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.

Tax rate	2023-24	2024-25 legislated	2024-25 proposed
0%	$0 – $18,200	$0 – $18,200	$0 – $18,200
16%			$18,201 – $45,000
19%	$18,201 – $45,000	$18,201 – $45,000
30%		$45,001 – $200,000	$45,001 – $135,000
32.5%	$45,001 – $120,000
37%	$120,001 – $180,000		$135,001 – $190,000
45%	>$180,000	>$200,000	>$190,000

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

Tax time is fast approaching and for some of you this might be the last thing on your mind. There might be other things that are more important for you to get through this uncertainty. However, now is the best time to get your tax affair in order and avoid last minute planning that can cost you.

As you have spent more time working from home during the lockdown period, it might be a good idea to put together all the information you need to prepare your returns as it will take some time especially if you have not organised them as you go. You can collect all your receipts or invoices for work related expenses and any credit card statements for invoices that you no longer had and discuss with your tax agent to ensure you are maximising your claims.

If you have been working from home as a result of COVID-19, the Australian Taxation Office has introduced special arrangements which will allow people to claim 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. You will need to keep a record of the number of hours you have worked from home. This will apply from March 1 to June 30, after which the ATO will review the arrangement for the next financial year.

If you choose to use the 80 cents per hour for all your running expenses, you can’t make other claims in relation to working from home because items such as mobile phone and internet are included in the 80 cent rate.

You still had the option to use the old claiming method which is known as the 52 cents per work hour method for claiming items such as heating, cooling, lighting, cleaning and the decline in value of office furniture. You need to keep a diary of when your start and finish work each day. This old method also allowed you to calculate the work-related portion of phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device. Nevertheless, you would still require to work out what private use and work use is on ‘a reasonable basis”

You can claim tools or equipment as a deduction in your tax return if you have to use them as part of your job and your employer didn’t reimburse you. You can claim a deduction straight away if the tools or equipment are $300 or less otherwise you will need to depreciate over the life of the item. On the other hand, if you run your own business and acquired all your capital items from 12 March 2020 and the cost of all of them less than $150,000, you can claim a deduction straight away. The capital items included work related IT equipment, cars and tools. Please note that you will still require to apportion the cost if you use them for private use.

As we are approaching the end of financial year, we still have plenty of time to generate some extra common tax deductions if you made the payment by 30 June:

• Donation to a charity registered as a deductible gift recipient over $2 with a receipt are tax deductible
• A personal contribution into your super fund including the contribution made on your behalf by your employer which are less than $25,000 can be claim as a tax deduction providing the payment made by 30 June. You need to advise your super fund by completing the relevant form or speak to your accountant for guidance.
• You need to pay by 30 June your professional membership or subscriptions and union fees to claim the deduction this year

Remember that good record keeping including invoices and receipts will ensure the finalisation of your tax return easier and you can claim for everything you’re eligible to.

If you know anyone in your circle who need any assistance during tax time, please reach out to them because “We can’t help everyone, but everyone can help someone” and “Together We Can Make A Difference”

Pitt Martin Accountants & Tax Advisers is here to assist you and your business in time of crisis by contacting 02 9221 3345 or connect@pittmartingroup.com.au.

As the coronavirus outbreak grows, more people are forced to work from home. While working from home can come with its benefits like getting to sleep in longer, avoid the daily commute and work from bed in your pyjamas, it can also hurt your hip pocket if you’re having to fork out for expenses your employer would normally cover, like increase utility bills, phone and home internet bills.

The good news is that most of these expenses can be claimed back at tax time. In order to make it easier for people to claim deductions for working from home, the Australian Taxation Office is introducing special arrangements which will allow people to claim 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.

Assistant Commissioner Karen Foat said that if you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim. “We needed something to help people through this time to make it easier to work out how much they can claim”, Ms Foat said.

The change will apply from March 1 to June 30, after which the ATO will review the arrangement for the next financial year. If the Federal Government announces a prolonged lockdown extending into the next financial year the ATO is likely to extend the new claiming method.

The new arrangement does not forbid people from making a working-from-home claim under existing arrangements, where you calculate all or part of your running expenses. Neither does it prohibit multiple people living in the same house to claim this new rate. Furthermore, the requirement to have a dedicated work from home area has also been removed. However, the claims for working-from-home expenses prior to March 1, 2020 cannot be calculated using the shortcut method and must use the pre-existing working from home approach and requirements,” Ms Foat added.

People still had the option to use the old claiming method which is known as the 52 cents per work hour method for claiming items such as heating, cooling, lighting, cleaning and the decline in value of office furniture. This old method also allowed taxpayers to calculate the work-related portion of phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device. Nevertheless, taxpayers would still need to work out what private use and work use is on ‘a reasonable basis”

ATO are expecting a lot of people to be working from home as the outbreak continues to grow; therefore believed that the new method would cut down on the need for reviews and audits, because it was simpler and reduce the chances of people making mistakes while claiming the deductions this year.

