2024 Tax Changes

There are a number of changes for the 2024 financial year to bear in mind when preparing your Income Tax Return

Working From Home Expenses

The shortcut method for claiming running expenses while working from home will be reduced to 67 cents per hour worked. The running expenses that are included in this shortcut method are:

· Energy

· Phone (including mobile) and internet.

· Computer consumables such as printer paper and printer cartridges

· Stationery

Therefore, taxpayer will need to either use:

· The actual cost of the working from home expenses; or 

· the shortcut method of 67 cents for every worked plus the actual cost of any purchases made that are not included in the list above.

Furthermore, anyone who is claiming working from home deductions will need to keep detailed records, for example diary, timesheets or rosters showing the total number of hours they worked from home. You will also need to substantiate these expenses with a bill or receipt, for example a quarterly bill for electricity or one receipt for stationery. 

Electric Vehicle Charging Costs

Anyone who has a work-related electric car can claim the cost of charging the vehicle at their premises. An eligible individual taxpayer can calculate their electricity charging cost based on a rate of $4.20 cents per kilometer travelled by a motor vehicle. 

Please note, this deduction cannot be claimed for hybrid vehicles. 

The $250 Threshold for Self-Education Expenses Removed

The removal of the $250 non deductibility threshold for self-education expenses will reduce compliance costs and make it easier for individuals to make a deduction from their Self Education expenses under S.8-1. 

Fitness Expenses

If a high level of fitness is not an essential part of a taxpayer’s income-earning activities or occupation, they are not entitled to claim a deduction for fitness expenses.

Downsizer Contribution Concession

The downsizer contribution concession was introduced from 1 July 2018 to allow older Australians selling an eligible dwelling to make additional contributions (over and above their standard contribution caps) into their superannuation fund.

Broadly, the downsizer contribution concession has traditionally allowed eligible individuals aged 65 or more before 1 July 2022, or aged 60 or more from 1 July 2022, to make non-deductible contributions of up to $300,000 (or up to $600,000 per couple) from the sale of an eligible dwelling that was used as their main residence.

The downsizer contribution concession is an attractive option for eligible individuals to boost their superannuation entitlements, particularly for the following reasons:

a) A downsizer contribution is not counted towards an individual’s standard contribution caps (i.e., their concessional or non-concessional contributions caps).

b) The total superannuation balance restriction (which determines an individual’s eligibility for a non-concessional contribution cap) does not apply in respect of a downsizer contribution. This means that an eligible individual can make a downsizer contribution into their super fund, regardless of their total superannuation balance (e.g., even where it exceeds $1.7 million).

c) A downsizer contribution is not included in the assessable income of the receiving fund.

Therefore, it will form part of the tax-free component of a member’s accumulation interest.

Increasing the Medicare Levy Low Income Thresholds

From 1 July 2023, the Medicare Levy low-income thresholds were increased for singles, families and seniors and pensioners. The Medicare Levy low-income thresholds are now:

· $26,000 for singles

· $43,846 for families

· $41,089 for single seniors and pensioners

· $57,198 for family seniors and pensioners

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

$20,000 Instant Asset Write-Off

From 1 July 2023 until 30 June 2025, small business will be able to claim an instant asset write off for eligible assets costing $20,000 or less. These assets will need to be first used or installed ready for use before 30 June 2025. 

Lodgment Penalty Amnesty Program

The ATO is providing an amnesty program for small businesses with an aggregated turnover of less than $10 million. If these entities have any outstanding obligations for that were originally due from 1 December 2019 to 28 February 2022 and these obligations are lodged between 1 June 2023 and 31 December 2023, the ATO will remit any failure to lodge penalties. 

Increasing the amount of Superannuation Paid

From 1 July 2024, superannuation guarantee entitlements will be increased from 11% to 11.5%. 

Increasing the Frequency of Superannuation Guarantee Payments

From 1 July 2026, employers will need to lodge their employees’ superannuation guarantee entitlements on the same day that they pay salary and wages. 

