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The Minister for Financial Services, Stephen Jones has issued a media release announcing the Government’s intention to amend the transfer balance cap legislation.

The proposed changes are aimed at ensuring that members with a capped defined benefit income stream are not adversely impacted by a merger or successor fund transfer between superannuation funds.

Under current legislation, a member’s transfer balance cap may be unintentionally impacted due to the original income stream being treated as ceasing and a new one beginning.

This means a new valuation of the capped defined benefit income stream is required which can result in a higher valuation for the transfer balance cap and lead to adverse outcomes for some members.

The media release states the ‘Government will ensure that members receiving an income stream prior to a merger or successor fund transfer will continue to receive their income stream without unintentionally impacting the transfer balance cap.’

The amendments are proposed to apply retrospectively from 1 July 2017. 

Last month, the government announced several changes to the social security Work Bonus and Employment income nil rate period.

The Social Security and Other Legislation Amendment (Supporting the Transition to Work) Bill 2023 has been introduced today to implement these changes.

Under the proposed legislation:

•  From 1 January 2024 , the temporary enhancements to the Work Bonus that were scheduled to end on 31 December 2023 will be made permanent. Under the permanent enhancements, new pension entrants over Age Pension age and eligible Veterans will have a starting Work Bonus income bank balance of $4,000, and pensioners will retain the current elevated maximum Work Bonus balance limit of $11,800 rather than $7,800.
The Bill also includes provisions to allow eligible Work Bonus recipients on or after 1 July 2024 to receive a ‘top-up’ to their Income Bank to a maximum of $4,000 once every two years in limited circumstances.

•  From 1 July 2024, the employment income nil rate period will be doubled from 12 weeks to 24 weeks, to reduce barriers for income support recipients to take up work by allowing them to retain concession cards and other supplementary benefits for a longer period. This change will apply to recipients of JobSeeker, Youth Allowance, Austudy, ABSTUDY, Parenting Payment, Age Pension, Disability Support Pension and Carer Payment.

The government released a consultation paper on the framework to pay superannuation guarantee (SG) at the same time as salary and wages. This initiative was part of the Securing Australians’ Superannuation package, which was originally announced at the 2023-24 Federal Budget.

The payday super initiative aims to strengthen Australia’s superannuation system by making improvements and changes in different areas, including:

•  Increasing the payment frequency of the SG

•  Investing in SG compliance, and

•  Improving SG recovery measures

The consultation paper is seeking input from industry and stakeholders on the policy and legislative design of the Securing Australians’ Superannuation package. Consultation closes on 3 November 2023.

For further information see the Treasurer’s media release here.

Further to an announcement by the Treasurer in February 2023, Treasury has released draft legislation regarding the Government’s proposal to apply an additional 15% tax on superannuation earnings corresponding to a client’s total superannuation balance over $3 million from 2025–26 (Division 296 tax).

The Bill largely reflects the initial proposal regarding how this tax will be calculated and levied: 

•  A member’s superannuation earnings for a financial year are generally calculated as their total superannuation balance at the end of the year (adjusted for withdrawals and contributions made during the year) less their total superannuation balance at the end of the previous year (negative earnings can be carried forward to offset future earnings) 

•  The portion of a member’s superannuation earnings subject to Division 296 tax in a financial year is calculated by multiplying those earnings by the proportion of their total superannuation balance at the end of the year that is above $3 million.

•  Division 296 tax is levied on the individual member and due 84 days after a notice of assessment is issued. The member can choose to pay the tax personally or have it released from one or more eligible superannuation interests. Debt deferral arrangements will apply for defined benefit interests.

Members who have ever made structured settlement contributions or who die during the year will not have to pay Division 296 tax for a year.

The Bills also propose to modify the definition of total superannuation balance in a way that removes the link between a member’s transfer balance account and calculation of their total superannuation balance. Regulations will be needed to clarify how some interests will be valued (e.g. defined benefit pensions). This change would apply from immediately before 1 July 2025 and apply for all purposes which total superannuation balance is relevant (e.g. determining non-concessional cap). A member’s total superannuation balance would still be reduced by structured settlement contributions made. Certain LRBA amounts are not included in a member’s total superannuation balance for Division 296 purposes, but will remain included for other purposes.

This draft legislation has not been introduced into Parliament and is not yet law.

FirstTech have released the Centrelink rates & thresholds - quick reference guide, effective 20 Sept 2023 to 31 Dec 2023.

