Tax Insights & Updates: What You Need to Know This Month
This month has been a bit quieter in terms of tax updates, partly because of the upcoming federal election. However, the ATO has provided another update on some practical issues to consider while we wait for the High Court to decide whether to hear the ATO’s appeal in the Bendel case.
The ATO has also updated the hourly rate that can be applied by individuals who are working from home, the change applies for the 2025 income year.
As change occurs, we’ll keep you posted through our social media accounts’ on Twitter, Facebook, and LinkedIn.
From the Regulators
ATO Updates Top 500 Tax Program for Private Groups
The Australian Taxation Office (ATO) has announced important updates to its Top 500 private groups tax performance program, starting from April 2025.
Key changes include:
- Turnover Limits Updated: Private groups with annual turnover over $250 million will no longer be part of the Top 500 program, no matter their net asset value. For groups with over $250 million in assets, the turnover threshold has increased from $100 million to $200 million.
- Exiting the Program: Groups that no longer qualify will go through an official exit process after current ATO reviews are wrapped up and any outstanding tax matters are resolved. However, businesses that are already meeting—or are close to meeting—the ATO’s ‘justified trust’ standards can choose to stay in the program.
- New Categories Introduced: The ATO will now classify Top 500 groups as either ‘significant’ or ‘general’. Those in the ‘general’ category that meet full tax compliance will benefit from a lighter-touch review in the future and just one year of monitoring.
- Broader Access to Benefits: The ATO is also expanding its “provisional justified trust” approach. Previously reserved for mostly passive investor groups, this will now be open to any group that has demonstrated full tax compliance.
These changes aim to streamline the program and reward private groups that have strong tax governance in place.
Luxury Car Tax: New Fuel-Efficient Vehicle Definition and Updated Thresholds
Starting 1 July 2025, the rules around what qualifies as a fuel-efficient car under the Luxury Car Tax (LCT) will change, following updates in the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025.
What’s Changing?
- Stricter Fuel Efficiency Standard:
From 1 July 2025, a car will only be considered fuel-efficient if it uses no more than 3.5 litres of fuel per 100 kilometres (combined rating). Previously, the threshold was 7 litres per 100 kilometres. - Updated LCT Thresholds for 2024–25:
- $91,387 for fuel-efficient vehicles
- $80,567 for other vehicles
These thresholds reflect the latest indexation rates: - 1.023 for fuel-efficient cars
- 1.047 for all other vehicles
- Transitional Rule for Pre-July 2025 Cars:
The old (less strict) fuel-efficiency definition will still apply to vehicles supplied or imported before 1 July 2025, as long as they’ve already been used in Australia for certain qualifying purposes.
These changes mean fewer vehicles will qualify for the higher luxury car tax threshold under the fuel-efficient category from July 2025, so it’s worth reviewing any planned vehicle purchases or business use before the deadline.
Upcoming Changes to PAYG Withholding Cycles from 1 July 2025
The ATO is updating how often businesses need to report and pay PAYG (Pay As You Go) withholding. These changes will take effect from 1 July 2025 and may affect your payroll processes.
What’s Changing?
- Medium Withholders:
If your business withholds between $25,000 and $1 million in a year, you’ll need to report and pay monthly using your activity statements. - Large Withholders:
If your annual withholding exceeds $1 million, you’ll need to pay electronically within 6–8 days of each payroll date. The ATO will give you a new Payment Reference Number (PRN) ending in 70 to use for these payments.
What You Need to Do:
- Check Your Withholding Status:
If your business is moving into a new category, make sure your payroll software is updated before 1 July 2025 to meet the new reporting and payment deadlines. - Request to Stay on a Lower Cycle (If Eligible):
If you expect your withholding amount for 2025–26 will be below the threshold, you can ask the ATO to keep you on your current cycle. You’ll need to submit a Request to Remain on a Lower Withholding Cycle form within 21 days of receiving the ATO’s letter, explaining your circumstances and estimated withholding.
These changes aim to improve timeliness and accuracy in how tax is collected from employee wages. Reach out to our team if you need help reviewing your status or updating your payroll system.
Additionally, the Board of Taxation’s Review on the Tax Treatment of Digital Assets concluded that Australia’s existing tax laws can accommodate crypto assets and transactions. Any uncertainties should be managed cooperatively between taxpayers and the ATO.
ATO Updates Small Business Benchmarks for 2022–23
The ATO has refreshed its small business benchmarks using the latest data from the 2022–23 financial year, covering around 100 different industries. These benchmarks let you compare your business’s income and expenses against others in your field.
Why This Matters?
- ATO Monitoring Tool:
The ATO uses these benchmarks to spot businesses that may be underreporting income or showing unusual expense patterns. Falling outside the typical range for your industry could lead to a closer look from the ATO. - Useful for Business Improvement:
The benchmarks aren’t just a compliance tool—they can also help you assess how your business is performing. If you’re spending more than similar businesses or earning less, this could highlight areas to improve costs, pricing, or efficiency.
If you’re unsure how your business compares or want to use this data to improve your operations, we’re here to help you make sense of the numbers.
Super Guarantee Reminder: March Quarter Due by 28 April & Rate Increase Coming
The ATO is reminding employers that super guarantee (SG) contributions for the March 2025 quarter must be paid by 28 April 2025.
Key Points:
- Payments Must Reach Super Funds:
Super is only considered paid when it lands in your employee’s super account—not when you transfer the funds. If you’re using a clearing house, allow extra time for processing to avoid late payments. - Upcoming Rate Increase:
From 1 July 2025, the super guarantee rate will increase from 11.5% to 12%.
This higher rate applies to any salary or wages paid on or after 1 July 2025, even if part of the pay period was worked before that date.
