car buying private or business

Changes to car thresholds from 1 July

The following car threshold amounts will apply for the 2024–25 financial year.

Income tax

  • The car limit for 2024–25 is $69,674. This is the highest value you can use to calculate depreciation on a car where both of the following apply:
    • you use the car for business purposes
    • you first use or lease the car in the 2024–25 income year.
  • As a business owner, you can claim a tax deduction for expenses for motor vehicles you use for business purposes.
  • If you use a motor vehicle for both business and private purposes, you can only claim a deduction for the business part. You must be able to show the percentage you claim as business use and have records to support your claim.

Goods and services tax (GST)

  • If you buy a car and the price is more than the car limit, the maximum GST credit you can claim (except in certain circumstances) is one-eleventh of the car limit. For the 2024–25 income year, the maximum GST credit you can claim is $6,334 (that is, 1/11 × $69,674).
  • You can’t claim a GST credit for any luxury car tax you pay when you buy a luxury car, even if you use it for business purposes.

Luxury car tax (LCT)

  • The LCT threshold for 2024–25 is:
    • $91,387 for fuel-efficient vehicles. This is in line with an increase to the motor-vehicle purchase sub-group of the Consumer Price Index (CPI)
    • $80,567 for all other luxury vehicles, in line with an increase in the ‘All Groups’ CPI.

If you’re looking to buy a luxury car, remember to be cautious of those who offer to buy one from a dealer on your behalf at a discount. This may be a scheme to evade LCT. You may be at risk if they don’t have the right insurance or if the car is damaged or defective.

To find out more about LCT, including when you need to apply it and what’s included in the LCT value of a car, visit the Luxury car tax page on the ATO’s website.

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parliament canberra

2024–25 Federal Budget Highlights

Budget 2024–25 key measures you must know

Described as a “responsible Budget that helps people under pressure today”, the Treasurer has forecast a second consecutive surplus of $9.3 billion.

The main priorities of the government, as reflected in the Budget, are helping with the cost of living, building more housing, investing in skills and education, strengthening Medicare and responsible economic management to help fight inflation.

The key tax measures announced in the Budget include extending the $20,000 instant asset write-off for eligible businesses by 12 months until 30 June 2025, introducing tax incentives for hydrogen production and critical minerals production, strengthening foreign resident CGT rules and penalising multinationals that seek to avoid paying Australian royalty withholding tax.

The Budget also includes various amendments to previously announced measures, as well as a number of income tax measures that have already been enacted prior to the Budget announcement, including:

These enacted measures have not been discussed in detail in our summary report:

Income tax

The tax, superannuation and social security highlights are set out below. The government anticipates that the tax measures put forward will collectively improve the Budget position by $3.1 billion over a 5-year period to 2027–28.

  • The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025
  • The foreign resident CGT regime will be strengthened for CGT events commencing on or after 1 July 2025
  • A critical minerals production tax incentive will be available from 2027–28 to 2040–41 to support downstream refining and processing of critical minerals
  • A hydrogen production tax incentive will be available from 2027–28 to 2040–41 to producers of renewable hydrogen
  • The minimum length requirements for content and the above-the-line cap of 20% for total qualifying production expenditure for the producer tax offset will be removed
  • A new penalty will be introduced from 1 July 2026 for taxpayers who are part of a group with more than $1 billion in annual global turnover that are found to have mischaracterised or undervalued royalty payments
  • The Labor government’s 2022–23 Budget measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions is being discontinued
  • The start date of a 2023–24 Budget measure to expand the scope of the Pt IVA general anti-avoidance rule will be deferred to income years commencing on or after assent of enabling legislation
  • Income tax exemptions for World Rugby and/or related entities for income derived in relation to the Rugby World Cup 2027 (men’s) and Rugby World Cup 2029 (women’s)
  • Deductible gift recipients list to be updated.

