Tax Facts

Activity Statement

Businesses use activity statements to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Non-business taxpayers who need to pay quarterly PAYG instalments also use activity statements.

Activity statements are personalised to each taxpayer to support reporting against identified obligations.

Activity statements for businesses may be due either quarterly or monthly. Generally, businesses can lodge and pay quarterly if annual turnover is less than $20 million, and total annual PAYG withholding is $25,000 or less. Businesses that exceed one or both of those thresholds will have at least some monthly obligations. Non-business taxpayers are generally required to lodge and pay quarterly.

Taxpayers with small obligations may be able to lodge and pay annually. Some taxpayers may receive an instalment notice for GST and/or PAYG instalments, instead of an activity statement.

The Australian Taxation Office (ATO) web site provides instructions on lodging and paying activity statements. Detailed instructions are provided for each of the different tax obligations:

Australian Business Number

The Australian business number (ABN) is a single business identifier that allows businesses to deal with the Australian Taxation Office (ATO) and other government departments and agencies with one identifier.

An ABN is generally not compulsory and not everyone is entitled to an ABN. The following entities will need an ABN to comply with other tax obligations

Businesses with GST turnover of $75,000 or more must register for GST and need an ABN to do this
Non-profit organisations with GST turnover of $150,000 or more must register for GST and need an ABN to do this
Entities seeking to be endorsed as a deductible gift recipient need an ABN to obtain that status
Charities seeking exemption from income tax need an ABN

Other eligible entities may choose to register for an ABN:

Companies registered under the Corporations Law
Business entities carrying on an enterprise
Trustees of self-managed superannuation funds should obtain an ABN for the fund

If an entity makes supplies of goods or services to a business, the supplier entity generally needs to quote an ABN. If the supplier does not quote an ABN, the payer may need to withhold tax from the payment.

Capital Allowances

Deductions for the decline in value of depreciating assets are available under the Uniform capital allowance (UCA) system. In addition to the rules for depreciating assets, deductions are allowed for certain other capital expenditure.

Small business entities have the option of choosing simplified depreciation rules. Under these rules, small business entities can claim an immediate deduction if the cost is below the relevant threshold or else add the asset to the small business depreciation pool.

Land, trading stock and most intangible assets (excluding exceptions such as intellectual property and in-house software) are not depreciating assets. Buildings and other improvements to land may be eligible for deductions under the capital works regime.

The decline in value is generally calculated by spreading the cost of the asset over its effective life, using one of two methods:

Prime cost method – decline in value each year is calculated as a percentage of the initial cost of the asset
Diminishing value method – decline in value each year is calculated as a percentage of the opening depreciated value of the asset

MORE: Australian Taxation Office (ATO) Decline in value calculator.

For most depreciating assets, taxpayers can either self-assess the effective life, or use estimates published by the ATO. Taxpayers can recalculate, either up or down, the effective life of an asset if the circumstances of use change and the effective life initially chosen is no longer accurate. An improvement to an asset that increases its cost by 10% or more in a year may result in an obligation to recalculate the effective life of the asset.

Decline in value of cars is restricted to the car limit. From 1 July 2023, the luxury car tax threshold for luxury cars is $68,108 (it was $64,741 for the year commencing 1 July 2022). Luxury car leases are treated as a notional sale and purchase, with decline in value restricted to the car limit.

The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value for depreciating assets in the pool is calculated at an annual diminishing value rate of 37.5%.

Changes for 2020 to 2023

From 12 March 2020 until 31 December 2020, the asset cost threshold for the instant asset write-off (which is usually only available to small business entities) was increased from $30,000 to $150,000 and the eligibility criteria expended to cover entities with an aggregated turnover threshold of less than $500 million (up from $50 million).

Further, from 12 March 2020 until 30 June 2021 the Backing business investment measure applied to businesses with aggregated turnover below $500 million and provided either:

A deduction of 50% of the cost or opening adjustable value of an eligible asset on installation (existing depreciation rules apply to the balance of the asset's cost), or
For businesses using a small business depreciation pool, a deduction of 57.5% of the cost of the asset in the first year, with the balance added the asset to the small business pool

In addition, from 6 October 2020 to 30 June 2023, full expensing applied to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets. For businesses with aggregated turnover of less than $50 million, full expensing also applied to eligible second-hand assets.

From 1 July 2023, these incentives no longer apply. However, it has been proposed to increase the instant asset write-off for small business entities from $1,000 to $20,000 for the period 1 July 2023 to 30 June 2024.

Capital Gains Tax

Capital gains tax (CGT) generally applies to CGT events that happen to CGT assets acquired after 19 September 1985. CGT is not a separate tax; it forms part of income tax.

CGT events

The most common CGT event is the disposal of an asset by selling it or giving it away. A full list of CGT events is available here.

CGT assets

A CGT asset is any kind of property, or a legal or equitable right that is not property. CGT assets include:

Part of, or an interest in, a CGT asset
Goodwill, or an interest in it
An interest in a partnership asset
An interest in a partnership, that is not an interest in a partnership asset
Land and buildings
Shares in a company
Units in a unit trust
Options
Debts owed to a taxpayer
A right to enforce a contractual obligation
Foreign currency

Where a taxpayer owns an interest in a CGT asset and then acquires a further interest, the interests remain separate CGT assets. Buildings, structures and other capital improvements to land may be treated as separate CGT assets to the land. A car is a CGT asset, but any capital gain made from it is exempt from CGT (the gain may be taxable under other provisions).

