Global Interest Charges Change Will Affect Businesses With Outstanding Tax Debts – Here’s How

It’s crucial to be aware of significant changes affecting businesses with outstanding tax debts. 

Effective from 1 July 2025, the Australian Taxation Office (ATO) will no longer allow the deductibility of General Interest Charges (GIC) incurred on or after this date. 

What This Means for Your Business

Previously, businesses could claim a tax deduction for GIC applied to overdue tax liabilities. From 1 July 2025, any GIC incurred—currently at an annual rate of 11.17%, compounded daily—will not be tax-deductible. This change increases the real cost of carrying tax debt, as the interest will now be a non-deductible expense.

Action Steps to Consider

  • Settle Outstanding Debts Promptly: If your business has overdue tax liabilities, these need to have been paid before 30 June 2025 to ensure any associated GIC remains deductible.
  • Establish Payment Plans: If immediate full payment isn’t feasible, consider setting up a payment plan with the ATO. While GIC will still accrue, a structured plan can help manage cash flow.
  • Explore Alternative Financing: Consult with financial advisors about refinancing options. Interest on business loans used to pay tax debts may still be deductible, potentially offering a more favourable financial outcome.
  • Seek Professional Advice: Consult with your accountant or tax advisor to discuss your specific situation and develop a tailored strategy that aligns with your business’s financial goals.

If you have any questions or would like additional information, speak with your licensed tax or business adviser – we’re here to help.

Family Trust Distributions & Their Tax Obligations

If your business operates through a family trust, it’s important to stay informed about how trust distributions are taxed, especially as we approach the end of the financial year. 

The ATO continues to monitor trust distributions closely to ensure they align with tax law and are not used to avoid tax.

Here are our tips for avoiding a red flag with your family trust distributions:

Distributions Must Reflect Genuine Entitlements

When your trust makes a distribution, it must go to a beneficiary who is genuinely entitled to it, not just on paper, but in practice. If income is appointed to someone but they don’t receive the benefit (for example, if another family member retains the funds instead), this could raise red flags with the ATO.

In particular, the ATO is focusing on arrangements that attempt to divert trust income to beneficiaries on lower tax rates, while the economic benefit goes elsewhere. These arrangements may fall under anti-avoidance provisions and could lead to additional tax, interest, or penalties.

Documentation Is Key

To remain compliant, ensure your trust deed allows for the distribution you intend to make, and keep good records that demonstrate beneficiaries are receiving their entitlements.

Minutes documenting trustee decisions, bank transactions, and any formal agreements between family members should be accurate and up-to-date.

Plan Ahead

Before finalising any trust distributions for the year, speak with your accountant or tax adviser.

It’s essential to evaluate the tax implications of each distribution and determine whether your current trust structure continues to serve its intended purpose.

Family trusts remain a valuable tool for managing assets and distributing income, but they must be utilised responsibly and in accordance with the law.

If you’d like guidance on the best way to manage your trust’s distributions this year, we’re here to help.

The Deductions A Tradesperson Can Claim Vary – But Here’s What They Have In Common

When tax time rolls around, it’s important to know what you can claim to ensure you’re getting the most out of your tax return.

As a tradesperson, you’re entitled to claim a range of work-related expenses that can help reduce your taxable income.

Let’s break down some of the key deductions you can make to keep more money in your pocket.

  1. Tools and Equipment

If you’ve bought tools or equipment for your job, you can claim these expenses on your tax return. This includes everything from power tools to smaller items like hammers and wrenches. You can claim an immediate deduction for tools that cost $300 or less, while more expensive items need to be depreciated over their useful life. Remember, the tools you’re claiming must be directly related to your work.

  1. Protective Clothing and Safety Gear

Safety comes first on the job, and the good news is that you can claim the cost of protective clothing and gear. This includes items like steel-capped boots, hard hats, high-visibility clothing, and gloves. If you need to buy sun protection like sunscreen, sunglasses, or hats for outdoor work, these can also be claimed. Just make sure the gear is essential for your work and not for personal use.