Superannuation

  • Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025
  • The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024
  • Prior to the Budget the draft of the $3 million super tax legislation was given Senate go-ahead and remains unchanged — it will include the taxing of unrealised gains and no indexation. Read more »

Tax administration

  • The ATO will be given a statutory discretion to not use a taxpayer’s refund to offset old tax debts on hold
  • Indexation of the Higher Education Loan Program (and other student loans) debt will be limited to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023
  • A pilot program of matching income and employment data of migrant workers will be conducted between the Department of Home Affairs and the ATO
  • A new ATO compliance taskforce will be established to recover tax revenue lost to fraud while existing compliance programs will be extended.

GST

  • Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme.

Small business depreciation — instant asset write-off threshold of $20,000 extended to 2024–25

The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025.

Small businesses (aggregated annual turnover less than $10 million) may choose to calculate capital allowances for depreciating assets under a simplified regime in Subdiv 328-D of ITAA 1997. Under these simplified depreciation rules, an immediate write-off applies for low-cost depreciating assets. The measure will apply a $20,000 threshold for the immediate write-off, applicable to eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. The provisions that prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out will also continue to be suspended until 30 June 2025.

The measure extends a 2023–24 Budget measure to increase the instant asset write-off threshold to $20,000 for the 2023–24 income year. A Bill containing amendments to increase the instant asset write-off threshold for 2023–24 is currently before Parliament. The Bill was amended by the Senate to increase the instant asset write-off threshold for 2023–24 to $30,000 and extend access to the instant asset write-off to entities that are not small business entities but would be if the aggregated turnover threshold were $50 million.

Tax administration

Statutory discretion for ATO to deal with tax refunds and debts on hold

The Commissioner of Taxation will be given the discretion to not use a taxpayer’s refund to offset old tax debts where that debt had been put on hold before 1 January 2017. The tax law will be amended to provide for this ATO discretion which will apply to individuals, small businesses and not-for-profits. The discretion will maintain the ATO’s current administrative approach to such debts.

Student loans indexation reform

Indexation of the Higher Education Loan Program (and other student loans) debt will be limited to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023, subject to the passage of legislation. The measure will apply retrospectively.

Data matching program for migrant workers’ income and employment

A pilot program matching income and employment data will be conducted between the Department of Home Affairs and the ATO to mitigate the exploitation of migrant workers and abuse of Australia’s labour market and migration system. This measure forms part of broader reforms to the migration system.

Strengthening ATO ability to combat fraud and extension of compliance programs

The ATO will be provided additional funding to continue various compliance programs. The current ATO Personal Income Tax Compliance Program will be extended for another year from 1 July 2027 to enable the ATO to continue its focus on emerging risks to the tax system. The Shadow Economy Compliance Program and the Tax Avoidance Taskforce will be extended for 2 years from 1 July 2026.

Funding will be provided to the ATO to improve its detection of tax and superannuation fraud, including to upgrade its information and communications technologies to be able to identify and block suspicious activity in real time. A new compliance task force will also be established to recover lost revenue and block attempts to obtain refunds fraudulently. Funding will also be provided to improve ATO’s management and governance of its counter-fraud activities.

The ATO will also be given additional time within which to notify a taxpayer if it intends to retain a business activity statement (BAS) refund for further investigation. The current required notification period of 14 days will be extended to 30 days, aligning it with time limits for non-BAS refunds. This measure will take effect from the start of the first financial year after assent of the enabling legislation.

2019-20 Budget measure on black economy will not proceed

The 2019–20 Budget measure “Black Economy — Strengthening the Australian Business Number system” will not proceed as integrity issues are being addressed through enhanced administrative processes implemented by the ATO.

GST

Refunds of indirect tax extended under Indirect Tax Concession Scheme

Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme (ITCS).

The Square Kilometre Array Observatory (SKAO) will have ITCS access upgraded for additional concessions to be claimed for the purchase of vehicles for personal use by SKAO officials or a member of their family. Additional concessions for commercial rent will also be formalised for existing ITCS packages for Bangladesh, Costa Rica, El Salvador and the Taipei Economic and Cultural Office. Construction and renovation concessions will be formalised for the existing ITCS package for the Netherlands. Concessions for both commercial rent and construction and renovation will be formalised for the existing ITCS package for Pacific Trade Invest.