Special rules apply to some kinds of CGT assets, including collectables, personal use assets, certain investments, leases and options.

Working out a capital gain or loss

For most CGT events, a capital gain arises if the capital proceeds from the CGT event exceed the cost base of the CGT asset. Conversely, a capital loss arises if the reduced cost base of the CGT asset exceeds the capital proceeds from the CGT event.

The amount of a capital gain is reduced by the CGT discount if the taxpayer is an individual, trust or complying superannuation entity, and the taxpayer acquired the CGT asset at least 12 months before the CGT event. The discount percentage is as follows:

50% for Australian resident individuals and trusts
33 1/3% for complying superannuation entities and eligible life insurance companies
Special rules apply to:
- foreign resident individuals and
- where the asset has been used to provide affordable housing

Taxpayers can choose the indexation method, rather than the CGT discount, if that results in a lower capital gain. Companies are generally not eligible for the CGT discount, but can use the indexation method. Discount capital gains made by trusts can generally be passed through to presently entitled beneficiaries, who can claim the discount percentage as above. Where the trustee is taxed on a capital gain, the availability of the discount depends on the particular circumstances of the trust.

Capital losses can only be offset against capital gains, they cannot be offset against other income. Care should be taken when applying capital losses to ensure the optimum reduction of capital gains for the CGT discount and small business CGT concessions. A net capital loss in an income year is carried forward to be offset against capital gains in later income years.

Exemptions, rollovers and concessions

A wide range of exemptions and rollovers apply. In addition to the generally available
exemptions and rollovers, small business entities are eligible for the small business CGT concessions.

International issues

A foreign resident makes capital gains only on the disposal of taxable Australian property. Temporary residents are subject
to the same CGT rules as foreign residents, however some specific rules apply. Special rules apply on becoming a resident or ceasing to be an Australian resident. Withholding can apply to sales of Australian real estate by
foreign residents.

Capital Works

Deductions are available for capital expenditure incurred in constructing ‘capital works’, including buildings and structural improvements. The deduction is either 2.5% or 4% of the construction cost, depending on when the construction started and how the capital works are used. The deduction cannot exceed the undeducted expenditure.

Unlike capital allowances, the deduction for capital works is based on the original construction cost, not the price paid by the current owner. Where the original construction cost is unknown, a building cost estimate by a qualified surveyor or other qualified person can be used (such qualified people would not normally include valuers, real estate agents, accountants or solicitors).

Alterations, extensions or improvements to buildings are treated as separate capital works.

While there is no catch-up deduction when a capital work is sold, the deductions claimed may reduce the cost base of the asset to which they are attached

Director Identification Numbers

The director identification number (DIN) is a unique permanent identifier for each person who consents to being a director. DINs provide traceability of a director’s relationships across companies and allow regulators and administrators to investigate a director’s involvement in unlawful activity including illegal phoenix activity.

Subject to limited exemptions, a director of a registered body corporate must apply for a DIN before becoming a director. Initially, the DIN will operate only in relation to appointed directors and acting alternate directors and not to de facto or shadow directors. The requirements apply to both Australian companies and registered foreign companies that are body corporates.

Applying for a DIN

Individuals requiring a DIN can apply online. An agent, or other third party, usually cannot apply for a DIN on behalf of a director. An applicant for a DIN will be required to complete a declaration confirming his/her identity and eligibility to obtain a DIN.

Excise

Excise duty is a tax on certain types of goods that are made in Australia including alcohol, tobacco, fuel and petroleum products.

Customs duty is imposed at an equal rate on imported alcohol, tobacco, fuel and petroleum products to ensure imported and local goods are treated consistently. These goods are referred to as Excise Equivalent Goods (EEGs).

Entities who manufacture or store excisable goods must hold an appropriate licence.

MORE: See excise on alcohol, excise on fuel and petroleum products, and tobacco and excise on the ATO website for more information.

First Home Super Saver

Eligible individuals can make voluntary contributions to their superannuation account under a First Home Super Saver (FHSS) Scheme. The Scheme enables individuals to save for their first home and take advantage of the concessional taxation arrangements that apply in the superannuation system. An FHSS tax is payable if the individuals withdraw money from the scheme and do not either purchase their first home within a specified period or recontribute an amount into superannuation.

An individual is eligible to participate in the FHSS scheme if he/she is 18 years of age (or older), never used the FHSS scheme previously, and has never owned real estate (except in rare cases).

The key features of the FHSS Scheme are:

Fringe Benefits Tax

Fringe Benefits Tax (FBT) is paid on particular benefits employers provide to their employees or their employees' associates instead of salary or wages. Benefits can be provided by an employer, an associate of an employer, or a third party by arrangement with an employer. An employee can be a former, current, or future employee.

FBT is separate from income tax and based on the taxable value of the various fringe benefits provided. The rate corresponds to the top marginal income tax rate for individuals, including the Medicare Levy (47% for the FBT year ending 31 March 2024). A complicated gross-up factor is applied in calculating the tax - the general principle is that the FBT payable should equal the income tax otherwise payable by an employee on the top marginal tax rate, on the cash salary needed to purchase the benefit (including GST) from after-tax income.

