What can I do to make the staff Christmas party tax deductible or tax-free? Not have one? Ok, seriously, it’s likely that you will pay tax one way or another; it’s just a question of how. If you structure your celebrations to avoid fringe benefits tax (FBT), then you normally can’t claim a tax deduction for the expense or goods and services tax (GST) credits.No FBT If you host your Christmas party in the office on a working day, then FBT is unlikely to apply to the food and drink. Taxi travel that starts or finishes at an employee’s place of work is also exempt from FBT - helpful if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer. If you host your Christmas party outside of the office and keep the cost per head under $300 (the FBT minor benefit limit) then FBT often won’t apply to the cost of entertaining your employees. But, if you do not incur FBT, you cannot claim GST credits or a tax deduction for the Christmas party expense.Tax deductible If your business hosts slightly more extravagant parties away from the business premises and the cost goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event. Are the costs of client gifts deductible? It depends on the gift and why you’re giving it. If you send a client a gift, the gift is tax deductible if you have an expectation that the business will benefit; it’s marketing. While this seems like a mercenary way to look at Christmas giving, it is the business giving the gift, not you personally. This assumes that the gift is not a gift of entertainment like golf, or restaurants, which would not be deductible. What about gifts for staff? Are they tax deductible? The key to Christmas presents for your team is to keep the gift spontaneous, ad hoc, and from a tax perspective, below the $300 FBT minor benefit limit. So, no ongoing gym memberships or giving the same person several of the same gift that adds up to $300 or more unless you want to give a gift to the ATO at the same time. But, you can give gifts at different times throughout the year without triggering FBT as these are counted separately for the minor benefit limit. A cash bonus will be treated as income in much the same way as salary and wages. I like to catch up with clients for lunch or a drink (or two) at Christmas. These expenses are deductible, right?  Regardless of whether it’s for Christmas or at any other time of the year, the cost of entertaining your clients – food, drink or other entertainment – is not deductible. The ATO is keen to ensure that taxpayers are not picking up part of the cost of your long lunches or special events while you’re bonding with clients.

The Federal Court has denied a sports company’s appeal to claim research & development incentives for the creation of an Australian signature basketball shoe. The Movie Air highlighted the importance of the signature Air Jordan shoe to Nike. While expected to sell around $3 million worth of shoes by its fourth year, the signature shoe eclipsed expectations raking in $126 million in its first year. Nike sold 1.5 million in the first six weeks following clever marketing suggesting that the colourful shoes were in breach of the NBA regulations. Nike’s recent fourth quarter results to 31 May 2024 show the Jordan brand worth $7 billion, and the bright spot in the company’s results with a 6% sales gain. In Australia, Peak Australia created the Delly1. Peak worked with Australian Olympian and NBA Champion, Matthew Dellavedova, on the final shoe design. Dellavedova has stated in interviews that he had, “...a whole lot of involvement with the shoe… I wanted a low-cut shoe that was light and close to the ground because I need to guard all these quick guards that are tough to defend over here [in the NBA]. They [Peak] did a great job with that, and as we went through the process of me testing it we just made minor adjustment.” But did the process undertaken to create the Delly1 meet the requirements to access research and development (R&D) concessions? Accessing R&D concessions The R&D tax incentive program encourages research and development that companies might not otherwise undertake. The incentive offers a tax offset which is calculated with reference to qualifying R&D expenditure. The rate of the tax offset and whether it is refundable or non-refundable depends on the company’s situation. To access the incentive, R&D activities have to be “core” or “supporting.” Active Sports Management Pty Ltd lodged applications with Industry Innovation and Science Australia (IISA), to register activities relating to the development of a customised basketball shoe (Delly1) as “core R&D activities.” A core activity is one that can’t be determined in advance, can only be determined by systematic progression through scientific principles and experimentation, and is conducted for the purpose of generating new knowledge. Unfortunately for Active Sports Management, the ATO, Administrative Appeals Tribunal, and now the Federal Court did not see the development of Delly1 as core R&D.  The claim was denied on the basis that the outcome did not appear to have technical or scientific uncertainty, just subjective views.