Superannuation

Super to be paid on government-funded paid parental leave

Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025. Eligible parents will receive an additional payment based on the superannuation guarantee (12% of their PPL payments), as a contribution to their superannuation fund. Payments will be made annually to individuals’ superannuation funds from 1 July 2026.

Recovery of unpaid super from liquidated or bankrupt employers

The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

To discuss how these Budget measures impact you or your business, please contact your Allan Hall Advisor.

Full Budget papers are available at budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

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house key

Foreign residents selling property in Australia

Foreign resident capital gains withholding (FRCGW) of 12.5% applies for all property sales of AUD$750,000 or more.

At a minimum, that is AUD$93,750 being withheld from the sale and paid to the Australian Tax Office, unless there is an approved variation.

The most common reasons why a seller may apply for a variation include:

  • making a capital loss
  • not having an income tax liability
  • foreclosure.

In 2023 over 60% of applications for variations were lodged late, affecting settlement. When clients are too late in applying, the conveyancer or solicitor has no choice but to withhold 12.5%.

Tips

  • Include the sales contracts with the variation application
  • Variations must be lodged online at least 28 days before property settlement to ensure processing time
  • The main residence exemption doesn’t apply to foreign residents
  • Australian residents for tax purposes must have a clearance certificate before settlement to prove their residency for tax purposes, so no withholding occurs.

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electric vehicle EV

Electric vehicle demand trending upwards

Shift in Australian vehicle preferences

New Roy Morgan research findings highlight the evolving preferences of Australian consumers’ vehicle purchases.

This trend signals a changing landscape in the automotive industry:

  • Over the next four years, more than 4.3 million Australians plan to buy a new vehicle
  • A significant shift has emerged in the intention to purchase hybrid or fully electric vehicles, surpassing petrol cars
  • Interest in petrol vehicles, although still the leading choice for new car purchases at 39%, has decreased by 81,000 compared to the previous year.

In 2023, the automotive industry saw record-breaking sales, with Australians considering the purchase of a new vehicle in the coming years. The most notable increase in interest lies in hybrid vehicles, with 1,273,000 Australians (30% of new car intenders) planning to purchase one, marking a rise of 154,000 from the previous year.

Fully electric cars also gained traction, with 607,000 Australians intending to purchase an electric vehicle, up by 37,000 from the previous year.

Conversely, diesel cars are experiencing a decline in popularity, with only 498,000 Australians intending to purchase one in the next four years, down by 130,000 from the previous year, representing 12% of new car intenders.

The shifting trends towards hybrid and electric vehicles suggest that it’s essential for consumers to stay informed about the evolving automotive market.

As part of your due diligence when exploring the benefits of vehicle models and how they align with your needs and preferences, talk with the team at Allan Hall for financing advice and about the tax and FBT implications of owning electric or hybrid models.

CONTACT ALLAN HALL BUSINESS ADVISORS

superannuation services

Implications of the proposed $3M Super Tax

Understanding the Implications of the Proposed $3M Super Tax

As the proposed tax on superannuation balances exceeding $3 million draws nearer, individuals potentially affected by this measure are urged to assess its implications thoroughly.

While not yet enacted into law, the Division 296 tax warrants careful consideration in investment strategies, especially concerning end-of-financial-year contributions into super.

  • For those affected, a strategic reassessment may be necessary, considering whether high-growth assets should be held within superannuation, given the potential tax implications
  • Individuals may need to reconsider investment vehicles, balancing tax effectiveness with asset protection
  • Estate planning and succession plans for Self-Managed Superannuation Funds (SMSFs) will require revisitation post-implementation of Division 296 to mitigate unnecessary tax burdens on beneficiaries.

Division 296 legislation proposes an additional 15% tax on investment earnings of super accounts with total super balances (TSB) exceeding $3 million at the end of the financial year.