FirstTech have also released the Aged Care rates & thresholds - quick reference guide, effective 20 Sept 2023 to 31 Dec 2023.

The ATO has released Draft Tax Ruling TR 2013/5DC1, which proposes changes to TR 2013/5 Income tax: when a superannuation income stream commences and ceases.

The proposed changes reflect legislative amendments, clarify how the general principles in the Ruling apply to successor fund transfers, and remove practical compliance approaches that were related to historical periods and are no longer relevant.

The ATO has released updated PCG 2022/2 which sets out how the ATO assesses risk for a range of trust arrangements to which section 100A of the Income Tax Assessment Act 1936 might apply. 

The Guideline provides examples of how the Commissioner will dedicate compliance resources for arrangements that are low risk (green zone) or high risk (red zone).

The updated Guideline includes minor amendments at paragraph 32 to clarify some features of arrangements that are excluded from the green zone.

As part of the release of the Employment White Paper, the Government has announced two key changes for pension and income support recipients.

Pending the passage of legislation:

•  From 1 January 2024 , the temporary enhancements to the Work Bonus that were scheduled to end on 31 December 2023 will be made permanent. Under the permanent enhancements, new pension entrants over Age Pension age and eligible Veterans will have a starting Work Bonus income bank balance of $4,000, and pensioners will retain the current elevated maximum Work Bonus balance limit of $11,800 rather than $7,800.

•  From 1 July 2024, the employment income nil rate period will be doubled to 12 fortnights (six months) to reduce barriers for income support recipients to take up work by allowing them to retain concession cards and other supplementary benefits for a longer period. This change will apply to recipients of JobSeeker, Youth Allowance, Austudy, ABSTUDY, Parenting Payment, Age Pension, Disability Support Pension and Carer Payment.

Further information can be found in the Treasury media release here.

The ATO has reminded SMSFs that they must report certain events that affect members transfer balance accounts quarterly using transfer balance account reporting (TBAR). These events must be reported even if the member's total superannuation balance is less than $1 million. SMSFs must report and lodge within 28 days after the end of the quarter in which the event occurs. They are not required to lodge if no TBA event occurred during the quarter. SMSFs who were currently lodging the TBAR annually at the same time as the SMSF annual return, will need to report all events that occurred in the 2023 income year by 28 October 2023.

The Social Security Amendment (Australian Government Disaster Recovery Payment) Bill 2023 passed both houses on 14 Sep 2023 and now awaits royal assent.

The bill will amend the Social Security Act 1991 to include an alternative objective qualification criteria to provide greater certainty in supporting automation processes and ensure the timely payment of claims for the Australian Government Disaster Recovery Payment (AGDRP).

The AGDRP is a one-off payment to eligible persons who are adversely affected by a major disaster. More information on the payment can be found on the Social Services website in this link.

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 was introduced in the House of Representatives on 13 Sep 2023. It implements several previously announced measures from the 2023-24 Federal budget, which includes: 

•  20K instant asset write-off – to increase the instant asset write-off threshold from $1,000 to $20,000, which is only available to small businesses with an aggregated annual turnover of less than $10 million. It applies to eligible depreciating assets first used or first installed ready for use for a taxable purpose in the period from 1 July 2023 until 30 June 2024.

•  Small business energy incentive – to provide small and medium businesses with an aggregated annual turnover of less than $50 million access to a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support electrification or more efficient energy use. It applies to eligible assets first used or first installed ready for use, and eligible improvement costs incurred, from 1 July 2023 until 30 June 2024.

•  Super fund non-arm's length expenses – proposes changes to the rules for non-arm's length expenses (NALE) for superannuation entities as follows:

•  Large APRA-regulated funds including exempt public sector superannuation funds would be exempt from the rules related to non-arm's length expenses, although these funds are still subject to rules for income derived on a non-arm's length basis.

•  For SMSF and small APRA fund general fund expenses that are NALE, the amount of non-arm’s length income would be calculated as twice the difference between the amount that would have been expected to have been incurred had the parties been dealing at arm’s length, and the amount actually incurred, with no deductions applying against that amount. However, the fund’s total non-arm’s length component cannot exceed the fund’s assessable income minus deductions, excluding assessable contributions and deductions against them.

