Superannuation Guarantee Rate Increase

As of 1 July 2024, employers in Australia are required to increase their superannuation guarantee contributions from 11% to 11.5%. This increment is part of a phased plan to raise the superannuation guarantee to 12% by 2025, with subsequent increases of 0.5% each year. Employers need to adjust their payroll systems accordingly to ensure compliance with the new rate and to avoid potential penalties.

ATO Focus for 2024: Work-Related Deductions

The Australian Taxation Office (ATO) is placing a heightened emphasis on the accuracy and substantiation of work-related deductions. Employers and employees alike should be aware of the following key areas:

Apportioning Expenses Between Private and Work Use

Expenses that have both private and work-related components must be properly apportioned. Substantiation is critical, and bank statements alone are insufficient to validate work-related expenses. Detailed records and receipts are essential to support any claims.

Working from Home Expenses

The ATO requires robust documentation for working from home expense claims. This includes:

  • Records of phone and electricity bills: Maintain comprehensive records.
  • Tracking work hours: Keep timesheets, diaries, or spreadsheets to record hours worked from home.
  • Depreciation claims: Retain receipts and documents for items claimed under depreciation.
  • Methods for claiming: Choose between the fixed rate or actual expense methods and ensure proper documentation for either.

Car Expenses

Changes to car expense deductions include:

  • Rate change: If using the cents per kilometre method, remember that this rate covers all vehicle running expenses such as fuel, oil, maintenance, registration, servicing, and depreciation.
    • Avoid double-dipping: Separate deductions for these costs are not allowed. Maintain a log of work-related kilometres, up to 5000 km per car per year.
  • Logbook method: Retain receipts for all claimed expenses and keep a valid 12-week logbook documenting all work-related car trips.

Record-Keeping

Bank statements alone are not sufficient for claiming work-related expenses. Valid receipts must include the cost, supplier, date of purchase, nature of goods or services, and the date the document was made. For example, a fuel purchase receipt is necessary to distinguish between fuel and other items bought at a service station. Retain receipts for at least five years.

Rental Expenses

The ATO also emphasises proper record-keeping and accurate claims for rental expenses:

Interest Expenses

Only the portion of interest expenses related to the rental property loan is deductible. Expenses for private, redrawing on the loan for private use or increasing the loan for private use are not deductible

Repairs and Maintenance vs. Capital Expenses

There is often confusion between these categories:

  • Initial repairs: These are repairs addressing damage present when the property was purchased and can be claimed over time. For structural repairs, these are considered ‘capital works’ and can be claimed at 2.5% over 40 years. Unclaimed capital works can be included in the capital gains tax (CGT) calculation when selling.
  • Capital allowances: Depreciating assets like air conditioners, appliances, pool pumps, window coverings, and removable flooring can be claimed. Immediate deductions are available for depreciating assets costing $300 or less. All depreciating assets have an effective life and must be depreciated accordingly.

Conclusion

Employers and taxpayers should stay informed about these updates and requirements to ensure compliance and optimise their deductions. Proper documentation and record-keeping are crucial for substantiating claims and avoiding penalties. For further guidance, contact our office today.