Historically, ATO interest charges, such as General Interest Charges (GIC) and Shortfall Interest Charges (SIC), have been tax deductible for businesses and individuals. These charges often arise from underpaid tax, late payments, or adjustments to prior tax returns.

However, from 1 July 2025, ATO interest charges will no longer be eligible for tax deductions. This means businesses and individuals will bear the full cost of these charges without the benefit of reducing their taxable income.

Why Is This Change Being Introduced?

The decision to remove the deductibility of ATO interest aligns with the government’s broader efforts to encourage timely tax compliance. By eliminating the tax advantage associated with ATO interest, the measure aims to promote more proactive financial management and timely payment of tax obligations.

What This Means for Businesses and Individuals

1. Paying More Tax
ATO interest charges will hit cash flow and profits harder. Businesses will need to adjust their budgets since they can no longer rely on tax deductions to soften the blow.

2. More Focus on Tax Planning
With bigger financial impacts, it’s more important than ever to stay on top of tax reporting and manage finances carefully.

3. Reconsider Borrowing Choices
Businesses may need to rethink how they borrow money to cover tax bills due to the higher cost of ATO interest. We confirm that the non-deductibility of interest expense only applies to ATO forms of interest, and not to other forms of external finance, such as from banks or suppliers.

Example

The following table outlines the impact of this change on the tax position on small to medium trading companies.

For every $10,000 in ATO interest charges, small to medium trading companies will lose a tax benefit of $2,500.

Preparing for the Change

1. Review Your Tax Payments
Be aware of your upcoming tax liabilities.

2. Manage Cash Flow Better
Review how you handle cash to ensure you’ve got enough set aside for tax payments. Setting up a tax savings account could help.

3. Plan Ahead
Start preparing now for the changes coming on 1 July 2025. Factor these costs into your budget to avoid surprises later.

4. Changing Tax Registration Cycles
Opt in to pay GST and PAYG Withholding monthly, to reduce large quarterly tax bills. We note that some entities may already be required to lodge and pay monthly by law.

Final Thoughts

The upcoming non-deductibility of ATO interest represents a fundamental shift in the tax framework, placing a greater emphasis on timely compliance and proactive cash flow planning. By understanding the implications and preparing early, businesses and individuals can minimise the impact of this change.

If you would like to understand more about how this change may affect your specific circumstances, we can assist in reviewing your current strategies and identifying opportunities for improvement. Contact us to find out more.

If you employ staff, here are the important dates and obligations to remember throughout the year, to set yourself up for success.

Super guarantee (SG)

• 28 January, 28 April, 28 July, and 28 October are the quarterly due dates for making SG payments.
• The SG rate is currently 11.5% of an employee’s ordinary time earnings. From 1 July 2025, the SG rate will increase to 12%.
• Ensure SG for your eligible employees is paid in full, on time and to the right super fund. If you don’t, you’ll need to lodge a super guarantee charge (SGC) statement and pay the SGC to the ATO.

Fringe benefits tax (FBT)

31 March 2025 marks the end of the 2024–25 FBT year. There are 4 key steps to nail your obligations for FBT tax time.

1. Identify if you’ve provided a fringe benefit.
2. Determine the taxable value to work out if you have an FBT liability.
3. Lodge an FBT return and pay any FBT owed (if you have a liability). As your reregistered tax agent we receive a lodgement extension, giving you more time to lodge and pay.
4. Keep the right records to support your FBT position.

Pay as you go (PAYG) withholding

Tax rates may increase from 1 July 2025. Use the tax withheld calculator to calculate how much you need to withhold from your employees’ payments.

Single touch payroll (STP)

Finalise your STP data by 14 July 2025 for the 2024–25 year.

This ensures your employees have the right information they need to lodge their income tax returns.

If you have any closely held payees, you may have a later due date for those payees only. Remember to finalise all employees you’ve paid in the financial year.

You can also check out the ATO’s range of resources for employers.

Remember, as your registered tax agent we can help you with your tax and super obligations, just contact us to find out more.