Phasing out Cheques The Government has announced a transition plan to phase out the use of cheques. Under the plan, cheques will stop being issued by 30 June 2028 and stop being accepted on 30 September 2029. The use of cheques has declined dramatically over the last 10 years, declining by around 90%. In response, banks have stopped issuing chequebooks to new customers. However, financial institutions have a legislated requirement to accept cheques until the Government no longer requires them to do so. Danish banks stopped accepting cheques in 2017 and New Zealand's banks in 2021. Cheques out but cash remains king While Australians have moved to digital payment methods, the Government has been careful to maintain cash as a payment method. Around 1.5 million Australians use cash to make more than 80% of their in‑person payments. Cash also provides an easily accessible back‑up to digital payments in times of natural disaster or digital outage. According to the most recent data, up to 94% of businesses continue to accept cash. The Government has stated that they will mandate that businesses must accept cash when selling essential items, with appropriate exemptions for small businesses. Currently, businesses don’t have to accept cash – business can specify the terms and conditions that they will supply goods and services. The issue of card surcharges often comes up when a business adds a surcharge rather than recognising this cost of doing business in their pricing. A business can charge a surcharge for paying by card, but the surcharge must not be more than what it costs the business to use that payment type.

What’s ahead in 2025? The last few years have been a rollercoaster ride of instability. 2025 holds hope, but not a guarantee, of greater stability and certainty. We explore some of the key changes and challenges. An election Welcome to political advertising slipping into your social media, voicemail, and television viewing - most likely with messages from the opposition asking if you are better off, and from the incumbents telling you all the reasons why you are. The 2025-26 Federal Budget has been brought forward to 25 March 2025. This suggests an election will be held in either March or May 2025 but no later than 17 May 2025. Legislation in limbo The Senate pushed through 32 Bills on the final sitting day of parliament for 2024 including seven of direct relevance to business and to the financial interests of some Australians. However, two key announcements remain in limbo: $3m tax on earnings in a superannuation fund The proposed Division 296 tax, which imposes a 30% tax rate on future earnings for superannuation balances above $3 million, is proposed to commence from 1 July 2025. The Bill enabling the new tax is stalled in the Senate. It’s unlikely that this tax will pass parliament prior to the election; at which point, the Bill lapses. It then becomes a question of whether the elected Government chooses to rectify the concept or let it fade into oblivion as a bad idea. $20,000 instant asset write-off for small business In the 2024-25 Federal Budget, the government announced the extension of the $20,000 instant asset write-off threshold for small business for a further year to 2024-25. The concession enables businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Without this measure, the threshold returns to $1,000. This concession was removed by amendment from the enabling legislation at the last minute in the final sitting of Parliament of 2024. The removal of this measure is unfortunate, as once again, SMEs now have no confidence about the tax treatment of investments in assets that they might be looking to make, or have made, in the current financial year. Tax & super changes Foreign resident capital gains withholding changes on sale of property One of the Bills pushed through Parliament at the end of 2024 changes how capital gains withholding applies to foreign residents from 1 January 2025. Currently, residents selling taxable Australian property must provide a clearance certificate to the purchaser at or before settlement to avoid having 12.5% withheld from a property sale where the value of the property is $750,000 or more. If applicable, the withholding is then made available as a credit against any tax liability. The vendor only receives any refund due after their next income tax return is processed at tax time. From 1 January 2025 however, the threshold will be removed and the withholding rate increased so that: The withholding is increased from 12.5% to 15%; and The withholding applies to the sale of all Australian land and buildings by foreign residents, regardless of the value of the assets. The reforms apply to acquisitions made on or after 1 January 2025. Superannuation rate increases to 12% The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025 - the final legislated increase. Super on Paid Parental Leave From 1 July 2025, superannuation will be paid on Paid Parental Leave payments. Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments), as a contribution to their superannuation fund. Interest rates At the last Reserve Bank Board (RBA) meeting, RBA governor Michele Bullock recognised the easing of headline inflation from 5.4% to 2.8% over the year to September 2024 but suggested that the economy still has some way to go before inflation is sustainably within the 2% to 3% target range. The RBA appears wary of volatility and wants to see inflation sustainably trending down before making any move. Commbank is predicting a February 2025 rate cut, ANZ and Westpac May 2025, and NAB June 2025. Cost of living pressures The National Accounts released in early December took economists by surprise with living standards growing by a mere 0.2% in the September quarter – the expectation was much higher. Discretionary spending only increased by 0.1%. The personal income tax cuts that came into effect from 1 July 2024 helped households, as did energy subsidies, but the impact is still working its way through the system. At the same time, mortgage costs continue to rise as past increases continue to impact. Through the year, Australia’s economy grew 0.8%, the lowest rate since the COVID-19 affected December quarter 2020. Economic activity in the Australian economy right now is heavily dependent on Government spending. Slow and steady is the expectation for 2025. The ‘Trump effect’ President-elect Trump will recite his oath of office on 20 January 2025. The Trump administration will hold the presidency, Senate and the House. For Australia, the question is the likely impact of some of President-elect Trump’s stated policy objectives including the imposition of tariffs. On social media, Trump has said: “…as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders.” “…we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.” This in response to claims that China is responsible for massive amounts of drugs, in particular Fentanyl being sent into the US. The issue for Australia is the secondary impact of a trade war. China is Australia's largest two-way trading partner, accounting for 26% of our goods and services trade with the world in 2023. A slowdown in the Chinese economy impacts Australia and the region generally. An immediate impact of the idea of a trade war has been the decline of the AUD/USD, currently sitting at around 64c. Fuel efficient cars New standards for vehicle manufacturers come into effect from 1 January 2025. Vehicle manufacturers will have a set average CO 2 target for all new cars they produce, which they must meet or beat. The target will be reduced over time and car companies must provide more choices of fuel-efficient, low or zero emissions vehicles. Suppliers can still sell any type of vehicle they choose but with more fuel-efficient models offsetting any less efficient models. If suppliers meet or beat their target, they'll receive credits. If they don’t, they will have two years to either trade credits with a different supplier, or generate credits themselves, before a penalty becomes payable. Wage theft criminalised As of 1 January 2025, the intentional underpayment of workers will be criminalised. Employers will commit an offence if: they’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument; and they intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid.  Employers convicted of wage theft face fines of up to 3 times the amount of the underpayment and $7.825 million.

We get a lot of questions from our SMSF clients regarding tax payable on concessional contributions. The below information is provided to assist you in understanding how the contributions are taxed, and at what rate. All Concessional Contributions made by each member of the SMSF must be deposited into a bank account established for your SMSF. Tax is payable on Concessional Contributions made into an SMSF at the rate of 15%. Additional 15% tax on Concessional Contributions for high-income earners Those earning more than $250,000 a year will have their Concessional Contributions taxed at 30% rather than the standard 15%. The definition of "income" is: Taxable income + concessional contributions + adjusted fringe benefits + total net investment losses. Concessional Contributions (i.e. your employer's contribution, salary sacrifice contributions and contributions by a self-employed person claiming a tax deduction) will count as income. For example, if your taxable income is $280,000 and your employer makes $25,000 in concessional contributions, you will trigger the threshold because your income will be assessed as $305,000 (i.e. $280,000 + $25,000 = $305,000). The additional tax of 15% (30% in total) will apply to those concessional contributions that take your income over $250,000, which in this case is on the extra $55,000. Income includes investment losses including losses on borrowing money to buy shares or from negatively geared property. For example assume your taxable income is $200,000, which has been calculated after deducting a net $90,000 loss on investment properties. You also receive $10,000 in fringe benefits, and your employer makes super contributions of $18,000. Under the rules, your income is $318,000. This is $68,000 above the $250,000 income trigger, which means your concessional contributions will now be taxed at 30% instead of 15%. Low income earners won't pay contributions tax Effectively, a person whose income is less than $37,000 will have the contributions tax on concessional contributions returned to their Fund, meaning they won't pay any contributions tax. Worth a maximum of $500, the Australian Taxation Office (ATO) will pay the Low Income Super Tax Offset refund to the SMSF. Like the co-contribution, a key eligibility requirement is that at least 10% of the person's income must come from employment. Need more information regarding your personal circumstances? Email super@st-m.com.au or call us on 02 6024 1655

