reduced based on the percentage of business use.

Does FBT Apply to Your Contractors?

FBT usually applies to employees and some directors. It does not apply to genuine independent contractors. However, businesses must ensure that their contractors are truly contractors.

Are Your Contractors Actually Contractors?

The ATO has provided new guidelines to help determine if a worker is an employee or an independent contractor. The High Court has also ruled on two important cases that set the rules for classification.

The ATO’s TR 2023/4 ruling states that if there is a written contract, the contract’s terms should be the main focus when determining the worker’s status. Just calling someone a contractor in the contract is not enough. If the contract’s terms indicate an employment relationship, the worker will be considered an employee.

The ATO’s PCG 2023/2 guideline provides four risk categories. A contractor arrangement is less risky if:

• There is clear evidence that both the business and the worker agreed on the contractor status.
• A proper written agreement is in place.
• Both parties understand the legal consequences of the arrangement.
• The actual working relationship follows the contract without major changes.
• Legal advice was obtained to confirm the classification.
• The business has followed all tax, superannuation, and reporting rules for the worker.

If your business hires contractors, it is important to review their classification regularly. Even if a worker is a genuine independent contractor, businesses may still have obligations, such as paying superannuation in certain situations.

Reducing the FBT Record-Keeping Burden

Keeping records for FBT can be time-consuming. However, from 1 July 2024, businesses will have more options. You can either continue using the current FBT record-keeping methods, use existing business records (if they meet the legal requirements), or combine both methods.

Here are some types of records you may need to keep:

• Travel diaries – see LI 2024/11
• Living-away-from-home-allowance (FIFO/DIDO declarations) – see LI 2024/4
• Living-away-from-home maintaining an Australian home declaration – See LI 2024/5
• Expense payments, property, or residual benefits declaration (Otherwise Deductible Rule) – See LI 2024/6
• Private use of a vehicle other than a car declaration– See LI 2024/7
• Car travel for a job interview or selection test declaration– See LI 2024/14
• Remote area holiday transport declaration– See LI 2024/10
• Overseas employment holiday transport declaration– See LI 2024/13
• Car travel for certain work-related activities declaration– See LI 2024/9
• Relocation transport declaration– See LI 2024/12
• Temporary accommodation for relocation declaration – See LI 2024/8

FBT Housekeeping

Keeping track of records for fringe benefits can be tricky, especially if they depend on employees providing documents on time. If your business provides cars, you must record odometer readings on 31 March and 1 April. To make this easier, ask employees to take a photo of the odometer and email it to a central contact person. This will help avoid missing records or having to check each car manually.

Biggest FBT Risk Areas

Mismatched Entertainment Claims

One of the most common FBT mistakes is claiming a tax deduction for entertainment expenses but not reporting the benefit for FBT purposes. The ATO closely monitors these mismatches.

For example, if a business takes a client to lunch and the cost per person is under $300, there may not be any FBT. However, the business cannot claim a tax deduction or GST credit unless FBT applies. If the business uses the 50/50 method for entertainment expenses, then 50% of the cost is subject to FBT, and only 50% of the amount can be claimed as a deduction.

Employee Contributions Made by Journal Entry

Many businesses allow employees to make after-tax contributions to lower the taxable value of fringe benefits. Instead of paying in cash, some businesses record these contributions as journal entries in their accounting system.

While this method can be acceptable if done correctly, the ATO has raised concerns about whether journal entries made after the FBT year-end are valid.

For an employee contribution through a journal entry to be valid in reducing FBT, these conditions must be met:

• The employee must be required to make a contribution toward the fringe benefit as part of their employment agreement.
• The employer must owe the employee a payment, such as a loan or a bonus that hasn’t been paid yet. However, if a loan is involved, additional tax issues may arise.
• Both the employee and employer must agree to offset their respective obligations (the employee’s contribution against the employer’s payment).
• The journal entries must be made before the business finalizes its financial accounts for the year.

If these conditions are not met, the ATO may challenge the validity of the arrangement. The business must keep proper documentation showing that the employee was actually required to contribute toward the fringe benefit. If there is no clear evidence, the business may face unexpected FBT liabilities.

Not Lodging FBT Returns

The ATO has noticed that some businesses are failing to submit FBT returns when they are required to do so.

