Employees Incorrectly Treated as Independent Contractors

The ATO is warning businesses that if they incorrectly treat an employee as an independent contractor, then they risk receiving penalties and charges, including:

• PAYG withholding penalty for failing to deduct tax from worker payments and send it to the ATO;
• Super guarantee charge ('SGC'), which is more than the super that would have been paid if the worker was classified correctly. SGC consists of a super guarantee shortfall amount, nominal interest, and an administration fee; and
• Additional SG penalties, including a penalty amount of up to 200% of the SGC.

'Sham contracting' may also contravene the Fair Work Act 2009. Courts can impose penalties against a business or person that incorrectly informs an employee that they are an independent contractor.

Reminder of September Quarter Superannuation Guarantee ('SG')

Employers are reminded that employee super contributions for the quarter ending 30 September 2025 must be received by the relevant super funds by Tuesday, 28 October 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which (as noted above) includes a penalty and interest component.

Correctly Dealing With Rental Property Repairs

Taxpayers who have had work done on their rental property should ensure the expense is categorised correctly to avoid errors when completing their tax return.

A deduction for 'repairs and maintenance' expenses can be claimed for work done to remedy, or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year they were incurred.

However, some 'capital' expenditure may not be immediately deductible, such as for 'initial repairs', 'capital works', 'improvements' and depreciating assets.

Initial repairs include fixing any pre-existing damage or deterioration that existed at the time of purchasing the property, even if the damage or deterioration was unknown to the taxpayer at the time of purchase.

Initial repairs are treated as part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are capital works or depreciating assets.

Capital works are structural improvements, alterations and extensions to the property, and can generally be claimed at 2.5% over 40 years.

Capital works deductions can only be claimed after the work has been completed, regardless of when the taxpayer pays the deposit and instalments.

Improvements or renovations that are structural are also capital works. Work that goes beyond remedying defects, damage or deterioration that improves the function of the property is regarded as an improvement.

Repairs to an 'entirety' are capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item.

Depreciating assets are treated as follows:

• Deductions for 'new' assets must generally be claimed over time according to their effective life.
• Second-hand depreciating assets generally cannot be deducted.

Tips to Help Sole Trader Clients

The ATO is seeing sole traders make mistakes in the following areas:

• not reporting all income — this includes income earned outside their business (like a 'side hustle'), cash jobs, or payments in-kind/barter deals;
• overclaiming expenses — this includes claiming the portion of an expense related to personal use, or overstating the cost of goods sold and other business expenses;
• calculating business losses;
• incorrectly claiming and offsetting losses from non-commercial business activities against other income sources;
• misreporting personal services income ('PSI') to gain tax benefits;
• not registering for GST if they are in the taxi or ride-sourcing industry, or when they reach the GST threshold; and
• not keeping accurate and complete records.

ATO Warning Regarding Private Use of Work Vehicles and FBT

Employers that supply work vehicles to their employees need to check how the work vehicles are used and whether any exemptions apply to determine if they attract fringe benefits tax ('FBT').

FBT generally applies when a work vehicle is made available for private use, even if it is not actually used. Private use includes any travel not directly related to the employee's job.

Exemptions may apply depending on the vehicle's specifications and the nature of the private use.

The most common issues the ATO sees include the following:

• incorrectly treating private use as business use;
• assuming dual cab utes are exempt from FBT — exemptions only apply if the vehicle is eligible for the specific FBT exemption and private use is limited;
• incorrectly classifying vehicles;
• poor record keeping that does not support the claims or the FBT calculations made; and
• not reporting or paying on time.

ART Dismisses Argument That Medical Expenses Were Deductible

In a recent decision, the Administrative Review Tribunal ('ART') held that a taxpayer could not claim a tax deduction for medical expenses incurred by him in relation to his total and permanent disability pension.

The taxpayer had been terminated from his employment due to total and permanent disablement ('TPD'). For the 2024 income year, his only income was a TPD pension.

