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Salary Sacrifice Guide for Employers

Salary sacrifice is a confusing term and sometimes a confusing arrangement. If you’re wondering how to navigate a salary sacrifice agreement as an employer, you’re in luck. This guide helps walk you through the ins and outs of salary sacrifice, including a simple definition, how to set up a salary sacrifice agreement, and the pros and cons of salary packaging.

What is a salary sacrifice?

A salary sacrifice agreement allows an employer and employee to negotiate a salary package (aka total remuneration package). In this agreement, the employee agrees to “sacrifice” their future salary or wages, and the employer agrees to other benefits of similar value instead. It’s really more of a trade or exchange rather than a “sacrifice.”

A salary sacrifice agreement is also commonly referred to as “salary packaging” or “total remuneration packaging”, which are perhaps more accurate terms. These arrangements aim to find a salary and benefits package that benefits both the employer and employee in terms of financial remuneration and tax benefits. Employers also use salary sacrifice arrangements as incentives for new and existing employees. There are tax implications and expenses to consider, though, which we’ll cover in more detail throughout this guide.

Which benefits can you exchange in a salary sacrifice?

The employer ultimately decides which benefits to offer in a salary sacrifice agreement, though the final arrangement requires both parties to agree. The ATO doesn’t restrict the benefits you exchange. When you’re setting up salary sacrifice agreements, there are three financial considerations: the cost of the benefits, the administrative expenses, and your tax obligations.

  • Fringe benefits: Fringe benefits include payments outside of standard salary and wages. Fringe benefits are generally for private use and unrelated to work. For example, if you allow an employee to use a company vehicle for their own private purposes, that is a fringe benefit. Other examples include reimbursement for expenses like tuition or childcare, gym memberships, and entertainment (e.g. concert tickets). Employers are required to pay Fringe Benefits Tax (FBT). It’s important to consider this expense when you’re negotiating a salary sacrifice arrangement.
  • Exempt benefits: Exempt benefits aren’t subject to FBT. Only work-related items are considered exempt benefits. The following items are allowed for exemption, and the item must primarily be used for work-related purposes: portable electronic devices, computer software, protective clothing, briefcases, and tools of trade. If the employee uses more than one item for a “substantially identical function” within an FBT year, only one of the items is exempt. The only exceptions are for replacement items and specific work-related portable electronic devices for small businesses (those earning less than $50 million per year).
  • Superannuation: Superannuation is one of the most popular benefits in a salary sacrifice agreement. The ATO states that employer contributions aren’t fringe benefits as long as they’re made on behalf of the employee and are paid to a complying super fund. However, if the contributions are made on behalf of another person (e.g. the employee’s spouse), or you pay them to a non-complying super fund, the ATO considers them fringe benefits. In that case, you’ll need to pay FBT.

Is there a limit on salary sacrifices?

However, their reduced salary or wages must at least equal minimum wage. If the salary sacrifice includes superannuation contributions, those contributions are subject to a cap because they’re considered concessional contributions. This cap applies to all super fund concessional contributions made for one employee throughout the year.

How to Set Up a Salary Sacrifice Agreement

Like most agreements, you should create a written contract for your salary sacrifice agreement. A verbal contract may also be legally binding, but these agreements are much more difficult to prove and possibly open for dispute.

You should agree on terms and sign the contract (both you and the employee) before work commences. The ATO doesn’t allow employees to sacrifice any salary or wages, leave entitlements, bonuses, or commissions that have already accrued. You may renegotiate the terms of the salary sacrifice agreement at any time during the person’s employment. If your contract is renewable, you should renegotiate the terms before each renewal starts.

Tax Implications of Salary Sacrifice Arrangements

There are specific tax guidelines related to salary sacrifice arrangements. Here are the details as outlined by the ATO:

  • The employee pays income tax on their reduced salary or wages.
  • The employer pays applicable fringe benefits tax (FBT) on any fringe benefits exchanged for salary. There are two exceptions here:
  1. Exempt benefits (listed above) aren’t considered fringe benefits.
  2. If an employee could claim an income tax deduction for an item, the employer isn’t required to pay FBT on that item under the “otherwise deductible” rule.

There are two notes to mention about superannuation contributions.

If the employer makes super contributions as part of a salary sacrifice agreement, those contributions are considered employer contributions (not employee contributions) as long as they are made on behalf of the employee (not their spouse or another person) and are paid to a complying fund. These contributions will be taxed in the super fund because they’re considered concessional contributions.