If your business employs staff, including family members in a closely held business, and is not registered for FBT, you should review whether you might have an FBT liability.

You may need to lodge an FBT return if your business provides any of the following:

• Cars or parking spaces for employees
• Reimbursements for private (non-business) expenses
• Entertainment, such as meals and drinks
• Employee discounts

Some benefits are exempt from FBT, such as work-related electronic devices (e.g., laptops), protective clothing, and tools of trade. If your business only provides these exempt items or occasional benefits worth less than $300, you likely do not need to worry about FBT. However, if you provide any taxable fringe benefits, it’s important to ensure compliance to avoid penalties.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax

The Australian Government has announced plans to introduce mandatory standards for large superannuation funds aimed at improving the efficiency and compassion of death benefit payouts. This raises the question: Is there a problem with paying out superannuation when a member passes away?

The Challenge of Distributing Superannuation Upon Death

Superannuation in Australia has grown to an enormous $4.1 trillion industry. However, when an individual passes away, their super does not automatically become part of their estate. Instead, the super fund trustee determines how the death benefit is distributed based on the fund’s rules, superannuation laws, and any valid death benefit nominations made by the deceased.

Concerns about delays in accessing these funds have been increasing. Between 2021 and 2023, the Australian Financial Complaints Authority (AFCA) recorded a sevenfold rise in complaints regarding superannuation death benefits, with delays being the primary issue. While many superannuation funds distribute benefits within three months, in some cases, beneficiaries have waited over a year to receive payments. Current superannuation laws only require that benefits be paid “as soon as practicable,” without specifying a clear timeframe.

Ensuring Your Superannuation Goes to the Right Beneficiary

Handling superannuation death benefits can be complex. Unless a valid death benefit nomination is in place, the super fund trustee retains discretion over who receives the funds. If a member has not made a valid nomination or let an existing nomination lapse, the trustee may distribute the superannuation to any eligible dependents or to the deceased’s estate.

To ensure your superannuation is distributed according to your wishes, it is crucial to understand the four main types of death benefit nominations:

1. Binding Death Benefit Nomination
   • This legally requires the trustee to pay the superannuation directly to the nominated beneficiary.
   • Most binding nominations expire after three years unless it is specified as non-lapsing.
2. Non-Lapsing Binding Death Benefit Nomination
   • If permitted by the fund’s trust deed, this nomination remains in place indefinitely unless revoked.
   • It ensures that the nominated beneficiary will receive the super without trustee discretion.
3. Non-Binding Death Benefit Nomination
   • This serves as a guideline for the trustee but does not guarantee the nominated individual will receive the super.
   • The trustee can still exercise discretion and allocate the benefit to another eligible dependant or the estate.
4. Reversionary Beneficiary
   • If you are receiving a superannuation pension, you can nominate a reversionary beneficiary.
   • Upon your passing, pension payments will automatically transfer to the nominated individual, usually a spouse or dependent child under 18.

Who Can Receive Your Superannuation?

Superannuation can be distributed to a dependant, a legal representative (such as the executor of the estate), or someone in an interdependency relationship with the deceased. A “dependant” under superannuation law includes:

• A spouse
• A child (regardless of age)
• An individual with whom the deceased had an interdependency relationship, meaning they provided financial support or care to each other.

The Consequences of Not Making a Nomination

If no valid nomination is in place at the time of death, the super fund trustee will determine the recipient based on relevant state or territory laws. In most cases, the benefit will be distributed to a superannuation dependant or the estate’s legal representative for allocation according to the Will.

Common Issues and Delays

Numerous court cases have challenged the validity of death benefit nominations, often resulting in costly and prolonged disputes. To ensure a valid nomination:

• It must be in writing, signed, and dated.
• It must be correctly witnessed.
• The nominee’s full legal name should be used.
• If directing the benefit to the estate, the wording must be legally precise.

Delays often arise when nominations are missing, expired, or invalid. Additionally, disputes can occur when multiple claimants are involved, requiring trustees to navigate complex family relationships before making a decision.

