The SMSF Annual Audit

With interest rates remaining stubbornly high, and some property investors bailing out altogether, others are taking steps to refinance their debt in order to secure a lower rate and obtain better terms. Before deciding to go down the refinancing route there are broader financial issues to weigh up and you may need to seek separate financial advice that takes into account your personal and financial circumstances. This article only examines the tax consequences of refinancing your investment property loan and some other issues around interest deductibility. Basic rule for interest deductibility The basic rule is that where you borrow money to acquire an income producing asset, the interest is deductible against your assessable income generally, including income from salary and wages. It’s about following the money and being able to demonstrate that a loan was used for income producing purposes. Any security given over a loan does not determine the deductibility of the interest. Maximising tax deductible debt There is nothing improper or untoward about maximising your tax deductible debt. We live in an after tax world and it’s perfectly legitimate to factor tax into your financial decision making. Lower rate on refinancing Where the refinancing involves no more than obtaining a reduced rate or better terms, there has been no additional borrowing and the interest on the new loan remains deductible in full, assuming the property is let or available to let. Releasing equity Where the refinancing releases equity in the investment property, interest deductibility depends on how the additional loan funds are applied. If they are used to maintain or renovate the investment property (or to buy other income producing assets), all the interest payable on the increased loan balance will be deductible. However, where all or part of the equity released is applied for private purposes (like renovating the house you live in, to pay for a holiday or to buy a car), the interest would need to be apportioned between the amount originally used to acquire the investment property (deductible) and the amount used for private purposes (non-deductible). Refinancing costs Refinancing costs for the investment property such as exit fees, valuation fees, break costs and legal fees are deductible over five years or the term of the new loan if that is shorter. Change in use What if there is a change in use of the investment property? You might decide to move into the property yourself or to make it available to a family member free of charge. As soon as the investment property stops being used to generate rental income, the interest associated with the loan taken out to acquire the property stops being deductible. By the same token, if you move out of your main residence to go and live somewhere else and you put tenants in, any interest on the mortgage over the property will become deductible. Debt in the wrong place Sometimes, through circumstances beyond your control, you can end up having debt in the wrong place. For example, you may have a mortgage over the house you live in and inherit the house of a relative which is unencumbered by debt. If you decide to keep the inherited property and put tenants in, you will have non-deductible home mortgage interest as well as an investment property that is debt-free. While you could borrow using the inherited property as security and use the funds to pay off your home mortgage, that would not get you a tax deduction, as the borrowed funds would have been used to pay off private debt. Remember, it’s the use to which the funds are put that determine tax deductibility – not the nature of the security provided. The only way to make the interest tax deductible in this situation would be through a change in use. For example, you may decide to move into the inherited property and let out your main residence. Forced sale Real estate values can go down as well as up, and sometimes life’s events (rising interest rates, unemployment, illness, divorce) can leave the property owner with no other option but to sell the property, sometimes with part of the borrowing remaining unpaid. Any interest on the outstanding balance would generally be tax deductible, although the ATO would expect the investor to make a reasonable effort to pay down the remaining debt rather than acquire more assets. Before deciding how to refinance an investment loan or taking any other steps that could impact on the tax deductibility of interest, come in and have a chat with us. We may be able to help you protect the interest deductibility you are legitimately entitled to.

