Here’s a quick rundown of the latest law changes

They say nothing is certain in life except two things – death and taxes.

Australians can probably add a third – the knowledge that come the end of financial year, the rules around superannuation and taxation will inevitably change. It can be hard keeping up with all the latest super and tax rule tweaks so here’s a quick guide to everything you need to know about what’s changing on 1 July 2024.

First, some good news.

Your employer will contribute more towards your super…

If you’re a PAYG employee, your compulsory super guarantee (SG) payment will go up by half a percentage point to 11.5%.

…and you can tip more in as well

There are annual caps – or limits – on how much money you can contribute towards super, both in terms of pre-tax ‘concessional’ contributions and after-tax ‘non-concessional’ contributions.

Both these caps are going up, so if you have any spare funds, you’ll be able to move more of your money into super’s low-tax environment.

• The concessional cap is increasing from $27,500 to $30,000 a year.
• The non-concessional cap is increasing from $110,000 to $120,000 a year.

This means if you have less than $1.66m in your super on 30 June 2024, you might be able to bring forward three years of non-concessional contributions (NCC) up to $360,000.

If you’re lucky enough to have more than $1.66m in your super, these bring-forward rules change – see the table below.

What this means for your super strategies

While the higher concessional cap will allow you to sacrifice more salary into super, the increased SG rate will reduce some of your extra capacity. So, it could be a good time to review any existing salary sacrifice arrangements you have with your employer.

Turning 60 in 2024/25? Here’s what you need to know

Your preservation age is the age you can start to access your super. It’s between 55 and 60, depending on when you were born.

So, if you’re born after 1 July 1964 and you’re turning 60 in the 2024/25 financial year, you’ll be able to access your super for the first time. It’s been a long haul, but you’ve finally made it…congratulations!

• You’ll be able to withdraw larger lump sums if you’re retired without worrying about the low-rate cap of $235,000.
• You’ll enjoy tax-free pension income payments, regardless of whether you have a transition to retirement (TTR) or retirement income stream.

If you’re still working, you won’t have full access to your super until you reach 65. But you can start accessing your super with a TTR strategy which allows you to draw regular income up to 10% but doesn’t allow lump sum withdrawals.

You’ll pay less income tax

The Government’s long-awaited ‘stage 3’ tax cuts are coming into effect on 1 July 2024. While there have been well-publicised changes – lower income earners will receive a higher cut than originally proposed, while higher income earners will receive a lower cut – the bottom line is that all personal income taxpayers will pay less tax.

Your tax cuts from 1 July 2024

Source: https://treasury.gov.au/tax-cuts/calculator

What this means for your EOFY tax strategies

Before 1 July 2024 you’ll still be paying a higher rate of tax. So, you might like to think about bringing forward any tax deductions by:

• making personal deductible contributions to your super using any unused amounts from 2018/19
• prepaying any deductible expenses such as income protection premiums and investment loan interest where possible.

After 1 July 2024 you’ll be paying a lower rate of tax. So, you might like to think about deferring any taxable income from:

• selling an asset that generates a capital gain
• receiving an employment termination payment or leave entitlement
• applying for a First Home Super Saver Scheme release
• making a taxable super withdrawal, such as total and permanent disability under age 60.

We can help

Everyone’s circumstances are different. Chat to us about how to make the most of the super and tax changes for your personal situation.

Current as at May 2024

Here’s a guide to how CGT works and some ways to minimise your tax burden

Capital gains tax is charged on the profit you make from the sale of assets.

CGT can apply to assets you’ve purchased or inherited – shares, investments, land, property (special rules apply to your primary residence), and even collectibles and personal items, depending on what you paid for them¹.

The good news is, if you understand the general ins and outs of CGT in Australia you could reduce the amount you have to pay².

When CGT is payable

When you sell an asset and make a capital gain, the amount is included as part of your personal income for tax purposes.

CGT isn’t a standalone tax. Any capital gains you’ve received need to be declared when you lodge your annual tax return and will then be assessed as part of your total income for the year. The amount of tax you pay will vary depending on what income bracket you fall into.

If you have a shared asset, you need to work out each owner’s individual interest in the asset to determine their personal capital gain or loss³.

How you can reduce CGT

Strategies that lower your total income could help to reduce the amount of tax you pay on any capital gains you make.

One example is making a tax-deductible super contribution. If you’ve sold an asset that you have to pay CGT on and you contribute some or all of that money into super – and claim a tax deduction – this could reduce or even eliminate the CGT that’s owing altogether. There are even catch-up rules that could allow you to tip more tax-deductible contributions into super from up to five previous years – you may have unused amounts from 2018/19 which will expire by 30 June 2024.

It’s a good idea to get across all the rules and limits around tax deductible super contributions.