Key Takeaway: Act Now to Protect Your Beneficiaries

Regardless of age, it is essential to review your superannuation nominations regularly to ensure they align with your current wishes. Confirm that your nomination type is appropriate, valid, and up-to-date. While delays in processing death benefits may still occur, having a clear and legally sound nomination in place can significantly expedite the process and alleviate stress for your loved ones during an already difficult time.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Zoe Ma @ Pitt Martin Tax

The Australian Taxation Office (ATO) has issued guidance on how Section 99B of the Income Tax Assessment Act 1936 (ITAA 1936) applies to distributions from non-resident trusts to Australian residents. This section ensures that, in most cases, Australian residents who receive payments from such trusts are taxed in Australia, unless exceptions apply. Below, we break down the key aspects of Section 99B, its implications, and what beneficiaries and trustees need to know.

What is Section 99B?

Section 99B ensures that distributions made by non-resident trusts to Australian residents are generally taxed in Australia. This section applies when the trust has been a non-resident at any point since its establishment. While the law is not specifically limited to non-resident trusts, the risk of it being applied is higher for such trusts.

A key provision of Section 99B is Section 99B(2), which allows a reduction in the amount taxed if the distribution is made from the trust’s corpus (principal), rather than income. However, this reduction only applies if the income or gains would have been taxed in Australia if derived by an Australian resident.

The Hypothetical Resident Taxpayer

A critical aspect of Section 99B is the ‘hypothetical resident taxpayer’ (TD 2024/9) of the rules. This assumes that the beneficiary receiving the distribution is an Australian resident, regardless of the trust’s actual residency status. The ATO uses this hypothetical resident taxpayer to determine how the distribution should be taxed.

For example, if a foreign trust sells a pre-CGT asset (an asset acquired before 1985, when capital gains tax was introduced) and distributes the capital gain to an Australian resident, Section 99B would reduce the capital gain under Section 99B(2). In this case, no capital gains tax would apply. Notably, the CGT discount does not apply to the hypothetical resident taxpayer, as the ATO treats them as an Australian resident taxpayer for tax purposes.

ATO’s Guidance on Section 99B

The ATO’s PCG 2024/3 provides further details on how Section 99B applies in different scenarios. While the guidelines are broad, they help clarify how low-risk and high-risk situations are treated under Section 99B.

Two common scenarios are identified where the ATO considers the risk of non-compliance to be low:

1. Deceased Estates
   If a deceased individual was a non-resident at the time of death, the distribution of their estate to Australian beneficiaries may be treated as low-risk, provided:
   • The property is distributed to the beneficiary within 24 months of death.
   • The value of the property received does not exceed $2 million.
   • The distribution is not made from a testamentary trust (created by a will).
   • Proper documentation, such as the signed will or trust deed, is provided.

If these conditions are met, the ATO considers the distribution to be low-risk and will not focus compliance efforts on it unless something unusual is detected.

2. Trust Property Used on Commercial Terms
   If a beneficiary uses trust property under commercial terms, the risk is considered low. The conditions include:
   • The agreement (whether verbal or written) must be on commercial terms.
   • The beneficiary must pay the trustee an amount that matches the commercial terms, such as interest or rental payments.

An agreement is considered on commercial terms if the rates and terms align with market rates. There is also a safe harbour for loans where interest rates and terms follow Division 7A loan standards.

Documentation Requirements

Beneficiaries must provide proper documentation to substantiate their claims for reductions under Section 99B(2). This documentation is essential for proving that the distribution is correctly taxed. Required documents include:

• Signed trust deeds or the will of the deceased person.
• Trustee minutes or distribution statements confirming that payments were made from the trust’s corpus.
• The trust’s financial accounts for relevant years, following the accounting standards of the relevant country.
• Additional case-specific documents, such as bank statements, working papers, and other relevant records.

If a beneficiary fails to provide the required documents, the ATO will treat the entire amount as assessable income, meaning the full distribution will be taxed.

For trustees and beneficiaries of non-resident trusts, understanding Section 99B is crucial for managing tax obligations. Always ensure you have the necessary documents to substantiate your claims and stay compliant with Australian tax law.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Yvonne Shao @ Pitt Martin Tax

The Australian Taxation Office (ATO) is paying close attention to wealthy baby boomers, especially those who own family-run businesses. Many of these individuals are passing on their businesses and assets to their children or selling them. The ATO is concerned that some of these transfers and business restructures are being done in ways that reduce tax payments unfairly.