Per the ATO, as of 1 January 2020, these contributions don’t:

  • Reduce the ordinary time earnings that the employer is required to calculate their employee’s super entitlement on.
  • Count towards the amount of super guarantee contributions that the employer is required to make in order for them to avoid the super guarantee charge.

Note: If a salary sacrifice arrangement doesn’t meet ATO requirements, the benefits are considered taxable income.

Other Salary Sacrifice Guidelines

The ATO outlines other requirements and procedures for salary sacrifice, including:

  1.  The employee must permanently forego the sacrificed salary for the entire period outlined in your arrangement.
  2.  If you, as the employer, don’t provide a fringe benefit outlined in the agreement, you must cash out that benefit by the end of the agreed period. This payment is considered normal taxable income.
  3.  If the employer makes payments to a third party from your earned salary, these are not part of an effective salary sacrifice arrangement. These payments must be after-tax. Common examples include payments for health insurance premiums or loan repayments.

Pros and Cons of Salary Sacrifice Agreements

There are many pros and cons for employers to consider in regards to salary sacrifice agreements.

Pros:

  • Salary packaging is an excellent incentive for new and existing employees. If you need to attract talent, salary sacrifice agreements are a great way to do so—as long as you understand the financial implications, too.
  • Many employees effectively earn more money with a salary sacrifice agreement; if done well, the employer won’t experience any additional cost.
  • Employers may save money on payroll taxes, workers compensation, and superannuation guarantee charges.

Cons:

  • Salary packaging is a complex task and requires a great deal of time and effort to negotiate and communicate.
  • If and when an employee leaves the organisation, it can be challenging to reconcile the outstanding wages or benefits owed under a salary sacrifice agreement.
  • Record keeping is more complicated than usual.
  • FBT requires additional time and expense.

Should you offer salary sacrifice arrangements?

There’s a lot to consider with salary sacrifice arrangements. While employers sometimes save a bit of money by packaging salaries, employees experience the greatest benefits. Most employees save money on taxes and take home more money overall with these agreements. Because salary sacrifice agreements offer so many financial benefits for employees, an employer who offers these agreements is much more appealing. The greatest challenge, of course, is setting up a salary sacrifice arrangement and keeping accurate records for tax purposes. If you need help, nexZen is here. We can work together to find a salary sacrifice arrangement that benefits both you and your employees. Book a discovery call now to get started.

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Business Value Creation Day to Day Accounting & Payroll

Casual vs Part-Time Employee: What’s the Difference?

While both workers are technically working on a part-time basis, there are some distinct differences in casual vs part-time employees. From contracts to salary to hours, there are important differences to know about these two groups of employees. Read on to find out what the differences really are between casual employees and part-time employees to help determine which employee is best for your company.

What is a Casual Employee?

A casual employee is an employee who is called to work when needed. They may or may not have a contract. If they have a contract, it will clearly state that the working hours may be sporadic and may not be consistent from one week to the next. This type of on-call employee does not receive company benefits and is paid by hours or days contributed. They may have their hours set up in advance but they may also be informed of their hours on a weekly basis. Some weeks, they may have no hours at all.

A casual employee is ideal for a business that doesn’t have steady work in a particular area, or for a company with busy seasons. During the busy season, you may need to call on your casual employees for help but you don’t need them all year round.

What is a Part-Time Employee?

A part-time employee does not work as many hours as a full-time employee but their hours are pre-determined and regular. This means they are at work every week during their allotted times and their schedule doesn’t change based on the workload. A part-time employee may be entitled to some employee benefits, including paid vacation days. They also have a contract stipulating their working hours and the nature of their contribution to the company. Contracts are usually updated and renegotiated annually.

A part-time employee is essential to a business that doesn’t need another full-time employee but still has a steady enough stream of work that needs to be taken on each week. A part-time employee may also be a smooth and simple segue to a new position. If your company is just expanding into a new department, you may want to schedule part-time employees on a trial basis before you expand to full-time staff.

Is There a Pay Difference?

There is a payroll difference in casual vs part-time employees. Casual employees sometimes get a higher hourly wage compared to part-time workers. This is to compensate for the unstable workflow and encourage workers to stay on board. Hiring casual workers may offer your company more flexibility but it also costs a little more. If costs are a concern for your startup business, then a part-time worker may be more suitable for you. If your think the work will only be temporary, it may be cheaper to pay a higher wage and eliminate benefits, but if you think the intermittent work may be spread out over a long period, then a part-time worker may be more beneficial to you.

There is also the cost of benefits for employers to consider. While a part-time employee may cost less per hour than a casual employee, they also cost the company in benefits. You should consider this when trying to calculate which type of employee is more economical for your business.