It’s important to note that this extra tax applies only to the portion exceeding $3 million.

Key aspects of the legislation include the concept of Adjusted Total Super Balance (ATSB), which determines the $3 million threshold. The ATSB calculation by the Australian Taxation Office (ATO) considers the market value of assets regardless of realisation, significantly affecting super funds holding property or speculative assets. Additionally, the legislation introduces a new formula for calculating ATSB for Division 296 purposes.

Under Division 296, deemed earnings exceeding the $3 million threshold will be apportioned and taxed accordingly. Negative earnings in such instances may be carried forward to offset future liabilities.

For those unaffected by Division 296, super remains an attractive option for retirement savings. Making additional contributions prior to EOFY presents an opportunity to maximise savings through various avenues such as concessional and non-concessional contributions, salary sacrifice arrangements, and downsizer contributions.

The draft Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, introduced to Parliament in 2023 is currently under scrutiny by the Senate Economics Legislation Committee, with a report expected next month. If passed and granted Royal Assent, Division 296 will come into effect from July 2025.

This forthcoming regulation represents a substantial change to superannuation rules, particularly impacting members with significant account balances. Given its complexity, seeking professional advice is crucial for informed decision-making concerning super and wealth creation strategies in the upcoming years.

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Further reading

cash in a hessian sack

SMSF record-keeping best practices

ATO reminds SMSFs to keep good records

How self-managed super fund (SMSF) trustees can meet their responsibility to keep accurate tax and super records.

Keeping good records

Keeping good records is more than just knowing which records to keep and for how long. It involves having a system for organising and maintaining records that makes it easier for you, and any SMSF professional you use, to:

  • complete the fund’s independent audit each year
  • lodge your fund’s annual return.

It may also help reduce audit and administration costs for your fund.

To help keep your records organised, you may want create separate files for your fund’s more permanent records, and for records that relate to a specific financial year.

For example, in your permanent file you may want to keep:

  • the fund’s trust deed
  • the fund’s investment strategy
  • details of the regular reviews of the fund’s investment strategy, including the consideration of insurance for members of the fund
  • reasons for decisions on the storage of collectables and personal use assets
  • minutes of trustee meetings
  • all signed trustee declarations
  • records of trustees consenting to their appointment as a fund trustee
  • records of all changes in fund members and trustees.

As each SMSF is unique, with its own investment strategies to achieve its objectives, you should consult with a professional licensed adviser when setting up a record-keeping system that suits your fund.

Keeping all relevant records together will simplify the process of compiling the records you need to give to your fund’s independent auditor. If your fund regularly holds trustee meetings, you could create a separate folder for them, and sort them by date.

Take minutes of all investment decisions

You should take minutes of all investment decisions, including:

  • why a particular investment was chosen
  • whether all trustees agreed with the decision.

This is because if you, as one of the fund’s trustees, invest the SMSF’s money in an investment that fails, the other trustees could take action against you for failing to be diligent in your duties.

However, if your investment decision was recorded in meeting minutes signed by the other trustees, you will have a record to show that they agreed with your actions.

Signature requirements for financial statements

Under Australia’s super laws, SMSF trustees must sign their SMSF’s financial statements before finalising their annual audit. This includes an operating statement and a statement of financial position which must be signed by the required number of trustees or directors of the corporate trustee.

Minimum record-keeping requirements

The most important reason for keeping good records is that it’s a legal requirement for you to do so. You may also need to provide accurate records to us if we ask to see them.

You need to keep any SMSF records for a minimum of 5 years.

Despite what you may have heard or read elsewhere, you cannot access your super before you retire unless you meet one of the very few exceptions to this fundamental rule of super law. Read more »

CONTACT ALLAN HALL SUPERANNUATION

fuel pumps

Register for fuel tax credits

Check if you can claim for fuel tax credits

You can claim credits for the fuel tax (excise or customs duty) included in the price of fuel used in business activities.