With interest rates remaining stubbornly high, and some property investors bailing out altogether, others are taking steps to refinance their debt in order to secure a lower rate and obtain better terms. Before deciding to go down the refinancing route there are broader financial issues to weigh up and you may need to seek separate financial advice that takes into account your personal and financial circumstances. This article only examines the tax consequences of refinancing your investment property loan and some other issues around interest deductibility. Basic rule for interest deductibility The basic rule is that where you borrow money to acquire an income producing asset, the interest is deductible against your assessable income generally, including income from salary and wages. It’s about following the money and being able to demonstrate that a loan was used for income producing purposes. Any security given over a loan does not determine the deductibility of the interest. Maximising tax deductible debt There is nothing improper or untoward about maximising your tax deductible debt. We live in an after tax world and it’s perfectly legitimate to factor tax into your financial decision making. Lower rate on refinancing Where the refinancing involves no more than obtaining a reduced rate or better terms, there has been no additional borrowing and the interest on the new loan remains deductible in full, assuming the property is let or available to let. Releasing equity Where the refinancing releases equity in the investment property, interest deductibility depends on how the additional loan funds are applied. If they are used to maintain or renovate the investment property (or to buy other income producing assets), all the interest payable on the increased loan balance will be deductible. However, where all or part of the equity released is applied for private purposes (like renovating the house you live in, to pay for a holiday or to buy a car), the interest would need to be apportioned between the amount originally used to acquire the investment property (deductible) and the amount used for private purposes (non-deductible). Refinancing costs Refinancing costs for the investment property such as exit fees, valuation fees, break costs and legal fees are deductible over five years or the term of the new loan if that is shorter. Change in use What if there is a change in use of the investment property? You might decide to move into the property yourself or to make it available to a family member free of charge. As soon as the investment property stops being used to generate rental income, the interest associated with the loan taken out to acquire the property stops being deductible. By the same token, if you move out of your main residence to go and live somewhere else and you put tenants in, any interest on the mortgage over the property will become deductible. Debt in the wrong place Sometimes, through circumstances beyond your control, you can end up having debt in the wrong place. For example, you may have a mortgage over the house you live in and inherit the house of a relative which is unencumbered by debt. If you decide to keep the inherited property and put tenants in, you will have non-deductible home mortgage interest as well as an investment property that is debt-free. While you could borrow using the inherited property as security and use the funds to pay off your home mortgage, that would not get you a tax deduction, as the borrowed funds would have been used to pay off private debt. Remember, it’s the use to which the funds are put that determine tax deductibility – not the nature of the security provided. The only way to make the interest tax deductible in this situation would be through a change in use. For example, you may decide to move into the inherited property and let out your main residence. Forced sale Real estate values can go down as well as up, and sometimes life’s events (rising interest rates, unemployment, illness, divorce) can leave the property owner with no other option but to sell the property, sometimes with part of the borrowing remaining unpaid. Any interest on the outstanding balance would generally be tax deductible, although the ATO would expect the investor to make a reasonable effort to pay down the remaining debt rather than acquire more assets. Before deciding how to refinance an investment loan or taking any other steps that could impact on the tax deductibility of interest, come in and have a chat with us. We may be able to help you protect the interest deductibility you are legitimately entitled to.

Have you ever wondered how your super balance compares to others in your age group? Or maybe you’re curious about how much you should have saved by now to ensure a comfortable retirement? It’s not always easy to figure out if your super is on track, but understanding how it stacks up can help you make smarter decisions now that will benefit you later. This article looks into the average super balances for people of different ages and explores how much you may need in retirement. Average balances of Australians The Australian Taxation Office (ATO) has released data showing average super balances for different age groups. The data gives a helpful overview of where Australians are at in terms of their retirement savings. Here’s how the averages break down: Age Averages ($) Men Women Under 18 7,666 5,088 18-24 8,069 7,297 25-29 25,407 23,273 30-34 53,154 44,053 35-39 90,822 71,686 40-44 131,792 102,227 45-49 180,958 136,667 50-54 237,084 176,824 55-59 301,922 228,259 60-64 380,737 300,717 65-69 428,533 379,483 70-74 474,898 422,348 75 or more 487,525 416,279 Source: ATO Statistics 2021–22: Median super balance, by age and sex, 2021–22 financial year You might be looking at your super balance right now, feeling either satisfied or a little worried about how it measures up to these averages. Remember, averages don’t tell the whole story. Your balance can be impacted by various factors like career breaks, part-time work, salary levels, or investment decisions. If you’ve made additional contributions or opted for higher-growth investment options, your balance may be above average. If it’s not quite where you’d like it to be, don’t worry – there’s still plenty of opportunity to take steps and get back on track. How much super do you need in retirement? Understanding what you’ll need in retirement can help you gauge whether your super balance is on track. The Association of Superannuation Funds of Australia (ASFA) provides clear benchmarks to define what a “comfortable” or “modest” retirement might look like. A modest retirement covers basic living expenses, with most of the income coming from the age pension. On the other hand, a comfortable retirement allows for a higher standard of living, including private health insurance, a reliable car, household upgrades, and leisure activities like holidays. Here’s what ASFA estimates you’ll need if you retire at 65, own your home outright, and are in good health: Comfortable retirement Modest retirement Singles About $595,000 in super for an annual income of $52,085 At least $100,000 in super, combined with the Age Pension, could provide an income of $33,134 for singles or $47,731 for couples Couples Around $690,000 in super to generate a combined annual income of $73,337 Source: ASFA retirement standard budget for retirees aged 65 to 84 (June quarter 2024) Knowing these benchmarks can help you assess your progress and plan for the future you want. Are you on track? Now that you know what the average super balance look like, and you have a better idea of how much you may need, it’s time to check where your super stands. If your balance is lower than the targets set by ASFA, don’t panic – it’s never too late to take action. You can still take steps to boost your super and make it work harder for your retirement. Consider making extra contributions, whether through salary sacrificing or personal after-tax payments. Reviewing your investment strategy to ensure it aligns with your goals and risk tolerance is also important. If you’re unsure about what changes to make, it could be helpful to speak to a financial adviser who can offer tailored advice for your situation. Super is an essential part of your retirement planning, and understanding where you stand can help you make smarter choices today. Whether you’re feeling confident about your balance or realising there’s more work to be done, it’s always worth taking the time to review and plan ahead. The sooner you act, the more time your super will have to grow – putting you in a better position to enjoy your golden years.