Reporting, lodging and paying FBT

The FBT year runs from 1 April - 31 March. Annual FBT returns must be lodged and tax paid by 21 May each year. Returns lodged through tax agents may qualify for extended due dates. Annual FBT liabilities of $3,000 or more are paid by quarterly instalments as part of the employer's activity statement.

If the taxable value of certain fringe benefits provided to an employee exceeds $2,000 in an FBT year, the 'grossed-up' taxable value must be reported on the employee's payment summary for the corresponding income tax year. The following categories of fringe benefits apply, with specific valuation methods applicable to each category:

Board - meals provided to an employee and family members, where the employer provides
accommodation and at least two meals a day
Car - a car made available for the private use of an employee or associate (car benefits
can be valued using either the statutory formula or operating cost methods)
Car parking - a car parking space provided for use by an employee or associate, on either
the employer's premises or in a commercial car parking station
Debt waiver - releasing an employee or associate from an obligation to repay a debt
Income tax exempt body entertainment - FBT is payable by income tax exempt employers on
entertainment provided to an employee or associate by way of food, drink or recreation
Expense payment - paying or reimbursing a private expense incurred by an employee or
associate
Housing - accommodation provided that is an employee's or associate's usual place of
residence
Living-away-from-home allowance - a cash allowance paid to compensate an employee for
increased costs, because the employee's duties require them to live away from their usual place of residence
Loan - a loan provided to an employee or associate either interest-free or at a discounted
interest rate
Meal entertainment - entertainment provided by taxable employers by way of meals to an
employee or associate
Property - goods provided to employees either free or at a discounted price
Residual - any fringe benefit (as defined) that does not fall into one of the specific
categories

MORE: See the ATO web site for more on FBT categories.

Exemptions, concessions and special rules

A wide range of exemptions and reductions in taxable value apply.

Concessional valuation rules apply to 'in-house' fringe benefits. The taxable value of certain fringe benefits can be reduced by employee contributions towards the cost of the benefit. Making such contributions can result in a lower overall tax liability, depending on the particular employee's tax situation and the valuation method that applies to each benefit received.

Fuel Schemes

Fuel schemes provide credits and grants to reduce the costs of some fuels or provide a benefit to encourage recycling of waste oils. There are various types of schemes:

Fuel tax credits for business - provides a credit for the
excise or customs duty included in the price of fuel used for business activities, in machinery, plant,
equipment and heavy vehicles
Fuel tax credits – non business - credit for fuel used to
generate domestic electricity or operate emergency vehicles or vessels for non-profit organisations
Product stewardship for oil (PSO) program - supports
recycling oil for environmental sustainability. This includes recycling used oil and using recycled oil

Goods and Services Tax

Goods and services tax (GST) is a tax of 10% on most goods, services, and other items sold or consumed in Australia. The general principle is that only the end consumer bears the economic cost of GST. Registered entities bear the liability of collecting GST in the price of sales to their customers, but can offset credits for GST included in the price of business purchases.

Registration

An entity (including an individual) must register for GST if the entity's annual turnover is $75,000 or more ($150,000 for non-profit organisations), the entity provides tax services or the entity wants to claim fuel tax credits. An entity may choose to register if the entity's turnover is below the threshold. Related entities may form a GST group and be treated as a single entity for GST. A single entity may register separate branches for GST.

Charging GST

A registered entity is generally required to charge GST on all sales of goods and services in Australia, unless a supply is GST-free or input taxed. The entity must provide its customers with a tax invoice for all taxable sales above a threshold of $82.50 ($75 + GST).

Claiming GST credits

A registered entity can claim an input tax credit for GST included in the price of goods or services purchased for the entity's business. A credit cannot be claimed for:

Purchases where GST was not included in the price (GST-free acquisitions)
Purchases used to make input taxed supplies
Purchases for the entity's private use or are non-deductible for income tax purposes

Rules for specific industries and transactions

A range of special rules apply to sales and purchases by entities operating in specific industries, or certain types of transaction entered into by any entity. Details are available here.

Reporting and paying GST

The reporting periods for GST are called tax periods and can be quarterly or monthly. GST is reported and paid on the entity's activity statement for its tax period. Entities with an annual turnover of less than $20 million generally have quarterly tax periods, but can choose to have monthly tax periods. Entities with an annual turnover greater than $20 million are required to have monthly tax periods and lodge their activity statements electronically.

In limited circumstances, entities can choose to report and/or pay GST annually. This may involve quarterly
instalments plus an annual GST return to reconcile actual transactions for the year.

The rules for attributing GST payable and input tax credits to tax periods differ according to whether GST is accounted for on a cash or accrual basis. An entity can account for GST on a cash basis if any of the following applies:

The entity is a small business with an annual turnover of less than $10 million (including the turnover of
related entities) or the entity is not carrying on a business and its turnover is less than $2 million
The entity accounts for income tax on a cash basis
The entity runs a type of enterprise that is permitted to account on a cash basis regardless of turnover -
generally a government school, a charity, or a gift deductible entity

Imputation

The imputation system provides a way for Australian and New Zealand corporate tax entities
that pay Australian tax, to pass on to their members a credit for Australian income tax they have paid. This
prevents the same income from being taxed twice - once when the income is earned by the entity, and again when
the income is distributed to members.