•  The Bill does not propose any changes to the treatment of specific expenses (those relating to gaining or producing income from a particular asset or assets of the fund). Previous treatment continues to apply where the amount of income that is taxed as non-arm’s length income is the amount of income derived from the scheme in which the parties were not dealing at arm’s length.

•  Expenses incurred or expected to have been incurred before 1 July 2018 cannot result in the application of the NALE rules.

•  The amendments will apply in relation to income derived in the 2018-19 income year and following income years.

The Assistant Treasurer, Stephen Jones issued a media release titled ‘Increased flexibility for the First Home Super Saver Scheme’ on 8 Sept 2023.

The media release states the Government had ‘passed legislation addressing significant pain-points in the scheme.’

The Treasury Laws Amendment (2023 Measures No.3) Bill 2023 passed both houses on 6 Sept 2023 and awaits royal assent.

Changes to the scheme schedule:

•  Having up to 90 days after entering into a contract to purchase or build a first home, to request the release of contributions and earnings (previously 14 days).

•  Allowing users of the scheme to amend or revoke applications made under the scheme (for example release requests).

•  Allowing eligible people to use the scheme if they have entered into a contract to purchase their first home but have not yet become the legal owner.

It is important to note that at this stage it is unknown when the changes will commence. The legislation states the changes do not commence until the earlier of date of proclamation and 12 months from date of royal assent. Once the changes commence, many amendments will be backdated to 1 July 2018.

The Minister for Social Services, Amanda Rishworth has issued a media release detailing increases to social security payments from 20 Sept 2023.

The increases are due to indexation, as well as measures originally announced in the Federal Budget and subsequently legislated.

From 20 Sept 2023:

•  Single JobSeeker Payment recipients will receive a base payment of $749.20 per fortnight, reflecting a $56.10 increase.

•  Parenting Payment Single recipients will receive a base payment rate of $942.40, reflecting a $20.30 increase. For those single parents transferring to this payment as a result of the Government’s change in the Budget to extend eligibility until their youngest child turns 14 (up from aged eight), they will receive an extra $227.50 per fortnight compared to their current rate, including supplements.

•  Those on a partnered rate of JobSeeker and Parenting Payment will receive a base payment rate of $686.00, reflecting a $54.80 increase.

•  As a result of indexation, recipients of the Age Pension, Disability Support Pension and Carer Payment will also receive an increase to their payments. The single pension rate will increase by $32.70 to $1096.70, and the rate for couples combined will increase by $49.40 to $1653.40.

•  Single veterans on a service pension will receive an additional $32.70, bringing their service pension to $1096.70 a fortnight, while veterans on the Disability Compensation Payment (Special Rate), known as the Totally and Permanently Incapacitated Payment will receive an additional $53.00 a fortnight, increasing their payment to $1729.20.

•  Income support recipients who are renting will also receive an increase to the maximum rates of Commonwealth Rent Assistance, as a result of both the Government’s 15 per cent increase in the Budget and regular indexation.

•  Income limits for Commonwealth Seniors Health Card recipients will also be indexed, increasing by $5400 to $95,400 per annum for singles and by $8640 to $152,640 per annum for couples combined.

•  Other supplementary payments including Telephone Allowance and Utilities Allowance are also being indexed.

The ATO recently updated their guide on Market valuation for tax purposes.

The guide is intended to assist taxpayers better understand the commissioner’s expectations on market valuation for tax purposes and sets out the basis for an adequate and acceptable valuation approach.

The updates to the guide included two changes:

•  remove specific references to institutes that provide certification and standards for valuers, and

•  insert general statements on the need for valuers to have the appropriate certification and registration or licensing.

The 2023 Intergenerational Report was released by Treasury on 24 August 2023. The report projects the economic outlook and the Australian Government’s budget to 2062-63. The report identifies 5 major forces which will shape the Australian economy in the coming decades:

This bill implements a number of social security measures announced in the 2023 Federal Budget including:

•  population ageing

•  technological and digital transformation

•  climate change and the net zero transformation

•  rising demand for care and support services

•  geopolitical risk and fragmentation

Among other findings, the report depicts that the Australian population is anticipated to reach 40.5 million by 2062-63, with a significant increase in the elderly population. This will induce a shift towards a more service-based economy due to an aging population, impacting sectors such as care services.

Regarding government revenue, tax receipts are expected to make up 93.9% of total receipts by 2062-63, with declining revenue from traditional sources such as fuel and tobacco excise. Personal income tax is projected to grow, while company tax declines, potentially leading to an increased personal tax burden.

