Retirees with an account-based pension or annuity are required to take a minimum amount of income each year from their account.  This is referred to as the minimum pension payment and is calculated as a percentage of the account balance.

The Government reduced the minimum drawdown requirement in March 2020 in response to the COVID 19 pandemic.  This was a temporary reduction that applied over the last few years and finishes on June 30, 2023.

From 1 July 2023 the minimum annual drawdown requirement reverts to the normal rates.  Accordingly, retirees who withdraw the minimum amount each year will need to double their payments for the 2023/24 financial year.  For those retirees who may be moving into a different age bracket, for example from the 80-84 age bracket to 85-89, then the minimum drawdown will increase even more.

Since 1 July 2015, the Victorian State Revenue Office has charged additional stamp duty for foreign purchasers, known as ‘Foreign Purchaser Additional Duty’ (FPAD).  A trust may be subject to FPAD where the trust is involved either in the purchase of residential property or land that is later intended for residential use.  The FPAD must be paid in addition to the usual stamp duty and is currently calculated at 8% of the purchase price.

The State Revenue Office recently changed its approach to FPAD, and now views discretionary trusts as a ‘foreign’ trust unless the trust deed specifically excludes foreign beneficiaries.

With this change in approach, regardless of whether any beneficiaries are in fact foreign or not, most discretionary trusts will now be treated as being foreign trusts and liable to pay FPAD when acquiring residential property.

In addition, if a trust is held to be a foreign trust, an additional annual land tax surcharge will apply.  This is called the absentee owner surcharge. This surcharge is currently 2% and is in addition to the general and trust surcharge rates.

We are currently working through our list of clients who may be affected by this change of approach and will be in contact shortly to advise an appropriate course of action.

If you have a study and training loan balance (e.g., a HELP debt), it may be worthwhile to consider methods of reducing the balance to ensure you are not left with a large tax bill when your 2023 income tax return is lodged.

While there is no interest charged on study and training loans, indexation is added to these debts on 1 June each year, based upon the consumer price index (‘CPI’).  Given the current rate of inflation, individuals with study and training loan balances should expect a larger than normal adjustment this year.

If you have a study and training loan balance, it is worth checking your loan balance and considering the following tips:

• Let your employer know if you have started studying or have a study loan.
• Check the amount your employer is withholding. If there has not been enough withheld to cover your compulsory repayment, you can ask your employer to increase the withholding amount.
• Make a voluntary repayment to reduce your total loan amount. Indexation on the loan is applied on 1 June, so a voluntary repayment prior to this date will reduce the balance that indexation is applied to.  Note that it may take a few business days for the ATO to receive and process the payment.

Indexation will not apply to a study and training loan on 1 June if the balance is nil.  Any loan debt over 11 months old will be subject to indexation.

Employers are reminded that the SG obligation for the 1 January 2023 to 31 March 2023 quarter is due by 28 April 2023.

If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

As a reminder, from 1 July 2022, the compulsory SG rate increased to 10.5% (previously 10%).  We note the compulsory SG rate will increase again to 11% for the period 1 July 2023 to 30 June 2024.

In another recent legislative change, the eligibility age to make a downsizer contribution into superannuation has been reduced to 55 from 1 January 2023.

This further reduces the downsizer eligibility age, which changed from 65 to 60 from 1 July 2022.

From 1 January 2023, eligible individuals aged 55 years or older can choose to make a downsizer contribution into their super fund of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home that has been held for at least 10 years and qualifies for at least a partial main residence exemption.

There are no changes to the remaining eligibility criteria.

Key dates for downsizer contributions:

• Eligible individuals aged 55 years or older can make a downsizer contribution from 1 January 2023.
• For any downsizer contributions made between 1 July 2022 and 31 December 2022, eligible individuals must be aged 60 years or older at the time of making their contribution.
• Prior to 1 July 2022, the eligibility age was 65 years and over.