Who is Entitled to Benefits?

There are also differences in benefits for casual vs part-time employees. A casual employee is not entitled to health or retirement benefits. They also do not receive annual leave or paid sick days. If a casual employee falls ill one day, you don’t need to compensate them. If your company policy offers some sick days, it will require a medical note to provide sick pay. A part-time employee may be entitled to some benefits, but this can vary based on the contract. Some contracts do not offer any paid leave while others may. This is at the discretion of the employer and must be accepted by the employee upon signing the contract. Paid sick leave usually allows employees two sick days per year without proof. If a part-time employee exceeds the number of allotted sick days, their employer may ask them to provide a medical note to justify their absence.

Can They Quit Without Giving Notice?

A casual employee can quit without offering notice. This means you could find yourself short-staffed if you don’t have an enormous pool of casual workers to choose from. Part-time employees sign a contract that usually states the employee must provide the standard two-week notice period before leaving their job. Nothing can absolutely force someone to follow the two-week notice period. However, a contract usually means if the employee does not follow this rule, they may not receive all the benefits or wages they would have received if they had provided two weeks’ notice.

Should I Hire a Casual Employee or a Part-Time Employee?

This is a tough question to answer. It depends on your business and sometimes it depends on the employee as well. If your business has a steady stream of income, then you can afford to hire a part-time employee. It is beneficial to you because it means your employees will remain more stable and more reliable. It’s sometimes worth it to invest more in your employees to build a stable team if your business can afford the expenditure.

The second thing to consider is your pool of candidates. If unemployment rates are very high, you will have an easier time securing casual workers. If unemployment is low and there is less demand for jobs, then you may have a smaller pool of candidates to choose from and will need to offer whatever employees you can find the terms that work best for them. There are pros and cons to both types of employees but the most important factor is finding an employee who is hardworking and can get the job done well.

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Business Advisory

QLeave Guide for NDIS Service Providers

We recently had a call from a client we’ll call Oliver. He didn’t realize his business qualified as a community service provider or that he needed to register for QLeave. To tell the truth, Oliver hadn’t really given QLeave much thought at all. He was too busy worrying about more important things—like cash flow!

When Oliver called us in a panic, we quickly explained QLeave and helped him become compliant. But it made us realize: What if other clients need help, too?

So, we created this guide to QLeave for NDIS service providers. It includes everything you need to know about QLeave. And if you have a specific question that’s not in this guide, just let us know! We’re here to help. Let’s get started.

What is QLeave?

QLeave is portable long service leave. (QLeave technically refers to the organization that provides the portable long service leave, but most people use QLeave and portable long service leave interchangeably.)

It’s available for NDIS workers in Queensland to help with a common complaint regarding long service leave. Typically, long service leave is for workers who stay with an employer for an extended time—maybe 10 years or more. Unfortunately, many NDIS workers were unable to take advantage of long service leave for various reasons that are specific to certain industries (such as community service providers and construction workers).

For example, many NDIS workers are under contract and switch employers often. Others are sole traders. In these situations, the workers aren’t usually entitled to standard long service leave because they don’t work for one employer long enough to qualify. By comparison, QLeave is portable, meaning it transfers from one employer to the next—as long as the worker stays within the NDIS industry.

Of course, the rules can be confusing for NDIS employers, but we’ll explain everything you need to know.

What are the requirements for NDIS employers?

If you’re an NDIS employer, you’ll need to register your workers for QLeave. You can start the application here. You just need your basic business info and ABN to submit the application. You’ll also need to file employer returns each quarter.

While neither of these tasks are difficult, we realize they may feel overwhelming when you already have so much on your daily “to do” list. We’ll give you the important info in this guide, but please let us know if you need help.

Which employers must register for QLeave?

Employers in the community services industry must register for QLeave. This includes everything from child safety and support services to financial counselling services. You can find the full list here. Note that this doesn’t include childcare or aged care services if you’re a standalone provider. If you offer chilcare services as part of your other community services, though, your childcare workers are eligible for QLeave.

Do employers pay for QLeave?

Yes, employers must pay 1.35% of each worker’s ordinary wages. We realize this may be a significant expense for your business. If you need help building revenue or managing your budget, please let us know. QLeave compliance is important, but there are ways to ensure you’re meeting your obligations without crippling your business financially.

When is QLeave due?

Your quarterly returns are due on the 14th day of the following month. For example, the first quarter begins 1 January and ends 31 March. So, your return and levy are due 14 April. You can find the full schedule here. You may file the return online.

When does QLeave go into effect?

