April 2023 – Practice Update

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April 20, 2023

Start thinking about your FBT obligations

The 2023 FBT year ended on 31 March, so it is now time for employers to get ready to lodge their 2023 FBT returns, where they have provided benefits to their employees (or their associates) between 1 April 2022 and 31 March 2023.

If you have provided fringe benefits to employees during the year, we are able to assist you with satisfying the following requirements:

  • self-assessing your FBT liability for the FBT year;
  • lodge an FBT return (if you have an FBT liability or paid FBT instalments through your activity statements);
  • pay the FBT you owe by the due date; and
  • calculate the reportable fringe benefits amount to be included on each employee’s income statement or payment summary (if the total taxable value is more than $2,000).

Employers that have an FBT liability for the year ended 31 March 2023 are generally required to lodge their FBT return and pay their FBT liability by 26 June 2023, where they lodge their FBT return electronically through a registered tax agent (noting the usual due date of 25 June falls on a weekend this year).

Employers that are not included on a registered tax agent’s FBT client list must generally lodge an FBT return by 22 May 2023.

Employers do not need to lodge an FBT return if they are not liable to pay FBT for the year and have not paid FBT instalments during the year. If you are registered for FBT but do not think you need to lodge a 2023 FBT return, please contact our office so that we can confirm and let the ATO know before the due date, to ensure the ATO will not seek a return at a later date.

Please contact our office to ensure you are ready for FBT season and confirm what information we will need from you to lodge your 2023 FBT return by the due date.

FBT exemption for electric cars

Until recently, the FBT consequences for providing electric cars to employees were effectively the same as any other car. However, from 1 July 2022, FBT is no longer payable on benefits provided for eligible electric cars and associated expenses. Practically, this exemption will be relevant for the first time in the 2023 FBT year.

Broadly, benefits provided for electric cars will be exempt from FBT where the following criteria are met:

  • the car is a zero- or low-emissions vehicle;
  • the first time the car is both held and used is on or after 1 July 2022;
  • the car is used by a current employee or their associate(s) (e.g., a family member); and
  • luxury car tax has never been payable on the importation or sale of the car.

Registration, insurance, repairs, maintenance and fuel expenses provided for eligible electric cars are also exempt from FBT.

Note that, while the benefit is exempt from FBT, the taxable value of the benefit must still be determined when working out whether an employee has a reportable fringe benefits amount to be included on their income statement or payment summary.

Please contact our office if you have any queries about this new exemption and how it may affect your obligations for the 2023 FBT year.

 Tips to reduce study and training loan balances

If you have a study and training loan balance (e.g., a HELP debt), it may be worthwhile to consider methods of reducing the balance to ensure you are not left with a large tax bill when your 2023 income tax return is lodged.

While there is no interest charged on study and training loans, indexation is added to these debts on 1 June each year, based upon the consumer price index (‘CPI’). Given the current rate of inflation, individuals with study and training loan balances should expect a larger than normal adjustment this year.

If you have a study and training loan balance, it is worth checking your loan balance and considering the following tips:

  • Let your employer know if you have started studying or have a study loan.
  • Check the amount your employer is withholding. If there has not been enough withheld to cover your compulsory repayment, you can ask your employer to increase the withholding amount.
  • Make a voluntary repayment to reduce your total loan amount. Indexation on the loan is applied on 1 June, so a voluntary repayment prior to this date will reduce the balance that indexation is applied to. Note that it may take a few business days for the ATO to receive and process the payment.

Indexation will not apply to a study and training loan on 1 June if the balance is nil. Any loan debt over 11 months old will be subject to indexation.

The compulsory repayment threshold for the 2023 financial year is $48,361. If you earn over this amount, the compulsory repayment is worked out when your tax return is lodged, and it will be included on your notice of assessment.

 Reminder of March 2023 Quarter Superannuation Guarantee (‘SG’)

Employers are reminded that the SG obligation for the 1 January 2023 to 31 March 2023 quarter is due by 28 April 2023.

If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.

As a reminder, from 1 July 2022, the compulsory SG rate increased to 10.5% (previously 10%). The compulsory SG rate will increase again to 11% for the period 1 July 2023 to 30 June 2024. So now might be a good time to ensure your payroll systems are updated by the start of the next income year.

Significant change to claiming working from home expenses

Before 1 July 2022, an individual taxpayer that incurred additional deductible expenses as a result of working from home, had a choice of three methods to claim these expenses.

These choices were:

  • The shortcut method – which was available from 1 March 2020 to 30 June 2022;
  • The fixed-rate method – which was available from 1 July 1998 to 30 June 2022; or
  • Actual expenses, that is calculating the actual expenses incurred as a result of working from home.This method can be burdensome to apply in practice

From 1 July 2022, as a result of the release of PCG 2023/1 by the ATO, the shortcut method and the fixed-rate method have been abolished.