Other important information to consider for 55-59 year olds:

• Individuals have 90 days from receiving the sale proceeds of their home to make a downsizer contribution. This means if an individual receives the proceeds of sale prior to 1 January 2023, they can make their contribution after 1 January 2023, so long as they are still making it within 90 days of receiving the proceeds.
• If 1 January 2023 falls outside of their 90 day window to make a downsizer contribution, they will not be eligible. It is unlikely the ATO would grant an extension of time in these circumstances.

Unlike most other contributions into superannuation, there is no upper age limit for being eligible to make a downsizer contribution.  For example, a 95 year old could make a downsizer contribution, and there is no need to satisfy the work test!

The ATO is reminding employers that the holiday season is fast approaching, and their holiday casual employees may now be eligible for super.

From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee (‘SG’) eligibility has been removed.

This change doesn’t affect other eligibility requirements for SG.  In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.

We recommend employers check their payroll and accounting systems with regards to the correct calculation of their employees’ SG payments.

We are available to assist clients if they are uncertain of their obligations.

We would like to bring to the attention of clients the implications of holding residential property in a discretionary trust.

Various states and territories impose stamp duty and land tax surcharges associated with residential properties, and the treatment of any potential foreign beneficiaries in a discretionary trust deed can be applied differently across the jurisdictions.

We will assist clients in updating their Trust Deeds to expressly exclude any ‘foreign’ beneficiaries.  For those clients potentially impacted, we will be in contact early in the New Year to advise of the necessary amendments and any consequences.

If you have any queries in relation to this please contact our office.

All trustees of SMSFs have a responsibility for ensuring their fund complies with Australian superannuation legislation.  While there are various courses of action available to the ATO when a SMSF is non-complying, one course of action is the application of administrative penalties.  With the Government recently proposing to increase the value of a penalty unit for contravention offences committed from 1 January 2023, it is timely to revisit the application of these penalties.

A number of factors determine the amount of the administrative penalty, including:

• the type of contravention;
• when it occurred; and
• the number of penalty units that apply.

For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320.  This could be even more if there are multiple contraventions.

From 1 January it is proposed to increase the penalty per unit from $222 to $275, an increase in excess of 20 per cent.

With the ATO imposing total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions, it is a reminder of the importance of superfund compliance.

In addition, just because a trustee receives an administrative penalty doesn’t mean the ATO won’t undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.

Small businesses with an annual turnover of less than $50 million will be able to claim a ‘bonus’ 20% deduction for eligible expenditure on:

• External training of employees until 30 June 2024; and
• The uptake of digital technologies until 30 June 2023.

Under the technology investment boost, small businesses will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support the adoption of digital technologies such as portable payment devices, cyber security systems and subscriptions to cloud based services.  An annual cap of $100,000 will apply to each qualifying income year.

While these incentives are not yet law and are subject to decisions from the new Government, it is expected that the legislation will be passed.  For more information please access the following link: Small Business Boost

Former Federal Treasurer, Josh Frydenberg handed down the Coalition Government’s 2022/23 Budget in March.  The budget included a number of announcements, of which some were legislated prior to the federal election.  The major tax-related measures announced in the Budget and now legislated include:

 Increase to Low and Middle Income Tax Offset (‘LMITO’)

The Government has announced a once-off $420 ‘cost of living tax offset’ for the 2022 income year, which will be provided in the form of an increase to the existing LMITO.  This will increase the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples, and will be paid from 1 July 2022 when Australians submit their tax returns for the 2022 income year.

Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase.  All other features of the LMITO remain unchanged.

Tax Deductibility of COVID-19 Test Expenses

The costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021.  In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.

No Changes to the Personal Tax Rates for 2022-23

The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.

Temporary Reduction in Pension Drawdown Rates Extended

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for the 2022/23 financial year.

As part of the response to the coronavirus pandemic, the Government reduced the superannuation minimum drawdown rates by 50% since the 2019/20 financial year.

Temporary Reduction in Fuel Excise

The Government will help reduce the burden of higher fuel prices by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel, and all other fuel and petroleum-based products except aviation fuels, for six months.  This measure will commence from 12.01am on 30 March 2022 and will remain in place for six months.

Apprentice Wage Subsidy Extension

The Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies has been extended by three months to 30 June 2022.