If January is any reflection of how quickly the rest of this year is going to go, don’t even bother taking down your Christmas decorations.
If you haven’t lodged our 2024 Tax Return already now is a good time to get that information in. For most people, that deadline will be approaching in May – which also happens to be one of our busiest times of the year so we recommend not leaving this to the last minute. The ATO can apply penalties for returns lodged after the due date. These penalties are applied at the ATO’s discretion and cannot always be overturned. For individuals, penalties are applied in units of $222 for each 28-day period the return is overdue for a maximum of 5 units (more than 112 days late = $1,110.00 penalty!). If you’re not sure what information you need or would like to make an appointment, please don’t hesitate to contact the office.
If you’re in business and have employees, could we please flag FBT on your radar as the end of the FBT year will be coming up 31 March, we’ll be reaching out soon to our business clients with our annual checklists to we can pick up any problems before they become nasty surprises!
Bon Voyage Carolina & Cathie! ✈
Our amazing Carolina will be jet setting off to Europe for the whole month of February and will return to the office on 10 March.
Our MVP Cathie is also taking some much-needed R&R. She’ll be out of the office for 2 weeks from 10 February and due back 25 February.
Both Carolina and Cathie’s inboxes will be monitored during their absence so unfortunately that means you’re stuck with Jess until they return.
A Quick Reminder for our Quarterly BAS clients…
If you haven’t got your December BAS information in just yet these will be due for lodgment and payment to the Tax Office on 28 February. If you haven’t made a start on this yet now’s a good time to get cracking before it’s too late. We’ll be following up with reminders shortly.
Employment Termination Payments
What is an Early Termination Payment?
An Employment Termination payment (ETP) is a lump sum payment made to an employee upon dismissal or death. The two types of ETP’s are life benefit ETP’s and death benefit ETP’s. This lump sum may contain a number of different payments.
What is Included in an ETP?
Employee Termination Payments can include many different types of payments in the lump sum. Some of these are genuine redundancy, early retirement scheme payments that exceed the tax-free limit, invalidity payments, severance or gratuity pay, unused sick leave & RDO’s, payments in lieu of notice of termination and compensation for loss of job or wrongful dismissal.
What is Excluded in an ETP?
With all the payments that may be included in an ETP, it can be confusing as to what should and should not be included in an ETP. Payments that should not be included in an ETP include unused annual & long service leave, superannuation benefits, foreign termination payments and the tax-free part of genuine redundancy payments or early retirement scheme payments.
How it is Taxed?
ETP’s have up to three tax treatments:
- Tax Free – if part of the payment is for invalidity to work done before 1 July 1983
- Concessionally taxed – up to the cap limit
- At the top marginal rate – this is 47% for any amounts over the relevant cap
You are required to withhold from the taxable component, however there is no withholding requirements for the tax-free component. The tax-free component applies if part of the payment relates to employment before 1 July 1983 or invalidity, which is if the employee suffered a permanent disability and has had to cease work.
The taxed component is taxed at the concessional rate, up to the ETP cap ($245,000 for the 2024-25 income year) or the whole-of-income cap ($180,000). The cap used depends on the type of payment being made, and whether it is subject to the ETP cap only, or both caps. Amounts above the ETP cap are taxed at the top rate.
The concessional rates for withholding are 32% for people under the preservation age, 17% for those over the preservation age (excluding death benefit ETP’s) and 47% for amounts above the relevant cap for all ages.
Fringe Benefits Tax (FBT)
With the end of the FBT year upon us, some of our clients will be hearing from us soon with our annual checklists to make sure you haven’t’ forgotten to mention something to us during the year. FBT is a sneaky tax that creeps up on employers for providing their employees with additional non-cash benefits. It’s calculated based on the value of the benefit provided and is subject to the FBT rate which is a whopping 47%!
Examples of fringe benefits can include:
- Use of a company car for personal purposes
- Free or discounted goods and services provided by the employer
- Private health insurance contributions
- Housing or accommodation provided by the employer
Employees can include:
- Current, future or past employees,
- Director of a company, or
- Beneficiary of a trust who works in the business.
Unlike the financial year, the FBT year operates from 1 April to 31 March. Employers must review and report any FBT to the ATO by 21 May of each year.
Common fringe benefits this year include the private use of motor vehicles, entertainment by way of food, drinks or recreation, and home office expenses.
There is often a misunderstanding when determining business and private use on motor vehicle which is the key aspect of determining FBT. If a motor vehicle is provided by the employer to an employee to perform their duties but is also used for private purposes, FBT is applied to the private portion of the vehicles use. As such, it’s imperative to keep a log book to record the private use of the vehicle.
Do you have outstanding debts with ATO?
Do you have an outstanding debt with the ATO and keep receiving reminder letters, text messages or messages in your myGov inbox requesting payment? It is crucial that you do not ignore them.
We encourage clients to urgently contact the ATO if they are experiencing financial difficulties in paying their tax obligations. In some circumstances, we can liaise with the Tax Office directly on your behalf to organise a payment arrangement.
Just because you stop receiving letters, doesn’t mean that the debt has gone away. The ATO can deem smaller debts uneconomical to pursue and will put the debt on hold. The ATO may offset the debt for now, causing it to disappear off your tax account but that does not mean that it just goes away. The debt on hold can be re-raised at a later date if the taxpayer becomes entitled to any credits.
Please note, that the law requires the ATO to offset credits against any tax debt clients have with them. In addition to this, if debt is owed to other Government departments (Child Support and Services Australia – previously Centrelink), these debts are settled prior to any monies being refunded back to the individual. However, there are some particular circumstances where the ATO may reconsider this decision, such as:
- You may already have an active payment plan for all of outstanding debts.
- Your tax debt has a future due date.
- The tax debt is for a director penalty liability.
- Your available credit is a Family Tax Benefit amount.
- You have been granted a deferral of recovery action.
By keeping your lodgments and payments up to date with the Tax Office, you are ensuring you are fully away of any money that you may owe at the end of the tax year. According to the ATO, on-time lodgments not only provide certainty to taxpayers about their net tax position, but also allow the ATO to help and assist clients who are in financial hardship.
If you have doubts regarding your current balance, please or require assistance with dealings with the ATO, please don’t hesitate to call us on 07 5596 5758 to see if we can help.