According to ATO Private Wealth Deputy Commissioner Louise Clarke, succession planning and tax risks are a major focus for 2025. The ATO has noticed a rise in business reorganizations that seem to be linked to business owners retiring and passing on their wealth.

If you belong to the ATO’s Top 500 (the wealthiest private groups in Australia) or Next 5,000 (those who control a net wealth of over $50 million), expect the ATO to closely examine how money moves through your businesses and investments.

Why Business Owners Should Be Careful

For many business owners, their company is more than just a source of income—it’s their biggest asset. Over the years, they’ve earned income through salaries, dividends, or by selling shares. While tax laws allow business owners to structure their assets in ways that protect their wealth, they must do so legally. If the ATO finds that a structure exists only to avoid taxes, it can deny any tax benefits under Part IVA, the rule that prevents artificial tax avoidance.

The ATO is particularly watching business owners who are nearing retirement and want to pass their companies down to their children. Often, these owners transfer wealth through trusts and other financial arrangements. While this is legal, the ATO is looking at whether these methods are being used to reduce tax payments unfairly.

Areas That Concern the ATO

Some of the key things the ATO is monitoring include:

1. Division 7A loans settlements – Some companies lend money to shareholders, and instead of repaying the loan, they remove it from the books by calling it a “distribution.” This raises tax concerns.
2. Moving Assets Without Proper Valuation – If businesses transfer assets between family members or related companies, they must properly value them. If an asset is moved just to avoid paying capital gains tax, the ATO may investigate.
3. Restructuring Family Interests – Changing how family members own or control assets may trigger tax issues.
4. Changes to Trust Deeds – The ATO is checking whether changes to trust agreements are being used to lower tax payments.
5. Delays in Tax Filings – Businesses delaying tax returns after a restructure may face scrutiny.

The Use of Trusts

Trusts are under greater scrutiny in 2025. If a trust makes a Family Trust Election (FTE) or Interposed Entity Election (IEE), it must follow strict rules about distributing income. If the trust distributes money outside the family, a 47% Family Trust Distribution Tax applies.

The ATO is also tightening rules on trust tax returns for private trusts. When a trust distributes money or assets to another trust, it must complete a Trustee Beneficiary (TB) statement, unless there is an exclusion that applies. If the TB statement is missing or late, the trustee may face a 47% Non-Disclosure Tax on the undisclosed income.

How to Avoid Risk

If you control multiple businesses or investment entities, make sure everything is structured correctly. Whether these businesses are in Australia or overseas, failing to report transactions properly could lead to penalties.

Transferring a business to the next generation might require changes to share ownership, trust structures, partnership agreements, or asset transfers. Each of these changes has tax consequences that need to be carefully managed.

Business owners should also keep detailed records of why and how they transfer assets. Proper documentation can help show that the purpose of a transaction was legitimate and not just for avoiding tax.

It’s important to plan succession and tax strategies properly. Seeking professional tax advice before making major changes could be something you might need to take into consideration. Tax laws are complex, and a professional can ensure that business owners comply with regulations while still minimizing tax burdens legally to avoid any issues in the future.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Angela Abejo @ Pitt Martin Tax

The last few years have been marked by economic and political uncertainty. As we just entered into 2025, there is cautious optimism for increased stability—though no guarantees. Below, we explore the key developments and challenges businesses and individuals can anticipate.

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Federal Election: Political Advertising Resumes

With a federal election on the horizon, prepare for an influx of political messages across social media, voicemail, and TV. Opposition parties will question if Australians are better off, while incumbents will emphasize their achievements.

The 2025-26 Federal Budget is set to be delivered on 25 March 2025, suggesting the election will occur in either March or May 2025, but no later than 17 May 2025.

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Legislative Uncertainty: Key Bills in Limbo

The final parliamentary sitting day of 2024 saw 32 bills passed, including several with implications for businesses and individuals. However, two significant proposals remain unresolved:

1. Division 296 Tax: 30% on Super Earnings Over $3 Million

The proposed Division 296 tax would impose a 30% tax rate on earnings from superannuation balances exceeding $3 million, starting 1 July 2025. Currently, the enabling legislation is stalled in the Senate and unlikely to pass before the election. If the bill lapses, the next government will determine whether to revisit or abandon the measure.

