Happy FY20! What you need to know about changes from 1 July
Another financial year dawns and already we’re inundated with changes to tax, superannuation and payroll.
From tax concessions to a super overhaul, plus changes to the minimum wage and child care subsidies, use this guide to help you get across everything you need to know.
INCOME TAX RELIEF ON STANDBY
Lower and middle-income earners get a tax break of up to $1,080 for single earners or up to $2,160 for dual income families, after lodging a tax return.
INSTANT ASSET WRITE-OFF INCREASED TO $30,000
This year, the instant asset write-off increased, but a recent survey found a quarter of business owners were unaware, yet the write-off expense allows businesses to purchase items costing up to $30,000 each and get an immediate tax reduction when 1 July ticks over. The instant asset write-off is a small business boost because if you’re buying tax-deductible office equipment, computers, laptops, tools, motor vehicles or utes, you write off the cost completely against your tax.
INACTIVE SUPER ACCOUNTS CLOSE 1 JULY
From 1 July insurance held in an inactive superannuation fund will be cancelled, unless the owner notifies the fund that they wish to retain their insurance cover. An ‘inactive’ superannuation account is one that has not received a contribution or rollover for 16 months. While this measure will be of benefit to many, it poses a risk to those who wish to retain their cover which, once lost, it may not be able to be recovered.
SUPER CHANGES IMPACTING YOUNG WORKERS
Further super changes from 1 July mean default life insurance attached to super funds will close unless the members decide to opt in. The idea behind these changes was to prevent smaller balances from being eroded by fees but unfortunately what it will also do is expose a new group of people to the risk of being underinsured, such as young workers and tradies.
Having insufficient insurance cover can have life-changing impacts if you become injured and can no longer work. Inexperience can play a huge part in subjecting someone to that risk, as opposed to having income protection insurance, for example, which can have 75% of a wage paid while they recover.
SUPER CHANGES IMPACTING LIFE INSURANCE FOR MATERNITY OR PATERNITY LEAVE
Workers on maternity or paternity leave often don’t make contributions into super so, under new changes, if it is longer than 16 months since the last payment into their account then their insurance will be cancelled. Parents who take extended leave of 2+ years or who don’t return to the workforce until their children are much older may be caught out from 1 July.
OTHER SUPER CHANGES
- Low balance accounts with less than $6,000 will have fees capped at 3% to avoid whole accounts being gouged by fees
- All super fund exit fees will be banned
- Those retired and aged between 65 and 74 can make voluntary super contributions if they no longer meet work test requirements and their super balance is under $300,000
STUDENT LOAN CHANGES
University grads begin repaying their student debt earlier from 1 July when the HELP repayment threshold is lowered to $45,881 from $51,957. Those who fall into the minimum repayment threshold will have to pay back their debt at a rate of 1% a year.
PENALTY RATES AND MINIMUM WAGE
The Minimum Wage Panel handed down its minimum wage decision on 30 May 2019. From the first pay period commencing on or after 1 July 2019, the National Minimum Wage increased to $740.80 per week, or $19.49 per hour.
PAYROLL TAX RELIEF
Approximately 1,500 Queensland businesses will receive tax relief with the state government raising the payroll threshold from $1.1 million to $1.3 million.
CHILD CARE SUBSIDY RATES
Changes for Child Care Subsidy income thresholds include:
- Up to $68,163 — 85%
- More than $68,163 to under $173,163 — down to 50%
- $173,163 to $252,453 — 50%
- $252,453 to $342,453 — down to 20%
- $342,453 to $352,453 — 20%
- $352,453 equal or above — 0%
FAMILY TAX BENEFIT CHANGES
The higher income free area for the Family Tax Benefit Part A has increased from $94,316 to $98,988. The benefit will reduce by 30% for every dollar families earn over $98,988.
COMMON MISTAKES AT TAX TIME
Good record-keeping goes a long way in assisting with claims in the event of a dispute with the ATO. Cases before the courts and tribunals have demonstrated that the onus of proving a tax claim falls on the taxpayer. Correct records allow you to claim a portion of your home bills such as electricity, internet, mobile and any depreciation on equipment like computers and printers.
WORK EXPENSES TO WATCH
- The ATO says that clothing claims are up nearly 20% over the last five years with people either making mistakes or deliberately over-claiming. Common mistakes include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated. Read more
- If you’re an employee who regularly works from home, you may be able to claim a deduction for expenses relating to that work. Deductions for home office use, including claiming for “occupation” costs like rent, rates and mortgage interest, which are not allowable unless you’re actually running a business from home. Read more
- Overtime meal claims
- Union fees and subscriptions
- Mobile phone and internet costs, particularly people who claim the whole (or a substantial part) of the bill for their personal mobile as work-related.
- Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2019. You should make a record of your odometer reading as at 30 June 2019 and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a log book can generally be used for a 5-year period. An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method. Read more
- Incorrectly claiming deductions under the rule that allows taxpayers who have incurred work-related expenses of $300 or less in total to make a claim without receipts.
DODGY PROPERTY DEDUCTIONS
ATO audits of rental deduction claims double this tax time as the Tax Office reinforces its claims that nine out of 10 deductions contain errors. The ATO continually increases its focus on holiday home investors and, in particular, whether they are correctly claiming deductible expenses.
SHARING ECONOMY SHAKE-UP
According to the Grattan Institute report published in 2016, the rise of the sharing economy is expected to provide Australians with the potential to save more than $500 million on taxi bills, as well as the opportunity to put underused homes, cars and other assets to use. Platforms such as Uber and Airbnb also create an income opportunity for those on the fringe of the job market and provide potential growth in the labour market. As the sharing economy continues to flourish, it is worth taking a look at the relevant business model and the current taxing arrangements.
Accordingly, the ATO is likely to take the view that any income earned by Uber drivers, Airbnb hosts and similar providers is assessable income and should be disclosed unless there are reasonable grounds to consider the activities a hobby.