The ART agreed with the ATO that the medical expenses were not deductible. The ART noted in this regard that the medical expenses were "incurred by (the taxpayer) to better live with his medical condition, not incurred 'in' gaining or producing the TPD pension." That is, "the occasion of the Medical Expenses is to assist (the taxpayer) with his medical condition, not to gain or maintain his eligibility to the TPD pension."

The ART also did not accept the taxpayer's argument that the medical expenses were not private or domestic in nature, as they were essentially personal in character.

ATO to include tax 'debts on hold' in taxpayer account balances

From August 2025, the ATO is progressively including 'debts on hold' in relevant taxpayer ATO account balances.

Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account).

Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance.

The ATO has advised it will remit the general interest charge ('GIC') that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period.

The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.

Bill to reduce student debt now law

Legislation has recently been enacted which delivers on the 2025/26 Federal Budget announcement to reduce student debts.

Pursuant to this legislation:

• there is a one-off 20% reduction to Higher Education Loan Program debts and other student loans that were incurred on or before 1 June 2025;
• the minimum repayment threshold is increased from $54,435 in the 2024/25 income year to $67,000 in the 2025/26 income year (to continue to increase each year with the growth in wages); and
• a marginal repayment system is introduced where compulsory student loan repayments are calculated only on income above the new $67,000 threshold (rather than having it based on a percentage of the repayment income).

Getting the main residence exemption right

The ATO has the following tips for taxpayers in relation to the CGT main residence exemption.

• They should consider if they have bought or disposed of property in the past income year. If they have sold property, were they using it solely as their primary place of residence, earning income from it (rental or business), or was it vacant land?
• They should understand the applicable record keeping requirements in relation to property.
• If they have disposed of vacant land, they are not eligible for the main residence exemption, even if they had intended to build their main residence on the land.
• They are only eligible for the '6-year absence rule' if the property was their main residence before they rented it out.
• Broadly, they can only have one property as their main residence at a time - the only exception is the 6-month period when they move from one home to another.

ATO AFCX data-matching program

The ATO will acquire relevant account and transaction data from the Australian Financial Crimes Exchange ('AFCX') for the 2025 to 2027 income years, including the following:

The ATO estimates that records relating to approximately 70,000 individuals will be obtained each financial year.

The data collected under this program will be used to (among other things) safeguard taxpayer accounts from identity crime by implementing protective controls to enable pre-lodgment detection and application of treatments to victims of fraud.

PAYGW reminders for activity statement lodgments

The ATO will be sending certain employers a reminder to lodge their activity statements.

The reminder will include the amounts the ATO has on record for them, such as:

• PAYG withheld amounts reported through Single Touch Payroll; and
• any other pre-filled amounts, including GST instalments and PAYG instalments (instalment amount option).

The ATO's reminders are intended to provide a timeframe for employers to review (and if necessary correct) the amounts the ATO has on record for them and lodge their activity statements.

If these selected employers do not lodge by the specified date, the ATO will consider the amounts it has on record are correct and complete, and it will add these amounts to the employer's account, meaning they will be due and payable.

The ATO may also finalise the employer's activity statement and consider it lodged unless the employer has any other obligations such as GST to report.

If employers do not make any changes to correct the data or lodge by the due date and the activity statement has been finalised in ATO systems, they will need to adjust these amounts by lodging a revised activity statement.

If the information is correct, they will not need to take any further action.

Paid parental leave changes have now commenced

As from 1 July 2025, the amount of Paid Parental Leave available to families increased to 24 weeks, and the amount of Paid Parental Leave that parents can take off at the same time has also increased from two weeks to four weeks.

Superannuation will now also be paid on Government Paid Parental Leave from 1 July 2025, at the new super guarantee rate of 12%, paid as a contribution to their nominated superannuation fund.

Parents will also benefit from an increase in the weekly payment rate of Paid Parental Leave, increasing from $915.80 to $948.10 (in line with the increase to the National Minimum wage). This means a total increase of $775.20 over the 24-week entitlement.

