In recent times, the Australian Taxation Office (ATO) has been sending shockwaves through the taxpayer community by alerting individuals and their tax agents to unpaid historical tax obligations. This unexpected notice confused many people who were previously unaware of the existence of these debts. In this article, we will focus on the latest developments in historical tax debt, the ATO’s approach, and the basic steps taxpayers take in managing their obligations.

Understanding the Situation

The ATO possesses the authority to waive debts only under specific circumstances, such as severe financial hardship. Occasionally, ATO may choose to place a debt “on hold” if it is not economical to do so. In such scenarios, the debt is temporarily suspended, not cancelled, meaning it could resurface in the taxpayer’s account later, potentially being deducted from future refunds. Notably, the ATO paused this practice of offsetting debts during the COVID period, leaving these amounts untouched.

However, in 2023, the Australian National Audit Office highlighted that excluding debts from offsetting contradicts the law, regardless of the debt’s age. Consequently, the ATO initiated contact with taxpayers regarding the historical debts placed on hold, catching many off guard.

Unveiling Hidden Debts

Numerous taxpayers accumulated debt unknowingly, as these obligations remained labelled as “inactive” within the ATO’s systems. Although the ATO has assured that action on debts placed on hold before 2017 has been suspended while they reevaluate their approach, it’s vital to understand that this does not nullify the debt. The burden of unpaid tax obligations can have significant implications for individuals and businesses alike, making it imperative to address these issues promptly and effectively.

Impact on Small Businesses

Small businesses, which constitute two-thirds of the $50 billion collectible debt owed to the ATO, are particularly affected by these developments. With the ATO resuming its standard debt collection practices as of July 2023, including reporting debts exceeding $100,000 to credit bureaus, small business owners must remain vigilant. Proactive engagement with the ATO is crucial for businesses with outstanding tax debts to mitigate the risk of further escalation.

Managing Tax Obligations

For taxpayers struggling with unpaid historical tax debts, a strategic approach is needed to address the issue. Firstly, individuals and businesses should carefully assess their tax records to identify any outstanding debts. Seeking professional advice from a tax professional or accountant can provide valuable insight into the complexities of tax law and the ATO’s procedures. In addition, discussing payment plans or hardship clauses directly with the ATO can help reduce the burden of outstanding tax debts.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Zoe Ma @ Pitt Martin Tax

Zoe Ma

Entrepreneurs often invest their personal finances into launching and sustaining their businesses until they become self-sufficient. However, a recent case underscores the importance of understanding the tax consequences associated with withdrawing funds from a company for personal use.

A recent case brought before the Administrate Appeals Tribunal (AAT) serves as a cautionary tale for those who blur the lines between personal and business expenses within their company.

The individual in question, a shareholder and director of a private company, had been making withdrawals and covering personal expenses directly from the company’s bank account over several years. These transactions were not initially treated as taxable income.

Upon audit, the Australian Taxation Office (ATO) assessed these withdrawals and payments in one of two ways:

• As ordinary income for the taxpayer.
• As deemed dividends under Division 7A of the tax code.

Division 7A is designed to address situations where private companies provide benefits to shareholders or their associates in the form of loans, payments, or forgiven debts. If triggered, Division 7A treats the recipient as having received a deemed unfranked dividend for tax purposes.

The taxpayer attempted to argue before the AAT that the withdrawals were repayments of loans he had extended to the company originally, and thus should not be considered ordinary income. Alternatively, he contended that the payments constituted a loan to him, and there was no deemed dividend under Division 7A because the company lacked a “distributable surplus.”

However, the AAT found flaws in the evidence presented by the taxpayer, concluding that he had failed to substantiate his claims. Among the factors considered were the inconsistencies in his financial records and his inability to explain the source of the original loans, particularly during years when he declared tax losses.

Although the taxpayer asserted that some of the loans to the company originated from borrowings from his brother, the AAT deemed this explanation implausible given the brother’s modest income as reflected in his tax returns.