ATO Maintains Position on Bendel Case and Unpaid Trust Distributions
The ATO has provided an update on the Bendel decision, clarifying its position while the appeal process continues.
What’s Happening?
The Bendel case relates to how unpaid trust distributions owed to corporate beneficiaries are treated under tax law. The ATO has confirmed it will stick with its current guidance in TD 2022/11 until the legal process is fully resolved—including any appeals to the High Court.
Key Updates from the ATO:
- No Blanket Lodgment Extensions:
The ATO will not delay tax return due dates for affected companies while the appeal is ongoing. Returns must still be lodged on time. - Other Integrity Rules Still Apply:
The ATO stresses that rules under section 100A and Subdivision EA of Division 7A apply regardless of how the Bendel appeal turns out. Businesses should still take steps to minimise their exposure to these integrity provisions. - No Blanket Use of Discretion for Deemed Dividends:
If a deemed dividend arises under Division 7A due to a group’s reliance on the earlier Full Federal Court decision, the ATO will not automatically apply discretion under section 109RB to waive the consequences. Instead, each case will be assessed individually, based on whether there was an honest mistake or inadvertent omission.
What Should Businesses Do?
The ATO encourages taxpayers to assess their own situation carefully. While the appeal outcome is pending, following the approach in TD 2022/11 is the safer path to reduce the risk of adverse tax consequences, such as being taxed on unfranked dividends.
If you’re unsure how this affects your trust or corporate beneficiary structure, we’re here to help you assess and take action as needed.
Rulings, Determinations & Guidance
ATO Announces New Fixed Rate for Working from Home Expenses
The ATO has updated PCG 2023/1 with important changes to the fixed rate method for claiming running expenses when working from home.
What’s Changing?
- New Fixed Rate of 70c Per Hour:
From 1 July 2024, individual taxpayers who choose the fixed rate method for claiming running expenses while working from home will be able to claim a new rate of 70 cents per hour. - Applies to 2024–2025 Tax Year:
This new fixed rate will apply for the year ending 30 June 2025. - Updated Information:
A new paragraph 26A has been added to PCG 2023/1, listing the fixed rates for each year, providing more clarity on how the rates will apply.
This change simplifies how taxpayers can claim running expenses when working from home, offering a clear, fixed amount instead of tracking actual costs.
Cases
Appeal on Dividend Stripping Case Dismissed by Full Federal Court
The Full Federal Court has dismissed the appeal of a taxpayer involved in a complex arrangement, confirming that Part IVA (anti-avoidance rules) and dividend stripping provisions could apply in this case.
Case Background:
- The Taxpayer:
Mr. Merchant, co-founder of the Billabong Group (BBG), controlled various entities in the Merchant Group. - The Deal:
In 2010, the Merchant Family Trust (MFT) bought shares in Plantic Technologies Ltd. By 2014, MFT sold a large block of shares in BBG to the Gordon Merchant Superannuation Fund (GMSF), realising a $56.5 million capital loss. This was followed by the full sale of the shares in Plantic to an unrelated third-party in March 2015. In connection with this, three entities in the Merchant Group forgave $55 million in loans to Plantic. - The ATO’s Argument:
The Australian Taxation Office (ATO) argued that the transaction was designed to create a capital loss to offset a capital gain. The ATO viewed the sale as a “wash sale” because the shares were transferred to a related super fund, meaning the economic control and ownership of the shares stayed within the same group.
Court’s Decision:
- The Full Federal Court agreed with the ATO’s view, rejecting the taxpayer’s appeal. They found that the sale of shares was not a genuine commercial transaction but rather a scheme to create a tax advantage, with no real change in economic ownership or investment risk.
- However, the Court did uphold the taxpayer’s appeal regarding another part of the arrangement, specifically related to the debt forgiveness.
Takeaways:
This case highlights the ATO’s ongoing scrutiny of arrangements aimed at minimising tax through artificial structures. Part IVA and dividend stripping provisions are powerful tools in the ATO’s anti-avoidance arsenal, and taxpayers need to ensure that their transactions have a real commercial purpose, not just a tax benefit.
- Determine FBT liability for fringe benefits provided to employees or associates between 1 April 2024 and 31 March 2025.
- If there’s an FBT liability, lodge the FBT return and pay by 21 May 2025.
- Report each employee’s reportable fringe benefits amount in their end-of-year payment information.
Important Updates for 2025:
- Clients can use existing records instead of travel diaries and declarations for certain fringe benefits, as long as the required information is provided at the time of lodging the return.
- The FBT exemption for plug-in hybrid electric vehicles ends on 31 March 2025. Employers can still apply the exemption if:
- The vehicle was used before 1 April 2025 (and was exempt).
- There is a financially binding commitment to continue providing private use of the vehicle after 1 April 2025.
Legislation
Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025 Receives Royal Assent
The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025 has been approved and received Royal Assent, introducing several key changes to Australian tax laws.
Key Amendments in the Bill:
The Labor Government has also proposed to extend this benefit until the 2026 income year if they are re-elected.
Tightening of Fuel-Efficient Vehicle Definition:
The definition of a fuel-efficient vehicle under the Luxury Car Tax rules has been updated, narrowing the criteria for what qualifies as fuel-efficient.
Denial of Deductions for GIC and SIC:
Starting 1 July 2025, businesses will no longer be able to claim deductions for General Interest Charges (GIC) and Shortfall Interest Charges (SIC).
Changes to ATO Refund Retention Period:
The ATO’s notification period for retaining refunds has been extended, providing businesses with more time to manage their tax affairs.
Extension of the $20,000 Instant Asset Write-Off:
The $20,000 instant asset write-off for small businesses has been extended until 30 June 2025.
If you have any questions regarding the above information, please do not hesitate to contact our office to speak to one of our team.