Franking account

The franking account is a record of franking credits and franking debits that arise in an income year. All
corporate tax entities are required to maintain a franking account, which is a notional account for tax purposes
that is separate to the entity's financial accounts. Corporate tax entities are taxed at the company income
tax rate (25% "base rate entities", and 30% for other entities). Typically, a franking credit would
arise in the franking account when the corporate tax entity pays income tax or receives a franked distribution.
A franking debit would arise when the corporate tax entity pays a franked distribution or receives a refund of
income tax it has paid. There are numerous other events that may give rise to franking credits or franking debits.

At the end of an income year, an entity that has a deficit in its franking account is liable to pay franking deficit tax.

Franked distribution

The imputation system works by franking a distribution. The general principle is that the entity allocates
franking credits to members by attaching franking credits to a distribution. For example, the entity earns $100
of profits and pays $30 tax. The entity pays a dividend of $70 to its members and attaches franking credits of
$30. The entity is required to give each member a distribution statement which must contain required information about the distribution. A long list of compliance and integrity measures exists to prevent abuse of the system.

Receiving a distribution

The general rule for individuals receiving a franked distribution (either directly, or indirectly through interposed entities) is called the "gross-up and credit" approach. The member who receives the $70 franked dividend must include $100 in assessable income ($70 + $30 franking credit), and is entitled to a tax offset of $30. If the individual's tax on the dividend (at marginal rates) is more than $30, the individual will need to pay the difference on assessment. If the individual's tax on the dividend is less than $30, the net amount is refundable.

The "gross-up and credit" approach also applies to corporate tax entities who receive a franked distribution, with some differences. The main difference is that where the company's franking credits exceed its tax liability, the excess franking credits are not refundable. Rather, the excess franking credit is converted to a tax loss that can be deducted against income in later years. As noted above, the franking credit attached to the distribution also creates a franking credit in the recipient entity's franking account, which it can pass on to its members.

Trans-Tasman imputation

The trans-Tasman imputation system allows a New Zealand company to
choose to enter the Australian imputation system. This will allow the New Zealand company to maintain an
Australian franking account and pay dividends franked with Australian franking credits. Reciprocal rules have
been introduced by the New Zealand government to allow an Australian company to elect into the New Zealand
rules.

Income Tax

Income tax is levied on taxable income, which is calculated as assessable income less allowable deductions. Gross tax on taxable income is reduced by tax offsets and credits, to arrive at net tax payable or refundable.

Individuals

The Australian Taxation Office (ATO) publishes lists of assessable income, allowable deductions and tax offsets for individuals. Sole traders declare business
income in their individual income tax return, they are not required to complete a separate return for their
business. Tax on individuals is charged at marginal rates. You can use the tax tables to determine how much you
are taxed.

Resident tax rates 2022-23 and 2023-24

Taxable income	Tax on this income
$0 - $18,200	$0
$18,201 - $45,000	19c for each $1 over $18,200
$45,001 - $120,000	$5,092 plus 32.5c for each $1 over $45,000
$120,001 - $180,000	$29,467 plus 37c for each $1 over $120,000
$180,001 and over	$51,667 plus 45c for each $1 over $180,000

The above rates do not include the Medicare levy of 2%.

Non-resident tax rates 2022-23 and 2023-24

Taxable income	Tax on this income
$0 - $120,000	32.5c for each $1
$120,001 - $180,000	$39,000 plus 37c for each $1 over $120,000
$180,001 and over	$61,200 plus 45c for each $1 over $180,000

MORE: Special rates apply to children and working holiday makers. See the ATO web site for more information on Individual Income Tax Rates.

Companies

A company is a distinct legal entity with its own income tax liability, and is required to lodge a Company income
tax return. For base rate entities the company tax rate is 25%; for most other
companies, the company tax rate is 30%. Special rates apply to certain types of companies, or
companies in certain industries.

Partnerships

A partnership carrying on a business must complete a Partnership tax return to show all income earned and deductions claimed for the income year, and how the net income or loss was shared between the partners. The partnership itself is not a taxable entity. Rather, each partner includes a share of the partnership's net income or loss in the partner's taxable income.

Partnerships where the only income is from joint investments (for example, jointly owned shares or rental properties) are not required to lodge a Partnership income tax return. Rather, each partner's share of the joint income is declared in the partner's own tax return.

Trusts

Where a resident beneficiary (not under a legal disability) is presently entitled to a share of net income of a trust, the trustee is generally not taxable. Rather, each such beneficiary includes a share of the trust's net income in the beneficiary's taxable income. A trust cannot distribute a net loss to the beneficiaries, the loss is carried forward to offset against net income in later years.

Where a presently entitled beneficiary is under a legal disability (for example, under 18 years of age, or incapable of managing his/her own affairs) or is a non-resident, the trustee is taxable on the beneficiary's share of the trust's net income. The tax rates correspond to the tax rates that would otherwise be payable by the beneficiary.

Where no beneficiary is presently entitled to part of the trust's net income, the trustee is taxable. The tax rates depend on the trust's particular circumstances, for example income of deceased estates attracts a different tax rate depending on the stage of administration of the estate.

