1. Fringe benefits tax (FBT) – Key Changes for the Upcoming Year
- Simplified Record-Keeping: From this FBT year, you can use existing corporate records instead of travel diaries for certain fringe benefits, as long as they meet the required information for your FBT return.
- End of PHEV FBT Exemption: The FBT exemption for plug-in hybrid electric vehicles (PHEVs) ends on 31 March 2025. However, if the PHEV was used before 1 April 2025 and there’s a binding commitment for private use beyond this date, the exemption may still apply.
2. ATO shifts non-compliant small businesses to monthly GST
- From 1 April 2025, the ATO will move 3,500 small businesses with non-payment, late lodgement, or incorrect reporting histories from quarterly to monthly GST reporting. This change aims to improve compliance and cash flow management. Businesses will be notified by the ATO when their reporting cycle changes.
- This shift is part of the ATO’s ‘Getting it right’ campaign and will last at least 12 months. Small businesses struggling with tax obligations should act early and seek assistance from a tax professional or the ATO.
3. ATO Updates on Superannuation and Tax Compliance:
- Foreign Superannuation Fund Earnings Taxpayers can elect to have earnings from a foreign fund assessed at a concessional 15% rate after transferring the entire balance post-6 months of Australian residency.
- Non-arm’s Length Expenditure & Superannuation Contributions Clarification on ensuring arm’s length for non-arm’s length expenditure and specific guidance on in-specie contributions.
- Penalties for Non-Compliance with Reporting Obligations Penalties up to 75% for late or incorrect reporting, including for Single Touch Payroll and superannuation contributions.
4. Operation Protego: ATO Targets GST Fraud
- In 2025, the ATO is intensifying efforts against large-scale GST fraud through Operation Protego, which involves individuals creating fake businesses and lodging false ABN applications and BAS to claim fraudulent GST refunds. The ATO warns the public against falling for such schemes promoted online and urges those involved to come forward. The Serious Financial Crime Taskforce (SFCT) is taking firm action against offenders, working with law enforcement and banks to detect and prevent fraud.
5. Average dividend and franking credit yields
- As of 26 February 2025, the All-Ordinaries Index has released updated average monthly dividend and franking credit yields.
- These are relevant for investors who qualify under the former section 160APHR of the Income Tax Assessment Act 1936.
- The simplified imputation system (since 1 July 2002) now expresses franking accounts in tax paid dollars. This update helps investors understand tax offsets and franking credits, especially for periods before 2002.
6. Debunking Division 7A myths – Key Insights for 2025
- The ATO has launched new resources to help private company owners navigate Division 7A and avoid costly mistakes.
- Division 7A ensures private company profits aren’t accessed tax-free by shareholders or their associates, but many common misconceptions lead to errors.
Common Myths Debunked:
- Private company funds are personal funds? Reality: You can’t access company money for personal use without tax consequences.
- Loans don’t need proper agreements? Reality: Loans must comply with formal agreements to avoid Division 7A consequences.
- Interest rate calculations can be flexible? Reality: Correct benchmark rates must be used for loan repayments under Division 7A.
To help businesses better manage their tax obligations, the ATO has made available a comprehensive guide to debunk Division 7A myths, covering topics like business structure and record-keeping.
7. Contractors omitting income:
Updates on Taxable Payments Reporting for Contractors
- Contractors in sectors like construction, courier, cleaning, IT, road freight, and security must ensure all income is reported on their tax return.
- The ATO is using data matching to identify unreported income.
- Failure to report can lead to audits, penalties, and interest.
- Contractors can use the ATO’s pre-filling service or Reported Transactions service to help report payments accurately.
8. Deductions and concessions
Non-Commercial Business Loss Risks
- The ATO is focusing on individuals incorrectly claiming and offsetting losses from non-commercial business activities (NCL) against other income sources.
- NCLs can’t be offset in the year the loss occurs; they must be deferred to a future year.
- Common errors include incorrectly offsetting hobby losses, not meeting income requirements, and failing to pass the four eligibility tests.
- To avoid mistakes, ensure you’re aware of the NCL rules and apply for the Commissioner’s discretion if necessary.
Small Business Boosts
In 2025, small businesses with an annual turnover under $50 million can claim two key tax boosts:
- Skills and Training Boost: An additional 20% deduction for training costs incurred between 29 March 2022 and 30 June 2024, for employee training from registered providers.
- Technology Investment Boost: A maximum $20,000 deduction for eligible technology expenses, available for costs incurred between 29 March 2022 and 30 June 2023.
Small business capital gains tax concession risks
Small business owners can access four CGT concessions to reduce tax on asset sales. Eligibility depends on business structure:
- Sole Traders/Partnerships: Report in your personal tax return.
- Companies/Trusts: Use the CGT schedule for companies and trusts.
Ensure you meet eligibility criteria, including turnover and asset limits. Common mistakes include misapplying concessions and incorrect asset date calculations. Always verify your reporting and calculations to avoid errors.
9. Residential property application for foreign investors
In 2025, foreign investors must apply for approval before purchasing residential property in Australia, unless exempt. Key points include:
- Approval Required: All foreign investors need approval for purchases unless exempt. Applications must be made before entering contracts.
- Exemption Certificates: Allows bidding on multiple properties in a nominated area, with restrictions on purchases.
- Visa Restrictions: Certain properties are only available to those holding specific visas (e.g., temporary residents).
- Approval Conditions: Conditions vary by property type, such as for principal residences, redevelopment projects, and vacant land.
- Fees: A fee is required for all applications and variations.
- Penalties: Non-compliance with rules may lead to penalties or legal action.
Foreign investors should review the requirements and seek legal advice before applying.
Credits
Abubashar Abdul Khadar, One Business Services Team