The report also highlights that health, aged care, NDIS, defence and interest payments on debt will account for a significant portion of Commonwealth spending in 40 years’ time, increasing from currently one third to one-half of the total spend by 2062-63.

The Government has established The Aged Care Taskforce (Taskforce) to ‘review funding arrangements for aged care and develop options for a system that is fair and equitable for everyone in Australia’.

The Taskforce will seek feedback on draft aged care funding principles and will build on the recommendations in the Royal Commission into Aged Care and Safety.

The Aged Care Taskforce Terms of reference include:

•  funding and contribution approaches to support innovation in the delivery of care,

•  a fair and equitable approach to assessing the means of older people accessing residential and in-home aged care, including the scope of income and assets included in the assessment of means,

•  issues and trade-offs for including and excluding different service types in the new in-home aged care program (the service list),

•  consumer contributions for in-home aged care, and reforms that support a future transition to a single in-home aged care system, and

•  reforms to arrangements for pricing and funding hotel and accommodation costs in residential aged care, including the phasing out of refundable accommodation deposits.

Consultations close on 31 August 2023 and the Taskforce will provide an interim report to Government in October 2023 and a final report in December 2023.

The Social Services and Other Legislation Amendment (Strengthening the Safety Net) Bill 2023 has been assented on 10 Aug 2023.

This bill implements a number of social security measures announced in the 2023 Federal Budget including:

•  expanding qualification for parenting payment (single) to single principal carers whose youngest child is aged under 14 years (up from under 8 years);

•  increasing the rates of working age and student payments by $40 per fortnight, including jobseeker payment, youth allowance, parenting payment (partnered), austudy payment, disability support pension (youth);

•  expanding eligibility for the higher rate of jobseeker payment to recipients aged 55 years and over who have been on payment for nine or more continuous months (reducing the qualifying age from 60 years); and

•  increasing the maximum rates of Commonwealth rent assistance by 15 per cent.

These measures are scheduled to commence 20 September 2023.

The ATO recently released data on the operation of the First Home Super Saver Scheme.

Among other statistics, it shows that in the 2021-22 financial year, approx. 12,500 members applied for a release request and approx. 9,500 members successfully received a payment under the scheme.

The data also details average processing times for First Home Super Saver release requests. In 2021-22, 86% of release requests were completed within 25 days.

This is inclusive of the:

•  number of business days from the submission of the release request

•  superannuation fund sending the FHSS amount to the ATO

•  payment to the individual.

More information can be found on the ATO website.

The Government released a consultation paper on a new individual tax residency framework, which will replace the current individual tax residency rules. This initiative was originally announced by the former government in the 2021-22 Federal Budget, based on the recommendations made by the Board of Taxation in its 2019 report: Individual Tax Residency Rules – a model for modernisation. 

The proposed framework introduces a 'bright line' primary test, which determines tax residency based on an individual's physical presence in Australia for 183 days or more during any income year. Individuals who do not meet the primary test will apply secondary tests to determine their residency status. These tests will be based on measurable, objective criteria with no requirement to test intention or undertake broad, holistic examinations of all relevant facts and circumstances.

Public feedback for the consultation paper is sought by 22 September 2023.2-63.

The ATO recently updated their online services simulator to include eight different clients’ super and tax scenarios. The purpose of the simulator is to allow individuals to test out the functions and features that ATO Online has to offer.

The simulator is strictly read only and can't be used to submit or change anything in a client's record. It doesn't interact with the ATO’s production systems and works on pre-set fictional data.

For more information, please go to ATO online services tool.

Some choice investment options, called Trustee Directed Products (TDPs), will be included in this year’s super performance test – and this could have a bigger impact than expected.

The complexity of determining which investment options are included in the test may mean unanticipated outcomes for some of your clients.

Our Head of FirstTech, Craig Day will be hosting a webinar to explain:

•  The meaning of TDP's & which Choice options will be subject to the test

•  How the performance test applies to TDP's offered through platforms

•  What actions super fund trustees will be required to take where a TDP fails the test.

Craig will also be joined by George Walker, Executive Director, Investments – Distribution, who will provide more information on which of CFS’s Choice options will be subject to the test and how they are positioned against the test.