The ATO will acquire rental bond data from State and Territory rental bond regulators bi-annually for the 2024 to 2026 income years, including details of the landlord and tenant, managing agent identification details, and rental bond transaction details.

The objectives of this program are to (among other things) identify and educate individuals and businesses who may be failing to meet their registration or lodgment obligations.

The ATO expects to collect data on approximately 2.2 million individuals each financial year.

The indexation rate for study and training loans is now based on the Consumer Price Index (‘CPI’) or Wage Price Index — whichever is lower.

This change has been backdated to indexation applied from 1 June 2023 for all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other study or training support loan accounts.

Consequently, indexation rates for 2023 and 2024 have changed to:

•       3.2% for 1 June 2023 (reduced from 7.1%); and
•       4% for 1 June 2024 (reduced from 4.7%).

Individuals who had a study loan that was indexed on 1 June 2023 or 1 June 2024 do not need to do anything.

Individuals whose study loan is in credit after the adjustment may receive a refund for the excess amount to their nominated bank account, if they have no outstanding tax or Commonwealth debts.

With the holiday period just around the corner, we’re reminding you how to keep your business premises and client information secure if you’re closing the workplace over the holiday break.

We’ve made a list (and checked it twice) of simple things to protect your business, both on site and online:

• Safely secure all physical files (or dispose of them appropriately). It only takes a few moments for thieves to photograph hard copies of your clients’ files so it’s crucial that all physical information is stored in locked storage units or shredded.
• Log out of all devices.
• Securely store your devices.
• Ensure all devices are using the latest software. Cyber criminals use known weaknesses in systems or apps to hack into devices. Turn on automatic updates to take the guesswork out of updating work devices.

Our list above is not an exhaustive list, and it’s important you take all necessary steps to ensure your information is protected.

The Foreign resident capital gains withholding (FRCGW) rules are changing from 1 January 2025.

Currently, Australian residents selling property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more.

Under the changes:

• the withholding rate will increase from 12.5% to 15%
• the $750,000 property value threshold will be removed, and the withholding rules will apply to all property sales.

The changes apply to contracts entered into on or after 1 January 2025.

FRCGW is designed to support the collection of tax liabilities owed by non-residents selling Australian property.

All Australian residents selling property will require a clearance certificate from the ATO, or withholding will apply to the transaction. If an Australian resident vendor doesn’t provide a clearance certificate by settlement, 15% of the sale price must be withheld by the purchaser and paid to the ATO.

If an amount is withheld from the sale price, the vendor will only receive any refund due after their next income tax return is processed at tax time.

Most clearance certificates will issue within a few days, but it is important to apply early because some can take up to 28 days to issue. They are valid for 12 months, so the vendor doesn’t need to wait until they have signed a contract.

Foreign resident vendors may be able to apply to vary the withholding rate.

There are very limited circumstances where you can legally access your super early, and the ATO is reminding taxpayers that “paying bills and buying Christmas presents doesn’t make the list.”

Generally, you can only access your super when you:

• reach preservation age and ‘retire’; or
• turn 65 (even if you are still working).

To access your super legally before then, you must satisfy a ‘condition of release’.

SMSF members who illegally access their benefits may be liable for additional income tax and administrative penalties, and they could be disqualified as a trustee.

For taxpayers who have illegally accessed their super, returning it to the fund may be considered a new contribution.  Depending on their contribution caps, this may result in additional tax on excess contributions.

You should beware of people promoting ‘early access schemes’ to withdraw your super early (other than by legal means).

You can protect yourself from promoters of such schemes by:

• stopping any involvement with the scheme, organisation or person who approached you;
• not signing any documents, and not providing any of your personal details such as your tax file number; and
• making a ‘tip-off’ to the ATO online or by phoning the ATO on 13 10 20.

While the ATO knows most small businesses try to report correctly, it understands that mistakes can happen.  The ATO advises taxpayers that it is important to get the following ‘basics’ right:

• using digital tools and business software to help track and streamline processes to increase the efficiency of their business;
• keeping accurate and complete records, which will help taxpayers meet their tax and super obligations and make lodging easier; and
• getting the right advice from trusted resources such as their registered tax professional, which can help taxpayers navigate change and uncertainty at any stage of the business life cycle.

