Articles and Technical Papers

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These are articles written by John Jeffreys that members of my website can use to promote their business. Members may send these articles to clients, use them on their websites, put them in a newsletter or any other use. Members have full licence to use the articles as they wish without any acknowledgement of John Jeffreys as the author or of John Jeffreys Tax Pty Ltd.

Some of the articles are technical papers which may not be suitable for sending to clients.

To access an article, note the article number in blue. Then click on the ‘Go To Articles’ button (you will need to be signed in). On the linked page, click the button with that number.

025

Minimum Yearly Repayments

If a private company makes a loan to a shareholder or their associate, action must be taken to avoid a deemed unfranked dividend under Division 7A. This can be done by repaying the loan in full by the lodgement date or entering into a complying Division 7A loan agreement with minimum yearly repayments. The ATO sets a benchmark interest rate annually (8.77% for 2024–25), and missing a required repayment can trigger a deemed dividend.

024

Work Expenses Substantiation

This article explains the substantiation rules for work expenses, including allowances for travel, meals, and laundry. While written evidence is generally required, exceptions exist—for example, if total work-related expenses are $300 or less, or if laundry expenses are $150 or less. Additional flexibility applies where allowances fall within ATO-determined “reasonable” amounts, though the ATO often expects more supporting documentation than the law explicitly requires.

023

Written Evidence

This article explains what constitutes valid “written evidence” for claiming work-related deductions under Australia’s substantiation rules. The required document must show the supplier’s name, the amount, the nature of the goods or services, the date incurred, and the date the document was issued. Exceptions exist for small expenses, depreciation claims, and cases where it is unreasonable to obtain documentation. If records are not maintained, the ATO may deny the deduction or impose penalties.

022

Substantiation of Expenses

This article outlines the ATO’s substantiation rules for claiming deductions, which apply to individuals and certain partnerships. It explains when documentary evidence is required, what types of expenses are covered (e.g. work-related, car, and business travel), and when exceptions may apply. Importantly, if records are not kept, a deduction may be denied—even if the expense was genuinely incurred—unless the taxpayer can otherwise satisfy the ATO with alternative evidence.

021

Deductibility of Financial Advice Fees

Tax Determination TD 2024/7 outlines the ATO’s updated position on when individuals can claim a deduction for financial advice fees. Generally, fees for setting up new investments or receiving initial advice are not deductible, while ongoing fees for managing existing investment portfolios and tax-related advice are deductible. Advice on income protection insurance is deductible, but advice on personal budgeting or general insurance is not. Apportionment is required where both deductible and non-deductible advice is provided.

020

Personal Services Income and Part IVA

The ATO’s draft PCG 2024/D2 confirms that even if a business passes the personal services business (PSB) tests under Part 2-42, the general anti-avoidance rule in Part IVA can still apply. The ATO considers income-splitting or profit-retention arrangements involving PSI to be higher risk, potentially resulting in the entire income being assessed to the individual and triggering penalties. This draft guidance poses significant implications for small businesses structured through entities.

019

Superannuation – Co-Contribution

This article outlines the Government’s superannuation co-contribution scheme for low-income earners. Eligible individuals who make personal (non-deductible) contributions to super may receive a Government contribution of up to $500. The benefit phases out between incomes of $45,400 and $60,400, and no application is needed—eligibility is assessed automatically by the ATO based on income and superannuation records.

018

FBT and Work Vehicles

This article provides an in-depth guide to the Fringe Benefits Tax (FBT) exemption for certain motor vehicle use under sections 8(2) and 47(6) of the FBT Act. It clarifies the types of vehicles that may qualify, defines “minor, infrequent and irregular” private use, and outlines the ATO’s compliance approach under PCG 2018/3. The article also offers practical insights, including vehicle eligibility tests, examples, and a pro-forma employee declaration to help satisfy ATO safe harbour criteria. This is a technical paper.

017

GST – Intangible Cross-Border Supplies

This article examines the GST treatment of intangible cross-border supplies made by Australian businesses, focusing on section 38-190(1) of the GST Act and the ATO’s guidance in GSTR 2003/7. It explains the GST-free treatment of certain services supplied for consumption outside Australia and unpacks the meaning of “directly connected with” goods or real property. The article includes practical examples, ATO interpretations, and highlights common traps for advisers navigating this complex area of GST law. This is a technical paper.

016

Section 109RB

This article explores section 109RB, which allows the Commissioner to disregard a Division 7A deemed dividend where it arose due to an honest mistake or inadvertent omission. It outlines how TR 2010/8 and PS LA 2011/29 guide the application of this discretion and explains key terms like “honest mistake” and “inadvertent omission.” Practical examples illustrate the ATO’s approach, highlighting both successful and borderline cases. The article is essential reading for practitioners managing Division 7A compliance issues or seeking remediation for past oversights. This is a technical paper.

015

Employees v Contractor Decision

This article explains how to determine whether a worker is an employee or an independent contractor for PAYG and superannuation purposes, focusing on ATO rulings TR 2023/4 and PCG 2023/2. It highlights the importance of the written contract, the ATO’s compliance risk framework, and the practical steps needed to avoid being placed in a high-risk category. The piece also critiques the complexity and quasi-legal nature of the PCG, warning tax practitioners of the administrative burden in maintaining compliance. This is a technical paper.