ASIC warning about pushy sales tactics urging quick super switches

ASIC is warning Australians to be on 'red alert' for high-pressure sales tactics, click bait advertising and promises of unrealistic returns which encourage people to switch superannuation into risky investments.

The warning comes amid increasing concerns from ASIC that people are being enticed to invest their retirement savings in complex and risky schemes.

ASIC Deputy Chair Sarah Court said the start of a new financial year was often the trigger for people to check their super fund's performance, and urged consumers to be extra cautious.

"When it comes to sales calls about super switching, there are some big red flags people should be alert to — being asked to make a quick decision is one of the most obvious. Remember, a good deal won't vanish overnight."

She said that these calls "don't have the hallmarks of a typical scam. The caller will seemingly have your best interests at heart, and they say they want to help you find a better super product or locate lost super for free."

Consumers should always ask questions about salespeople's connections to funds, particularly in circumstances where a particular fund appears in the pitch, as there may be a commission arrangement.

"If you are unsure or are feeling pressured, just hang up."

ATO warns of common Division 7A errors

The ATO reminds shareholders of private companies that understanding how Division 7A of the tax legislation applies is crucial to avoiding costly tax consequences when accessing the company's money or other benefits.

When Division 7A applies, the recipient of a payment, loan or other benefit can be deemed to have been paid an unfranked dividend that will be included in their assessable income.

While Division 7A can be complex, most errors the ATO sees that result in its application are simple in nature, including:

• shareholders not recognising that acompany's money is not their money, andthey cannot access it for personal usewithout tax consequences;
• loans being made without complying loanagreements; and
• applying the wrong benchmark interestrate when calculating Division 7A loanrepayments.

These errors are often the result of common myths about Division 7A and how it works.

To support taxpayers' understanding of their tax obligations when managing private company money, the ATO has launched new content: 'Division 7A Myths debunked' on its website.

This page debunks common myths about Division 7A, breaking them into topics such as 'business structure', 'record keeping', and 'payments to other entities'.

Taxpayers who need to lodge a TPAR

Taxpayers may need to lodge a Taxable payments annual report ('TPAR') online by 28 August if they have paid contractors to provide any of the following services on their behalf:

• building and construction;
• cleaning;
• courier and road freight;
• information technology; or
• security, investigation or surveillance.

If the ATO is expecting a TPAR from a taxpayer who does not need to lodge one, they can complete a 'TPAR non-lodgment advice form'  by 28 August.

Taxpayers who no longer pay contractors can also use this form to tell the ATO they will not need to lodge a TPAR in the future (although if their circumstances change they may need to lodge a TPAR).

Changes to tax return amendment period for business

Businesses with an annual aggregated turnover of less than $50 million now have up to four years from the date of their tax return assessment to request amendments (increased from two years). This applies to assessments for the 2024/25 and later income years.

If businesses make a mistake on a tax return and need to request an amendment, they should lodge their requests well before the end of the amendment period to make sure the ATO can process it within the time limit.

They should keep accurate and complete records to support their amendment request.

Taxpayer's claim for travel expenses denied

In a recent decision, the Administrative Review Tribunal ('ART') denied an offshore worker's claim for work-related travel expenses, although it did allow his claim for home office expenses.

During the relevant period, the taxpayer resided in Queensland with his family, while his employment as an engineer was primarily based at an offshore facility located off the coast of Western Australia.

In his tax return for the 2022 income year, the taxpayer claimed work-related expenses of over $30,000, relating to accommodation, meal and incidental expenses for stays in Perth, Darwin and Broome between rotations on the offshore facility.

The ART noted that the taxpayer's permanent work location was the offshore facility. It accordingly largely disallowed the work-related expenses on the basis that they were "either preliminary to the commencement of those (employment) duties, or occurred after employment duties had ceased, and the (taxpayer) was on leave."

The ART also did not accept the taxpayer's claim for travel-related expenses with reference to the substantiation exception, as the allowances he received were not 'travel allowances'.

However, the ART did accept the taxpayer's claim for home office expenses of $579, noting that "As an engineer, he is required to engage in continuing professional development and the Masters and other studies completed in the home office were for this purpose."