Superannuation funds

A superannuation fund is a distinct legal entity with its own income tax liability and is required to lodge an income tax return. Different income tax return forms are used by self-managed superannuation funds and other superannuation funds. The superannuation fund tax rate is generally 15%. Higher rates apply to net non-arm's length income, and contributions by or on behalf of a member who has not quoted his/her tax file number to the trustee.

Loans to Shareholders

Advances (or loans), including the forgiving of debts, made by a private company to a shareholder (or an
associate of a shareholder) are automatically deemed to be dividends, unless they come within certain specified exclusions. The deemed dividend can also apply to
the unpaid present entitlement to which the private company is entitled.

If the advances are converted to a loan before the due date of the company's income tax return, the advances will
not be treated as a dividend. However, this loan must be written and have a maximum term and minimum interest rate.

There is also a requirement that the shareholder make minimum repayments on the loan. If the minimum repayments are not made, a deemed dividend will arise
in relation to the shortfall.

Luxury Car Tax

Luxury car tax (LCT) is a s a tax on cars that have a GST-inclusive value above a certain threshold. For the 2023-24 income year, the threshold is $89,332 for fuel efficient vehicles and $76,950 for other vehicles. LCT is imposed at the rate of 33% on the amount above the threshold and is paid by businesses that sell or import luxury cars (dealers), and by individuals who import luxury cars.

LCT is paid as part of the entity's activity statement, the tax period is the same as the entity's tax period for GST (which may be monthly, quarterly or annually). Purchasers are not entitled to claim back the cost of the LCT.

MORE: See the ATO web site for more information on Luxury car tax and for instructions on filling out the LCT section of the Activity Statement.

Medicare Levy

The Medicare Levy is a tax payable by Australian residents to cover health care charges. It is payable on taxable
income, in addition to income tax. Individuals and families on higher incomes who do not have an appropriate
level of private hospital cover may have to pay the Medicare levy surcharge.

Medicare Levy is usually calculated at 2% of taxable income. A reduction in the rate is available for people on low incomes
and an exemption is available for people in certain categories.

A Medicare Levy Calculator is available on the Australian Taxation Office (ATO) web site
to help you work out your obligation.

MORE: See the Medicare and private health insurance section of
the ATO web site.

PAYG Instalments

Pay As You Go (PAYG) Instalments is a system for paying instalments during the income year towards an entity's or individual's expected tax liability on business and investment income. The actual tax liability is worked out at the end of the income year when the annual income tax return is assessed. PAYG instalments paid during the year are credited against the assessment to determine whether the entity or individual owes more tax, or is owed a refund.

The Australian Taxation Office (ATO) will contact entities and individuals who are required to pay PAYG instalments, notifying them of their instalment rate. This is calculated according to information in the last assessed income tax return. PAYG instalments may be included as part of an activity statement, or a separate instalment notice may be issued.

The instalment is calculated as the instalment rate multiplied by business and investment income for the instalment period. The main advantage of this method is that instalments are based on income as the entity or individual earns it, instead of a projection based on the previous tax situation. Some entities, and all individuals, may however choose to pay an instalment amount calculated by the ATO, which is based on the most recent tax assessment plus an uplift factor (this is the default method for all individuals, certain trustees, and certain other entities). This decision needs to be made before the due date for payment of the first instalment for each income year, and then applies for the remainder of that year.

Entities and individuals can vary an instalment if they believe the instalment rate, or the ATO calculated instalment, will result in paying more or less than the expected tax liability for the year.

Instalments are generally payable quarterly, but some entities may be able to pay annually and certain large taxpayers are required to pay monthly.

Individuals

PAYG instalments for individuals are generally paid quarterly. Where the most recent annual tax liability on
business and investment income is less than $8,000 and certain other conditions are met, individuals can choose
to pay an annual instalment. For more information see Annual PAYG instalments. A special two instalment option is available to some primary producers
and special professionals (e.g. sportspersons, artists, inventors and authors).

Partnerships and trusts

Partnerships and most trusts are generally not required to pay PAYG instalments. However, special rules apply to
partners and beneficiaries when calculating their own PAYG instalments.

Companies

PAYG instalments for companies are generally paid quarterly. Companies can choose to pay an annual instalment if they meet the criteria that apply to individuals, plus some additional conditions. Companies will be required to pay monthly if their income exceeds $100 million ($20 million if they are the head company in a consolidated group or required to remit GST monthly). Companies can pay the amount notified by the ATO if their income is less than $2 million, they are a small business entity (or would be if the turnover limit was $50 million), or they could pay an annual instalment but chose not to.

Superannuation funds

PAYG instalments for superannuation funds are generally paid quarterly. Superannuation funds can choose to pay an annual instalment if they meet the criteria that apply to individuals noted above. Superannuation funds will be required to pay monthly if their income exceeds $100 million ($20 million if they are required to remit GST monthly). Superannuation funds can pay the amount notified by the ATO if their income is less than $2 million or they could pay an annual instalment but chose not to.