Online webinar details

•  Tuesday 25 July 2023, 12.30pm Sydney time

•  CPD points available

Register now

Prior to 1 July 2023, depending on its situation, an SMSF was required to report transfer balance cap (TBC) events either on:

•  a quarterly basis (within 28 days after the end of the quarter) or

•  an annual basis (at the same time as lodging the SMSF’s annual return for the year in which the TBC event occurred).

From 1 July 2023, all SMSFs must report most TBC events on a quarterly basis, within 28 days after the end of the quarter in which the event occurs.

Under these new rules, any unreported TBC events that occurred prior to 30 September 2023 need to be reported by no later than 28 October 2023. This means that an SMSF who was previously required to report on an annual basis must report any TBC events from 2022–23 by this date (and cannot wait until a later time such as when the fund’s 2022–23 annual return is submitted).

For further information about TBC event reporting for SMSFs, see this page on the ATO website. 

FirstTech Guides have been updated for 2023/24 - online versions now available:

•  Super and Retirement Income Streams Guide

•  SMSF Guide

Printed Guides

You can now pre-order copies of the following printed guides using our new ordering process for delivery in August:

•  Super and Retirement Income Streams Guide

New ordering process:

1. Go to: https://cfs-first-tech.qponline.com.au

2. Click on 'New User' under the blue 'Log In' button

3. Sign up for Your New Account

Complete the online ordering process

After ordering

•  You will receive confirmation emails from Quality Press

•  You can check your order history online at https://cfs-first-tech.qponline.com.au (Orders > Order history)

•  Queries about your online order can be sent to sales@qualitypress.com.au

Please note, due to printing timeframes your new guides will not be delivered until August.

The ATO has issued draft guidance TD 2023/D1 on how the non-arm’s length income and capital gains tax provisions interact to determine the amount of statutory income that is non-arm’s length income.

When the final determination is issued, it is proposed to apply to years of income commencing both before and after its date of issue.

The last day for comments on draft TD 2023/D1 is 28 July 2023.

The ATO has provided updated information to assist individuals to work out if their military invalidity pension is affected by the Douglas decision.

The Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220 (the Douglas decision) found that, from 1 July 2007, certain invalidity pension payments for veterans and their beneficiaries are superannuation lump sums, and not superannuation income stream benefits.

The ATO have advised that the vast majority of veterans will be in a better tax position due to the Douglas decision – paying less tax. Tax will increase for a small number of veterans.

As a result of the Douglas decision:

•  a new veterans' superannuation (invalidity pension) tax offset> (VSTO) has been introduced to ensure veterans and their beneficiaries don't pay more tax because of the Douglas decision

•  a simplified review process is available to amend prior year tax assessments for veterans – whether you pay less tax following the Douglas decision or are entitled to a VSTO amount.

The ATO have advised they are writing to veterans affected by the Douglas decision who will receive a new tax offset or are yet to request a review of their prior years’ tax returns.

The Government handed down the Federal Budget for 2023-24 on 9 May. FirstTech has unpacked the Budget proposals and summarised their insights and analysis, including potential impacts to your clients' advice strategies.

Some of the proposals include:

•  Super pay day

Tax increase for super balances over $3 million

•  $20,000 instant asset write-off

•  Energy Price Relief Plan

Download the FirstTech Federal Budget Briefing, 09 May 2023 here.

We have made some security updates to the FirstTech App. As a result, iOS device (iPhone and iPad) users will need to update the app by 5 May to maintain access.

How do I update the app?

Updating the app is easy. Simply open the FirstTech app before 5 May and select Contacts, then FirstTech App updates, then Update.

To confirm the update has occurred, open the app and click the Disclaimer tab at the bottom of the home page. The version number should be v3.5.

What if I don’t update by the 5 May deadline?

If you don’t update the app by 5 May you will get an error message saying “FirstTech is no longer available”.

To resolve this simply open this email on your device and then click here and follow the steps to download the app.

To confirm the update has occurred open the app and click the Disclaimer tab at the bottom of the home page. The version number should be v3.5.

What if I am an Android user?

If you are an Android user, you don’t need to do anything. You only need to update the app if you access it via an iOS device.

Don’t have the app yet?

The FirstTech app gives you easy access to the latest rates and thresholds for superannuation, tax and social security. It also includes a handy Centrelink pension calculator.

To download the FirstTech app, click here on your Apple or Android device and follow the steps to download the app.

The Federal Budget for 2023-24 will be handed down on 9 May 2023.

Join our FirstTech team as they unpack the key announcements and outline potential impacts to your clients’ advice strategies.