Christmas is a time for giving, but it’s also a great time to give your future self the gift of financial security. Here are 12 simple superannuation tips to help you make the most of your super fund – wrapped up with a touch of festive cheer! 1. Consolidate your superannuation If you’ve worked multiple jobs, you might have multiple super accounts. Consolidating them into one fund can save you money on fees, similar to decorating one Christmas tree instead of several. The good news is that consolidating is easy through ATO online services or your myGov account where you can also search for lost or unclaimed super. Before consolidating, consider potential impacts like the loss of insurance coverage, fees, investment options, and tax implications to ensure the transfer aligns with your needs and adds value. 2. Review your investment strategy Your super is an investment for your future, so make sure it aligns with your goals and risk tolerance. Think of it like choosing the perfect star for your Christmas tree – get it right, and it will shine brightly for years. For self-managed super funds (SMSFs), it’s a legal requirement to have a documented investment strategy aligned with your objectives, which must be reviewed regularly. Now is a great time to ensure your strategy supports your retirement goals. 3. Check your insurance coverage Many super funds offer default insurance, including life, total and permanent disablement (TPD), and income protection coverage. It’s essential to review your cover to ensure it provides adequate protection for you and your family. If you manage an SMSF, you’re also required to consider and document the insurance needs of each member as part of the investment strategy. Seek professional advice to ensure your current cover is sufficient for death, disability or illness. 4. Check your fund’s performance Not all super funds are created equal, and performance can vary significantly. Regularly check your fund’s performance compared to others to ensure it’s performing. If your fund’s performance is underwhelming, consider revisiting your investment strategy or switching to another fund that better aligns with your retirement goals. 5. Nominate your beneficiaries Super isn’t automatically part of your estate, so it’s important to nominate valid beneficiaries to ensure your funds go to the right people. Without a valid nomination, your super fund may decide who receives the benefits, regardless of your Will. Regularly review your beneficiary nominations, especially when circumstances change, to ensure they are up to date and reflect your preference. 6. Make extra contributions Even small additional contributions can make a big difference to your super balance at retirement thanks to compounding returns. It’s like adding an extra treat to a Christmas stocking – small now, but a delightful surprise in the future. In addition to the 11.5% employer super guarantee contributions for 2024/25, adding extra contributions through salary sacrificing or personal after-tax payments can boost your retirement savings. Just be mindful of contribution caps to avoid extra tax. Small sacrifices now can lead to substantial benefits later. 7. Salary sacrifice Salary sacrificing is an efficient way to boost your retirement savings and reduce your tax. By redirecting part of your pre-tax salary into your super fund, you can benefit from lower tax rates, allowing more money to work for you in the long term. It’s an easy way to start saving for the future without feeling the pinch today, and over time, compounding returns will help your super grow. 8. Claim your government co-contribution If you earn below a $60,400 a year and make a voluntary contribution to your super, the government may top up your super with a part co-contribution. The maximum co-contribution is $500. To receive this maximum amount your income must be below $45,400 and you must contribute at least $1,000 as a personal after-tax contribution into super. This is a great way to boost your super savings and is a government bonus, much like finding an unexpected gift under the tree. To be eligible there are several other rules, so check if you qualify and take advantage of this opportunity to grow your retirement savings. 9. Explore spouse contributions If your spouse earns less than $40,000 pa, you can contribute to their super fund and potentially claim a tax offset of up to $540. This is a great way to help boost their retirement savings and potentially reduce your taxable income in the process. 10. Plan for transition to retirement If you’re nearing retirement, a transition-to-retirement (TTR) strategy could help you make the most of your savings and ease into retirement more comfortably. This strategy allows you to draw down some of your super while still working part-time, supplementing your income without fully retiring. It’s a way to boost your savings and ensure a smooth transition to retirement, making your golden years as stress-free as possible. 11. Review fees Super funds charge various fees for managing your money, and these can add up over time, reducing your returns. It’s important to review the fees associated with your super to ensure you’re not overpaying. Much like trimming unnecessary expenses from your Christmas shopping list, minimising fees helps your super balance grow. Check if you’re getting good value for the services provided and whether switching to a more cost-effective option could be beneficial. 12. Seek professional advice If you’re unsure about any aspect of your super, seeking advice from a financial adviser can be a great step. A financial adviser can provide tailored advice, helping you navigate decisions about your super, investments, and retirement planning. Think of them as your financial Santa’s helpers, ensuring your super journey stays on track and guiding you toward the best financial decisions for your future. It’s always worth consulting an expert to maximise the benefits of your super and financial planning. The last word ... By ticking off these 12 tips, you’ll be giving yourself the ultimate Christmas present: a brighter and more secure future. Merry Christmas and happy super planning!

