Summer 2024
Welcome to summer and, for many, an active season with last-minute tasks and celebrations with family and friends. We take this opportunity to wish you and your family a joy-filled and safe festive season!
This month:
Gifting for Future Generations – At this time of year, when giving is particularly on our minds, some might turn their attention to how best share their wealth or an unexpected windfall with their loved ones.
Tax Update – GST focus remains, while community tip-offs increase. A roundup of the latest tax news for the quarter.
The Age Pension and your Retirement Plans – Most people intend to retire between ages 65 and 66, according to the latest data and, surprisingly, despite growing superannuation balances, the Age Pension is the main source of income for many retirees.
Gifting for future generations
At this time of year, when giving is particularly on our minds, some might turn their attention to how best share their wealth or an unexpected windfall with their loved ones.
You might be thinking about handing over a lump sum to help them with a major purchase or business opportunity, or be keen to help reduce or extinguish their student loans. Alternatively, it might be about helping to solve a housing problem.
Whatever the reason there are some rules that it is worth being aware of to ensure both you and they are protected.
Giving a cash gift
You can give anyone, family or not, a gift of cash for any amount and, as long as you don’t materially benefit from the gift or expect anything in return, no tax is paid on the amount by either you of the receiver.i
The same applies if you’re planning to pay out your child’s student loans.
However, be aware that if the beneficiary of your cash gift is receiving a government benefit, such as an unemployment benefit or a student allowance, there is a limit on the size of the gift they can receive without it affecting their payments.
They may receive up to $10,000 in one financial year or $30,000 over five financial years (which can not include more than $10,000 in one financial year).ii
Helping out with housing
Many parents also like to help their children get into the property market, where possible.
It’s been a difficult time for many in the past few years in dealing with the COVID-19 pandemic, the rising cost of living and interest rates, and a housing crisis.
A Productivity Commission report released this year found that while most people born between 1976 and 1982 earn more than their parents did at a similar age, income growth is slower for those after 1990.iii
With money tight and house prices climbing, three in five renters don’t believe they will ever own a home even though most (78 per cent) want to be homeowners, according data collected by the Australian Housing and Urban Research Institute (AHURI).iv
Just over half of those surveyed (52 per cent) were renting because they didn’t have enough for a home deposit and 42 per cent said they couldn’t afford to buy anything appropriate, the AHURI survey found.
So, in this climate, help from parents to buy a home isn’t just a nice-to-have it’s becoming a necessity for many.
Moving home
Allowing your adult child, perhaps with a partner and family, to share the family home rent-free is common option, giving them the chance to save up for a deposit.
One Australian survey found that one-in-10 people had moved back in with their parents either to save money or because they could no longer afford to rent.v
If it gets too much living under the same roof, building a granny flat in your backyard may be an option. Of course there are council regulations to consider, permits to be obtained and the cost of building or buying a kit but on the upside, it may add value to your home.
Becoming a guarantor
Another way to help might be to become a guarantor on your child’s mortgage. This might be the best way into a mortgage for many but before you sign, think it through carefully, understand the loan contract and know the risks.vi
Don’t forget that, as guarantor, you’re responsible for the debt. You will have to step in and repay if the lender can’t afford to repay, and the loan will be listed as a default on your own credit report.
Any sign that you are being pressured to be a guarantor on a loan may be a sign of financial abuse. There are a number of avenues for advice and support if you’re concerned.
It’s vital that you obtain independent legal advice before signing any loan documents.
If you would like more information about how to provide meaningful financial support to your children, we’d be happy to help.
i Tax on gifts and inheritances | ATO Community
ii How much you can gift – Age Pension – Services Australia
iii Fairly equal? Economic mobility in Australia – Commission Research Paper – Productivity Commission
iv Rising proportion of ‘forever renters’ requires tax and policy re-think | AHURI
v Coming home: 662,000 Australian households reunite with adult children – finder.com.au
Tax update December 2024
GST focus remains, while community tip-offs increase
Fraudulent claims for GST refunds continue to be a major focus for the ATO, with several new pilot programs announced to help small businesses with GST reporting.
Here’s a roundup of the latest tax news.
New PAYG adjustment factor
Pay As You Go (PAYG) instalments – whether you pay quarterly or twice-yearly – has been increased to 6 per cent for 2024-2025 to reflect the latest GDP increase.
The change in the adjustment factor does not affect taxpayers who work out their own instalments or pay annually.
PAYG instalment amounts can be varied through the ATO’s Online services for business if you believe your current instalment amount will be more or less than your expected tax liability for the year.
Pilot programs to protect GST system
The ATO will be running a number of pilot programs during 2025 that aim to improve the digital tax experience for small businesses.
The pilot programs will encourage more frequent payment and reporting by small businesses and try to reduce complexity by embedding the tax rules and logic into small business software.
The ATO also hopes to empower small businesses by providing more information to help them get their GST right from the start, providing them with more time to focus on their business, rather than their tax obligations.
Community tip-offs increasing
The community appears increasingly willing to report tax cheats. The ATO received more than 47,000 tip-offs during 2023-24, with around 90 per cent deemed suitable for further investigation.