You can claim for taxable fuel that you purchase, manufacture or import. Just make sure it’s used in your business. Taxable fuels include liquid fuels, fuel blends and gaseous fuels.

Check what activities you can claim for

You can claim for business activities in:

  •  machinery
  •  plant
  •  equipment
  •  heavy vehicles over 4.5 tonnes
  •  light vehicles on private roads (not on public roads)

To be able to claim, you must be registered for goods and services tax (GST) and fuel tax credits.

Register for fuel tax credits (and other taxes)

Register for fuel tax credits through the Business Registration Service. You can use the same form to register for other taxes at the same time.

Before you apply:

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hyperlink

Removal of ATO SMS hyperlinks

ATO announces the removal of hyperlinks in SMS

The ATO is in the process of removing hyperlinks from all outbound unsolicited SMS by Tax Time 2024.

Removing hyperlinks is a scam-preventative measure. It will help protect the community by making it easier to identify legitimate ATO SMS interactions and provide trust and confidence in the ATO’s tax, superannuation and registry systems. 

There has been significant growth in the use of SMS by cybercriminals.

Throughout the 2022–23 financial year, SMS scams impersonating the ATO brand, products, services and employees increased by over 400%. 

Cybercriminals often use hyperlinks in targeted SMS phishing scams. The hyperlinks take individuals to highly sophisticated fraudulent websites (such as a fake myGov sign-in page) designed to steal their personal information or install malware.  

The ATO  may use SMS  to contact you, but will never include links to log-in pages. If you want to access the ATO’s online services, always type my.gov.au or ato.gov.au into your internet browser yourself. 

This change also serves as a timely reminder to protect your information. Do not give out your TFN, date of birth or bank details unless you trust the person you are dealing with, and they genuinely require these details. 

If you think communication such as a phone call, SMS, voicemail, email or interaction on social media claiming to be from the ATO is not genuine, do not engage with it. You should either: 

  • go to Verify or report a scam to see how to spot and report a scam 
  • phone the ATO on 1800 008 540 if you have divulged information or remitted a payment to a scammer. 

For information and examples of ATO impersonation scams see Scam alerts »

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Covid 19 Relief

Land Tax changes to principal place of residence exemption

Land tax principal place of residence exemption changes

From 1 February 2024, persons who purchase and occupy a property but own less than 25% interest (either solely or combined) will not be entitled to the principal place of residence exemption from the 2025 land tax year onwards, transitional provisions may apply until the 2026 land tax year for existing homeowners and those who purchase a property and claim the exemption by 31 January 2024.

Principal place of residence

You can claim an exemption for land that you use and occupy as your principal place of residence (your home).

The general requirements of this exemption are that you must:

  • only claim one exemption per family
  • only claim one principal place of residence worldwide
  • have continuously used and occupied the property solely for residential purposes before the taxing date
  • have used the land for residential purposes
  • be a natural person — the exemption does not apply to land owned partly or wholly by a company or held in a Special Trust.

The 2023-24 NSW State Budget announcement introduced an amendment to Schedule 1A of the Land Tax Management Act 1956. Following the amendments, a principal place of residence exemption will only be available to a person/s occupying the property as their principal place of residence who owns an interest of at least 25% in the property, either solely or combined.

The transitional provision provides that, those who claim the principal place of residence exemption from land tax but own less than a 25% interest in the land may continue to claim the exemption for the 2024 and 2025 land tax years. The minimum 25% ownership requirement will then apply to these owners from the 2026 land tax year onwards. The principal place of residence exemption must be claimed by 31 January 2024 for the transitional provisions to apply.

For persons who purchase a property on or after 1 February 2024 and own less than a 25% interest in the land will not be entitled to the principal place of residence transitional provisions, making them liable from the 2025 land tax year.

When applying for the exemption you may need to provide supporting documents such as but not limited to:

  • electricity bill showing usage
  • gas bill showing usage
  • home and contents insurance policy

Council land rates and water rates are not acceptable documents as these do not demonstrate you reside in the property.

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