June 2025 Newsletter

As we fast approach the end of another financial year, we are delighted to share some tips to help you streamline your tax position:

For Your Business

• Opportunities

• Risks

• ATO interest charges will no longer be tax deductible

Superannuation Changes - New rate of 12%

For Individual Tax

• Working from Home Deductions

Looking ahead to 2026-27

• Payday Superannuation

• Personal Income Tax Cuts

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For your Business:

Opportunities:

Write-off bad debts when your Customer is not going to pay.

If all attempts have failed to recover the amount owed, the debt can be written off by 30 June and claimed as a deduction this financial year. Ensure you document the fact that you have written off (e.g. Minute the decision at a Directors meeting) the bad debt on your debtor’s ledger. Remember, writing off a debt as bad is not the same as waiving or forgiving a debt or if the debt otherwise comes to an end.

Obsolete plant & equipment.

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, write it off before 30 June if you don’t use it anymore.

Instant asset write-off threshold.

An extension of the increased instant asset write-off threshold to $20,000 for the 2024-25 financial was passed by Parliament on 26 March 2025. The Government has committed to extending the same threshold to 30 June 2026.

Bring forward tax deductions.

For companies, if it makes sense to do so, bring forward tax deductions by committing to pay directors’ fees and employee bonuses (by resolution), as well as paying June quarter super contributions before 30 June.

Risks:

Tax debt and not meeting reporting obligations.

One of the biggest and brightest "Red Flags" to the ATO is a business failing to lodge returns. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, Talk to us! Our team can assist by working with the ATO on your behalf.

Professional firm profits For professional services firms - architects, lawyers, accountants, etc.

The ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

ATO interest charges will no longer be tax deductible:

General interest charges (GIC) and shortfall interest charges (SIC) incurred from 1 July will no longer be tax deductible, increasing the cost of carrying a tax debt.

The GIC rate is currently 11.17% and it compounds daily.

Previously, this could be claimed as a deduction in your tax returns. However, GIC and SIC incurred in income years starting on or after 1 July 2025 will no longer be deductible, regardless of whether the debt relates to an earlier income year. This means your clients will pay more overall to carry forward an unpaid tax debt.

GIC and SIC that was incurred before 1 July 2025 can still be claimed as a deduction this tax time.

Preparing for the changes.

With these changes starting 1 July, it’s more important than ever for you to keep on top of your ATO obligations. We encourage you to:

• Make a payment – If you have an ATO debt, paying it as soon as possible will reduce the amount of interest you’ll pay. If you can’t pay it in full, you may be able to set up a payment plan. As GIC still accrues, the payment plan should be over the shortest possible timeframe, which will decrease the amount of interest charged.

• Get advice – Talk to us for personalised advice based on your circumstances.

• Plan ahead – You could set aside GST, pay as you go withholding and super from cash flow, so that you have the funds available when it’s next time to pay.

If you are experiencing difficult circumstances there are always support options available. You can learn more about the changes to GIC and SIC on the ATO website.

Superannuation Changes

The final Super Guarantee rate increase – coming 1 July

The superannuation guarantee (SG) rate will increase from 11.5% to 12% on 1 July, 2025.

If you have employees please ensure the 12% rate is applied for all salary and wages paid to eligible workers on and after 1 July. This is even if some or all of the pay period it relates to is before this date.

Other Superannuation

Legislation enabling the proposed Division 296 tax on superannuation balances above $3m lapsed when Parliament dissolved. The question now is whether the Government will seek to push this reform through the Senate with the support of The Greens. Greens Senator Nick McKim has previously advocated for the Division 296 threshold to be lowered to $2m and indexed to inflation. In addition, the Senator tied his support for the tax to a “prohibition for super funds to borrow to finance investments.”

Originally intended to apply from 1 July 2025, if enacted, Division 296 will increase the headline tax rate to 30% for earnings on total superannuation balances (TSB) above $3m. The proposed calculation captures growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.

Tips for Individual Tax

Working From Home Deductions

If you work from home there are two methods to calculate WFH deductions:

• Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate isn’t enough.

• Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous.

Note: Double dipping is not allowed. For instance, if you claim deductions using the fixed rate method you can’t separately claim a deduction for your mobile phone costs.

Looking ahead to 2026/27

Payday Superannuation

From 1 July 2026, employers will be required to pay their employees' super at the same time as their salary and wages.

This measure is not yet law. We will keep you updated!

Personal Income Tax Cuts:

The 2025-26 federal budget introduced a modest income tax cut for all taxpayers from 1 July 2026 and again from 1 July 2027.

The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year. Legislation enabling the tax cut passed Parliament on 26 March 2024 introducing a $1,000 instant tax deduction from 2026-27.

The reform will allow taxpayers to choose to claim a $1,000 instant tax deduction instead of claiming individual work-related expenses, saving time and money.

Taxpayers won’t need to collect receipts for deductions less than $1,000 and will save on the costs of professional tax advice.

As a result of the instant deduction:

• The average amount of annual tax relief for those who benefit is $205.

• Australians earning between $45,001 and $135,000 could get a benefit of up to $320.

When the tax cuts to every taxpayer are fully implemented, the average full time income earner on $103,000 will receive $2,790. This will rise to up to $3,110 when combined with this reform, for those taxpayers who weren’t already claiming deductions.

To be eligible for the instant tax deduction, taxpayers have to earn labour income. People who only earn business or investment income and no labour income can continue to claim their deductions in the usual way.

Taxpayers claiming more than $1,000 in work-related deductions will still be able to do so in the usual way. Charitable donations and other non-work related deductions would continue to be claimed on top of the instant tax deduction.

If any of the above raises questions for you or your business, please contact our office.

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