What happens when you transfer a property

Making a cash gift to family or friends doesn’t trigger CGT. But gifting assets (such as property and shares) generally will trigger CGT – even if no cash changes hands. If you sell, transfer or gift a property for less than it’s worth, you still need to use market value to calculate the capital gain.

There are special cases when it comes to marriage breakdowns and special disability trusts but understanding how it works can be complex. So, it’s a good idea to make sure you’re across the rules and get some expert advice if you need it.

How to calculate your capital gain

Got your calculator ready? Right. Here goes…

Generally, you can calculate your net capital gain by adding up your capital gains over the financial year and subtracting your capital losses (including any from previous years that haven’t been used already) and any CGT discounts or small business concessions you may be entitled to⁴.

A capital gain is typically reduced by 50% when an asset has been held for at least 12 months⁵. So, if you sell an asset you’ve owned for less than a year – such as an investment property or shares in a business – the entire gain will need to be included in your taxable income.

Reviewing your portfolio before EOFY

The end of financial year is fast approaching so it could be a good idea to do a stocktake of your finances to minimise your CGT exposure.

If you received a capital gain from selling any assets during the year you could consider selling underperforming assets. This would realise a capital loss to offset the capital gain.

But you need to be very careful, particularly if you’re planning to immediately buy back the same assets. The ATO monitors these sorts of ‘wash sales’ and could disallow the capital loss. Your best approach is to speak to us or your tax accountant to work out the best approach that’s within the rules.

You should also make sure you’re aware of what the upcoming tax cuts could mean for your CGT exposure.

What tax cuts mean for CGT strategies

Net capital gains forms part of your taxable income. So, tax cuts are good news!

The Government’s long-awaited ‘stage 3’ tax cuts are coming into effect on 1 July 2024. While there have been well-publicised changes – lower income earners will receive a higher cut than originally proposed, while higher income earners will receive a lower cut – the bottom line is that all personal income taxpayers will pay less tax.

Source: https://treasury.gov.au/tax-cuts/calculator

After 1 July 2024 you’ll be paying a lower rate of tax. So, you might like to think about deferring any capital gain from selling an asset. This applies any time you move from a higher tax bracket to a lower one. So, if you’re planning to retire, it could make sense to defer the income.

Assets exempt from CGT

CGT generally doesn’t apply to⁶:

• assets acquired before 20 September 1985
• a property that’s your main residence
• cars, motorcycles or similar vehicles
• personal-use assets, which you paid under $10,000 for
• winnings or losses from gambling and prizes.

Check the ATO website to find out more about which assets are subject to CGT and which assets are exempt.

How long you should keep records

You need to keep records of every transaction, event or circumstance that may be relevant to working out whether you’ve made a capital gain or loss for five years⁷.

There’s no time limit on how long you can carry forward a net capital loss and it can be deducted against capital gains in future years⁸, helping to reduce the tax you pay.

Where to go for more help

To find out more, speak to us or an accountant who specialises in taxation.

Current as at May 2024
1, 7 ATO – CGT assets and exemptions
2, 6 ATO – Working out your capital gain
3 ATO – Joint ownership
4, 5 ATO – Working out your net capital gain or loss
8 ATO – Record keeping for CGT

Your 5-minute round-up

It’s that time of the year again when the Australian Government unveils the Federal Budget, setting the stage for the nation’s economic direction. We help you find out all you need to know in this 5-minute read.

With the aid of a $9.3 billion surplus, Treasurer Jim Chalmers has announced a number of proposals to help Australians manage their finances, whether they’re paying off a student loan, looking for work or paying rent.

There’s also a $300 energy bill rebate, cheaper medicine and superannuation for paid parental leave.

But with interest rates at generational highs, cost of living pressures and the ongoing debate about housing affordability, read on for how the proposals might affect your household expenses and financial future.

Remember, many of these proposals could change as legislation passes through parliament.

Relieving cost of living pressures

Energy bill relief is on the way

Proposed effective date: 1 July 2024

All households will receive a $300 a year rebate in quarterly instalments on their energy bills. Eligible small businesses will receive $325 a year.

Making it easier for students to manage and repay their loans

Proposed effective date: 1 June 2023 (backdated)

The Government will cap the indexation rate for student loans at the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI).

This will apply to all Higher Education Loan Program (HELP), vocational education and training (VET) Student Loans, Australian Apprenticeship Support Loans and other student loan accounts.

This proposal is designed to prevent growth in student debts from outpacing wages in the future.

It means the indexation rate will be reduced from 7.1% to 3.2% in 2023 and from 4.7% to around 4% in 2024.

The ATO will automatically apply an indexation credit to reduce the outstanding loan. You can estimate the amount of credit you’ll receive here.

Superannuation

Paying superannuation on Paid Parental Leave

Proposed effective date: 1 July 2025

The Government will pay superannuation on the Paid Parental Leave scheme at 12% of the PPL rate, which is set at the national minimum wage (currently $882.75 per week). The contribution rate will be the same as the new super guarantee rate come 1 July 2025.