To assist us in the preparation of your 2025 Income Tax Return(s) we have prepared a brief checklist detailing the information we require. Please complete the checklist and return it to us, together with all the relevant documents and details requested. The checklist can be found here.

In an endeavour to complete your tax return(s) efficiently and to meet the lodgement deadlines, we ask that you forward your information to us as soon as possible. Before you do, please check it against last year’s return(s) for completeness. We also request that you attend to any queries raised by us during the preparation of the return(s) as quickly as possible.

The ATO is continuing its policy of conducting random tax audits to ensure compliance, and will impose penalties for errors and omissions in returns lodged. We remind you that the onus is on you, as the taxpayer, to ensure a detailed and accurate disclosure of income and expenses is made at all times. We strongly suggest that claims for rental property expenses and work related expenses be supported by the appropriate documentary evidence before you forward your information to us for the preparation of your return(s).

We have also prepared a summary of key issues to consider; the summary can be found here.

We would also like to bring to your attention our revised Engagement terms and Privacy Policy.

Should you have any doubts as to the assessability or deductibility of an item please provide us with the full details or contact this office and we will be pleased to assist you.

List of items to review:

1. 2025 individual checklist
2. 2025 Issues to consider
3. Engagement terms and Privacy Policy.

Changes to car thresholds from 1 July

The car limit for the 2026 income year is $69,674.This is the highest value that a taxpayer can use to calculate depreciation on a car where they use the car for work or business purposes and they first use or lease the car in the 2026 income year.

Careful planning and timing are always important when taxation is concerned. To help inform clients, we have prepared this checklist which you may find helpful in planning your year-end tax strategies. This document is not exhaustive, and your individual circumstances must be considered.

'Wild' tax deduction attempts

The Australian Taxation Office (ATO) recently revealed some of the 'wild' work related expense tax claims people have tried to "put past" the ATO, including the following:

How to manage business day-to-day transactions

The ATO has the following tips for small business owners "that can make your tax life easier":

ATO's new focus for small business

The ATO is currently focusing on the following 'specific risk areas', where it is concerned "small businesses are getting it wrong":

The Fringe Benefits Tax (“FBT”) year ended on 31 March 2025 and each employer is required to calculate their liability for FBT. Where a liability for FBT exists, an annual return is required to be lodged and any tax paid by 21 May 2025. However, if the return is lodged electronically by a Tax Agent the due date of lodgement and for payment is 25 June 2025.

Welcome to the Land Tax edition of our client newsletter for 2025, where we hope to keep you informed of the key dates and latest updates for Land Tax in NSW. Click here or the link below to view or download a PDF copy of our newsletter.

StewartBrown Client Newsletter - 2025 Land Tax Edition

NSW LAND TAX REMINDER – ACTION REQUIRED BY 31 MARCH 2025
Land Tax 2024 – Registration Form
All landowners in NSW, including Individuals, Companies, Superannuation Funds and Trusts are reminded that the due date for lodgement of the initial return for land held as at 31 December 2024 is 31 March 2025...
(Read more on pages 1-2)

LAND TAX FOREIGN OWNER SURCHARGE
From 1 January 2025 the surcharge land tax rate for foreign owners will increase from 4% to 5%...
(Read more on page 2)

LANDHOLDER DUTY
Landholder Duty is applied when someone acquires a ‘significant interest’ in a company or unit trust that owns real property in NSW with an unencumbered value of $2 million or more...
(Read more on page 2)

CHANGES TO THE ELIGBILITY CRITERIA FOR THE PRINCIPAL PLACE OF RESIDENCE EXEMPTION
To receive the principal place of residence (PPR) exemption from 1 February 2024 you must...
(Read more on page 2)

Click here to download or view a PDF of the following newsletter

This special edition of our newsletter is to remind you of your employer obligations for the year ended 30 June 2024, as well as to provide an update on key changes from 1 July 2024 onwards. Please contact your StewartBrown Manager or Partner should you need any assistance with any of the matters mentioned below.