  1. Vehicle and Travel Expenses

As a tradie, you probably rely on your vehicle to get to job sites, carry tools, and transport materials. You can claim a deduction for vehicle expenses if you use your car for work-related travel. This includes trips between job sites or when transporting bulky tools that can’t be securely stored at your workplace. There are two ways to claim: using the cents-per-kilometre method or by keeping a logbook to track actual expenses. Remember, you can’t claim for the normal commute between your home and regular workplace.

  1. Work-Related Courses and Training

Keeping your skills sharp is crucial in the trades, and any work-related courses or training you undertake can be claimed on your tax return. Whether it’s a first aid course or a certification that helps you do your job better, the costs can be deducted. Just make sure the training is directly connected to your current job and not for a new career.

  1. Union Fees and Licenses

If you’re a member of a trade union or professional association, you can claim the cost of your membership fees. Additionally, if you need to renew licenses or certifications for your trade, these costs are also deductible. This includes items like electrical licenses, plumbing certifications, or white card renewals.

Tax time doesn’t have to be stressful for tradies. Knowing what you can claim can maximise your tax return and keep more of your hard-earned money.

From tools and protective clothing to vehicle expenses and training costs, there are plenty of deductions available.

Keep good records of your expenses throughout the year, and don’t hesitate to contact a tax professional if you need help.

Closely Held Employees & How To Report Them On Your STP

Small businesses, especially family-run ones, require careful attention to payroll for closely held employees, such as family members, directors, and shareholders.

The Australian Tax Office (ATO) mandates that all employers adhere to Single Touch Payroll (STP) reporting requirements regardless of the employee’s relationship to the business.

However, small businesses with fewer than 19 employees have some flexibility in how they meet these obligations. In many cases, small businesses may also have closely-held employees.

Understanding Closely-Held Employees

Closely held employees are individuals directly related to the business entity from which they receive payments. This category typically includes:

  • Family members working in a family business
  • Directors or shareholders of a company
  • Beneficiaries of a trust

For small businesses, closely held employees are part of the team, but how you manage their payroll might differ from that of other employees.

STP Reporting Obligations

STP reporting is mandatory for all employees, including closely held payees. The main difference lies in the flexibility small businesses offer in reporting this information. You can choose to report the pay of closely held employees in one of two ways:

  1. With Each Pay Period: Just as you would for regular (arm’s length) employees, you can report the payroll information for closely held employees on or before each payday.
  2. Quarterly Reporting: You can also opt to report this information quarterly. This option might be more convenient for small businesses that prefer a less frequent reporting schedule.

However, for arm’s length employees – those who are not closely related to the business owner – STP reporting must be done on or before each payday without exception.

Deciding the Best Approach for Your Business

Choosing between quarterly and regular reporting depends on what works best for your business.

Quarterly reporting might be a practical solution if your closely held employees have irregular pay schedules or if managing weekly or fortnightly reports feels burdensome.

On the other hand, some businesses may prefer to keep all payroll processes uniform, opting to report both closely held and arm’s length employees together during regular pay periods.

Regardless of the chosen approach, it’s essential to maintain accurate records and ensure that all reporting is timely. This not only helps in staying compliant with ATO requirements but also avoids potential penalties.

Other Payroll Obligations

While STP reporting is a significant part of payroll management, don’t overlook other obligations.

For example, businesses must avoid pay secrecy practices and ensure transparency in how wages are determined and reported.

Additionally, maintaining up-to-date records and ensuring fair pay practices are vital responsibilities that all employers should uphold.

While managing payroll for closely held employees in a small business comes with specific requirements, the flexibility in reporting can be adapted to suit your business needs.

By understanding your obligations and choosing the best reporting method, you can ensure smooth and compliant payroll management for your closely held employees. Speak with your tax adviser to ensure you are meeting your obligations and prepare for a smoother journey with your small business.

Overwhelmed By Tax? Learn About What’s Expected For You…

As you dive into your career in your 20s and 30s, taxes can seem a bit overwhelming.

However, understanding how taxes work is key to managing your finances and ensuring you’re on the right track.

Let’s break down some vital tax concerns for young professionals like you so you can feel confident when tax season rolls back around.

1. Understanding Your Tax Bracket

One of the first things to understand is your tax bracket, which determines how much tax you pay based on your income. In Australia, the more you earn, the higher your tax rate.

For example, you won’t pay any income tax if you’re just starting out and earning under $18,200. But as your income grows, your tax obligations will increase too.