So, how should contributions from an owner to launch a business be treated? It largely depends on the circumstances. For small startups, common approaches include structuring contributions as loans to the company or issuing shares with the amounts paid treated as share capital.

The decision on the best approach hinges on various factors, including commercial considerations, the ease of withdrawing funds from the company later on, and compliance with regulatory requirements.

The manner in which funds are injected into the company also influences the available options for withdrawing them later. However, it’s crucial to remember that withdrawing funds from a company will likely have tax implications that require careful management.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Yvonne Shao @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

In a recent case before the Administrative Appeals Tribunal, the intricacies of tax law and property transactions came to the forefront as a taxpayer successfully argued for a significant deduction on the sale of her apartment. The decision, which favored the taxpayer, sheds light on the complexities surrounding profit-making ventures and the tax implications associated with them.

Case Overview

The key of the case revolved around a taxpayer who claimed a substantial loss of $265,935 on the sale of her apartment in her tax return. The taxpayer contended that despite living in the apartment as her primary residence, her primary intention was profit-oriented, thus justifying the loss as deductible.

Taxpayer’s Argument

The taxpayer insisted that the purchase and subsequent sale of the apartment constituted a short-term profit-making venture. Despite using the apartment as her private residence, the taxpayer maintained that her overarching intention was to generate profit from the transaction.

Case Timeline

The timeline of events provided critical context to the case:

• July 2015: The taxpayer entered into an ‘off-the-plan’ contract to purchase the apartment.
• December 2016: Completion of the apartment was delayed until June 2020.
• May 2018: The taxpayer sold her family home and purchased another apartment with the intention to make a profit.
• April 2020: The contract to sell the apartment was entered during the COVID lockdown.
• July 2020: The sale of the apartment occurred, and the purchase of the off-the-plan apartment was settled.

ATO’s Position

The Australian Taxation Office (ATO) disagreed with the taxpayer’s claim, contending that a profit-oriented venture typically wouldn’t involve residing in the property and would likely wait for a more favorable market.

Tribunal’s Decision

Contrary to the ATO’s position, the Tribunal sided with the taxpayer. The Tribunal emphasized a low threshold for proving profit-making intentions and deemed living in the property as secondary to such intentions.

Implications

The implications of this decision extend beyond the specific case, potentially impacting how property transactions are taxed in Australia:

• Tax Treatment: If deemed commercial, profits from property transactions may be taxed as ordinary income rather than under Capital Gains Tax (CGT) provisions.
• CGT Exemptions: The decision challenges the assumption that living in a property automatically qualifies it for CGT exemptions, highlighting the importance of intention in property transactions.

Lessons Learned

This case underscores several important lessons for property owners and investors:

• Unexpected Tax Consequences: Property owners, including those engaged in flipping properties, may face unexpected tax consequences on gains without access to CGT concessions.
• Complexity of Tax Treatment: Determining the appropriate tax treatment for property transactions can be complex and often requires professional advice to navigate effectively.

Pending Decision

As of now, the ATO has not confirmed whether it will appeal the decision, leaving the full implications of the case uncertain for the time being.

In conclusion, this case serves as a reminder of the nuanced nature of tax law, particularly concerning property transactions. It underscores the importance of understanding the intentions behind such transactions and seeking professional guidance to navigate the complexities of tax implications effectively. 

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Zoe Ma @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Originally set to commence on July 1, 2024, the Stage 3 of the personal income tax cuts will undergo a significant overhaul as proposed by the Federal Government.

Following widespread speculation, the Prime Minister has confirmed the Government’s intent to revise the scheduled Stage 3 tax cuts set to begin on July 1, 2024. In contrast to the current plan, the proposed redesign aims to extend the benefits of the tax cuts to individuals earning below $150,000 in taxable income. If implemented, an additional 2.9 million Australian taxpayers are expected to see an increase in their take-home pay starting from July 1.