Earnings for Superannuation Balances above $3 million taxed at 30%

From 1 July 2025, superannuation balances that are above $3 million will be taxed at 30%. 

Extending the Compliance Program for Personal Income Tax

The ATO will be actively engaging in tasks that ensure businesses and individuals meet their tax and GST obligations. With funding from the Government, they have been able to develop sophisticated analytic tools to ensure that taxpayers are being truthful and diligent with the tax claims. 

One area that is being focused on by the ATO are deductions relating to short-term rental properties and ensuring they are genuinely available to rent. 

ATO’s Audit Target for 2024

Incorrectly claiming working from home expenses - You now need to record each hour you worked from home in a calendar, diary or spreadsheet and the additional expenses you incur must be substantiated with a tax invoice or receipt. To claim a deduction, you must have spent the money yourself and not been reimbursed by your employer, the expense must directly relate to your income and you must have records, for example receipts, to prove each claim. 

Inflating claims for rental properties - The ATO are targeting those who are increasing their deductions to offset the rental income. In particular, repairs and maintenance that are capital in nature e.g. replacing an old kitchen with a new one or installing a new oven, hot water system, etc. must be depreciated over time and not claimed in full. You can only claim repairs and maintenance in full on expenses that are replacing damaged items or fittings that are no longer working e.g. Broken windows, damaged carpet, etc.

Failing to include all income received - If you receive income from multiple sources including interest, managed funds, dividends, interest and multiple employers, you should wait to lodge your income tax return until all of the information is appearing on your pre-filling report to ensure any income isn’t accidently omitted from your income tax return. The pre-filling reports are usually correct from the 1st of July, however some managed funds take longer to report the income to the ATO. 

Financial Advice Fees - You can only claim financial advice fees that relate to an existing or ongoing income-producing investment or fees related to managing your tax affairs. 

Car expense claims under the logbook method – It has recently been identified that many

of the ATO’s audits regarding car expense claims under the logbook method in Division 28 of

the ITAA 1997 contained errors, resulting in incorrect claims being made under this method.

On this basis, it is expected that the ATO will heavily scrutinize car expense claims under the

logbook method for the 2024 income year, with a particular focus on identifying logbook records that do not comply with the stringent logbook requirements in Division 28.

Claims for ‘work horse’ vehicles – In recent years, the ATO has become increasingly concerned about claims for motor vehicle expenses that relate to the use of a vehicle that does not qualify as a ‘car’ (which are often referred to as ‘work horse’ vehicles).

In particular, the ATO has become increasingly concerned about claims for these vehicles that are based on a 100% (or close to a 100%) work-related or business use, especially where an

individual has the use of another vehicle for private purposes.

Using cryptocurrency losses – With the value of cryptocurrencies recently plummeting (especially the price of Bitcoin and Ethereum), it is anticipated the ATO will be paying closer attention to those individuals who are utilising losses from the disposal of cryptocurrencies.

In most cases, this will include individuals who trigger capital losses from the disposal of

cryptocurrency held for investment purposes and who are looking to offset those capital losses against capital gains derived in the same income year.

Asset disposals that generate losses (‘wash sales’) – The ATO has also recently warned taxpayers who hold assets with unrealised losses not to engage in asset wash sales.

This usually involves the disposal of assets (e.g., shares and cryptocurrency), often just before year-end, to artificially increase capital losses or allowable deductions and reduce capital gains or assessable income.

Rental Property Audit Targets:

The ATO have a new residential investment property loan data-matching program which will collect data for property loans from financial institutions from 2021 to 2026. They will obtain information about interest charged on a loan, loan repayments and borrowing costs and cross reference them with the information included in an individual’s tax return to ensure that the reporting is correct. 

The ATO have identified common errors with rental properties that they will be scrutinizing this year, these include:

• The incorrect treatment of purchase-related costs. 

• Inaccurate claims for interest expenses, including claims not being correctly apportioned. 

• The incorrect classification of capital works (or improvements) as deductible repairs. 

• Excessive claims concerning holiday homes and similar properties.