What accountants need to know about the 2024 tax year

This article was current at the time of publication.

The end of the 2023-24 financial year is looming, so now is an opportune time to be across changes to tax regulations and the Australian Taxation Office’s (ATO) key focus areas.

The ATO has warned that it will be leveraging its data-matching capabilities to ensure taxpayers declare all income and capital gains, and that it will be on the lookout for inflated rental property claims and incorrect claims for work-related expenses.

SW Accountants & Advisors Partner and Tax Director, Daren Yeoh CPA, has provided the following information to help practitioners identify what to look out for this tax time.

Trust distributions and resolutions

Trust resolution is an ongoing and pivotal tax concern. When acting for trusts, it is important that trustee resolutions, outlining the distribution of income, be signed before 30 June. 

This allows for beneficiaries to be assessed on their share of the trust’s net income. Otherwise, the trustee could be assessed on that income at the top marginal rate.

Unpaid present entitlements, Section 100A and Division 7A

The Administrative Appeals Tribunal recently ruled in the case of Bendel and FCT that outstanding unpaid present entitlements (UPEs) owed to a company, whether within a separate trust or otherwise, were not categorised as loans to the trust for Division 7A purposes.

However, the ATO has filed an appeal with the Federal Court and practitioners should monitor developments. Pending the appeal’s outcome, shareholder loans should be scrutinised, including any outstanding corporate beneficiary present entitlements, and if necessary, establish Division 7A compliant loan agreements and ensure minimum loan repayments are made.

It is also important to continue to exercise diligence in comprehending clients’ arrangements following distributions to ensure compliance with Section 100A.

Significant global entities

Due to the sizeable penalties applicable to significant global entities, it is important to consider whether an entity in Australia (no matter how small or large) is a significant global entity (SGE). 

An SGE is broadly an entity that is part of a global accounting consolidated group with an accounting turnover of A$1 billion or more. SGEs have additional reporting and lodgement requirements.

Increase to the SG rate

The superannuation guarantee (SG) rate will rise from 11 per cent to 11.5 per cent from 1 July 2024. Practitioners should remind clients to update their systems and procedures to accommodate the new rate.

Change to the thin capitalisation rules

The approach to performing thin capitalisation calculations changed from 1 July 2023. The changes primarily revolve around how safe harbor calculations are conducted and imposes restrictions on debt deductions. 

Newly classified “general class investors” are subject to one of three new tests. Practitioners should become familiar with the new rules.

Introduction of a debt deduction creation (DDC) rule

Likewise, practitioners should stay informed on the new DDC rule, which may be triggered by routine business transactions conducted by multinational groups. 

The rule limits debt deductions on related party debt arising from acquiring a CGT asset (such as real property or trading stock) or legal or equitable obligation from an associate(s), or from financing a distribution or specific payments to an associate.

Small business concessions

On 14 May 2024, as part of the 2024–25 Australian Federal Budget, the government announced it intends to extend the A$20,000 instant asset write-off program for small businesses with turnovers of less than A$10 million until 30 June 2025. 

The full cost of eligible assets costing less than A$20,000 can be deducted if they are first used or installed ready for use between 1 July 2023 and 30 June 2025.

Separately, businesses with an annual turnover of less than A$50 million can claim an additional 20 per cent bonus deduction on assets that support electrification or promote more efficient energy use. This measure applies to assets used between 1 July 2023 until 30 June 2024.

Lastly, the skills and training boost enabling qualifying businesses with annual turnovers of less than A$50 million to claim a 20 per cent bonus tax deduction for external training courses delivered to employees by registered training providers will expire on 30 June 2024.

Note: legislation surrounding some of these measures is yet to be passed.

Dividends funded by equity raisings

A new law has been introduced preventing the franking of dividends funded by capital raisings. The changes apply to distributions made on or after 28 November 2023. 

It is advisable to counsel clients who have raised funds through equity raising to document how these funds have been or will be used.

Characterisation of software fees as royalties

Applicable to practitioners with clients in the software industry, it is crucial to highlight the ATO’s views as set out in TR 2024/D1. 

It addresses scenarios where a software company makes payments to non-resident software owners for the right to distribute or sublicense software to Australian customers. These payments may be liable to Australian royalty withholding tax.

Costs of charging electric vehicles at home

PCG 2024/2 introduces an optional methodology for determining the cost of electricity when an electric vehicle (excluding plug-in hybrids) is charged at the employee's or individual’s residence. 

This methodology applies to employers for fringe benefits tax (FBT) purposes, effective from 1 April 2022, and to individuals for income tax purposes when computing car expenses, effective from 1 July 2022. The allowable claim is 4.20 cents per kilometre.

Alternate record keeping for fringe benefits tax

The ATO has issued new Legislative Instruments specifying the records the Commissioner will accept as an alternative to an employee declaration in respect of fringe benefits where the employer seeks to reduce the taxable value of the relevant benefit. 

The rules will apply for the FBT years ending on or after 31 March 2025. The Legislative Instruments apply in respect of:

• LI2024/4: Fly-in Fly-out and Drive-in Drive-out employees
• LI 2024/5: Living-Away-From-Home - Maintaining an Australian Home
• LI 2024/6: Otherwise Deductible Benefits
• LI 2024/7: Private Use of Vehicles Other Than Cars
• LI 2024/8: Temporary Accommodation Relating to Relocation
• LI 2024/9: Car Travel to Certain Work-Related Activities
• LI 2024/10: Remote Area Holiday Transport
• LI 2024/11: Travel Diaries
• LI 2024/12: Relocation Transport
• LI 2024/13: Overseas Employment Holiday Transport
• LI 2024/14: Car Travel to Employment Interview or Selection Test