FirstTech will be running 3 webinar sessions on Wednesday 10 May. Select the session you would like to register for:

9.00am – 9.45am

12.30pm – 1.15pm

2.30pm – 3.15pm

All session times are Australian Eastern Standard time.

Attendees will be eligible for CPD points.

The Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Bill 2022 was finally passed by both houses of Parliament and awaits royal assent to become law.

The changes will make it easier for parents to claim Parental Leave Pay, with either parent able to claim first. Parents will also be able to access the entitlement in multiple blocks, as small as one day, with periods of work in between.

Minister for Social Services Amanda Rishworth said "Around 180,000 Australian families take up this benefit each year and they will now be able to share their entitlement in the way that best suits their circumstances."

A new family income test of $350,000 per annum will also see nearly 3,000 additional parents become eligible for the entitlement.

The changes will come into effect for parents whose children are born or adopted from 1 July 2023.

Single parents will now be able to receive the full 20-week entitlement, up from 18-weeks currently.

Parents can pre-claim up to three months before the expected date of birth or adoption so there is no delay to receiving payment. Pre-claims under the improved scheme will be open from the end of March.

The Government will bring forward additional legislation before July next year to increase the scheme to 26 weeks by 2026.

More information about the Government’s Paid Parental Leave changes can be found on the Department of Social Services website.

indexed rates and thresholds for social security, effective 20 March 2023, have been released by the Government. 

The updated FirstTech quick reference guide and FirstTech app will be available from 20 March

A Parliamentary FlagPost has highlighted how people in multiple relationships — those with more than one partner — are treated for social security purposes.

In December 2016, social security policy recognised that individuals could be in a de facto relationship with more than one person at a time and could treat each relationship as a separate couple relationship. In August 2018, the Department of Social Services policy guide was updated to state: 'The Australian social security system does NOT recognise the existence of multiple relationships'.

This February 2023 FlagPost examines the effect of the 2018 policy change.

The Treasurer announced an increase in taxation for large superannuation balances to commence from 2025-26. 

The Treasurer stated in his media release:

"Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15 per cent. This will continue for all superannuation accounts with balances below $3 million.

From 2025‑26, the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent.

This is expected to apply to around 80,000 people, and they will continue to benefit from more generous tax breaks on earnings from the $3 million below the threshold.

This adjustment does not impose a limit on the size of superannuation account balances in the accumulation phase. And it applies to future earnings – it is not retrospective."

More information about the policy details is available here.

This announcement requires the introduction and passage of legislation through Parliament and is not yet law.

The ATO has published Military invalidity pensions – Douglas decision - a page dedicated to explaining the impact of the Douglas court decision on veterans receiving military invalidity pensions.

From late February, the ATO will write to those veterans affected by the Douglas decision who haven't yet requested a review of their prior year tax returns to advise on their options.

The Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220 (the Douglas decision) found that, from 1 July 2007, certain invalidity pension payments for veterans and their beneficiaries are superannuation lump sums, and not superannuation income streams.

The vast majority of veterans will be in a better tax position – paying less tax. For veterans that will pay more tax, the government has proposed a new tax offset. The proposed tax offset will not apply until it becomes law (see Treasury Laws Amendment (2022 Measures No. 4) Bill 2022.

The ATO has released a new fact sheet for employers:

Electric vehicles and fringe benefits tax

The Australian Bureau of Statistics released the Average Weekly Ordinary Time Earnings (AWOTE) for November 2022. Estimates for AWOTE for full-time adults (seasonally adjusted) increased by 3.4% annually to November 2022.

AWOTE is used to calculate the indexation of a number of superannuation and tax rates and thresholds for the next financial year.

The ATO will update its Key Super Rates and Thresholds page shortly.  In the interim, we estimate, from 1 July 2023 the following rates and thresholds will apply:

•  Concessional contribution cap: $27,500 (no change)

•  Non-concessional contributions cap: $110,000 (no change)

•  CGT cap amount: $1.705m (2022-23: $1.650m).

•  Superannuation Guarantee 'maximum contribution base': $62,270 per quarter (2022-23: $60,220 per quarter)

•  Co-contribution income thresholds:

•  Lower: $43,445 (2022-23: $42,016)

•  Upper: $58,445 (2022-23: $57,016)

•  Lump sum low rate cap: $235,000 (2022-23: $230,000)

•  Untaxed plan cap: $1.705m (2022-23: $1.650m)

•  ETP cap amount: $235,000 (2022-23: $230,000)

•  Genuine redundancy and early retirement payments:

•  2023-34 tax free amount: $11,985 + ($5,994 x each complete year of service)

•  2022-23 tax-free amount: $11,591+ ($5,797 x each complete year of service))

Minimum SG rate will rise to 11.0% from 1 July 2023 as previously legislated.