We would like to introduce you to HubDoc , a great tool that can help simplify how you store and manage your receipts. Managing financial documents can be time-consuming, but HubDoc makes it easier than ever. With this tool receipts, bills, and bank statements can be captured digitally and stored securely in the cloud, reducing manual entry and the risk of errors. HubDoc also integrates seamlessly with Xero and is free to use for Xero subscribers. If you’re looking to streamline your financial management, HubDoc could be the solution. For more information visit Xero's Hubdoc centre Interested in learning more or getting started? Please reach out to the bookkeeping team who can assist with setup and training. Call Perrie on 02 6024 1655 or email bookkeeping@st-m.com.au

Soon, myGovID will be changing to myID. The app will have a new name and new look, but you’ll continue to use it in the same way. What you need to know There’s nothing you need to do to prepare for the change. You’ll still have: your same details – there’s no need to set up a new myID. Your login details (including email address) and the identity strength you’ve set up on your device, and any other devices, will remain the same continued use – your existing app should automatically update to myID or you can manually update it from the App Store or Google Play. You can download the myID app any time once it’s available access to services – you can still use the app to securely access a range of government online services (find out where to use it ). When the change happens, you might see both myID and myGovID when using your app to log in to participating government online services. This won’t affect your access, and your Digital ID will remain fully functional and secure during this time. Why the change The change from myGovID to myID aims to reduce the ongoing confusion between the myGovID app and myGov. The new name for the Australian Government’s Digital ID app reflects the community’s understanding of Digital ID and demonstrates how a whole-of-government ID provider can help protect Australians from identity theft and fraud. Avoid scams and fraudulent websites and apps It is important to be aware of fraudulent websites, apps and phishing scams. Scammers can make fake websites or apps that look just like myGovID or myID. To help protect yourself: don’t click on suspicious links, open attachments or download any files from suspicious emails or SMS; Government agencies will never send an unsolicited SMS that contains a hyperlink only download the myGovID (soon myID) app from the official app stores (Google Play and the App Store). Find out how myGovID protects your identity, what you can do to manage the security of your myGovID and how to stay safe online.

Ok, not that Succession series. Each month we’ll bring you a new perspective on transferring property. Be it estate planning, managing an inheritance, or the various forms of business succession. This month, we look at the tax consequences of inheriting property. Beyond the difficult task of dividing up your assets and determining who should get what, it’s essential to look at the tax consequences of how your assets will flow through to your beneficiaries. When assets pass from a deceased individual to a beneficiary of the estate, the tax impact will generally depend on the nature of the asset and the tax characteristics of the beneficiary, such as their residency status. Inheriting cash When cash passes from a deceased individual to their estate and then to a beneficiary, generally, there should not be any direct tax issues to deal with, assuming that the cash is denominated in AUD. Inheriting assets Death is a taxing event. When a change of ownership of an asset occurs, generally, a capital gains tax event (CGT) is triggered. However, the tax rules provide some relief from CGT when someone dies. The basic rule is that a capital gain or loss triggered by a death is disregarded unless the asset is transferred to one of the following: An exempt entity (although there are some exceptions to this where the entity is a charity with deductible gift recipient status); The trustee of a complying superannuation fund; or A foreign entity and the asset is not classified as taxable Australian property. The exemption applies if the asset passes to the deceased’s legal personal representative (i.e., executor) or to a beneficiary of the estate, which is not one of the entities listed above. Once the asset has been transferred to the beneficiary, the beneficiary will need to manage the tax impact when they sell the asset. Inheriting shares Let’s assume you inherit an ASX listed share portfolio under your mother’s will. The tax outcome will depend on whether your mother was an Australian resident for tax purposes when she died, and whether the shares were acquired by your mother before or after 20 September 1985 (i.e., pre-CGT or post-CGT). If your mother was an Australian resident for tax purposes when she died, and the shares were acquired post-CGT, then the cost base of the shares is normally based on the original purchase price. That is, the tax rules treat the inherited shares as if you purchased them. For example, if your mother purchased BHP shares for $17.82 on 2 January 1997, when you sell the shares, the gain is calculated based on your mother’s purchase price of $17.82. If your mother was a resident of Australia when she died, and the shares were acquired pre-CGT, then the cost base of the shares is normally reset to their market value