This departure from the original vision of Stage 3, part of a 5-year plan to restructure the personal income tax system, reflects a response to the sharp rise in living costs, altering the prevailing sentiment within the community. As stated by the Prime Minister, the focus now lies on addressing immediate concerns rather than long-term structural changes.

The redesign is anticipated to generate an estimated $28 billion in additional Government revenues from personal income tax by 2034-35, primarily due to bracket creep.

So, what’s changing?

The revised tax cuts will reallocate resources to benefit lower-income households that have been disproportionately affected by rising living costs.

Under the proposed redesign, resident taxpayers with taxable income below $146,486 will experience larger tax cuts compared to the existing Stage 3 plan. For instance:

• A taxpayer with a taxable income of $40,000 will receive a tax cut of $654, as opposed to no tax cut under the current Stage 3 plan (though they may have benefited from Stage 1 and Stage 2 tax cuts).
• A taxpayer with a taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3 plan.

However, those earning $200,000 will see their expected benefit from the Stage 3 plan nearly halved, from $9,075 to $4,529. While there’s still a benefit compared to current tax rates, it’s not as significant.

Additionally, low-income earners will receive relief through a 7.1% increase in the Medicare Levy low-income threshold, indexed to inflation. This adjustment means individuals won’t begin paying the Medicare Levy until their income reaches $26,000, and they won’t pay the full 2% levy until their income reaches $32,500 for singles.

While the proposed redesign aims to maintain revenue neutrality compared to the existing budgeted Stage 3 plan, it is estimated to incur approximately $1 billion more in costs over the next four years before the effects of bracket creep mitigate the gains.

It’s not a done deal yet!

The implementation of the redesigned Stage 3 tax cuts is contingent upon the enactment of amending legislation by July 1, 2024. This necessitates securing support from independent or minor parties in Parliament, which convenes from February 6, 2024.

How did we get here?

Initially introduced in the 2018-19 Federal Budget, the personal income tax plan aimed to tackle the issue of ‘bracket creep’—where tax rates fail to keep pace with wage growth, leading to increased taxes over time. The three-point plan sought to simplify tax thresholds and rates, reduce the tax burden on many individuals, and align Australia’s tax system with some neighboring countries (e.g., New Zealand’s top marginal tax rate of 39% applying to incomes above $180,000).

The plan introduced incremental changes starting from July 1, 2018, and July 1, 2020, with Stage 3 slated to take effect from July 1, 2024.

What’s next?

For tax planning purposes, those with taxable incomes of $150,000 or more will find fewer planning opportunities with the redesigned Stage 3 tax cuts. Nevertheless, any alteration in tax rates presents an opportunity to review and adjust to ensure you’re maximizing available opportunities and not paying more than necessary.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Robert Liu @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Approaching 2024, a mix of both hope and uncertainty defines the landscape, with economic factors, upcoming tax changes, and changing work dynamics taking centre stage. This article explores the key factors that will shape the year ahead, breaking down the complex interactions that affect businesses, individuals, and policymakers.

• Economic Outlook:

In setting the stage for 2024, RBA Governor Michelle Bullock expresses cautious optimism about inflation while recognizing ongoing uncertainty. Locally, there’s persistent inflation alongside slower growth and a tight job market, especially for highly skilled workers. Despite signs of resilience, the Australian economy faces external risks related to the Chinese economy and global conflicts. The Reserve Bank of Australia (RBA) leaves room for potential interest rate increases, emphasizing the delicate economic balance.

• Labor Market Dynamics:

The job market remains crucial, with a steady 3.7% unemployment rate and wages reaching a 14-year high, growing by 1.3% in the September 2023 quarter. Challenges persist in finding highly skilled workers, causing employers to hesitate in meeting higher salary expectations. This has broader implications for productivity and competitiveness, affecting the overall economic landscape.

• Tax Changes and Fiscal Policies:

Australia is gearing up for a significant shift in its tax system starting July 1, 2024, with the introduction of stage 3 tax cuts. These cuts aim to simplify personal income tax brackets, consolidating them into a single 30% rate for those earning between $45,001 and $200,000. The actual impact hinges on decisions made in the upcoming May Federal Budget, adding an element of suspense to the financial roadmap.

