April 2024 – Accounting and SMSF Roundup

April 2024 Round Up

This month we bring you updates from the senate on the new super tax bill, compliance tips as FBT season kicks off and solvency tips from our team. Click to read below:

1. Support Growing for changes to new super tax bill

2. Common FBT mistakes flagged as FBT season kicks off

3. Never say Never – Accountant and SMSF tips for staying solvent

Support growing for changes to new
super tax bill

There is growing support from the Senate crossbench for the government to rethink its plans to tax unrealised gains in the proposed $3 million super tax.

Last week, the legislation was before the House of Representatives, along with the Objective of Super bill, following which it was reported that a number of Independent MPs spoke out against it highlighting the unintended consequences of taxing unrealised gains and lack of indexation.

SMSF Association CEO, Peter Burgess, said the Teal crossbenchers have always been strong supporters of the association’s position on the taxation of unrealised capital gains and indexation.

“As we have said on many occasions this new tax introduces an unprecedented treatment of assets, and it’s encouraging to see this now being called out,” he said.

“It could have far reaching implications for future tax changes beyond superannuation.”

In parliament last week, North Sydney representative Kylea Tink said the proposed tax was a “moment-in-time cash grab” and asserted it introduces an unprecedented treatment of assets in Australia.

“At the same time it doesn’t seem to be in any way, shape or form future-proofed,” she said, adding it was reasonable to expect asset classes held by super funds, such as property, to fluctuate over time,” she said.

She added that despite submissions from leading industry associations, there had been little change to the bill since it was first proposed.

Moreover, Goldstein MP Zoe Daniel said taxing unrealised gains of large balance super accounts was “out of line with their treatment in other areas of tax policy where capital gains are normally taxed on realisation, not accrual” and added that the “refusal to entertain indexing the cap” was the “superannuation equivalent of bracket creep”.

Meanwhile, Wentworth MP Allegra Spender argued the tax could potentially deter investment from SMSFs in venture capital in early-stage start-ups.

“There’s a real danger that we will basically disincentivise angel and other investors making these early or midsize investments in their super funds,” Spender said.

“Superannuation has a disproportionate sway in the Australian investment space, it’s where people put their discretionary income … so at a time when cash is already going out of that [start up] system, they could lose more.”

Burgess said the government has previously acknowledged that economic growth requires investment and the common ingredient for success in a more challenging economic world is business investment.

“SMSFs have historically been a strong source of venture capital. Taxing unrealised capital gains will discourage investment, particularly investment in technology where it is common for valuations to increase significantly long before the payment of any income,” he said.

By Keeli Cambourne (SMSF Adviser)

Common FBT mistakes flagged as FBT season kicks off

BDO has outlined several areas within fringe benefits tax that employers and accountants should pay close attention to.

Accountants and their business clients should be closely considering their fringe benefits (FBT) tax compliance as they approach the FBT compliance season this year, with employee benefits now much more of a focus in the current labour market, says BDO.

In a recent article, BDO said there is a need for “heightened awareness and diligence among employers” concerning FBT compliance, with many still struggling to understand the law in this area.

“There are several specific areas within FBT that employers should pay particular attention to, with both the ATO and our advisers commonly seeing mistakes in these areas,” the accounting firm said.

One of the key areas where mistakes happen is the misclassification of a vehicle for
either private or business use and not understanding which vehicles are FBT-exempt and which are not.

“This particularly relates to commercial vehicles such as dual cab utes,” said BDO. BDO said it also commonly sees issues with businesses not accurately keeping logbooks.

Other areas where businesses can fall into trouble with FBT compliance are inconsistencies between FBT and income tax returns, where employee contributions are miscategorised during reporting, and incorrect application of employee contributions.

“[Other issues include] employers applying a consolidation approach to filing FBT returns and not lodging a separate FBT return for each employing entity or not submitting a notice of non-lodgement when there is no FBT to declare,” said BDO.

Other problem areas include fringe benefit amounts being incorrectly reported and failing to take prompt action when a mistake has been made.

Recent changes with FBT

“Employers should also be aware of the recent changes to the FBT regime and other areas of tax reform that affect FBT application for FBT compliance season 2024,” said BDO.

Updates have been made to the electric vehicle home-charging rate in PCG 2024/2. “This is the introduction of a safe harbour of 4.2 per cent per kilometre that can be used for calculating electric charging costs of vehicles at home-charging stations in effect from 1 April 2022 for FBT tax and 1 July 2022 for income tax purposes,” the article explained.

“While electric vehicles are exempt from FBT, they are required to be included on individual’s employee’s earnings statement meaning that this safe harbour method provides a practical alternative where employers use the operating cost method to calculate the taxable value.”

Alternative record-keeping measures have also been introduced to reduce and simplify FBT record-keeping requirements for employers while producing similar compliance outcomes with lower compliance costs.

“It allows employers the choice to use existing records in place of travel diaries or
employee declarations for certain types of benefits. This applies to the 2025 FBT year
(1 April 2024 to 31 March 2025) and onwards,” said BDO.

By Miranda Brownlee (Accountants Daily)