Knowing where you stand is important so you can budget effectively and avoid surprises.

2. Claiming Deductions

One of the perks of working is that you can claim deductions to reduce your taxable income. This means you could pay less tax, keeping more money in your pocket.

Common deductions include work-related expenses like uniforms, tools, and travel costs. If you’re working from home, you can also claim a portion of your home office expenses. Keep receipts and records of work-related spending—these will be handy at tax time!

3. Managing Your Superannuation

Superannuation, or “super,” is a big part of your financial future, even if retirement is a lifetime away. Your employer should contribute to your super fund, but it’s also worth considering if you want to make additional contributions.

Extra contributions can be smart because they’re taxed at a lower rate than your regular income. Plus, money will grow, setting you up for a more comfortable retirement.

4. Filing Your Tax Return

Filing your tax return might seem daunting, but it’s pretty straightforward once you get the hang of it. Most of your income details, like your salary and super contributions, are automatically populated by the Australian Taxation Office (ATO).

All you need to do is review the information, add any deductions, and submit your return. If it still feels overwhelming, don’t hesitate to contact a tax professional—they can help you ensure everything is accurate and that you’re getting the best possible refund.

5. Saving for the Future

As you earn more, you might be in a position to start saving for bigger goals, like buying a home. In Australia, certain incentives are designed to help with this, like the First Home Super Saver Scheme, which allows you to save for a house deposit within your super fund. Knowing about these options early can help you plan better and make the most of your hard-earned money.

Navigating taxes in your 20s and 30s doesn’t have to be stressful. By understanding your tax bracket, claiming deductions, managing your superannuation, and filing your tax return correctly, you can take control of your finances and avoid any tax time headaches.

You’re not alone in this, though, as there are plenty of resources and professionals who can help you. Why not start a conversation with us to find out how we can assist?

FBT Considerations For Employers

Fringe Benefits Tax (FBT) is a significant aspect of tax compliance for employers in Australia.

It applies to the non-cash benefits employers provide to their employees in addition to their salary or wages. Understanding and managing FBT obligations is crucial for businesses to avoid penalties and ensure tax efficiency.

The FBT year runs from 1 April through to 31 March, with returns needing to be lodged by 21 May.

Common Fringe Benefits

Employers may provide employees with fringe benefits as an additional incentive to their employment. These may include:

  • Car Benefits: Providing a car for private use is common and requires careful FBT calculation using the statutory formula or operating cost methods.
  • Entertainment: Meals, events, and other entertainment expenses can attract FBT; it is crucial to distinguish between deductible and non-deductible expenses.
  • Housing/Accommodation: Benefits like housing or accommodation payments are subject to FBT, and their taxable value is influenced by factors such as location and market value.

Exemptions and Concessions

  • Benefits like work-related portable devices, minor benefits under $300, and certain remote area benefits may be exempt or attract reduced FBT.
  • Non-profit organisations may qualify for FBT concessions, such as the $30,000 exemption cap for public benevolent institutions.

Employee Contributions

Employees can reduce FBT liability by contributing towards benefits, such as paying part of a company car’s running costs.

Salary Packaging

Offering salary packaging can be tax-effective for employees but increases FBT obligations for employers. Proper structuring is key to minimizing FBT impact.

Common Pitfalls

  • Underestimating FBT: Miscalculating or failing to identify fringe benefits can lead to penalties.
  • Inadequate Documentation: Poor record-keeping complicates FBT reporting and substantiating exemptions.
  • Misclassifying Benefits: Incorrect classification of benefits, such as confusing entertainment expenses, can result in unexpected FBT liabilities.

FBT requires careful management and understanding to ensure compliance and avoid costly errors.

Employers can effectively manage their FBT obligations by staying informed about the types of benefits subject to FBT, exemptions, and proper reporting practices.

Consulting with a tax professional is recommended to navigate the complexities and make informed decisions when offering employee benefits.

How Does The Tax-Free Threshold Work If You Have Multiple Jobs?

It’s important to know how the tax-free threshold works, especially if you’re earning income from more than one job.

Many people mistakenly claim the tax-free threshold from multiple employers, which can lead to an unexpected tax bill.

