Government announces changes to proposed 'Stage 3' tax cuts
Despite previous assurances, and after much speculation, the Government has announced tweaks to the 'Stage 3' tax cuts that will apply from 1 July 2024.
More particularly, the Government proposes to:
reduce the 19% tax rate to 16%;
reduce the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000 threshold;
increase the threshold at which the 37% tax rate applies from $120,000 to $135,000; and
increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.
The Medicare levy low-income thresholds for the 2024 income year will also be increased.
New ATO guidance on "who is an employee?"
The ATO recently issued a ruling which explains when an individual is an 'employee' of an entity for pay as you go ('PAYG') withholding purposes.
A useful approach for establishing whether or not a worker is an employee of an engaging entity is to consider whether the worker is working in the business of the engaging entity, based on the construction of the terms of the relevant contract. Importantly, the fact that a worker may be conducting their own business, including having an ABN, is not determinative.
If you need help with this important issue, please contact our office.
Avoiding common Division 7A errors
Private company clients who receive payments, benefits or loans from their private companies need to ensure compliance with their additional tax obligations (which are often referred to as their 'Division 7A' obligations).
There are multiple ways in which business owners may access private company money, such as through salary and wages, dividends, or what are known as complying Division 7A loans.
Division 7A is an area where the ATO sees many errors and the ATO is currently focused on assisting taxpayers in managing their obligations when receiving payments and benefits from their private companies.
In this regard, the ATO has recommended that business owners do the following:
keep adequate records;
properly account for and report payments and use of company assets by shareholders and associates; and
comply with rules around Division 7A loans.
Understanding these Division 7A obligations is essential in order to:
make informed decisions when receiving private company money and using private company assets; and
avoid unexpected and undesirable tax consequences.
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.