A replacement method that can be used instead of the actual expenses method (which has not been abolished) is the revised fixed-rate method.

Under the revised fixed-rate method, a deduction can be claimed of 67 cents per hour for energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables.

Other expenses associated with working from home, such as depreciation of  home office furniture and a personally owned computer used at home for work purposes, will need to be calculated on an actual basis when using the revised fixed-rate method.

To claim a deduction under the new fixed-rate method, an individual needs to meet three criteria, which are:

  • The individual is working from home while carrying out their employment duties or carrying on their business on or after 1 July 2022;
  • They are incurring additional running expenses of the kind outlined in the above discussion as to what the 67 cents per hour amount reflects, as a result of working from home;
  • They keep and retain relevant records in respect of the time they spend working from home and for the additional running expenses (covered by the rate per hour) they are incurring.

There are strict record keeping requirements associated with this new method.

For the year ending 30 June 2023, a taxpayer using this new method will need to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.

The taxpayer will also need to keep a record of the total number of actual hours they worked from home for the period 1 March 2023 to 30 June 2023.

The record of the actual hours worked from home could be maintained by timesheets, rosters, time-tracking apps, logs of time spent accessing employer systems or online business systems, or a diary kept contemporaneously.

For the year ending 30 June 2024 and later income years, a taxpayer using this method must also keep a record of actual hours worked from home for the entire year.

Under both the short-cut method and the previous fixed-rate method, there was no need for detailed record keeping of the actual hours worked from home.  Estimates were acceptable.   This is a significant change and increases the record keeping burden on taxpayers.

Another significant change, which results in an increase in record keeping obligations under the revised fixed-rate method, is that in relation to running costs such as energy costs, phone and internet costs, a taxpayer needs to maintain at least one monthly or quarterly bill.

This is because the ATO now requires proof that the individual has incurred the running costs represented by the 67 cents per hour deduction.

Transfer balance cap indexation

An individual’s transfer balance cap (‘TBC’) determines the maximum amount they can commit to a retirement phase interest in their super fund, such as an account-based pension, without being subject to penal taxation.

When the TBC concept was introduced with effect from 1 July 2017, it was initially $1,600,000.  It was increased by $100,000 as of 1 July 2021 to $1,700,000.

The TBC increases in $100,000 increments (or multiples of $100,000) in line with the Consumer Price Index (‘CPI’).

As a result of a substantial increase in the CPI, the TBC is due to increase on 1 July 2023 by $200,000.

Accordingly, an increase in the TBC is seen as a good thing, as it potentially means an individual can have more of their superannuation interest supporting a tax-free pension.

Individuals who start their first retirement phase income stream (otherwise known as a pension) on or after 1 July 2023 will have a TBC of $1.9 million.

From 1 July 2023 individuals will have a TBC between $1.6 million and $1.9 million.

An individual who already had a transfer balance account and at any time met or exceeded their personal TBC will not be entitled to indexation, and their personal TBC will remain the same.

For example, an individual who started their first retirement phase income stream, an account based pension, on 1 January 2022 with a value of $1,700,000 at the time of commencement, would have fully utilised their then TBC of $1,700,000.

Such an individual, having already fully utilised their TBC, will not gain any benefit from the increase in the TBC due to indexation.

Where an individual has partially utilised their TBC before 1 July 2023, instead of benefiting from the full $200,000 increase in the TBC, they will have access to a proportional indexation of their TBC based on the unused cap percentage of their transfer balance account.

To see if this change will impact on how much you can have counted towards a pension interest in your super fund, please contact our office

New 15% super tax to apply from 1 July 2025

The Government recently announced it will be imposing a 15% additional tax on individuals that have more than $3 million in superannuation.  The new measure is expected to commence from 1 July 2025 (i.e., the start of the 2026 income year).

The main takeaways from the information provided thus far include the following:

  • The additional 15% tax will broadly apply to the annual movement in the value of an individual’s superannuation balance, adjusted for withdrawals and contributions.  These ‘earnings’ are further adjusted to ensure only the proportion corresponding to the balance above $3 million will be subject to the new tax.
  • There will be no limit imposed on the size of superannuation account balances.
  • Individuals will have the choice of paying the tax liability personally or from their super fund.

In current terms, the Government expects that the new tax will apply to 0.5% of people with money in superannuation (around 80,000 people).  However, the proposal does not currently allow for indexation of the $3 million threshold, so more individuals may be impacted in the future.

The Government will consult on the implementation of this proposed measure, so expect to hear much more about it before 2025!

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances


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