014

Superannuation Death Benefits

This article provides a comprehensive overview of the taxation implications associated with the payment of superannuation death benefits. It outlines the requirements under the Superannuation Industry (Supervision) Regulations for the cashing of benefits, defines eligible beneficiaries, and details how tax outcomes vary depending on whether recipients are dependants or non-dependants. It also explains how death benefit income streams interact with the transfer balance cap, supported by real-world ATO rulings and practical examples. This is a technical paper.

013

Deceased Estates and Family Trust Elections

This paper examines how family trust and interposed entity elections interact with deceased estates and testamentary trusts. It outlines when such elections may be beneficial or necessary, especially in complex estates involving franked dividends, losses, or continuing business operations. Accountants are encouraged to assess the potential tax implications of a death on trust structures and consider proactive planning, particularly for wealthier clients. This is a technical paper.

012

BPFN NALI Case

In BPFN and Commissioner of Taxation [2023] AATA 2330, the Tribunal ruled that trust distributions received by a SMSF were not non-arm’s length income (NALI), despite the ATO’s claims. While the Tribunal agreed the entities were not dealing at arm’s length due to shared control, it accepted that the income received was still within commercial expectations. The case underscores the importance of documenting arm’s length terms when SMSFs transact through related entities, especially given the potential tax impact of NALI assessments. This is a technical paper.

011

Superannuation Work Test

From 1 July 2022, super funds can accept contributions from members aged 67–74 without the work test, but individuals must still meet the test to claim a personal tax deduction. This requires being “gainfully employed” for 40 hours in 30 consecutive days, defined as work for gain or reward. The ATO interprets this strictly—passive income like dividends doesn’t qualify, and being unpaid or only receiving partnership income may not meet the requirement.

010

Superannuation Contributions Strategies

This article explores strategies for making superannuation contributions, particularly in light of possible indexation to contribution caps and the transfer balance cap from 1 July 2024. It explains how concessional and non-concessional contributions interact with a person’s total super balance, and how the bring-forward rule can be optimally used. Practical examples are provided to help individuals plan contributions around expected cap increases.

009

Working From Home

This comprehensive guide explores the tax implications of working from home, comparing the actual expenses method and the ATO’s revised fixed-rate method of 67 cents per hour. It explains key rulings, record-keeping requirements, and the limitations of each method—including risks with ATO objections and the impact on CGT if occupancy costs are claimed. The paper also highlights the tax agent’s obligations when advising clients in this area. This is a technical paper.

008

Is it Time for a Restructure?

Wanting to save tax is not inherently wrong—what matters is how it’s done. Legitimate tax planning involves structuring affairs within the law, such as using a company structure to reduce tax rates. In contrast, tax evasion involves concealing income or contravening the intent of the law. Since the line between planning and evasion can be unclear, engaging a qualified accountant is essential to ensure compliance with ATO expectations.

007

Is it Bad if You Want to Save Tax?

006

Make Sure Your Trust Distributions Count

If you operate through a discretionary trust, it is crucial to ensure a properly executed trustee income distribution resolution is in place before midnight on 30 June. Failing to do so could result in all trust income being taxed to the trustee at the top marginal rate. The resolution must comply with your trust deed, so up-to-date accounting records and early planning are essential.

005

Superannuation Contribution Rates to Rise

From 1 July 2023, the superannuation guarantee rate increases to 11%, up from 10.5%, with further rises to 12% by 1 July 2025. Employers need to review employment contracts to determine whether the increase will be absorbed into existing remuneration or result in higher overall employment costs. Legal advice may be needed where contract terms are unclear.

004

Contractors and Superannuation Contributions

Many business owners are unaware that superannuation contributions may be required for contractors, even those with an ABN, if the contract is principally for their labour. This can apply where the contractor is paid for their time and must perform the work personally. To avoid this liability, businesses can engage contractors through an entity such as a company, trust, or partnership.

003

Year End Planning

With just weeks left before 30 June, now is the time for business owners to get financial records up to date and begin tax and strategic planning for year-end. Key considerations include trust distributions, Division 7A repayments, asset write-offs (ending 30 June 2023), cash flow for upcoming tax bills, and superannuation contributions. Early planning in May can help avoid a last-minute scramble in June.

002

ATO Debt

The ATO is currently owed around $66 billion in unpaid taxes, with only $45 billion expected to be recoverable. In response, the ATO has intensified its debt recovery efforts, including issuing 18,500 Director Penalty Notices (DPNs) in 2022 and reporting nearly 500 businesses to credit agencies. Business owners facing tax debt are urged to seek professional advice promptly rather than avoid the issue.

001

Working from home tax deduction

The ATO has introduced a revised method for claiming working-from-home deductions. Taxpayers can now choose between the actual expenses method or a new fixed-rate method of 67 cents per hour, which covers energy, internet, phone, and stationery costs. Importantly, from 1 March 2023, you must keep detailed daily records of hours worked at home to use the new method, along with evidence of relevant expenses.

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