At the same time, the superannuation guarantee rate is set to increase to 11.5%, reflecting a commitment to retirement savings. Small and medium businesses, particularly those with group turnover below $50 million, will experience changes as certain concessions are scheduled to end or revert to conventional levels. Several incentive programs, such as the Skills and Training Boost and Small Business Energy Incentive, are nearing conclusion, with legislative processes still pending.

• Labor Rights and Workplace Dynamics:

2024 brings heightened attention to labour rights and workplace rules. A noteworthy development in 2023 was the 5.75% increase in the minimum wage, reaching $23.23 per hour from July 1, 2023. New rules limit some fixed-term employment contracts to a 2-year term without renewal options, reshaping contractual dynamics.

A landmark case clarified worker classification, leading the Australian Taxation Office (ATO) to issue new guidelines PCG2023/2 for accurate contractor assessment. This highlights the importance for businesses to correctly classify contractors to reduce legal risks. Additionally, 2024 introduces greater flexibility for unpaid parental leave, aligning with changing workforce needs and societal shifts towards recognizing the importance of work-life balance.

Entering 2024, the economic, tax, and labour landscapes are undergoing changes. Successfully navigating this complexity requires a deep understanding of how these factors interact. Economic indicators provide insights into the nation’s financial health, tax reforms shape the fiscal environment, and labour dynamics influence workforce vibrancy. The year ahead presents challenges, opportunities, and a continuous evolution demanding adaptability from businesses, individuals, and policymakers alike.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Yvonne Shao @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

The Australian Taxation Office (ATO) has raised concerns over the widespread misreporting of income and expenses related to rental properties, estimating an annual loss of approximately $1 billion in tax revenue. A significant contributor to this issue lies in the questionable practices surrounding the claiming of interest on investment property loans.

Recent heightened ATO scrutiny is particularly directed at refinanced or redrawn loans, stemming from an extensive data matching initiative covering residential property loan data from financial institutions spanning 2021-22 to 2025-26. This data is meticulously cross-referenced with taxpayers’ reported information, and individuals with inconsistencies may anticipate communication from the ATO seeking clarification.

For those with investment property loans engaging in redraws for purposes differing from the original borrowing, the loan account transforms into a mixed-purpose account. It becomes imperative to apportion the interest accruing on such accounts among the various purposes for which the funds were utilized.

Conversely, if the redrawn funds are invested to generate income, the interest on this specific portion of the loan remains tax-deductible. As an illustration, if funds are redrawn to cover personal expenses like a vacation or to settle personal debts, the interest linked to this part of the loan balance becomes non-deductible. This not only necessitates the apportionment of interest expenses into deductible and non-deductible components but also typically requires a proportional allocation of repayments.

It is crucial to note that withdrawals from an offset account are treated as savings rather than fresh borrowings. In cases where a loan account is paired with an interest offset account reducing the loan’s payable interest, withdrawing funds from the offset account may elevate the accruing interest on the loan. However, this does not alter the deductible percentage of interest expenses. In essence, withdrawing funds from the offset account constitutes a savings withdrawal, maintaining the existing deductible status of interest accruing on the loan.

If a home loan, initially used for a private residence, has funds in an offset account, withdrawing those funds to finance a rental property deposit does not grant eligibility to claim interest on the home loan. However, if funds are redrawn from the home loan explicitly for acquiring a rental property, the interest accruing on this portion of the loan becomes tax-deductible. It is crucial to emphasize that the tax implications always hinge on the specific structuring of the arrangement.

