During February, the Stage 3 tax cuts have passed with no changes. In Victoria, the State Government has also passed the changes to Vacant Residential Land Tax, with a late increase in the rates of the tax.

LEGISLATION UPDATE

Foreign investment fees

Treasury Laws Amendment (Foreign Investment) Bill 2024 has passed the House of Reps. The intention of the Bill is to ensure that Double Tax Agreements do not prevent foreign investment fees and State and Territory property taxes being imposed on foreign purchasers. The changes will apply from 1 January 2018.

Stage 3 tax cuts changes

Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 has passed the Senate with no changes. The Bill gives effect to the changes to the Stage 3 tax cuts commencing on 1 July 2024. (Refer Tax Bulletin—January 2024).

RULINGS, COMPLIANCE GUIDELINES & TAXPAYER ALERTS

PCG 2024/2—EV Home Charging Expenses

The ATO has finalised its guidance on calculating the electricity costs of charging an EV at home for FBT and income tax purposes. The EV home charging rate is 4.20 c/km. The employer or the individual, as
relevant, can choose each year either to use the EV home charging rate or to use the actual charging cost.

The rate does not apply to plug-in hybrids, electric bikes or scooters. Taxpayers will be required to keep opening and closing odometer readings and a valid logbook. Individuals will also be required to keep a copy of one electricity bill to show they have incurred electricity costs. PCG 2024/2 will apply from 1 April 2022 for FBT purposes and from 1 July 2022 for income tax purposes.

MT 2024/D1 —Time limits for claiming input and fuel tax credits.

The ATO has issued a draft ruling setting out the Commissioner’s view on the 4-year entitlement period for claiming input tax credits or fuel tax credits (tax credits). Key points include:
– The 4-year period is based on when a taxpayer is required to lodge a return for the period to which the credit would be attributable.
– Any action taken after the period expires cannot revive the entitlement. However, it can be altered if a formal extension to the due date for the return is granted or an objection to the return is lodged, before the end of the period.

CASE LAW UPDATE

Re The Pickering Family Trust—no variation power

This case involved two family trusts controlled by brothers (Ted and George) which held units in a unit trust with significant assets. The succession planning on their death involved passing all income and assets to both George and Ted’s sons. However, the sons were not beneficiaries of their uncle’s trusts and the Deeds had no variation power.

The trustees therefore sought approval from the Court under Section 63A of the Trustee Act to vary the terms of the trusts by expanding the beneficiaries of each trust to include the children and grandchildren of the other brother, and certain family trusts. They also made certain undertakings to satisfy the requirements of the section. The Victorian Supreme Court approved the arrangement as it was satisfied that it would genuinely benefit the relevant person, and that the arrangement is a proper and fair one.

Key points: Where there is no variation power in a trust deed, court approval may be granted if certain conditions are met. (The issue of potential resettlement may also need to be considered, but was not dealt with in this decision.)

OTHER UPDATES

Victorian State Taxes—Vacant Residential Land Tax

The Victorian government has passed legislation to expand the application of Vacant Residential Land Tax. From 1 January 2025, Vacant Residential Land Tax will apply to all vacant residential land in Victoria, subject to certain exemptions. Land may be considered vacant if it is unoccupied for more than 6 months per year. The Vacant Residential Land Tax rate will also expand to apply on a sliding scale based on how long the property is vacant, starting at 1%; increasing to 2% for the second year; and 3% for the third and later years.

From 1 January 2026, the tax will also include land in established areas of metropolitan Melbourne that is capable of residential development, and that has been unimproved for at least 5 years. Land contiguous to an owner’s principal place of residence will be exempt if certain conditions are met.

Other changes from 1 January 2025 include:
– The period that new residential premises can remain vacant, and be exempt from Vacant Residential Land Tax, is extended to up to 3 years, where the owner has made genuine and reasonable efforts to sell the land.
– The existing exemption for a home owned by an individual (or vested beneficiary of a trust) that is used and occupied as a holiday home for at least 28 days in a calendar year will be expanded to allow use by a relative of the owner.

Note: The relevant period that properties can be deemed vacant commenced from 1 January 2024. Individuals with a holiday home should therefore be keeping records (such as a logbook or receipts from their stay) to substantiate its use. Holiday homes held within a trust will need to meet the higher threshold of 6 months. Further information can be found at https://www.sro.vic.gov.au/vacant-residential-land-tax

Data matching programs

The ATO will acquire the following data for the 2024 to 2026 income years:
– Rental bonds—the objective is to identify properties producing income and therefore individuals who may be failing to meet their lodgement, reporting and/or payment obligations. The ATO may then take compliance and/or education and assistance action.
– Novated lease data —this may be used to initiate nudge messaging through online services at, or before lodgement. Messaging will appear for taxpayers identified in the prior financial year to inform them that motor vehicle expenses under a novated lease arrangement are not tax-deductible.

Superannuation contribution caps

From 1 July 2024, the contributions caps will increase as follows:
– The standard concessional contributions cap will increase from $27,500 to $30,000.
– The non-concessional contributions cap will increase from $110,000 to $120,000. This also means that the maximum available under the non-concessional contribution bring-forward provisions will increase to $360,000.

CONTACT US

For further information on any of these updates, or for general assistance, please get in touch.

The information contained in this bulletin is intended to provide general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayers’ particular circumstances. Please contact MC Tax Advisors if you would like assistance with the issues identified in this bulletin.