Tax accountants have urged clients to make sure they are aware of new rules introduced by the Australian Tax Office, before they file their End of Financial Year returns.
The ATO is ending the tax deductibility for interest charges on late or underpayments.
Angus Gasbarri from Armidale’s Earnt Advisory Accounting said until recently you were able to reduce your taxable income through this method, but the new changes mean it will now cost more to carry a tax debt.
“The ATO is hardening on collections, and from 1 July ATO interest charges on outstanding tax debts will no longer be deductible, even if the debt relates to prior years,” Mr Gasbarri said.
“This increases the real cost of falling behind with the ATO.
“It is important taxpayers are across the new rules and organised before EOFY.”
The Australian Government will also put an extra 15 per cent levy on profits from pension balances above $3 million, a change likely to initially impact around 80,000 savers.
That’s on top of the 15 per cent tax that most Australian workers, already typically pay on investment earnings in their superannuation accounts.
“The Division 296 tax is the elephant in the room,” Mr Gasbarri said.
“It’s not yet law, so taxpayers should avoid making hasty decisions until the final details are clear,”
“If the proposed start date of 1 July 2025 holds, it’s the balance at 30 June 2026 that matters — which means there’s still time for those affected to assess their position and plan appropriately.”
“The tax will scale with how much a retiree holds above the $3 million threshold.”
“Someone with $4 million in superannuation and a $500,000 gain would owe about $19,000 in extra tax.”
“A person with $6 million and the same gain would be hit with a $38,000 bill.”
At first glance, it may seem this will affect only a small number of Australians. But without indexing the $3 million threshold, that group will expand significantly over the coming decades.
The levy will capture changes in assets’ value regardless of whether they’re sold within the financial year.
Mr Gasbarri said the proposed changes are problematic on multiple fronts — the $3 million threshold isn’t indexed, there’s potential for double taxation, and most concerning of all is the unprecedented move to tax unrealised gains.
“This could hit hardest for those holding real estate or other illiquid assets, where the value is on paper, but the cash isn’t in hand.”
Mr Gasbarri said taxing these unrealised gains may require pension holders to sell assets to pay the tax, placing a liquidity burden on participants, while also making individuals more vulnerable to swings in financial markets.
Other changes by the ATO include reduced lower tax brackets, while the thresholds for higher brackets were increased:
- The 19 per cent tax rate was reduced to 16 per cent for incomes between $18,200 and $45,000, while the 32.5 per cent tax rate was lowered to 30 per cent for incomes between $45,000 and $135,000.
- The threshold for the 37 per cent tax rate was increased from $120,000 to $135,000, and the threshold for the 45 per cent tax rate was lifted from $180,000 to $190,000.
Earnt advisory said there has been some good news from the ATO, regarding tax cuts:
- From 1 July 2026, the 16 per cent rate will be reduced to 15 per cent.
- From 1 July 2027, the 15 per cent rate will be reduced to 14 per cent.
“And there is some good news on work-related expenses,” Mr Gasbarri said.
“The fixed rate method to claim additional running expenses from the working from home rate was increased from 67 cents to 70 cents per hour.”
“The Government also proposed an automatic deduction of $1000, without the need for substantiation, before the recent election. And, regarding instant asset write-offs, small businesses with an aggregated turnover of less than $10 million can claim an immediate deduction for the full cost of eligible assets costing less than $20,000 per eligible asset.”
“Assets must be purchased and installed ready for use before 30 June 2025.”
“Both new and second-hand assets qualify, including machinery, tools, office equipment and vehicles.”
While a further extension is yet to be legislated, the Government has announced plans to extend the $20,000 threshold out to 30 June, 2026.
But a warning from the ATO about those who fail to report a disposal of crypto assets in their tax return.
Taxpayers must maintain records of their crypto transactions to ensure any relevant disclosures are made in their tax returns, including where crypto is sold, converted into fiat currency, traded for another crypto, or used to purchase goods and services.
For more information contact your accountant or check out the ATO’s website www.ato.gov.au.
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