In conclusion, property investors are urged to proactively engage with the nuances of investment loan reporting. Staying informed about the regulations governing redrawn loans and offset accounts not only ensure their tax compliance so mitigate the risk of unnecessary investigation by ATO, but also fosters a transparent and compliant financial environment.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Zoe Ma @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

The Australian Taxation Office (ATO) reveals a concerning statistic: workers are owed an estimated $3.6 billion in superannuation guarantee (SG). Despite an impressive 94% compliance rate in SG payments without regulatory intervention in the fiscal year 2020-21, a 5.1% net gap persists, contributing to the staggering $3.6 billion deficit. This gap encompasses various factors, including $1.8 billion from concealed wages, such as off-the-books cash payments and misclassified contractors. Furthermore, $1.1 billion of SG charge debt faces insolvency as of February 2022, leaving it unlikely to be recovered.

To tackle this issue, the ATO is leveraging technology, specifically the Single Touch Payroll (STP) system, harmonized with super fund data. This technological integration allows the ATO to pinpoint late payments and incorrect reporting swiftly. The rise in late payment of quarterly SG contributions is a growing concern, often attributed to cash flow difficulties or technical glitches. The ATO emphasizes the necessity for SG contributions to reach the employee’s fund before the due date, highlighting the importance of timely payments.

Employers failing to meet the quarterly SG contribution deadline are subjected to the Superannuation Guarantee Charge (SGC). This charge comprises the SG amount owed, 10% interest per annum, and an administration fee. Unlike normal SG contributions, SGC amounts are non-deductible. Employers should make late SG payments to promptly lodge a superannuation guarantee statement to avoid accumulating additional interest and potential penalties.

There are risks associated with misclassifying workers, that even genuine contractors may still be subject to PAYG withholding, SG, payroll tax, and workers’ compensation obligations. The penalties for employers who misclassify workers can be substantial, underlining the necessity for accurate classification to avoid legal repercussions.

In response to these challenges, the government is planning to implement laws mandating that employers pay SG concurrently with employee salary and wages, starting from July 1, 2026. This proposed reform aims to increase the frequency of SG contributions, benefiting employees and mitigating the accumulation of SG liabilities when employers miss deadlines. Two timing options for SG payments are under consideration: on the day salary and wages are paid or a ‘due date’ model.

The consultation paper on payday super proposes updating the SGC with interest accruing from ‘payday.’ Currently, the majority of employers make SG payments quarterly. These reforms are contingent on the passage of legislation and are slated to take effect in 2026. The employers, for the time being, there is no immediate action required concerning payday super.

In light of the significant SG gap and the various challenges contributing to it, the ATO’s use of technology, coupled with future legislative reforms, aims to address these issues head-on. Employers are urged to stay informed about the evolving landscape of SG regulations and to proactively ensure compliance, not only to avoid penalties but also to contribute to the financial well-being of Australian workers. The payday super initiative, if implemented, promises to be a pivotal step towards achieving more timely and consistent superannuation contributions, fostering a more secure retirement for the nation’s workforce.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Yvonne Shao @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Chobani’s plain yogurt is exempt from GST, but their ‘flip’ range is taxable. A recent case before the Administrative Appeals Tribunal (AAT) highlights the fine line between GST-free and taxable foods.

In 2000, when the Goods & Services Tax (GST) was initially introduced, basic food was excluded to secure support for the new tax regime. Now, 23 years later, this exclusion has created a complex distinction between GST-free and taxable foods, which is continually tested and modified. Chobani Pty Ltd, the U.S. yogurt giant, recently challenged this distinction in a case before the AAT.

The case centred on Chobani’s Flip Strawberry Shortcake flavoured yogurt and whether it should be subject to GST. This product consists of a tub of strawberry-flavoured yogurt and a separate tub of baked cookie and white chocolate pieces. If the two components were sold separately, the baked cookie pieces would be taxable, and the yogurt would be GST-free.

Initially, Chobani considered the Flip yogurt range as GST-free, relying on a 2001 GST ruling that allowed a “composite supply” to be treated as GST-free if the other components did not exceed the lesser of $3 or 20% of the overall product. This allowed them to treat the Flip yogurt as GST-free.

In 2021, the Australian Taxation Office (ATO) informed Chobani that their position had changed, and the Flip yogurt should be considered a combination food and, therefore, taxable.

