From August 2025, the ATO is progressively including ‘debts on hold’ in relevant taxpayer ATO account balances.

A ‘debt on hold’ is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold should the ATO decide it is not cost effective to collect the debt at the time.

From August 2025, the ATO will begin including debts placed on hold in the taxpayer’s ATO account balances.  However, only debts placed on hold post 1 January 2017 will be reinstated to the client’s ATO account.

Taxpayers with ‘debts on hold’ of $100 or more will receive (or Kelly & Associates will receive) a letter before it is added to their ATO account balance.  The balance can be viewed in the ATO’s online services or the statement of account.

Taxpayers with a ‘debt on hold’ of less than $100 will not receive a letter, but the debt will be included in their ATO account balance.

Importantly, the ATO will begin charging the general interest charge (‘GIC’) six months from the day the taxpayer’s ‘debt on hold’ has been included in their account balance.

Clients are advised to contact our office should they have a debt on hold and wish to discuss their options.

Legislation has recently been enacted to reduce student loan debts. In summary:

• there is a one-off 20% reduction to Higher Education Loan Program debts and other student loans that were incurred on or before 1 June 2025;
• the minimum repayment threshold is increased from $54,435 in the 2024/25 income year to $67,000 in the 2025/26 income year (to continue to increase each year with the growth in wages); and
• a marginal repayment system has been introduced where compulsory student loan repayments are calculated only on income above the new $67,000 threshold (rather than having it based on a percentage of the repayment income).

Notably, the ATO will apply the one-off 20% reduction, and individuals do not need to take any action.

The car limit for the 2026 income year is $69,674.  This is the highest value that a taxpayer can use to calculate depreciation on a car where they use the car for work or business purposes and they first use or lease the car in the 2026 income year.

If a taxpayer is buying a car and the price is more than the car limit, the highest input tax (GST) credit they can claim (except in certain circumstances) is one-eleventh of the car limit.  For the 2026 income year, the highest input tax credit they can claim is $6,334 (i.e., one-eleventh of $69,674).

The luxury car tax (‘LCT’) threshold for the 2026 income year is $91,387 for fuel-efficient vehicles, and $80,567 for all other luxury vehicles.

Input tax credits need to be claimed within the four year time limit.  A taxpayer cannot claim an input tax credit for luxury car tax when they buy a luxury car, even if they use it for business purposes.

We are pleased to introduce our team of accountants who will be completing the bulk of our individual tax returns this year.  Kaylie and David will be overseeing the process with assistance from Ashleigh, Kathryn, Jordan, Christian and Sarah.

As always, we are available for face-to-face consultations as well as offering a remote service.  Our remote service has continued to be popular with clients and includes phone appointments and Microsoft Teams meetings.

Please contact reception to book your face-to-face or remote service appointment on (03) 5224 1022.

Information for your 2024/25 tax return can be emailed directly to your accountant or to reception@kellyassoc.com.au.  Alternatively, we can provide a secure link upon your request, allowing you to safely deliver sensitive taxation information to us electronically.  Please note that payment summaries no longer need to be provided as we can access them from the ATO portal.

To further assist with tax preparation this year, we have provided an Individual Tax Return Checklist and a complementary Tax Data Organiser to help gather and compile your tax information.  The ATO website also provides some helpful deduction guides that are specific to particular occupations and industries: Occupation & Industry Specific Guide Occupation & Industry Specific Guide

Where appropriate, we are using DocuSign for signing and returning documents.  Please keep an eye out for documents sent to you via DocuSign and contact our office if you require any assistance with the signing program.

We look forward to assisting with all your taxation needs for the 2024/25 tax year!

The ATO reminds employers they need to keep on top of their payroll governance.  This includes:

• using their tax and super software to record the amounts they pay;
• withholding the right amount of tax; and
• calculating superannuation guarantee (‘SG’) correctly.

As 30 June gets closer, employers should check their reporting obligations, along with any upcoming key dates, including for:

• SG rate change — From 1 July, the SG rate will increase to 12%.  Employers must pay their SG contributions by 28 July in full, on time and to the right fund; and
• Single touch payroll (‘STP’) reporting — Employers should remember to make STP finalisation declarations by 14 July for all employees the employer has paid during the financial year and also check their employees’ year-to-date amounts are correct.
• Employers in the following industries are reminded of the need to prepare a Taxable Payment Annual Report (TPAR):
  • Building and construction
  • Cleaning services
  • Couri services
  • Road freight services
  • Information technology services
  • Security, investigation or surveillance services
  • Mixed services (provides one or more of the services listed above)

Should you require assistance with your year-end payroll obligations please contact our office.

From 1 July 2025, the ATO interest charges, specifically the General Interest Charge (GIC) and Shortfall Interest Charge (SIC) will become non-deductible.  This change will increase the after-tax cost of ATO interest charges affecting taxpayers with overdue tax liabilities or tax shortfalls.

Business taxpayers with ATO tax debts may wish to consider repaying their tax liabilities or refinancing these tax debts to avoid accruing further non-deductible interest charges.

Please contact your accountant to discuss these options further.

1. Personal income tax measures

New tax cuts for individual taxpayers in 2027 & 2028

The Government will deliver new tax cuts to individual taxpayers commencing from 1 July 2026 (i.e., from the 2027 income year). Under the new tax cuts, it is proposed that:

• the (current) 16% tax rate will be reduced to 15% from 1 July 2026; and
• the 15% tax rate will be further reduced to 14% from 1 July 2027.