PAYG Withholding

Pay as you

go (PAYG) withholding is a system for withholding amounts from payments to employees, other individuals
and businesses. An entity will have withholding obligations if the entity:

Has employees, including company directors and officeholders
Has other workers such as contractors, and voluntarily agrees to withhold tax from payments to them
Makes payments to other businesses, if they don't quote an Australian business number (ABN) to the entity,
or
Makes certain other payments that are subject to withholding

If you are an employer or run a business and withhold amounts from payments, you need to:

Register for PAYG withholding
Register as an employer of working holiday makers (417 or
462 visa's) if applicable
Withhold amounts from wages and other payments
Report to the ATO (generally using single touch payroll (STP))
Lodge activity statements and pay the withheld amounts to the Australian Taxation Office (ATO)
For amounts not reported using STP, provide payment summaries to employees and other payees, and
For amounts not reported using STP, provide the ATO with an annual report once each income year has ended

Paid Parental Leave

The government-funded Paid Parental Leave scheme provides financial support for
parents to take up to 18 weeks off work following the birth or adoption of a child, with pay at the National
Minimum Wage. Dad and Partner Pay provides eligible working dads or partners
with up to two weeks of pay at the National Minimum Wage.

Employers receive funds from the Department of Human Services and pay eligible employees in the same way they would normally pay salary or wages.

Rates and Calculators

The Australian Taxation Office (ATO) provides a variety of rate tables, tax calculators, and other tools on many topics, including the following:

MORE: To access these tools, navigate to the Calculators & Tools section of the ATO web site.

Rental Properties

Top 10 tips to help rental property owners avoid common tax mistakes

Whether you use a tax agent or choose to lodge your tax return yourself, avoiding these common mistakes will save you time and money.

Click here to view the top 10 tips on the ATO website.

You can download this information
in portable document format (PDF) – Top 10 tips to help rental property owners avoid common tax
mistakes (PDF 148KB).

Reportable Tax Payments

Some business in certain industries need to report to the ATO the payments made to contractors. The reporting is
made in the taxable payments annual report and is due by 28 August each
year.

The industries covered include:

Building and construction services
Cleaning services for contractor payments
Courier services for contractor payments
Road freight services for contractor payments
Information technology (IT) services for contractor payments
Security, investigation or surveillance services for contractor payments
Electronic distribution platforms in relation to taxi travel (as defined in the GST Act, which includes
ride-sourcing) and short-term accommodation (from 1 July 2023)

The taxable payment reporting system will extend to asset sharing, food delivery, task-based platforms and other platforms (other than marketplaces) from 1 July 2024.

Single Touch Payroll

Single

Touch Payroll (STP) is a reporting framework for employers to provide payroll
information to the ATO. It is embedded in most payroll software programs and allows for reporting of the
following obligations:

Salary and wages, including foreign employment income
Payments under labour mobility programs, labour hire arrangements and CDEP scheme
Termination payments (including ETPs, lump sum payments for unused leave, redundancy, and early retirement
amounts)
Paid parental leave and dad and partner pay
Reportable superannuation contributions and reportable fringe benefits can be reported using STP
Salary sacrificed amounts
Superannuation liability
Tax offset amounts
Foreign tax paid
Voluntary agreements

For most employers, the STP report is required at or before the time the payment is made or the date the PAYG withholding is required. Use of STP allows employees to see their year-to-date salary and superannuation data via myGov (when linked to the ATO).

STP data is also shared with Services Australia and other Government agencies.

Small Business Entity Concessions

Small businesses with an annual turnover of less than $10 million may qualify for a range of tax concessions
(although the threshold may be lower or higher based on the concession). If your business is eligible you can use the concessions that suit you. For certain concessions, the threshold has been increased from $10
million to $50 million. You may have to satisfy additional conditions and will need to check whether you qualify
for the concessions each tax year.

Eligible businesses can use the concessions outlined below.

CGT 15-year asset exemption*

If you are 55 or older and retiring and your business has owned an asset for at least 15 years, you won't pay capital gains tax when you sell the asset.

CGT 50% active asset reduction*

If you have owned an asset to conduct your business, you will only pay tax on 50% of the capital gain when you sell the asset. For individuals (including partners in partnerships and beneficiaries of trusts), this reduction applies in addition to the standard* 50% CGT discount, thereby reducing the taxable amount to 25% of the capital gain.

* For foreign or temporary residents, a reduced CGT discount between 0-50% applies depending on individual circumstances.

CGT retirement exemption*

There is a CGT exemption on the sale of a business asset (up to a lifetime limit of $500,000). If you are under 55, money from the sale of the asset must be paid into a complying superannuation fund, or retirement savings account.

CGT rollover*

If you sell a small business asset and buy a replacement, you can roll over your CGT liability to the value of the replacement asset. This means you won't pay any CGT owing until you sell the replacement asset.

Simpler depreciation rules******

You can usually pool your assets to make depreciation calculations easier.

You can also immediately write-off – deduct the full cost in the year you buy them – most depreciating assets that cost less than a certain limit. The limits are:

From 1 July 2011 to 30 June 2012	$1,000
From 1 July 2012 to 31 December 2013	$6,500
From 1 January 2014 to 7.30 pm on 12 May 2015	$1,000
From 7.30 pm on 12 May 2015 to 28 January 2019	$20,000
From 29 January 2019 to 7.30 pm on 2 April 2019	$25,000
From 7.30 pm on 2 April 2019 to 11 March 2020	$30,000
From 12 March 2020 to 31 December 2020 (must be first used by 30 June 2021)	$150,000
From 6 October 2020 to 30 June 2023, full expensing applies to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets	No limit
From 1 July 2023 to 30 June 2024 (this has not yet passed Parliament)	$20,000
From 1 July 2024 onwards (or 1 July 2023 if the $20,000 limit does not pass Parliament)	$1,000

Simpler trading stock rules*****

If the value of your trading stock has not increased or decreased by more than $5,000 over the year, you can choose whether or not to do an end-of-year stock take.