at the date of death. That is, if your mother passed away on 1 October 2024, the share price at close was $45.96. If you subsequently sold the shares in three years, the gain or loss is calculated using this value. If your mother was a non-resident when she died, then the cost base of the shares is normally based on their market value at the date of death. But it’s not all about the tax. Managing shares in your will can be difficult as prices and allocations change over time, and the companies you are invested in evolve. A portfolio that was once worth a small amount 20 years ago, might be worth significantly more when you die. Inheriting property Let’s assume you inherit an Australian residential property from your father under his will. For certain tax purposes, you are taken to have acquired the property at the date of his death. The general rule is that the executor and/or beneficiaries of the estate inherit the cost base and reduced cost base of the CGT assets (the house) owned by the deceased just before their death, but this isn’t always the case, especially when it comes to pre-CGT properties and a property that was the main residence of the deceased individual just before they died. Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. If the house was your father’s main residence before he died, he did not use the home to produce income (did not rent it out or use it as a place of business) and he was a resident of Australia for tax purposes, then a full CGT exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met: The house is disposed of within two years of the date of death; or The dwelling was the main residence of one or more of the following people from the date of death until the dwelling has been disposed of: o The spouse of the deceased (unless they were separated); o An individual who had a right to occupy the dwelling under the deceased’s will; or o The beneficiary who is disposing of the dwelling. For example, if the house was your father’s main residence and was eligible for the full main residence exemption when he died, if you sell the house within the 2 year period, no CGT will apply. However, if you sell the house 10 years later, the CGT impact will depend on how the property has been used since the date of your father’s death. An extension to the two year period can apply in limited certain circumstances, for example when the will is contested or is complex. If your father did not live in the property just before he died, it still might be possible to apply the full exemption if your father chose to continue treating the home as his main residence under the ‘absence rule’. For example, if he was living in a retirement village for a few years but maintained the property as his main residence for CGT purposes (even if it was rented out). If your father was not an Australian resident for tax purposes when he died, the cost base for CGT purposes will normally be based on the purchase price paid by your father if he acquired it post-CGT. Inheriting foreign property If you are an Australian resident who has inherited a foreign property or asset from an individual who was a non-resident just before they died, the cost base is normally taken to be the market value at the time of death. For example, if you inherited a house from your uncle in the UK, the cost base is likely to be the value of the house at the date of his death. If a taxable gain arises on sale, then it is necessary to consider whether the CGT discount can apply, but the discount will sometimes be less than 50%. If the gain is also taxed overseas, then a tax offset can sometimes apply to reduce the amount of tax payable in Australia. Managing an inheritance can become complex. For assistance with estate planning, or to understand the tax implications of an inheritance, please contact us. Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained. Please contact us if you would like the facts about downsizer contributions. Call us on 02 6024 1655 or email advisory@st-m.com.au

If you are aged 55 years or older, the downsizer contribution rules enable you to contribute up to $300,000 from the proceeds of the sale of your home to your superannuation fund (eligibility criteria applies). In 2023-24, over 57% of people making a ‘downsizer’ contribution to super were women. And, the average value of the contribution was marginally higher at $262,000 versus $259,000 contributed by men. The most likely age someone makes a downsizer contribution is between 65 and 69. From age 65, a downsizer contribution can be withdrawn from super if your circumstances change, even if you are still working. Those aged 55 to 64 generally won’t have access to these funds until they are at least 60 and retired. Downsizer contributions are excluded from the existing upper age test, work test, and the total super balance rules (but the amount that can be moved to a retirement pension is limited by your transfer balance cap). For couples, both members of a couple can take advantage of the concession for the same home. That is, if you or your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria). To be eligible to make a downsizer contribution you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home - you could buy a larger and more expensive one and make a downsizer contribution if you have access to other funds. Please contact us if you would like the facts about downsizer contributions. Call us on 02 6024 1655 or email advisory@st-m.com.au