Christmas is a time for giving, but it’s also a great time to give your future self the gift of financial security. Here are 12 simple superannuation tips to help you make the most of your super fund – wrapped up with a touch of festive cheer! 1. Consolidate your superannuation If you’ve worked multiple jobs, you might have multiple super accounts. Consolidating them into one fund can save you money on fees, similar to decorating one Christmas tree instead of several. The good news is that consolidating is easy through ATO online services or your myGov account where you can also search for lost or unclaimed super. Before consolidating, consider potential impacts like the loss of insurance coverage, fees, investment options, and tax implications to ensure the transfer aligns with your needs and adds value. 2. Review your investment strategy Your super is an investment for your future, so make sure it aligns with your goals and risk tolerance. Think of it like choosing the perfect star for your Christmas tree – get it right, and it will shine brightly for years. For self-managed super funds (SMSFs), it’s a legal requirement to have a documented investment strategy aligned with your objectives, which must be reviewed regularly. Now is a great time to ensure your strategy supports your retirement goals. 3. Check your insurance coverage Many super funds offer default insurance, including life, total and permanent disablement (TPD), and income protection coverage. It’s essential to review your cover to ensure it provides adequate protection for you and your family. If you manage an SMSF, you’re also required to consider and document the insurance needs of each member as part of the investment strategy. Seek professional advice to ensure your current cover is sufficient for death, disability or illness. 4. Check your fund’s performance Not all super funds are created equal, and performance can vary significantly. Regularly check your fund’s performance compared to others to ensure it’s performing. If your fund’s performance is underwhelming, consider revisiting your investment strategy or switching to another fund that better aligns with your retirement goals. 5. Nominate your beneficiaries Super isn’t automatically part of your estate, so it’s important to nominate valid beneficiaries to ensure your funds go to the right people. Without a valid nomination, your super fund may decide who receives the benefits, regardless of your Will. Regularly review your beneficiary nominations, especially when circumstances change, to ensure they are up to date and reflect your preference. 6. Make extra contributions Even small additional contributions can make a big difference to your super balance at retirement thanks to compounding returns. It’s like adding an extra treat to a Christmas stocking – small now, but a delightful surprise in the future. In addition to the 11.5% employer super guarantee contributions for 2024/25, adding extra contributions through salary sacrificing or personal after-tax payments can boost your retirement savings. Just be mindful of contribution caps to avoid extra tax. Small sacrifices now can lead to substantial benefits later. 7. Salary sacrifice Salary sacrificing is an efficient way to boost your retirement savings and reduce your tax. By redirecting part of your pre-tax salary into your super fund, you can benefit from lower tax rates, allowing more money to work for you in the long term. It’s an easy way to start saving for the future without feeling the pinch today, and over time, compounding returns will help your super grow. 8. Claim your government co-contribution If you earn below a $60,400 a year and make a voluntary contribution to your super, the government may top up your super with a part co-contribution. The maximum co-contribution is $500. To receive this maximum amount your income must be below $45,400 and you must contribute at least $1,000 as a personal after-tax contribution into super. This is a great way to boost your super savings and is a government bonus, much like finding an unexpected gift under the tree. To be eligible there are several other rules, so check if you qualify and take advantage of this opportunity to grow your retirement savings. 9. Explore spouse contributions If your spouse earns less than $40,000 pa, you can contribute to their super fund and potentially claim a tax offset of up to $540. This is a great way to help boost their retirement savings and potentially reduce your taxable income in the process. 