QLeave started 1 January 2021. All employers with eligible workers are required to submit quarterly returns now. If you haven’t filed any QLeave returns yet, please let us know ASAP. We can help you get caught up and in compliance, even if you don’t know where to start. Please don’t worry about something we can help you resolve quickly.

Do employers still need to pay long service leave?

Yes. If your workers qualify for regular long service leave, you still need to make those payments. However, you can apply for reimbursement from QLeave as long as the payment was within the last three months. You’ll find the reimbursement form when you log into your QLeave account. If you need help applying for QLeave reimbursement, please let us know. The process isn’t necessarily complicated, but the rules can be confusing.

How nexZen Can Help

As an NDIS service provider, you have a lot of responsibilities. The very nature of your job is often emotionally draining, and the extra steps required to stay in compliance may sometimes feel like too much to bear.

But you can’t avoid important tasks like QLeave. In fact, QLeave may check your records whenever they like. Compliance is important if you want to avoid fines, penalties, and unnecessary stress. We can help.

NexZen works with NDIS service providers (like you!) to ensure your accounting practices are in tip-top shape and you’re in full compliance with all Australian laws. More importantly, we’re focused on your business’s financial health and your personal health, too. Business owners work best when they’re refreshed and excited about their work. Please don’t let a small compliance issue become a looming threat. Contact nexZen for personalized information about your business’s QLeave requirements today.

 

Categories
Business Value Creation

Motor Vehicle Expense Tax Deductions for Small Businesses

Small business owners can claim tax deductions for certain vehicle expenses. The rules vary depending on the type of business you own, the kind of vehicle you use, and the method you use to claim your deduction. If you’re overwhelmed by all the complicated rules and terminology regarding motor vehicle tax deductions, we’re here to help. In this guide, we’ll cover everything you need to know about tax deductions for motor vehicle expenses.

Types of Motor Vehicles

First, it’s important to know which vehicles qualify for a deduction. You can claim a deduction for both cars and other vehicles. The ATO uses these two types of motor vehicles for tax purposes.

Cars are considered motor vehicles if they meet two criteria:

  1. They are designed to carry less than one tonne of weight.
  2. They are designed to carry fewer than nine passengers.

Other vehicles include the following:

  • Motorcycles
  • Vehicles designed to carry one tonne or more, including trucks or large vans.
  • Vehicles designed to carry nine passengers or more, including minivans or buses.

You must own, lease, or have a hire-purchase agreement for each motor vehicle you use for tax-deductible purposes.

If your business is a company or trust, you may deduct expenses for motor vehicles you provide to employees.

A List of Expenses You Can Claim

You can claim most vehicle expenses. Specifically, per the ATO, you can claim:

  • Fuel
  • Oil
  • Repairs and maintenance
  • Interest on the loan for your vehicle
  • Lease payments for your vehicle
  • Automobile insurance premiums
  • Registration fees
  • Vehicle depreciation
Which method should you use to claim motor vehicle expenses?

You can use several methods to track and claim motor vehicle expenses. Some business structures are only allowed to use specific methods. The ATO requires accurate and thorough records [note to nexZen: you can link to the record-keeping article here].

Cents Per Kilometre

Cents per kilometre is a simple method that doesn’t require written evidence.

Who can use the cents per kilometre method?
  • Sole traders
  • Partnerships (with at least one partner who is an individual)

This method is only allowable for motor vehicles that fall under the ATO’s definition of a car (outlined above).

The Benefits of the Cents Per Kilometre Method
  1. The CPK method is simple and uses a set rate.
  2. You may claim up to 5,000 kilometres per car each year.
  3. You don’t need written evidence to support your claim. (You may, however, need to explain how you calculated your business kilometres.)
  4. The effective rates are designed to cover most standard vehicle expenses such as fuel, maintenance, registration, and insurance.
Cents Per Kilometre Rates by Year

CPK rates are updated each year to keep up with inflation and current vehicle costs. For 2020-21 and 2021-22, the rate is 72 cents per km.

How to calculate cents per kilometre:

Multiply your total kilometres travelled for business purposes by the effective rate. The resulting number is the amount you may claim on your income taxes.

Logbook Method

The logbook method is much more complicated than the cents per kilometre method. However, if your vehicle expenses are higher than average, this method may provide greater tax savings.

Who can use the logbook method?
  • Sole traders
  • Partnerships

This method is only allowable for motor vehicles that fall under the ATO’s definition of a car (outlined above).

