What has the ATO been saying?

Are you a small or medium business?

Small and medium businesses qualify for a range of tax concessions. For most tax purposes, a business qualifies as a small business if its aggregated annual turnover is less than $10 million. For the purposes of the small business CGT concessions, however, the turnover threshold is only $2 million.

A business qualifies as a medium business if its aggregated annual turnover is at least $10 million but less than $50 million.

Aggregated turnover is worked out by adding together the annual turnovers of the business, any ‘affiliates’ of the business and any entities ‘connected with’ the business. An entity is “connected with’ another entity if either one controls the other or if both are controlled by the same third entity.

In certain circumstances, the ATO has a discretion to determine that one entity does not control another entity if the control percentage is at least 40% but less than 50%.

Tip! If you have any concerns whether your business qualifies as a small or medium business for tax purposes, talk to Burns Sieber.

Business income and expenses

If you are running a business, most income received by the business is assessable for income tax purposes. The total amount is referred to as ‘assessable income’.

You need to report assessable income in your business’ tax return. It includes:

• cash income and income from online transactions;
• commissions and investment earnings;
• recovered bad debts for which your business previously claimed a tax deduction;
• most government payments;
• net capital gains;
• increases in the value of trading stock;
• stock taken for personal use; and
• payments from an insurance claim related to your business.

Make sure to also check what income you can exclude – for example, some COVID-19 government payments are not assessable if you meet the eligibility criteria.

Remember you can reduce your business’ taxable income by claiming business tax deductions, as long as:

• the expense is necessarily incurred in earning your business’ assessable income;
• you claim only the business portion if the expense is for a mix of business and private use, or apply the fringe benefits taxx (FBT) provisions; and
• you have records to substantiate your claims.

Expenses may include:

• motor vehicle and travel expenses;
• items related to protecting staff from COVID-19;
• employee superannuation contributions; and
• payments you make to workers (including their wages) as long as you have complied with the pay as you go (PAYG) withholding and reporting obligations for each payment.

Hiring new employees for the festive season?

As the festive season approaches, you may be thinking of hiring new employees to help with your business.

Here are some key things to remember when it comes to your tax and superannuation obligations.

Withhold the right amount of tax

As an employer, you will need to make sure you are withholding the right amount of tax from payments you make to your employees and other payees.

This helps them to meet their end-of-year tax liabilities.

Your accounting or payroll software will help you do this.

Don’t forget to pay superannuation guarantee (SG)

You must pay SG to all eligible employees’ super funds in full and on time to avoid paying the SG charge. The minimum level of support for the 2024–25 tax year is 11.5% of ‘ordinary time earnings.’

Report through Single Touch Payroll (STP)

If you are still not reporting through STP and do not have an approved exemption, deferral or concession in place, you should start reporting now.

If you have just started a business or recently employed staff, you will need to report through STP from your first payday.

Remember, if you report through STP, you do not need to send your employee’s completed TFN declaration to the ATO. It will have already received this information through your STP reporting. You’ll still need to keep this information for your own records.

Entertaining your employees?

With the festive season approaching, you may be planning a party or similar event (e.g. a bowls day) for your employees. If so, make sure you consider the FBT implications of the party or other event.

These will depend on:

• the amount spent on each employee;
• when and where the event is held;
• the value and type of gifts provided; and
• who attends – is it just employees, or are partners, clients or suppliers also invited?

Don’t forget to keep all records relating to the entertainment-related fringe benefits provided by your business, including how the taxable value of benefits is worked out.

Using a motor vehicle for business?

Here are four things to keep in mind when claiming motor vehicle expenses – such as fuel, oil, servicing and registration – for your business:

• If you operate your business as a sole trader or partnership (where at least one of the partners is an individual), the method you must use to calculate your deduction depends on the type of vehicle.
• For cars, you must use either the cents per kilometre method or the logbook method. The cents per kilometre rate for the current income year (2024–25) is 88 cents per kilometre (up to a maximum of 5,000 kilometres).
• For all other vehicles, you must use the actual costs method, where you claim the actual costs of expenses you incurred based on receipts.
• If you use the logbook or actual costs method, remember you can only claim the business portion of your motor vehicle expenses.
• If you operate your business through a company or trust, you must use the actual costs method to work out the deductions you are entitled to, regardless of the type of motor vehicle you use. Any non-business use of the vehicle by an employee of the business is dealt with by the FBT provisions.
• If you use the logbook or actual costs method, you can claim depreciation or decline in value only for the business portion of the motor vehicle. The maximum amount you can claim as a deduction for the depreciation of your car is $69,674 for 2024–25 or the cost of the vehicle (whichever is less).

Varying your PAYG instalments

If you are a pay as you go (PAYG) instalment amount payer, your instalments have been increased by the gross domestic product (GDP) adjustment factor. For the 2024–25 income year, the GDP adjustment factor is 6%.

You can vary your PAYG instalments if you think your current instalments will be more or less than your expected tax liability for the year. Your varied amount or rate will apply for the remainder of your income year or until you make another variation. You or your tax adviser can lodge your variation online.

Businesses are encouraged to review their tax position regularly, so that their PAYG instalments reflect their expected tax liability for the year.

Update your ABN details

When was the last time you checked your business’ Australian business number (ABN) details on the Australian Business Register (ABR)? If you are not sure, it’s time to check the details are up to date.

Emergency services and government agencies use ABN details to identify businesses in areas affected by emergencies, so it’s important to check your business’ physical business address and postal address are listed.

Other ABN details include authorised contacts, contact details and business activities.

If the details are out of date, your business risks missing out on important assistance, information or opportunities such as financial grants.

It’s your responsibility to keep your business’ details up to date, but your tax adviser can update them on your behalf.

If your business is no longer using its ABN, you need to cancel it. The ATO actively reviews ABN entitlement and may cancel your business’ ABN if there are no signs of business activity.