The personal income tax rates (excluding the Medicare levy) for the 2025 and 2026 income years are set out in the following table, along with the proposed changes to the tax rates for the 2027 and 2028 income years:

By way of example, a taxpayer earning between $18,201 and $45,000 will get a tax cut of up to $268 in the 2027 income year and up to $536 from the 2028 income year.

Increased Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income threshold amounts and phase-in ranges for single individuals, families and seniors and pensioners that apply from 1 July 2024 to provide cost-of-living relief, as set out in the table below.

The increase to the thresholds ensures that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.

The Medicare levy low-income thresholds for single individuals and families for the 2025 income year, together with the comparative thresholds for the 2024 income year, will be as follows:

For each dependent child or student, the family income thresholds will increase by a further $4,216 (up from $4,027).

2. Non-tax related budget measures of interest

Making student loans fairer

As previously announced by the Prime Minister on 3 November 2024, the Government will reduce all outstanding Higher Education Loan Program (‘HELP’) and other student debts by 20%, subject to the passage of legislation. The 20% reduction is in addition to the recent indexation reforms.

The Government is also increasing the amount that people can earn before they are required to start paying back their loans, from $54,435 in the 2025 income year to $67,000 in the 2026 income year.

Energy bill relief

The Government is extending energy bill relief by providing eligible households and small businesses with two $75 bill rebates directly off their electricity bills until 31 December 2025.

Expansion to Help to Buy scheme for first home buyers

Under the Help to Buy scheme, the Government will provide an equity contribution of up to 40% to support eligible home buyers to purchase a home with a lower deposit and a smaller mortgage.

The Government will boost the scheme by increasing income caps from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents.

Property price caps will also be increased and linked with the average house price in each state and territory, rather than dwelling price.

Restricting Foreign Ownership of Housing

The Government will take action to ensure foreign investment in housing supports the Government’s broader agenda to boost Australia’s housing supply in the following ways:

• Banning foreign persons (including temporary residents and foreign-owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies.
• Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign-owned companies to provide housing for workers in certain circumstances.
• An enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.

National Anti-Scam Centre

The Government will provide $6.7 million in the 2026 income year to extend the operation of the National Anti-Scam Centre.

Operating within the Australian Competition and Consumer Commission, the Centre will continue to protect consumers and businesses from scam activity.

Support for the Hospitality Sector and Alcohol Producers

The Government will increase support for hospitality venues, brewers, distillers and wine producers through changes to the alcohol tax settings in Australia.

The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a two-year period, from August 2025.

Under this measure, biannual indexation of draught beer excise and excise equivalent customs duty rates applicable from August 2025 to February 2027 will not occur. Biannual indexation will then recommence from August 2027.

The Government will also increase support available under the existing Excise remission scheme for manufacturers of alcoholic beverages (the ‘Remission scheme’) and Wine Equalisation Tax (‘WET’) producer rebate (‘Producer rebate’).

Currently, all eligible brewers and distillers can receive an excise remission under the Remission Scheme up to a cap of $350,000. All eligible wine producers can currently receive a WET rebate up to a cap of $350,000 under the Producer rebate. This measure will increase the caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026.

Banning non-compete clauses for low and middle income workers

The Government will ban non-compete clauses that apply to workers earning less than the high-income threshold in the Fair Work Act (currently $175,000). The Government will also close loopholes in competition law that currently allow businesses to:

• fix wages by making anti-competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers; and
• use ‘no-poach’ clauses to block staff from being hired by competitors.

Our clients who have recently adopted the document automation procedures in QBO and Xero are very happy with the results!

QBO allows users to automate almost every aspect of their workflow, including bills, receipts and  invoicing along with secure storage of documents such as bank statements.  These automated features can save valuable time and reduce errors.

In Xero, setting up specific bank rules supports the automatic coding of transactions which can save time.  You can also use Hubdoc to reduce manual entry and streamline document collection, although this is not available with all subscriptions.

The accounts payable function can be further enhanced by utilising the automated bill entry function.

Xero also has the capacity to store any resource documents such as employment contracts, insurance policies, bank statements etc.

Contact our bookkeeping team or your accountant if you require assistance regarding these automation features.

Please also note if you require any further assistance with your bookkeeping needs, we have some scope in our bookkeeping team at present to assist you.

Around 3,500 small businesses with a history of non-payment, late or non-lodgement, or incorrect reporting will be moved to monthly GST reporting from April 1, 2025.

The ATO will be contacting small businesses and their tax professionals when their GST reporting cycle is changing from quarterly to monthly.

Changes to the reporting cycle will remain in place for a minimum of 12 months.

Prior to 1 January 2025, Victorian Residential Land Tax (VRLT) applied to vacant residential land in inner and middle Melbourne. However, from 1 January 2025, VRLT will be extended to now apply to residential land anywhere in Victoria that is vacant in the preceding year.

Vacant residential land is defined as property that has not been lived in for more than 6 months in the preceding calendar year. Land owners are required to notify the Commissioner of State Revenue of any vacant residential land owned by 15 January of the relevant land tax year.

Notably, this means that if you own residential land in Victoria that is vacant in 2024 then you may be liable for VRLT in 2025. Holiday homes are exempted from VRLT under certain circumstances and documentation, such as a logbook, may be required to demonstrate use of the holiday home.

Further information regarding VRLT can be found at: SRO – Vacant Residential Land.

Should you require any additional assistance regarding these changes to VRLT please contact our office.