As reported on 26 January 2023, the CPI based general transfer balance cap will increase to $1.9 million in 2023-24, as will the total super balance thresholds for non-concessional contributions caps.

Treasury has released the consultation paper, Legislating the objective of superannuation, which is open for comment until 31 March 2023.

The proposed objective is:

"The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way."

Stephen Jones, Minister for Financial Services has previously stated:

"We will consult widely to inform a common, agreed objective for super. Australians need to have their say. With an objective that is settled, we can talk sensibly about tax."

This comment was made in November 2022, in reference to large super balances and the speculation of caps being introduced.

As reported on 16 November 2022, the ATO issued two draft legislative instruments which proposed exemptions from the obligation to obtain a director identification number.

These have now been finalised as:

•  LI 2023/1 Corporations (Eligible Officer Exclusion - non-individuals and resigned directors) Determination 2023 (registered 17 February 2023); and

•  LI 2023/2 Corporations (Aboriginal and Torres Strait Islander) (Eligible Officer Exclusion - resigned directors) Determination 2023 (registered 17 February 2023)

Broadly there are two categories of entities excluded from requiring a Director ID:

•  corporate directors – non-individual entities that hold a role as a director under the Corporations Act

•  resigned directors – individuals who have ceased to hold any role as a "director or alternate director acting in that capacity" prior to 1 December 2022.

The ATO has finalised PCG 2023/1 Claiming a deduction for additional running expenses incurred while working from home - ATO compliance approach.

Prior to 1 July 2022, to calculate a deduction for expenses incurred as a result of working from home, taxpayers had the choice of using one of the following methods:

•  the shortcut method - available from 1 March 2020 to 30 June 2022 (outlined in Practical Compliance Guideline PCG 2020/3)

•  the fixed-rate method - available from 1 July 1998 to 30 June 2022 (outlined in PS LA 2001/6), or

•  actual expenses; that is, calculating the actual expenses incurred as a result of working from home.

From 1 July 2022, the short cut method cannot be used. Taxpayers can continue to claim their actual expenses or, alternatively, they can use the revised fixed-rate method.

PCG 2023/1 outlines the revised fixed-rate method for calculating the work-related additional running expenses incurred as a result of working from home. It should be read in conjunction with TR 93/30 Income tax: deductions for home office expenses, which explains when working from home expenses are deductible.

To calculate your total deduction for running expenses using the revised fixed-rate method:

1. calculate the number of hours worked from home during the income year based on taxpayer records

2. multiply the total number of hours worked from home during the income year by 67c per hour

3. calculate the work-related decline in value of any depreciating assets used to work from home during the income year and any other running expenses incurred which are not covered by the rate per hour

4. add the amounts calculated at (2) and (3) - this is the amount that may be claimed as a deduction in the taxpayer’s tax return.

A record of hours for the income year can be in any form, provided it is kept contemporaneously. For example, records may be kept in one of the following forms:

•  timesheets

•  rosters

•  logs of time spent accessing employer systems or online business systems

•  time-tracking apps

•  a diary or similar document kept contemporaneously.

For the 2022-23 income year only, taxpayers 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, and

•  a record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023.

In our 26 January Latest News we reported that the new general transfer balance cap will increase to $1.9m from 1 July 2023.

The increased general transfer balance cap means the total super balance threshold for non-concessional contributions will also increase to $1.9m.

When looking at the bring-forward rule, the thresholds are a combination of the general transfer balance cap and the standard non-concessional contribution cap.

The standard non-concessional contribution cap for 2023-24 depends on the AWOTE index figures to be released on 23 February.  It is expected that AWOTE will not increase signficiantly and so it is expected that concessional and non-concessional contribution caps will remain unchanged for 2023-24.

The expected bring-forward thresholds for 2023-24 are shown in the table below. This assumes non-concessional contribution caps remain unchanged in 2023-24. 

Clients with a total super balance of $1.9m or more on 30/6/2023 will have a Nil non-concessional contributions cap in 2023-24.  This has already been legislated.