Individual income tax thresholds effective from 1 July 2024
The Stage 3 individual income tax thresholds will start to apply from 1 July 2024. These should result in lower tax paid by everyone. If your business has employees, you will need to ensure that your payroll system takes into account these tax threshold changes for any salary packaging arrangements with employees.
The new tax brackets following the implementation of the stage three tax cuts will be:
Taxable income
$0–$18,200
$18,200–$45,000
$45,000–$135,000
$135,000-$190,000
$190,000 and over
Tax rate
Nil
16%
30%
37%
45%
Superannuation guarantee increases to 11.5%
This is the biggest change that will affect you this year.
From 1 July 2024, the Superannuation Guarantee rate will increase from 11% to 11.5%. It is planned to increase by 0.5% each year until it reaches 12% on 1 July 2025.
If any employees are paid on a “total remuneration” basis (a package inclusive of superannuation), this will mean that their take home pay will reduce by 0.5% unless the employer decides to increase their total remuneration by 0.5%.
For employees who are paid wages or salary plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their superannuation payments.
All employers will need to give immediate action to managing this increase, and they will need to factor in this increase to their cash flow planning for 2024/2025.
Cryptocurrency
The Australian Taxation Office (ATO) is concerned that many taxpayers believe their cryptocurrency gains are tax free or only taxable when the holdings are cashed back into Australian dollars.
Gains from cryptocurrency are similar to gains from other investments, such as shares. Generally, as an investor, if you buy, sell, swap for dollar currency, or exchange one cryptocurrency for another, it will be subject to capital gains tax (CGT) and must be reported. CGT also applies to the disposal of non-fungible tokens (NFTs).
It is vital that you keep good records of your cryptocurrency exchanges. The ATO has access to the data from crypto platforms and banks and is running data matching to ensure tax is paid on all crypto gains.
The tax laws are complex on this area – so please contact our KMT advisers to ensure you receive the right advice.
Temporary full expensing replaced with $20,000 instant asset write-off
The unlimited tax deduction for purchases of business assets known as Temporary Full expensing finished on 30 June 2024.
From 1 July 2023, assets costing less than $20,000 can be instantly written off. Assets costing more than $20,000 will need to be depreciated. Please note that this $20,000 limit is subject to legislation being approved by Federal Parliament.
Important: If you have claimed the full cost of an asset – for example a motor vehicle – in a prior year using temporary full expensing, when you sell it in the future you will have the full value of its sale price included in your taxable income for the year!
Single touch payroll
If you are reporting payments to employees to the ATO using Single Touch Payroll (STP), most businesses will need to lodge a STP Finalisation Declaration with the ATO by 14 July 2024.
Employees will be able to access their Income Statement through their MyGov account.
Reportable fringe benefits
Where you have provided fringe benefits to your employees more than $2,000, you need to report the FBT grossed-up amount. This is referred to as a `Reportable Fringe Benefit Amount’ (RFBA) amount, and it needs to be updated for each employee as part of your Single Touch Payroll finalisation procedure for 2024.
Stocktake
Businesses that buy and sell stock generally need to do a stocktake at the end of each financial year as the increase or decrease in the value of stock is included when calculating the taxable income of your business.
If your business has an aggregated turnover below $10 million, you can use the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes if the difference in value between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year is less than $5,000. You will need to record how you calculated the value of trading stock on hand.
If you do need to complete a stocktake, you can choose one of three methods to value trading stock:
- Cost price – all costs connected with the stock including freight, customs duty, and if manufacturing, labour and materials, plus a portion of fixed and variable factory overheads.
- Market selling value – the current value of the stock you sell in the normal course of business (but not at a reduced value when you are forced to sell it).
- Replacement value – the price of a substantially similar replacement item in a normal market on the last day of the income year.
A different basis can be chosen for each class of stock or for individual items within a particular class of stock. This provides an opportunity to minimise the trading stock adjustment at year-end. There is no need to use the same method every year; you can choose the most tax effective option each year. The most obvious example is where the stock can be valued below its purchase price because of market conditions or damage that has occurred to the stock. This should give rise to a deduction even though the loss has not yet been incurred.
Reporting payments to contractors
A “Taxable Payments Annual Report” (TPAR) is due for lodgement with the ATO by 28 August 2024 for the following industries:
- Building and construction services
- Cleaning services
- Courier services
- Road freight services
- Information technology (IT) services – including software development
- Security, investigation or surveillance services
- Mixed services (providing one or more of the services listed above)
This report includes a listing and total of all payments and non-cash benefits made to contractors during the year.
Payroll tax
Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.
You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:
- Fringe benefits based on the grossed-up taxable value of fringe benefits;
- All employer contributions to superannuation on behalf of employees; and
- Some contractor or sub-contractor fees.
For more detailed information about whether payroll tax applies to your business, please contact our office.
The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2024 (Queensland, Victoria, Northern Territory, Tasmania and WA) or by 28 July 2024 (NSW and South Australia) with your State Revenue Office.
Workcover/ Worksafe
Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.
In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:
- Fringe benefits based on the taxable value of fringe benefits (do not gross-up);
- All employer contributions to superannuation on behalf of employees; and
- Some contractor or sub-contractor fees.
For more detailed information about what items to include in the reconciliation statement, please contact our office.
Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.
Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.
ATO audit activity
Please note that the ATO and State Revenue Office are constantly increasing their audit activities. There has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.
We can offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.
Please contact our KMT office if you would like to request this service.
About our advisers:
Michael Fox has been dedicated to his clients’ success, devising comprehensive wealth strategies for personal and business growth for over four decades. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value, and smoothing transitions to the next generation. Please do not hesitate to reach out if you need assistance.
Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.