10. Plan for transition to retirement If you’re nearing retirement, a transition-to-retirement (TTR) strategy could help you make the most of your savings and ease into retirement more comfortably. This strategy allows you to draw down some of your super while still working part-time, supplementing your income without fully retiring. It’s a way to boost your savings and ensure a smooth transition to retirement, making your golden years as stress-free as possible. 11. Review fees Super funds charge various fees for managing your money, and these can add up over time, reducing your returns. It’s important to review the fees associated with your super to ensure you’re not overpaying. Much like trimming unnecessary expenses from your Christmas shopping list, minimising fees helps your super balance grow. Check if you’re getting good value for the services provided and whether switching to a more cost-effective option could be beneficial. 12. Seek professional advice If you’re unsure about any aspect of your super, seeking advice from a financial adviser can be a great step. A financial adviser can provide tailored advice, helping you navigate decisions about your super, investments, and retirement planning. Think of them as your financial Santa’s helpers, ensuring your super journey stays on track and guiding you toward the best financial decisions for your future. It’s always worth consulting an expert to maximise the benefits of your super and financial planning. The last word ... By ticking off these 12 tips, you’ll be giving yourself the ultimate Christmas present: a brighter and more secure future. Merry Christmas and happy super planning!

With the festive season just around the corner (or already under way), many business owners will be gearing up for year-end celebrations with both employees and clients. Knowing the rules around FBT, GST credits and what is or isn’t tax deductible can help avoid unwelcome surprises on the tax front. Holiday celebrations generally take the form of Christmas parties and/or gift giving. Parties Where a party is held on business premises during a working day, is attended by current employees only and comes in at less than $300 a head (GST-inclusive), FBT does not apply, the cost of the function is not tax deductible and GST credits cannot be claimed.  Where the function is held off business premises, say at a restaurant, or is also attended by the employees’ partners, FBT applies where the GST-inclusive cost per head is $300 or more, but not where the cost is below the $300 threshold, as it would be regarded as a minor or infrequent benefit. Where FBT applies, it applies to the entire cost of the event, not just to the excess over $300, while the cost of holding the function is tax deductible and GST credits can be claimed. Where clients also attend, FBT will not apply to the cost applicable to them (not being employees), but those costs will not be tax deductible and GST credits will not be available. Gifts First, you need to work out whether the gift itself is in the nature of entertainment – for example, movie or theatre tickets, admission to sporting events, holiday travel or accommodation vouchers. Where the recipient of an entertainment gift is an employee, and the GST-inclusive cost is below $300, the minor or infrequent exemption may apply so that FBT is not payable, in which case the cost will not be tax deductible and GST credits are not claimable. For larger entertainment gifts to employees, however, FBT applies, the cost is deductible and GST credits can be claimed. Where the gift is not in the nature of entertainment and it falls below $300, the FBT minor or infrequent exemption may apply – for example, Christmas hampers, bottles of alcohol, pen sets, gift vouchers. But because the entertainment rules do not apply, the cost of the gift is tax deductible and GST credits are claimable. Where a gift is made to a client, the $300 FBT minor benefit exemption falls by the wayside, as long as it is not an entertainment gift and the gift was made in the reasonable expectation of creating goodwill and boosting future sales. Such gifts are uncapped (within reason) and are tax deductible to the business. GST credits are also claimable. Best approach for employees Provided it’s not a regular thing, taking employees out for Christmas lunch or dinner escapes FBT, as long as the cost per head stays below the $300 threshold. While the cost of the function will still be non-deductible, that has much less of a cash-flow impact on the business than the grossed-up FBT amounts. Combined with a non-extravagant off-site Christmas party, making a non-entertainment gift costing up to $299 is a very tax-effective way of showing your appreciation. Gift cards are always well-received and even where they can be used to make a wide variety of purchases (including theatre tickets and the like), they will not be regarded as an entertainment gift, which means the cost is tax deductible and GST credits can be claimed. Best approach for clients While FBT is off the table for business clients, making a non-entertainment gift (tax deductible; no dollar limit) is actually much more tax-effective than wining and dining a key client (non-deductible entertainment). If you put some thought into what gift to buy a client and in some cases deliver it yourself, you may make much more of an impact than joining them in one of many restaurant meals in their already crowded Christmas calendar. If you need help on the tax treatment of holiday celebrations and gifting, please give us a call.