2. $20,000 Instant Asset Write-Off for Small Businesses

The government proposed extending the $20,000 instant asset write-off for eligible small businesses for the 2024-25 financial year. However, this measure was unexpectedly removed from the final enabling legislation. Without this extension, the write-off threshold will revert to $1,000, creating uncertainty for small businesses planning asset investments.

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Tax and Superannuation Changes

1. Foreign Resident Capital Gains Withholding (FRCGW)

From 1 January 2025, changes to capital gains withholding will apply to foreign residents selling Australian property:

• The withholding rate will increase from 12.5% to 15%.
• The value threshold (currently $750,000) will be removed, applying the withholding to all property sales by foreign residents.

The reforms will affect property acquisitions made on or after 1 January 2025.

2. Superannuation Guarantee Increase

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025, marking the final step in the legislated increase.

3. Superannuation on Paid Parental Leave

From 1 July 2025, superannuation contributions (12% of Paid Parental Leave payments) will be paid to eligible parents’ super funds.

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Economic Outlook: Interest Rates and Cost of Living

Interest Rates

While inflation eased from 5.4% to 2.8% over the year to September 2024, the Reserve Bank of Australia (RBA) remains cautious. Governor Michele Bullock emphasized the need for sustainable inflation levels within the 2-3% target range before rate cuts occur. Forecasts for interest rate reductions vary:

• CBA: February 2025
• ANZ and Westpac: May 2025
• NAB: June 2025

Cost of Living Pressures

Australia’s economic growth remains sluggish, with just 0.8% growth through 2024—the lowest since the December 2020 quarter. Personal income tax cuts and energy subsidies have provided some relief, but rising mortgage costs continue to strain households. Government spending remains a key driver of economic activity.

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International Developments: The Trump Effect

Donald Trump has been inaugurated as U.S. President on 20 January 2025, with the Republican Party controlling both the Senate and the House. Trump’s proposed policies, including tariffs on imports from China, Canada, and Mexico, raise concerns of a trade war. Key statements include:

• A 25% tariff on goods from Canada and Mexico.
• An additional 10% tariff on Chinese imports.

For Australia, these policies could have a secondary impact, given China’s significance as Australia’s largest trading partner, accounting for 26% of two-way trade in 2023. A slowdown in China’s economy may negatively affect Australia’s economic growth. The immediate result has been a decline in the AUD/USD, currently hovering around 63c.

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Environmental Policy: New Car Emissions Standards

From 1 January 2025, vehicle manufacturers will face mandatory CO2 emissions targets for new cars. These targets will gradually tighten over time, requiring manufacturers to produce more fuel-efficient or zero-emission vehicles.

While manufacturers can still sell any type of vehicle, they must balance less efficient models with more fuel-efficient ones. Suppliers who meet or exceed their targets will earn credits, while those who fall short will have two years to either trade credits or generate them before facing penalties.

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Workplace Changes: Wage Theft Criminalised

Effective 1 January 2025, intentional underpayment of wages or superannuation will become a criminal offence. Employers face penalties if they intentionally fail to pay required amounts under the Fair Work Act or relevant agreements.

• Penalties: Fines up to three times the underpayment amount or a maximum of $7.825 million.

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Transitioning Away from Cheques

The government has outlined a plan to phase out cheques:

• Cheques will no longer be issued after 30 June 2028.
• Cheques will no longer be accepted after 30 September 2029.

Usage of cheques has declined by 90% in the last decade, and banks have already begun discontinuing chequebooks for new customers. Despite this transition, cash remains an essential payment method.

Cash Remains Essential

While Australians increasingly use digital payments, the government has emphasized the importance of cash:

• 1.5 million Australians rely on cash for over 80% of in-person payments.
• Cash provides a backup during digital outages or natural disasters.

The government intends to mandate that businesses accept cash for essential items, with certain exemptions for small businesses.

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Final Thoughts: Slow and Steady Progress

2025 promises measured changes in tax, superannuation, and economic policy, along with ongoing political and international challenges. While the path toward stability remains uncertain, businesses and individuals should prepare for key transitions in legislation, workplace regulation, and global trade conditions.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Zoe Ma @ Pitt Martin Tax