Immediate deduction for certain prepaid business expenses***

You can claim an immediate deduction for prepaid business expenses if the payment covers a period of 12 months or less and ends in the following income year.

Immediate deduction for certain business start-up expenses***

You can claim an immediate deduction for certain business start-up expenses, such as professional expenses and legal and accounting advice.

Two-year amendment period*****

The time limit for the Commissioner or the taxpayer to amend an income tax assessment of an individual or small business is two years, instead of the standard four years.

Accounting for GST on a cash basis*****

You don't need to account for GST on a sale you make until you receive payment for the sale. Equally, input tax credits for purchases can only be claimed when you have paid for the purchase.

Annual apportionment of GST input tax credits

If you purchase items you use partly for private purposes, you can claim full GST credits for these on your activity statements. You can then make a single adjustment to account for the private use percentage at the end of the year.

Paying GST by instalments****

You can pay GST by instalments the ATO calculates for you and can vary this amount each quarter if required.

Paying GST annually

You can pay GST annually if you are voluntarily registered for GST.

FBT car parking exemption****

In some cases you may be exempt from FBT for employee car parking.

FBT exemption****

Multiple work-related portable electronic devices (e.g. laptop computers) provided to your employees are exempt from FBT.

PAYG instalments based on GDP amount*****

All individuals and small business entities can pay fixed quarterly instalment amounts as calculated by the ATO based on their business and investment income in their most recently assessed tax return.

Lower company tax rate***

Base rate entities pay company tax at 25% rather than 30%.

Small business income tax offset **

Individuals who receive business income other than via a company are entitled to a tax offset.

Small business technology investment boost***

From 29 March 2022 to 30 June 2023, small businesses can deduct an extra 20% of expenditure incurred for the purposes of digital operations or digitising its operations. This can be business expenses (such as cyber security systems or subscriptions to cloud based services) and depreciating assets (such as portable payment devices). There is a limit on this expenditure of $100,000 per income year.

Small business skills and training boost ***

From 29 March 2022 to 30 June 2024, small businesses can deduct an extra 20% of expenditure incurred for the provision of eligible external training courses to their employees.

* The annual turnover threshold for the CGT concession is $2 million.

** The annual turnover threshold for the small business income tax offset is $5 million

*** The annual turnover threshold for these concessions is $50 million

**** The annual turnover threshold for these concessions is $2 million

****** Please note that the turnover test for the instant asset write-off has changed over time. For more details, see here.

MORE: For more information, see the Small business entity concessions essentials section
of the ATO web site.

State Taxes

Payroll tax

Payroll tax is a state tax on the wages paid by employers when the total wages exemption threshold is exceeded. Exemption thresholds vary between states. The definition of wages generally includes employer superannuation contributions and fringe benefits, although the definition also varies between states.

NOTE: Payroll tax is not the same as PAYG withholding tax collected by the Australian Taxation Office (ATO). PAYG is the tax deducted from an employee's income and forwarded to the ATO.

The following organisations are generally exempt from payroll tax, provided specific qualifying conditions are met:

Religious institutions
Public benevolent institutions
Public or non-profit hospitals
Non-profit non-government schools, and
Charitable organisations

Land tax

All landowners, except those in the Northern Territory, may be liable for land tax. In the Australian Capital Territory land tax is levied on lessees under a Crown lease, because land generally cannot be acquired under freehold title. Landowners are generally liable for land tax when the unimproved value of taxable land exceeds certain thresholds (excluding the ACT).

In some states, deductions and rebates are available, depending on how the land is used. Principal places of residence are generally exempt from land tax, however this depends on particular qualifying criteria (these vary between jurisdictions).

Land owned and used by the following types of organisations might be exempt from land tax:

Non-profit societies
Clubs and associations
Religious institutions
Public benevolent institutions, and
Charitable institutions

Stamp duty

Stamp duty is levied on particular written documents and transactions, including:

Motor vehicle registrations and transfers
Insurance policies
Leases
Mortgages
Hire purchase agreements
Property transfers (e.g. transfer of businesses, real estate, and particular shares)

The stamp duty rate varies according to the type of transaction and its value. Depending on the nature of the transaction, certain concessions and exemptions may be available.

State tax web sites

Particular deductions and exemptions vary between states for all duties. For additional state-specific information, visit the applicable state web site:

Superannuation Contributions for High Income Earners

Additional tax on superannuation contributions at the rate of
15% is imposed on individuals whose combined income and contributions are greater than a certain threshold. This
threshold is $250,000 and for affected individuals, this effectively increases the rate of tax on their
superannuation contributions from 15% to 30%.

The additional tax can be paid personally by the taxpayer or the taxpayer can apply to his/her superannuation
fund to have the necessary amount released and paid to the ATO.