The ATO is also reminding people that the three golden rules for deductions still apply,

1. The taxpayers must have spent the money themselves and not have been reimbursed by the employers
2. The claim must be directly related to earning income, and
3. The record must be kept to substantiate the claim

Please note that children’s education expenses, as well as tea, coffee and toilet paper which used to be supplied by employers in the office could not be claimed and neither do rent and mortgage (unless it is an investment property)

The ATO gives this example of how the arrangement might work:

Sophie is an employee who works as a copywriter and an editor. Sophie starts working from home on 10 March as a result of COVID-19 and had since using a lot of online video conferencing for her meeting.

Sophie has just bought a new computer, monitor, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, Sophie can now claim all her expenses under a rate of 80 cents per hour. All she needs is her timesheets to show a record of the number of hours worked from home.

Sophie can also decide to claim using existing working from home calculations which is known as the 52 cents per work hour method. Under that method, Sophie can claim the desk, chair, gas and electricity under the 52 cents per hour, but would need to work out the decline in value of the computer, monitor, and calculate the work-related portion of the computer, monitor, stationery, phone and internet.

Pitt Martin Accountants & Tax Advisers are Xero qualified and award-winning accountants and bookkeepers for small businesses which can be reached on 02 9221 3345 or connect@pittmartingroup.com.au.

With the announcement from Federal Governments Economic Response to the COVIC-19 Coronavirus, the cash flow grant for employers measure is designed to support employing small and medium sized businesses and to improve business confidence. The measures also supports the activities of not-for-profits (including charities) at a time where they are facing increased demand for services.

On 12 March 2020, the Government announced the cash flow grant for employers measure and initially provided up to $25,000 with a minimum payment of $2,000 for eligible businesses. Small and medium sized business entities that employ workers with aggregated annual turnover less than $50 million are eligible.

The Government has then improved this measure as part of the second economic stimulus package. Not-for-profit entities (NFPs), including charities that employ workers, with aggregated annual turnover less than $50 million will now also be eligible. This will support employment activities at a time where NFPs are facing increasing demand for services.

Under the improved scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (increase from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. Furthermore, the minimum payment is being increased from $2,000 to $10,000.

An additional payment is also being introduced in the July to October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the cash flow grant for employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. The cash flow grant for employers is tax-free payment with no new forms required and automatically calculated by the ATO

This additional payment continues to support businesses over a longer period to help them maintain staff, improve confidence, continue operating and at the same time stimulating the economy. It’s crucial for the government to help small businesses because they are the backbone of the economy.

Who is eligible and what is the timing?

SME business entities and NFPs that employ workers, with aggregated annual turnover less than $50 million will be eligible with the eligibility generally be based on prior year turnover.

• The payment will be an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
• Eligible employers that withhold tax on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
• Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
• The payments will only be available to active eligible employers established prior to 12 March 2020 except charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements.

The cash flow grant for employers payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger	Eligible period	Lodgement due date
Quarterly	Quarter 3 (January, February and March 2020) Quarter 4 (April, May and June 2020)	28 April 2020 28 July 2020
Monthly	March 2020 April 2020 May 2020 June 2020	21 April 2020 21 May 2020 22 June 2020 21 July 2020

If you lodged quarterly, you will be eligible to receive the payment for the quarters ending March and June 2020.

If you lodged monthly, you will be eligible to receive the payment for the March, April, May and June 2020 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (which is 300 per cent) in the March 2020 activity statement with the minimum payment will be applied to the entities’ first lodgement.

Additional payment eligibility and timing

Your entity must remain active in order to qualify for the additional payment from the Government.

If you lodged activity statements monthly, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial cash flow grant for employers payment following the lodgement of their June, July, August and September 2020 activity statements up to a total of $50,000.

If you lodged activity statements quarterly, the additional payments will be sent as an automatic credit in the activity statement system. This will be equal to half of their total initial cash flow grant for employers payment following the lodgement of their June and September 2020 activity statements up to a total of $50,000.

The additional payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger	Eligible period	Lodgement due date
Quarterly	Quarter 4 (April, May and June 2020) Quarter 1 (July, August and September 2020)	28 July 2020 28 October 2020
Monthly	June 2020 July 2020 August 2020 September 2020	21 July 2020 21 August 2020 22 September 2020 21 October 2020

If you lodged quarterly, you will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial cash flow grant for employers payment with up to a total of $50,000.

If you lodged monthly, you will be eligible to receive the additional payment for the June, July, August and September 2020 lodgements. Each additional payment will be equal to a quarter of their total initial cash flow grant for Employers payment with up to a total of $50,000.