This guide will help you understand how to manage the tax-free threshold while juggling multiple sources of income, so you can keep your finances in check.

Getting to Know the Tax-Free Threshold

The tax-free threshold allows you to earn up to $18,200 each year without paying any tax. It’s a great benefit for Australian residents, especially for those on lower incomes. Understanding how this threshold works is key to making sure you’re not caught off guard when tax time rolls around.

Which Incomes Count Toward the Tax-Free Threshold?

It’s important to remember that the tax-free threshold applies to your total income, not just what you earn from one job. This includes:

  • Salaries and wages from your employers
  • Payments from government agencies
  • Income from work done under an Australian Business Number (ABN)

How to Claim the Tax-Free Threshold

You can only claim the tax-free threshold from one employer at a time. When you start a new job, your employer will ask if you want to claim the tax-free threshold. If you’re already claiming it from another job, you should let them know by answering “no.” This will help you avoid any tax-related issues later on.

What Happens If You Claim the Tax-Free Threshold from Multiple Employers?

If you mistakenly claim the tax-free threshold from more than one employer, you might not have enough tax withheld from your total income. This can happen if:

  • Your combined income from all employers exceeds $18,200, and
  • You’ve claimed the tax-free threshold from more than one job

When this happens, you could end up with a tax bill that needs to be paid as a lump sum at the end of the financial year. No one likes surprises like that, so it’s best to get it right from the start.

How to Avoid an Unexpected Tax Bill

To steer clear of any tax surprises at the end of the financial year, here’s what you can do:

  • Claim the Tax-Free Threshold from Just One Employer: Choose the employer who pays you the most.
  • Notify Your Other Employers: If you need to stop claiming the tax-free threshold from one of your jobs, simply fill out a Withholding Declaration form and give it to your employer.
  • Keep an Eye on Your Income: Make sure you’re aware of how much you’re earning from all sources so you don’t exceed the threshold without enough tax being withheld.

Managing Study or Training Support Loans with Multiple Employers

If you have a study or training support loan, like a HECS-HELP or SFSS loan, it’s important to let each of your employers know. You’ll need to make compulsory repayments if:

  • You still have a study loan when you lodge your tax return, and
  • Your repayment income is above the minimum threshold

Steps to Take

  • Inform Your Employers: Make sure all your employers know about your study loan so they can withhold enough for your compulsory repayments.
  • Adjust Withholding Amounts: You can use a Withholding Declaration form to ensure your employers are withholding the right amount to cover your loan repayments.

Making Voluntary Repayments

You’re always welcome to make voluntary repayments to reduce your study loan balance. But remember, if your repayment income is above the threshold, you’ll still need to make compulsory repayments even if you’ve made voluntary ones.

Managing Tax If You’re a Sole Trader or Earn Through Online Platforms

If you earn income as an employee and also as a sole trader or through online platforms, managing your tax is crucial to avoid surprises.

Prepaying Tax on Business Income

As an employee, your employer takes care of withholding tax from your pay. But as a self-employed individual, you’re responsible for the tax on your business income. To avoid a big tax bill at the end of the year:

  • Pay As You Go (PAYG) Instalments: You can prepay tax on your business income throughout the year using PAYG instalments. This spreads out your tax liability, making it easier to manage than paying a large sum at tax time.

Understanding and managing the tax-free threshold is key to staying on top of your finances, especially if you have multiple sources of income.

By claiming the tax-free threshold from only one employer and carefully managing any study loans or additional income, you can avoid unexpected tax bills and keep your financial situation under control.

If you’re ever unsure about your tax situation, don’t hesitate to seek advice from a tax professional.

What Do I Do If I Have A Mistake On My Tax Return

Tax time can be stressful, and it’s not uncommon to discover errors or omissions after submitting your tax return.

Fortunately, the Australian Taxation Office (ATO) provides a straightforward process for amending your tax return.

This guide will walk you through the steps and considerations involved in changing your lodged return.

Why Amend Your Tax Return?

There are several reasons why you might need to amend your tax return, including:

  • Incorrect income or deductions reported.
  • Forgotten deductions or income.
  • Misreported credits or rebates.
  • Errors in personal information.