Superannuation Guarantee

In addition to employees' salaries and wages, employers are required to pay superannuation contributions on behalf of all eligible employees. This compulsory contribution is called the superannuation guarantee. The definition of employee for this purpose includes certain contractors. The minimum contribution is calculated with reference to each eligible employee's earnings base (usually their ordinary time earnings) and must be paid within 28 days after the end of each calendar quarter, although it is proposed to bring this forward to the time the employee’s salary is paid. There is no minimum earnings amount, although there is a maximum amount to ensure that excess contributions are not made. Employers must also provide employees with a choice of superannuation fund.

The minimum contribution rate is 11% from 1 July 2023 and will continue to increase by 0.5% each financial year until it reaches 12% from 1 July 2025.

Employers are generally required to pay superannuation contributions for employees if they are:

Under 18 years old, you pay it if they work more than
30 hours in a week and note that earnings amount is not relevant
Over the age of 18 (no upper age limit applies)

If an employer fails to make the minimum contributions for a quarter by the due date, the employer is liable for the Superannuation Guarantee Charge (SGC). The SGC comprises the unpaid contributions calculated on a higher earnings base, plus an interest charge (which is credited to the employee's superannuation account) and an administration fee. The employer cannot claim an income tax deduction for the SGC.

The Australian Taxation Office (ATO) provides the following tools/guidelines to help you understand and meet your obligations:

Superannuation Guarantee Charge (SGC) statement and
calculator - calculate the SGC liability and prepare the SGC statement
How to work it out: employee or contractor - determine
whether new or existing workers are contractors or employees (for tax and super purposes)
Superannuation guarantee eligibility decision tool - see
whether an employer needs to make super contributions for employees
Superannuation guarantee contributions calculator -
calculate how much superannuation an employee should be contributing for eligible workers

Tax file numbers

A tax file number (TFN) is a unique number issued to each taxpayer by the ATO. The TFN is used to identify taxpayers, detect non-disclosure of income and to enable the ATO to match the details of income disclosed in a taxpayer’s return with details it receives from other sources. While this is primarily in the areas of employment and investment income, it is also used in relation to the paid parental leave scheme and other areas not directly related to tax (for example, quotation of a TFN may be a precondition to receiving a Commonwealth income support payment and may be necessary for enrolment at a higher education institution or in an Open Learning course). Quotation of TFNs is also relevant in other tax areas, such as superannuation.

While there is no obligation for a taxpayer to quote a TFN in relation to employment and investments, in many circumstances the payer will be required to withhold tax from any payment at the top marginal rate plus the Medicare Levy where the recipient’s TFN has not been quoted.

There are significant penalties for the abuse of the TFN system.

Instruction on how to apply for a TFN are on the ATO website: here for individuals and here for non-individuals.

Taxpayer Penalties

Taxpayers who do not meet their tax obligations may face penalty or interest charges. To avoid these charges, ensure you pay the full amount of tax you owe by the due date.

The main charges for failing to meet tax obligations are the:

General interest charge (GIC) - applies to a variety of situations, whenever amounts
owing to the Australian Taxation Office (ATO) are paid after the due date
Shortfall interest charge (SIC) - applies to a variety of situations where a
tax liability is increased in an amended assessment
Failure to lodge on time penalty (FTL) - administrative
penalty which may be applied if a taxpayer fails to lodge a return, statement, notice, or another document
with the ATO by the due date

Additional penalties include failing to:

Keep or retain required records
Retain or produce required declarations
Provide access and reasonable facilities to an authorised tax officer
Apply for or cancel GST registration when required
Issue a required tax invoice or adjustment note
Register as a PAYG withholder when required
Lodge a required activity statement electronically
Pay a required amount electronically

If a taxpayer is audited and an amended assessment is raised, further penalties of up to 75% of the additional tax levied may be applied, depending on the severity of the offence. Examples include making a false or misleading statement, not taking reasonable care, or taking a position that is not reasonably arguable in a tax return or other document.

Wine Equalisation Tax

Wine Equalisation Tax (WET) is a tax on wine levied at 29% of the taxable value of wine. The taxing point is the last wholesale sale, or a retail sale or application for own use (e.g. tastings) when there is no wholesale sale. The taxable value is the actual sale price (excluding WET and GST) for wholesale sales, or a notional equivalent value in the other situations.

WET affects wine manufacturers, wholesalers, and importers. Retailers do not have a WET liability unless they make their own wholesale wine. WET is paid as part of the entity's activity statement, the tax period is the same as the entity's tax period for GST (which may be monthly, quarterly or annually).

The Producer Rebate scheme entitles wine producers to a rebate of WET for up to $500,000 of
domestic sales each financial year. There is a modified producer rebate scheme for New Zealand wine producers.

Generally, WET is included in the price that retailers such as bottle shops and restaurants pay when purchasing wine. The retailer is not entitled to claim back the cost of the WET, as the WET is built into the price the retailer pays and then passed on to the consumer.

WET applies to the following alcoholic beverages:

Grape wine (including sparkling and fortified wine, marsala, vermouth, wine cocktails, and creams)
Other fruit wines and vegetable wines (including fortified fruit and vegetable wines)
Cider and perry
Mead (including fortified mead) and sake

MORE: See the ATO web site for more information on Wine Equalisation Tax and for instructions on filling out the WET section of the Activity Statement.