The proposal will help to normalise parental leave as a workplace entitlement, close the super gender gap and reduce the impact of taking parental leave on retirement incomes. It builds on legislation yet to be passed to gradually increase PPL to 26 weeks by July 2026.

Contributions will be taxed at the super tax rate of 15% and count towards the concessional contributions cap.

The Australian Tax Office (ATO) will make the payments directly to the recipients super account.

Social security and aged care

Relieving cost of living pressures for retirees

1 July 2024

The Government will extend the existing two-year freeze on deeming rates by another 12 months.

The lower rate of 0.25% and upper rate of 2.25% will remain frozen until 30 June 2025.

The deeming rate is the assumed return that retirees receive on their investments and helps to work out their age pension entitlements.

The freezing of deeming rates has provided some certainty in an environment of rising interest rates to help alleviate cost of living pressures for retirees. It’s part of the government’s broader efforts to support individuals on fixed incomes during times of economic fluctuation.

Increasing Rent Assistance

Proposed effective date: 20 September 2024

The Government will increase the maximum Rent Assistance rate by 10% to help address rental affordability challenges.

This is in addition to the 15% increase in September 2023.

You can find out more about Rent Assistance here.

Securing cheaper medicines

Proposed effective date: 1 January 2025

There will be a temporary freeze on indexing the Pharmaceutical Benefits Scheme (PBS) co-payment.

In 2024, the co-payments are $31.60 for general patients and $7.70 for concessional patients.

From 1 January 2025, the Government will introduce:

• a 1-year freeze on indexation for PBS co-payments for general patients
• up to a 5-year freeze for concessional patients.

The $1 discount will gradually be removed without leaving patients worse off.

Increasing JobSeeker payments for recipients with a partial capacity to work

Proposed effective date: 20 September 2024

The Government is extending eligibility for the higher rate of JobSeeker Payment to single recipients who can only work up to 14 hours per week. The higher rate is currently $816.90 per fortnight.

Eligible recipients will receive an increase of at least $54.90 per fortnight, including the Energy Supplement.

This will provide extra support to people with limited or no capacity to work due to physical, intellectual or psychiatric impairment (but don’t qualify for Disability Support Pension).

Increasing the flexibility for carers to work and study

Proposed effective date: 20 March 2025

The Government will provide greater flexibility for Carer Payment recipients to structure their work and study commitments around their caring role.

• Recipients will be able to work up to 100 hours over a four-week period.
• Travel time, education and volunteering won’t be counted.
• A six-month suspension period will be introduced for recipients who work over the limit. So if their circumstances change, they won’t need to reapply.
• Temporary Cessation of Care days can be used for one-off instances of exceeding the limit.

This will help carers to better balance work, study, volunteering and their caring duties, particularly if they live in regional and remote areas and need to travel further.

Providing extra funding for aged care

Proposed effective date: From 2023-24

The Government will provide $2.2 billion over five years from 2023–24 to deliver key aged care reforms.

The Government is also providing an extra 24,100 Home Care packages in 2024–25 to reduce wait times.

Keeping women safe

Proposed effective date: 1 July 2023

The Government has pledged $925.2 million over five years to the Leaving Violence Program to support victim survivors leaving a violent intimate partner relationship.

From 1 July 2025, victims of domestic violence will be able to access up to $5,000 a year of financial support indexed to keep pace with inflation.

The Government has also allocated $1 billion to crisis housing for women and children escaping domestic violence.

Tax – personal

No changes to previously legislated tax rates

Effective date: 1 July 2024

*Excluding 2% Medicare Levy

In 2024-25, the effective tax-free thresholds will increase.

• Individuals below age pension age – $22,575
• Individuals of age pension age, eligible for Seniors and Pensioners Tax Offset (SAPTO):
  • Single – $35,813
  • Member of a couple (each) – $31,888*
  • Illness separated couple (each) $34,626*

*Some Medicare levy may be payable.

These thresholds include the $700 Low Income Tax Offset (LITO).

Increasing the Medicare Levy low-income thresholds

Effective date: 1 July 2023

Low-income taxpayers will continue to pay a reduced rate or be exempt from the Medicare levy. The threshold for:

• Singles will increase from $24,276 to $26,000,
• Families will increase from $40,939 to $43,846,
• Single seniors and pensioners will increase from $38,365 to $41,089
• Families (seniors and pensioners) will increase from $53,406 to $57,198.

For each dependent child or student, the family income thresholds increase by a further $4,027.

Tax – Small Business

Extending the $20,000 instant asset write-off

Proposed effective date: 1 July 2024

The Government will extend the instant asset write-off scheme by 12 months until 30 June 2025 to support small businesses with improving cashflow and encourage business investment.

Small businesses, with annual turnovers of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000.