Starting 1 July 2025, new parents will receive superannuation payments on top of their paid parental leave (PPL). The change Eligible parents with babies born or adopted from 1 July 2025 will get an extra 12% of their government-funded PPL as a superannuation contribution to their nominated superannuation fund. The lump sum superannuation payment will be paid annually by the ATO after the end of each financial year. The contribution will also include an additional interest component to account for the delay. Eligible parents can continue to apply for PPL through Services Australia who are responsible for assessing eligibility for the payment and superannuation contribution. Who is eligible? Currently, parents can get up to 22 weeks of government-funded PPL at the minimum wage, which will increase to 24 weeks from 1 July 2025 and to 26 weeks by 1 July 2026. To be eligible, parents must meet the following requirements: Have a newborn or have recently adopted a child Have met an income test Won’t be working during their PPL period, except for allowable reasons Have met the work test Have met the residency rules Have registered or applied to register their child’s birth with their state or territory birth registry if they’re a newborn. For further information regarding the government-funded PPL scheme see the Services Australia website. What about employer-funded PPL? PPL falls into two categories: government-funded PPL, or employer-funded PPL. If eligible, employees could receive both types. Although it is not compulsory for employers to do so, many choose to support their employees with PPL. Generally, employers will set out a minimum service period that employees need to meet before they are eligible for employer-funded PPL, and the amount they receive (usually measured in weeks) varies from employer to employer. Employers will have their own policies when it comes to parental leave and the available benefits will depend on the employee’s agreement/contract. So while some employers offer PPL and pay superannuation on top of that, the new laws ensure parents using government-funded PPL will be able to have the same benefit. Impact on families As super isn’t currently paid on government-funded PPL, this change will enable employees to receive super contributions for the period they are on PPL. This change helps close the gap in superannuation savings, especially for women, by ensuring parents receive superannuation while on parental leave, improving financial security in retirement.

Starting 1 July 2025, new parents will receive superannuation payments on top of their paid parental leave (PPL). The change Eligible parents with babies born or adopted from 1 July 2025 will get an extra 12% of their government-funded PPL as a superannuation contribution to their nominated superannuation fund. The lump sum superannuation payment will be paid annually by the ATO after the end of each financial year. The contribution will also include an additional interest component to account for the delay. Eligible parents can continue to apply for PPL through Services Australia who are responsible for assessing eligibility for the payment and superannuation contribution. Who is eligible? Currently, parents can get up to 22 weeks of government-funded PPL at the minimum wage, which will increase to 24 weeks from 1 July 2025 and to 26 weeks by 1 July 2026. To be eligible, parents must meet the following requirements: Have a newborn or have recently adopted a child Have met an income test Won’t be working during their PPL period, except for allowable reasons Have met the work test Have met the residency rules Have registered or applied to register their child’s birth with their state or territory birth registry if they’re a newborn. For further information regarding the government-funded PPL scheme see the Services Australia website. What about employer-funded PPL? PPL falls into two categories: government-funded PPL, or employer-funded PPL. If eligible, employees could receive both types. Although it is not compulsory for employers to do so, many choose to support their employees with PPL. Generally, employers will set out a minimum service period that employees need to meet before they are eligible for employer-funded PPL, and the amount they receive (usually measured in weeks) varies from employer to employer. Employers will have their own policies when it comes to parental leave and the available benefits will depend on the employee’s agreement/contract. So while some employers offer PPL and pay superannuation on top of that, the new laws ensure parents using government-funded PPL will be able to have the same benefit. Impact on families As super isn’t currently paid on government-funded PPL, this change will enable employees to receive super contributions for the period they are on PPL. This change helps close the gap in superannuation savings, especially for women, by ensuring parents receive superannuation while on parental leave, improving financial security in retirement.