When to Amend Your Tax Return

It’s essential to amend your tax return when you discover an error. Delaying corrections can lead to interest and penalties, mainly if the error results in underpaid tax. Generally, you can amend your tax return within two years of the original assessment date. However, different rules apply to complex cases or specific taxpayer categories.

Methods for Amending Your Tax Return

1. Online via myTax

The quickest and most convenient way to amend your tax return is through myTax. Follow these steps:

  1. Log in to myGov: Access your myGov account linked to the ATO.
  2. Navigate to ‘Manage tax returns’: Select the relevant tax year.
  3. Select ‘Amend’: Follow the prompts to make the necessary changes.
  4. Review and submit: Ensure all amendments are accurate before submitting.

2. Using a Registered Tax Agent

If you used a tax agent to file your original return, you might prefer to have them handle the amendment. They can provide professional advice and ensure all changes comply with tax laws.

3. Paper Amendments

For those unable to amend online, a paper form option is available. Complete the Request for Amendment of Income Tax Return form and send it to the ATO.

Key Considerations When Amending

1. Record-Keeping

Keep detailed records of all changes made, including supporting documents. This is crucial if the ATO requests further information or audits your return.

2. Interest and Penalties

You might incur interest and penalties if your amendment makes additional tax payable. The ATO may reduce these charges if you voluntarily disclose the error.

3. Refund Adjustments

The ATO will process the additional amount if the amendment increases your refund. Conversely, you must repay the difference if it reduces your refund.

4. Processing Time

Amended returns typically take up to 20 business days to process. However, complex cases or those requiring additional information may take longer.

Common Scenarios for Amendments

1. Missed Deductions

It’s common to overlook deductions such as work-related expenses, donations, or investment losses. Ensure you have proper documentation to support these claims.

2. Incorrect Income Reporting

Errors in reporting income, such as wages, dividends, or rental income, are also common. Cross-check with your records and financial institutions to ensure accuracy.

3. Adjusting for New Information

Sometimes, new information, such as revised payment summaries or financial statements, becomes available after lodging your return. Use this information to amend your return accordingly.

Amending your tax return in Australia is generally straightforward and can help you correct errors and ensure compliance with tax laws.

Whether you amend online, through a tax agent, or via a paper form, timely and accurate amendments can save you from potential penalties and interest charges. Always keep thorough records and seek professional advice if needed.

By taking these steps, you can have peace of mind knowing your tax affairs are in order.

Vehicles, Expenses & The Tax Return

Making the most of available tax deductions for your business can be an important aspect of starting the new financial year. It’s why planning and strategising with your tax advisor could lead to different and new perspectives regarding tax in areas of your business.

One area where you can significantly benefit is through claiming motor vehicle expenses.

Here’s how to navigate the process and ensure you claim the maximum allowable deductions.

What Can You Claim?

As a business owner, you can claim a tax deduction for several business-related motor vehicle expenses. These include:

  • Fuel and oil
  • Repairs and servicing
  • Interest on the motor vehicle loan
  • Lease payments
  • Insurance cover premiums
  • Registration
  • Depreciation of the vehicle

However, the method you use to claim these expenses will depend on the type of vehicle you have and your business structure.

Choosing the Best Method for Your Business

If you operate your business as a sole trader or partnership, you have two primary methods to claim motor vehicle expenses: the cents per kilometre method and the logbook method. Let’s explore both to determine which might work best for you.

1. Cents Per Kilometre Method

Using the cents per kilometre method allows you to claim a set rate for each kilometre travelled for business purposes. You can claim up to 5,000 business kilometres per year using this method. It’s a straightforward option if you have a lower amount of business travel and prefer simplicity in record-keeping.

2. Logbook Method

The logbook method requires more detailed records but can be more beneficial if you use your vehicle extensively for business. You need to keep a logbook or diary for a continuous 12-week period, documenting every trip and the purpose of each journey. This logbook will help you determine the percentage of time you use your vehicle for business purposes. Based on this percentage, you can then claim the relevant proportion of all your vehicle expenses.

Important Considerations

When deciding which method to use, consider the following:

  • Ease of Record-Keeping: The cents per kilometre method is simpler but may limit the amount you can claim if you travel extensively for business.
  • Potential Deductions: The logbook method, though more time-consuming, can potentially yield higher deductions if you use your vehicle heavily for business purposes.