Year-end (and other) staff parties

Editor:  With the well-earned December/January holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.  However, there are important issues to consider, including the possible FBT and income tax implications of providing ‘entertainment’ (including Christmas parties) to staff and clients. 

FBT and ‘entertainment’

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the ‘actual method’ or the ’50/50 method’, rather than the ’12-week method’.

Using the actual method

Under the actual method, entertainment costs are normally split up between employees (and their family) and non-employees (e.g., clients).

Such expenditure on employees is deductible and liable to FBT.  Expenditure on non-employees is not liable to FBT and not tax deductible.

Using the 50/50 method

Rather than apportioning meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible.

However, the following traps must be considered:

• even if the function is held on the employer’s premises – food and drink provided to employees is not exempt from FBT;
• the minor benefit exemption* cannot apply; and
• the general taxi travel exemption (for travel to or from the employer’s premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of ‘less than $300’ that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.

The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.

However, entertainment expenditure that is FBT-exempt is also not deductible.

Editor:  ‘Less than’ $300 means no more than $299.99!  A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all.

The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used: 

• For all 40 employees and their spouses – no FBT is payable (i.e., if the minor benefit exemption is available), however, the party expenditure is not tax deductible.

If the 50/50 method is used:

• The total expenditure is $10,000, so $5,000 (i.e., 50%) is liable to FBT and tax deductible.

Christmas gifts

Editor:  With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled ‘tax-wise’.

Gifts that are not considered to be entertainment

These generally include a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers or a pen set, etc.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

• gifts to employees and their family members – are liable to FBT (except where the ‘less than $300’ minor benefit exemption applies) and tax deductible; and
• gifts to clients, suppliers, etc. – no FBT, and tax deductible.

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie, etc, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

• gifts to employees and their family members – are liable to FBT (except where the ‘less than $300’ minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
• gifts to clients, suppliers, etc. – no FBT and not tax deductible.

 Non-entertainment gifts at functions

Editor:  What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (i.e., the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible.

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

• 50% of the total cost of food and drink is liable to FBT and tax deductible; and
• in relation to the gifts:

         –     the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and

 –      as the gifts are not entertainment, the cost is tax deductible.

Editor:  We understand that this can all be somewhat bewildering, so if you would like a little help, just contact our office.

If you’re registered for GST and you make a business purchase, you may be eligible to claim the GST you paid in the purchase price as a credit.

GST credits offset the GST you need to pay when you lodge your business activity statement (BAS). This will reduce the amount of GST you owe and may result in a refund.

If you’re also eligible for fuel tax credits, you can claim credits for the tax included in the price of fuel you use in your business.

The best way to ensure you don’t miss out on any credits is to lodge your BAS on time.

How long do you have to claim?

You need to claim your GST and fuel tax credits within 4 years of the due date of the earliest BAS in which you could have made your claim for the relevant credit. If you don’t claim the credits within that time, you’ll no longer be eligible to claim them.

The credits must be included in your assessment within the 4-year credit time limit. Lodging an amendment to your original assessment or a private ruling request does not mean you have claimed your GST credits and fuel tax credits.

There are a number of options for claiming a credit other than requesting us to amend your original assessment to include the credits. You can:

• Claim the credits yourself by including them in your next BAS, provided that BAS is lodged within the 4-year credit time limit.
• Lodge a Revised BAS (RBAS) for the original period via Online Services during the 4-year credit time limit (however, this is treated the same as an amendment request and so the credits will not be included in your assessment until the RBAS is processed by us.
• Lodge a valid objection during the 4-year credit time limit to preserve your entitlement to those credits.

We recommend you consider your options early and do not leave your credit claims to the last minute because you risk your credit expiring.

Remember to keep accurate records to support your claims and we are here to help as your trusted registered agent.

To learn more about the 4-year credit time limit, visit Time limit on GST credits.

Fuel tax credit rates changed on 1 July 2024 and 5 August 2024.