According to the GST system, “combination foods” where at least one food component is taxable are subject to GST. For instance, lunch packs containing tuna and crackers are considered combination foods because it is intended for the tuna and crackers to be eaten together. However, in a “mixed supply” scenario where each item is separate and not intended to be consumed together, the GST applies individually to each product, as seen in the case of a hamper.

The AAT ruled in favour of the Commissioner’s interpretation that the Flip product was a combination food and, therefore, subject to GST on the entire product.

The Chobani case has several implications. Firstly, the ATO has issued a new draft GST ruling on combination foods (GST 2023/D1), replacing previous guidance. This ruling outlines three principles for determining whether a combination food exists:

1. There must be at least one separately identifiable taxable food.
2. The separately identifiable taxable food must be sufficiently joined together with the overall product.
3. The separately identifiable taxable food must not be so integrated into the overall product, or be so insignificant within that product, that it has no effect on the essential character of that product.

Secondly, the GST status classification for at least one major product line on the ATO’s list will change. Notably, “dip” (packaged with biscuits, individually wrapped) was previously categorized as a mixed supply rather than a combination food.

In a previous case, Birds Eye (Simplot Australia) also failed to appeal the Federal Court’s decision that their frozen vegetable products combining omelettes, rice, or grains were not GST-free. The Court deemed them either prepared meals or a combination of foods and, therefore, taxable.

For food manufacturers, importers, and distributors, staying updated on the evolving GST landscape and using the correct classifications is crucial, as the rules and definitions are subject to change.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Robert Liu @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

The Australian Taxation Office (ATO) has recently issued a draft ruling on self-education expenses which clarifies what can and cannot be claimed as deductions. If you pursue education related to your current job, you can typically claim the associated costs as a tax deduction, as long as your employer hasn’t already covered these expenses. Importantly, there is no specified limit on the amount you can claim as a deduction. However, before you start considering claiming these expenses, there are some important considerations to keep in mind which this article will guide you through.

Connection to Current Job

One of the essential criteria for claiming self-education expenses is that the education must be directly connected to your current job. If you are pursuing education to obtain a new job or for something unrelated to your current income-earning activities, the expenses are not deductible. For instance, if a nurse’s aide pursues a university degree to become a registered nurse, the expenses related to this degree are not deductible because it lacks sufficient connection to their current role as a nurse’s aide.

If your employment ends while you are in the middle of a course, your expenses can only be deducted up to the point at which you stopped working. Anything incurred beyond that point is not deductible unless you secure a new job where the course remains relevant.

Specificity of Knowledge and Skills

When it comes to personal development or self-development courses, ATO requires a direct link between your current role and the knowledge or skills acquired from the course content. A key challenge in claiming deductions lies in the fact that the knowledge or skills gained are often too general. For example, if a manager attends a stress management course to cope with work-related stress due to a family situation, this course may not be deductible because it is not designed to maintain or increase the specific skills or knowledge required in his/her current position.

Overseas Study Tours and Conferences

Expenses related to overseas study tours can be deductible if the primary purpose of the trip is connected to your income-earning activities, and it’s not purely recreational. Similarly, overseas conferences can be deductible if the primary purpose of the trip is work-related, even if there are some leisure activities involved. However, if you extend your stay beyond the conference for recreational purposes, you may need to apportion expenses accordingly.

Additionally, airfares incurred for self-education activities are deductible if you are not residing at the location of the self-education activity, as they are considered part of the cost of undertaking self-education.

Partial Deductions

Even if the entire course isn’t fully deductible, you may still claim a deduction for specific subjects or modules that are directly related to your employment or income-earning activities. In such cases, the course fees can be apportioned and this flexibility allows you to maximise your deductions.

By government support

When your course is designated as Commonwealth supported, you are not eligible to request a deduction for course fees. However, the deductibility of these course fees remains unaffected by the act of borrowing money to cover them. For instance, this applies to full-fee paying students who utilise a government FEE-HELP loan to meet their course fee obligations.