Private Use of Your Vehicle

Remember, you cannot claim any motor vehicle expenses related to the private use of your vehicle. This includes commuting from home to work unless your home is your primary place of business.

Record-Keeping Requirements

Knowing what records to keep and for how long is crucial. Most records need to be kept for five years, and they should be stored in a safe place. Ensure that all records are written in English or easily convertible to English. Keeping accurate and detailed records will make it easier for you to lodge your tax returns and defend any claims if audited.

Final Tips

  • Stay Organized: Implement a good record-keeping system. This could be digital or physical, but ensure it’s reliable and easily accessible.
  • Plan Ahead: If you choose the logbook method, start your 12-week logbook period at a time representing your typical business vehicle use.
  • Consult a Professional: If you’re unsure which method is best for you or need help setting up a record-keeping system, don’t hesitate to consult a tax professional.

By carefully considering your options and maintaining meticulous records, you can maximise your tax deductions for motor vehicle expenses and ensure compliance with tax regulations.

If you have any questions or need further assistance, please reach out. We’re here to help you make the most of your business deductions.

Not-For-Profit Sporting Organisations & Tax

Starting from the 2023-24 income year, not-for-profit (NFP) organisations, including sporting clubs, societies, and associations with an active Australian Business Number (ABN), must lodge an annual NFP self-review return to maintain their income tax exemption status.

It’s time to ensure that, if this applies to you, you are aware of the critical steps and considerations for sporting organisations to prepare for this new requirement.

Lodging the NFP Self-Review Return

The NFP self-review return is designed to help your sporting organisation evaluate its purpose and activities against the criteria for income tax exemption. Here are the essential points:

  • Lodgment Period: The first NFP self-review return for the 2023-24 income year must be lodged between 1 July and 31 October 2024.
  • Individual Lodgment: Each organisation with its own ABN must lodge its own self-review return, even if it is part of a larger sporting group.

Preparing for Annual Reporting

To ensure your organisation is ready to lodge the NFP self-review return, follow these steps:

  1. Verify ABN Status:
    • Check that your organisation has an active ABN using the ABN Lookup.
  2. Update Contact Information:
    • Notify the ATO if your organisation’s address or responsible persons’ details need updating. This ensures access to important tax information and the ability to lodge the return.
  3. Review Main Purpose and Governing Documents:
    • Identify and document your organisation’s main purpose, which must be the encouragement of a game, sport, or animal racing.
    • Ensure that any non-sporting activities are incidental, ancillary, or secondary to the primary purpose.
  4. Early Self-Review:
    • Conduct an early self-review to confirm your organisation’s eligibility for income tax exemption.
  5. Set Up Digital Access:
    • Set up myGovID with either Standard or Strong identity strength.
    • Link myGovID to your organisation’s ABN in the Relationship Authorisation Manager (RAM) to access Online Services for Business.
  6. Stay Informed:
    • Subscribe to the ATO’s monthly Not-for-Profit news for the latest tax and super updates, tips, and advice.

Consequences of Not Lodging

Failure to lodge the NFP self-review return may make your organisation ineligible for income tax exemption, and penalties may apply. Ensuring timely and accurate lodgment is crucial to maintaining your tax-exempt status.

Identifying Your Sporting Organisation’s Main Purpose

Your organisation’s main purpose must be encouraging a game, sport, or animal racing. Here’s how to determine and document this:

  • Governing Documents: Review these documents to clarify the purpose for which your organisation was established.
  • Activities Review: Ensure that your organisation’s activities during the income year primarily support the encouragement of the game, sport, or animal racing.
  • Non-Sporting Activities: Assess whether any non-sporting activities are merely incidental or ancillary to the primary purpose. Your organisation must be able to justify that its main purpose is the encouragement of a game, sport, or animal racing.

For many sporting organisations, the primary purpose will be evident through activities directly related to their game, sport, or animal racing.

Adhering to the new requirement of lodging an annual NFP self-review return is essential for not-for-profit sporting organisations to maintain their income tax exemption.

By following the outlined steps and ensuring that your organisation’s purpose and activities align with the criteria for tax exemption, you can avoid penalties and continue to benefit from this status.

For more tailored support and guidance, why not speak with your trusted tax adviser?