Examples of Tax-Free Payment to Employers

Example 1 – John’s Removalist Business

John owns and runs a removalist business in Western Australia and employs 10 workers on average full-time weekly earnings, who each earn $90,750 per year. John reports withholding of $15,600 for his employees on each of his monthly Business Activity Statements (BAS).

Under the Government’s measure, John will be eligible to obtain the payment on lodgement of his BAS. John’s business receives:

• A credit of $46,800 for the March period
• A credit of $3,200 for the April period, before he reaches the $50,000 cap.
• No payment for the May period, as he has now reached the $50,000 cap.
• An additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, John’s business will receive $100,000.

Example 2 – Tony’s Barber Shop

Tony owns a barber shop on the Surfers Paradise. He employs 10 employees, with average salary of $45,000 per year. Tony reports withholding of $8,601 for his employees in each of his monthly BAS. Under the measure, Tony will be eligible to receive the payments on lodgement of his relevant BAS.

Tony’s business will receive:

• A credit of $25,803 for the March period
• A credit of $8,601 for the April and May period, respectively
• A credit of $6,995 for the June period, before he reaches the $50,000 cap. Tony will also receive an additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, Tony’s business will receive $100,000.

Example 3 – Todd’s Courier Run

Todd owns and runs a small paper delivery business in South Australia and employs two casual employees who each earn $10,000 per year. In his quarterly BAS, Todd reports $0 withholding tax for his employees as they are under the tax-free threshold.

Under the Government’s measure, Todd will be eligible to receive the payment on lodgement of his BAS.

Todd’s business will receive:

• A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
• An additional payment of $5,000 for the June and September quarter, respectively

If Todd begins withholding tax for the June quarter, he would need to withhold more than $10,000 before he receives any additional payment.

Under the Government’s enhanced cash flow grant for employers measure, Todd’s business will receive $20,000.

If you know anyone in your circle who need any assistance during these times, please reach out to them because “We can’t help everyone, but everyone can help someone”and “Together We Can Make A Difference”

Pitt Martin Accountants & Tax Advisers is here to assist you and your business in time of crisis by contacting 02 9221 3345 or connect@pittmartingroup.com.au.

The COVID-19 situation is bigger than any of us have ever faced. Our clients, professionals, mum’s and dad’s don’t understand how badly they need accountants and advisors’ help.  They are scared and don’t know what to do, and most probably haven’t really thought through what the consequences will be for them.

As a business owner, there’s one key thing you need to focus on now which is keeping your business alive during these tough times. Downturn can be scary usually because there is no plan in place for your business and the world around you appear to be panicking. There is no reason to be panicking. In times of difficulty lies an opportunity. If your cash flow is under control then so is your business.

You need to take actionable appropriate steps to create a Continuity Plan, then in reality a downturn is just a stop gap to the next upturn, where your business will be cash flow fit and ready to take full advantage.

To maintain your cash, you may need to consider options that you haven’t consider before. You need to work with your accountant to identify which key parts your business is eligible for Australian Government stimulus package and get the process started to obtain these cash flow bonuses. When you meet with your accountant, it’s important to update your business cash flow plan over the coming months.

As an employer, you need to openly discuss reduced working hours with your employees to save cash (if this does save cash) and working from home arrangements. Employees will be scared. They will need to be assured, so they need to be given an understanding of the plan to keep the business alive.

Constant communication and a payment plan with the ATO could be an option especially if you need to delay making payments of GST and PAYG Withholding Tax. However it’s vital that you keep lodging you Business Activity Statements (BAS) and Instalment Activity Statements (IAS) by their due dates. The Australian Taxation Office (ATO) is implementing a series of relief options to assist those impacted by the coronavirus. The relief will not be automatically applied. You can contact your accountant to contact the ATO to make any requests for assistance.

In addition, you can contact your Bank Manager as soon as possible and arrange for additional bank funding or lines of credit that can be approved now for use in an emergency. Making these arrangements early before things have gone bad is the key. Bank approvals may take up to one month or longer. Consider also using alternative funders to set up a short term line of credit now to pay for inventory and operating costs. You should consider doing this as a backup now to any other bank lending arrangements you may have.

If you have to self-quarantine or if you incapacitated in any way, you need to have an Enduring Power of Attorney (EPOA) in place so your business can continue to operate. Ensure your EPOA and Will are up to date now and ensure your family and your Accountant know where the original signed documents are.

Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident. Review your general insurance policies for any Business Interruption Insurance inclusions.

We need to stay calm and rely on reliable sources of information from State and Australian Government. In the meantime, below is the link directly to the Government Media release of the second Economic Stimulus Plan, https://www.pm.gov.au/media/supporting-australian-workers-and-business

If you have any questions or would like to seek assistance, please do not hesitate to contact Pitt Martin Accountants & Tax Advisers on 02 9221 3345 or connect@pittmartingroup.com.au