Scrutiny by the ATO

While there’s no specific limit on self-education expense claims, it’s important to note that the ATO may scrutinise large claims. To avoid any issues, be sure to maintain detailed records and demonstrate a clear connection between your self-education expenses and your current job or business activities.

In conclusion, understanding the rules and regulations of claiming self-education expenses on your tax return is essential for maximising your tax benefits. It’s important to ensure that your self-education is directly related to your current job, maintain meticulous records, and seek professional advice when necessary. By following these guidelines, you can maximise your eligible deductions while avoiding unwanted scrutiny from tax authorities.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Zoe Ma @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Electricity is rapidly becoming the energy source of choice, supplanting traditional fossil fuels and natural gas in various industries. To encourage businesses to embrace electrification, improve energy efficiency, and reduce reliance on fossil fuels, a new tax incentive has been introduced, known as the Small Business Energy Incentive.

This initiative is part of ongoing efforts to prompt small and medium-sized enterprises (SMEs) to adopt sustainable and energy-efficient practices. The program offers a substantial tax deduction to SMEs with an annual turnover of less than $50 million. Businesses can claim a extra 20% tax deduction on expenses up to $100,000 to enhance energy efficiency, but there’s a time limit. The legislation, currently awaiting parliamentary approval, mandates that these investments must be made between July 1, 2023, and June 30, 2024.

Here are the key details:

Investment Cap: SMEs can invest up to $100,000, with a maximum bonus tax deduction of $20,000 per business entity. This tax incentive doesn’t result in a cash refund but instead reduces taxable income or increases tax losses for the 2024 income year.

Eligibility Criteria: The program doesn’t provide a specific list of assets that qualify. Instead, it sets forth a series of eligibility criteria. Expenditure related to the asset must be eligible for a deduction under another provision of the tax law.

For new depreciating assets, they must be first used or installed for any purpose, including a taxable one, between July 1, 2023, and June 30, 2024. For upgrades to existing assets, the expenditure must be incurred within the same timeframe.

Additional conditions apply to new depreciating assets. They must use electricity and meet one of the following criteria: be more energy-efficient than reasonably comparable assets using fossil fuels, serve as a replacement for an existing asset with higher energy efficiency, exceed new, reasonably comparable assets on the market in energy efficiency, or be energy storage, time-shifting, or monitoring assets.

For upgrades to existing assets, the expenditure must meet at least one of these conditions: enable the asset to use only electricity or renewable energy, enhance the asset’s energy efficiency when using electricity or renewable energy, or facilitate the storage, time-shifting, or monitoring of electricity or renewable energy.

Exclusions: Not all assets or improvements are eligible for the bonus tax deduction. Assets or enhancements using fossil fuels, such as hybrid solutions, are excluded. Solar panels, motor vehicles, assets primarily designed for electricity generation, and financing costs, including interest and borrowing expenses, are also not eligible.

Qualifying Investments: The legislation provides examples of qualifying investments, including electrifying heating and cooling systems, upgrading to more efficient appliances like refrigerators and induction cooktops, installing batteries and heat pumps, and replacing gas heaters with electric reverse cycle air conditioners. Additionally, replacing less energy-efficient equipment, like coffee machines, with more efficient models can qualify if supported by the manufacturer’s data. Investments in thermal storage solutions and solar thermal hot water systems can also qualify if they meet the criteria.

In summary, the Small Business Energy Incentive encourages SMEs to adopt electrification and improve energy efficiency while phasing out reliance on fossil fuels. With the potential for a tax deduction of up to $20,000 per business entity, it presents a substantial financial incentive. However, the opportunity is time-limited, with investments required between July 1, 2023, and June 30, 2024. To maximize the benefits, businesses should carefully assess their energy efficiency and electrification options, ensuring they align with the eligibility criteria. Embracing this program not only contributes to a greener future but also reduces tax liabilities, offering a win-win for both the environment and finances.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Yvonne Shao @ Pitt Martin Tax

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.