Building and construction, cafes and restaurants, and hairdressing and beauty services topped the list of industries reported.
Common tip-offs include taxpayers not declaring income, demanding cash from customers, paying workers in cash to avoid paying tax and super, not reporting sales, and where someone’s lifestyle did not appear to match their income.
Obligations for festive season employees
Hiring new employees to help out during the festive season brings with it the same tax and super obligations as for regular employees.
The ATO is reminding employers to ensure they withhold the right amount of tax from any payments made and also to pay all eligible employees’ super funds the correct amount of Super Guarantee to avoid paying the Super Guarantee Charge.
Employers without an approved exemption, deferral or concession must lodge the necessary information for new employees through the Single Touch Payroll system from their first payday.
GST fraudster imprisoned
Stamping out GST fraud continues to be a priority for the ATO, with a Victorian woman sentenced to four years imprisonment after claiming nearly $600,000 in GST refunds from 27 fraudulent business activity statements.
She is also being pursued for the amount she fraudulently obtained by submitting the multiple false claims for a fake cleaning business.
The case is part of the ongoing ATO-led Operation Protego, which was set up in response to numerous cases of attempted GST fraud. So far 104 people have been arrested and 59 convicted.
Eligibility for small business litigation funding
If you have a dispute with the ATO being heard by the Administrative Review Tribunal, you may be eligible for litigation funding to cover “reasonable” legal expenses.
To qualify, you must be a small business (sole trader, partnership, company or trust) operating a business for all or part of the relevant income year and have a turnover under $10 million.
Funding is available only if the matter does not involve a tax avoidance scheme, fraud or cash economy issues. You must not have a history of failing to lodge tax returns.
Updating your ABN details
The ATO is reminding taxpayers holding an Australian Business Number (ABN) they need to regularly ensure their current contact details are correct so they don’t miss out on important help, information, or support like financial grants.
Check both your physical business address and postal address are listed on the Australian Business Register, together with your authorised contacts, contact details and business activities.
The Age Pension and your retirement plans
Most people intend to retire between ages 65 and 66, according to the latest data and, surprisingly, despite growing superannuation balances, the Age Pension is the main source of income for many retirees.i
The intended retirement age has increased significantly in the last two decades, from just over 62 years on average in 2004.
Australian Bureau of Statistics (ABS) figures show that, in 2022-23, a government pension or allowance was still the main source of personal retirement income. This was followed by super, an annuity or private pension.
More than 60 per cent of those aged over 65 years were receiving the Pension in 2021ii
Am I eligible?
It is important to remember that, while you may not meet the eligibility requirements today, you may qualify later in life.
In 2021, only 44 per cent of people aged 65-69 received either full or part Age Pensions but this increased to 81 per cent for those aged 80 to 84 years.iii
Veterans who have served in the Australian Defence Force may be eligible for pensions or benefits from the Department of Veterans Affairs.iv
You are generally eligible for the Age Pension if you:
- are over 67 years (depending on when you were born)
- are an Australian resident and have lived in Australia for at least 10 years
- can meet an income and assets test
What are the income and assets tests?
The Age Pension means tests considers your income and the value of any assets you own. If the value of your income and assets exceed certain limits, your payment will be reduced.
Income includes money from a job (including salary packaging), other pensions or annuities, earnings from investments and any earnings outside of Australia.v
Assets are items of value you or your partner own or have an interest in such as investment properties and artworks; caravans, cars, and boats; shares; and business assets. While your family home isn’t included in the assets test, your pension may be affected if you sell it.vi
Can I still work?
Singles can earn up to $212 per fortnight without their pension being affected. For every dollar over that amount, their pension will be reduced by 50 cents. Couples can earn up to $372 per fortnight and for every dollar over that amount, 25 cents in the dollar will be deducted from their pension payment.vii
If your income in a fortnight goes over a certain amount, you will not receive a pension payment. This cut-off amount is $2500.80 for a single person and a combined $3,833.40 for a couple. There are other higher cut-off allowances for those affected by ill-health.
The Work Bonus may help you earn more from working without reducing your pension. You don’t need to apply for it, the Bonus will be automatically applied to your eligible income – you just need to declare your income.viii
What does the Age Pension pay?
There are different rates of pension for singles and couples.
The current maximum basic rate for a single person is $1047.10 per fortnight. A couple would receive 1,578.60 per fortnight. With extra supplements, those on a full Pension could receive a fortnightly total of $1,144.40 for singles and $1,725.20 for couples.ix
Get in touch if you’d some help to work out your eligibility for the Age Pension and other government entitlements.
ii, iii Age Pension guide | SuperGuide
iv Eligibility for benefits and payments | Department of Veterans’ Affairs (dva.gov.au)
v Income – Age Pension | Services Australia
vi Asset types – Age Pension | Services Australia
vii Income test for Age Pension – Age Pension | Services Australia
viii Who can get the Work Bonus – Work Bonus | Services Australia
ix How much Age Pension you can get – Age Pension | Services Australia
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