The Benefits of the Logbook Method
  1. The logbook method helps you keep track of your vehicle expenses throughout the year with thorough records to back up your claims.
  2. This method may provide greater tax savings if your vehicle expenses are higher than average.
How to Calculate Your Tax Deduction Using the Logbook Method:
  1. To use the logbook method, start a log of the kilometres you travel for business and personal purposes. Also, keep records of all of your car expenses for the tax year.
  2. Divide the total kilometres you travelled for business by the total kilometres you travelled overall.
  3. Multiply the result by 100.
  4. Total your car expenses for the tax year.
  5. Multiply the result from Step 4 (your total car expenses) by the result from Step 3 (your business-use percentage). The final result is the amount you can claim for income tax purposes.
Which records are required for the logbook method?
  • You’ll need to keep a logbook. You can purchase a pre-printed logbook or use a digital version. Many app stores have logbook apps that are easy to use and functional.
  • You’ll also need evidence to support your fuel and oil costs. These may be odometer readings you use as estimates.
  • Finally, you’ll need documentation that supports your other expense claims, including receipts for car-related purchases, such as maintenance, registration, etc.
What should you record in your logbook?

Most pre-printed logbooks and logbook apps will have all the necessary fields for record-keeping purposes. The ATO requires you to keep track of:

  • The dates your logbook period starts and ends.
  • Your odometer readings at the beginning and end of your logbook period.
  • The total number of kilometres you travelled in the car during this period.
  • A record of each trip and the number of kilometres you travelled. You only need to record one total journey for each day, however. If you make two or more trips in one day, record them as one logbook entry. Also include the reason for the journey, the trip start and end dates, and odometer readings.
  • The car’s business-use percentage for each logbook period.
  • If you use your logbook for more than one income year, record the odometer readings for the start and end of each year.
  • Car information, including the make, model, engine capacity, and registration number.
Other Logbook Requirements

If you’ve never kept a logbook before, you must continuously track your trips for at least 12 weeks in the first income year. If the income year ends before you’ve tracked at least 12 weeks in your logbook, you may continue using the logbook into the next income year until you’ve recorded at least 12 continuous weeks.

Your logbook is valid for five years. You may start a new logbook whenever you like.

If you use one logbook for multiple cars, you must cover the same 12-week period for each car.

The Logbook Method and Depreciation

Using the logbook method, you can claim motor vehicle depreciation. Use your business-use percentage to calculate your depreciation; only the business portion of your car’s cost is depreciable for tax purposes.

Actual Costs Method

The actual costs method is more straightforward than the logbook method but more complicated than the cents per kilometre method. However, most business structures can use this method, providing substantial tax savings.

Who can use the actual costs method?

  • Companies
  • Trusts
  • Sole traders
  • Partnerships

Note that companies and trusts may use the actual costs method for any qualified motor vehicle. Sole traders and partnerships may only use this method for motor vehicles defined as “other vehicles” by the ATO.

The Benefits of the Actual Costs Method
  • The actual costs method provides accurate tracking of vehicle expenses.
  • This method often provides the greatest tax savings for businesses with substantial vehicle-related expenses.
How to Calculate Actual Costs

The actual costs method is very straightforward: Keep all of your business-related vehicle receipts and add the amounts to find your actual costs for the year.

Remember, if you use the vehicle for both business and personal purposes, you must calculate how much of the distance travelled is for business use and how much is for personal use. You may only claim the business-use percentage of your vehicle expenses. You must also keep records supporting your claim.

The Actual Costs Method and Depreciation

You may claim depreciation on your vehicle if you use the actual costs method. Use your business-use percentage to calculate your depreciation; only the business portion of your car’s cost is depreciable for tax purposes.

nexZen Helps Clarify Vehicle Expense Tracking

Vehicle expense tracking for tax purposes is never easy, but there are certainly ways to simplify things. While you have several options, many business owners use the simplest tracking method that provides the greatest tax deduction. Sole traders who rarely travel may benefit most from the cents per kilometre method. Large companies with a fleet of vehicles may benefit most from (and be required to use) the actual costs method. Please let us know if you need help setting up an accurate tracking system or figuring out which method to use. You can book a discovery call with nexZen to discuss your options and figure out the best method for your business.

We look forward to hearing from you.

NexZen Accounting

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This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

From

1 July 2021

As previously announced, work‑related COVID‑19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID‑19 testing to their employees for work‑related purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

1 July 2022
Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 
From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

4 

2 

65-74 

5 

2.5 

75-79 

6 

3 

80-84 

7 

3.5 

85-89 

9 

4.5 

90-94 

11 

5.5 

95 or more 

14 

7 

 

From

1 July 2024

Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

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