Work-related expenses But that isn’t quite right, as the tax rules in fact enable you to make legitimate claims for work-related expenses for up to $300 in a financial year without having receipts, provided: · you have spent the money; · the expense is directly related to earning your income; · you haven’t been reimbursed by your employer; · it is not of a private or capital nature; and · you have a record of the expense (other than a receipt). Work-related expenses can include, among other things, tools and small items of equipment, office supplies, union or professional association fees, uniforms and protective clothing and associated cleaning costs, newspapers and periodicals and many more. The cost of laundering work uniforms and protective clothing can be included without having receipts for an amount of up to $150. These costs form part of the $300 deductible limit without needing receipts. However, where total work-related expenses exceed $300, it is not necessary to have receipts in relation to costs for laundering work uniforms for these expenses if they do not exceed $150. The ATO will accept a rate of $1 per load where the laundry is done at home, or half that amount when accompanied by private items. Dry cleaning costs are not included in the receipt-free $150. Minor items costing up to $10 can be claimed without a receipt, up to $200 per financial year, and are also included in the $300 limit. But again, where total work-related expenses exceed $300, it is not necessary to have receipts for these costs. The record of the expense can be in the form of a diary that records how much you have spent, what you spent it on, how you paid for it and how it relates to earning your income. You will need to retain those records for five years. Of course, there is nothing wrong with keeping all your receipts as you go along, just in case you unexpectedly overshoot the $300 limit later in the financial year. Where that happens, you will need receipts and invoices to substantiate your entire work-related expense claim – not just for the excess over $300. Car expenses Instead of keeping receipts and invoices for the actual running costs of the employment-related use of your own car, you can elect to claim on a cents per kilometre basis for up to 5,000 business kilometres. The rate you can claim is 88 cents per kilometre for the 2024-25 financial year (the maximum claim is $4,400). The claimable use of a private car covers situations where, for example: · you visit a client’s premises after arriving at your usual place of work; · you’re working at another location that is not your usual place of work; or · you drive to a work-related conference. The cost of driving between home and work is generally regarded as a private expense. You won’t need any receipts to claim on a cents per kilometre basis, but you do have to be using your own car and you will need to maintain a logbook or a diary that records your employment-related car use. Where two taxpayers use the same car for their respective work-related purposes they can each claim for up to 5,000 kilometres. It also needs to be a requirement of the employer that you provide your own transport for work-related purposes. There was a recent AAT case where the applicant’s cents per kilometre claim failed spectacularly when it emerged in evidence that the employer provided a company car for traveling between different work sites. Note this is not a standard deduction anyone can just claim. The ATO has previously made noises about how it has noticed there are many claims right on the cusp of the 5,000 kilometre limit and has been actively challenging some claims. Working from home With many employees still working from home in the wake of the COVID-19 pandemic, at least on a part-time basis, the ATO has developed an administrative method for claiming associated expenses. Working from home for the purpose of making a claim has to involve something substantive – minimal tasks such as occasionally checking emails or answering phone calls while at home are not regarded as enough. While the option is always there to make a claim using the actual cost method (which would require receipts), taxpayers can also opt for the fixed rate method, which has been set at 67 cents per hour since 2023. The 67 cents per hour rate covers: · energy costs; · internet expenses; · mobile and landline expenses; and · stationery and computer consumables. Depreciation on office furniture, computers and printers is available on top of the fixed rate deduction, as are repairs to those items. Since those claims fall outside the fixed rate method they will need to be supported by receipts or invoices. A crucial requirement to qualify for the fixed rate method is to keep a diary or a timesheet of the hours worked from home during the financial year. This record needs to be maintained throughout the year – making an estimate at tax time will not be sufficient. While you won’t need comprehensive receipts for the various items covered by the fixed rate method, the ATO will expect you to retain a sample copy of an invoice, bill or bank statement verifying you have incurred each of the expenses covered by the fixed rate method. All the information has to be retained for five years. The Commissioner doesn’t like work-related expenses much, but Australian taxpayers love them which is why governments have been wary of getting rid of them. While there are a number of specific exceptions to the need to have receipts to substantiate particular claims, all these “concessions” come with conditions attached, mainly to ensure that the expenses were actually incurred in earning assessable income. It’s important to be aware of all the legal and administrative requirements so that your work-related expense claim can survive an ATO audit.