P r a c t i c e U p d a t e December 2023

5 December 2023

Stage 3 Tax Cuts

The Federal government has reaffirmed its commitment to the so-called Stage 3 Tax Cuts. By way of background, the previous government legislated these tax cuts. They will abolish the current 37 per cent tax bracket, lower the existing 32.5 per cent bracket to 30 per cent, and raise the threshold for the top tax bracket from $180,001 to $200,001. You can see what that means by looking at the table below.

It shows how the personal income tax rates and thresholds will change in the 2024-25 financial year.

Tax RateCurrent 2023/24 ThresholdsTax RateNew thresholds from 1 July 2024


Nil         Up to $18,200                  Nil             Up to $18,200

19%       $18,201-$45,000              19%            $18,201 – $45,000

32.5%    $45,001-$120,000           30%           $45,000 to $200,000

37%       $120,001-180,000

45%       $180,001 and over         45%.          $200,001 and over


The result will be that the first $18,200 you earn will be tax-free (as it is currently), and every dollar you earn between that and $45,000 will be taxed at 19% (as it is presently). But then things change.

From July 1, 2024, every taxable dollar you earn from $45,001 to $200,000 will be taxed at 30%, and every dollar you earn above $200,000 will be taxed at 45%. That’s very different from what currently happens.

On the face of it, lowering the 32.5% bracket to 30% and removing the 37% tax bracket altogether seems like a big win for middle and upper-middle-income earners. But it will be a much bigger win for higher-income earners in dollar terms.

Please reach out to us when these cuts begin in July next year to figure out your tax position.

Advantages of company structure

There are many advantages of operating your business via a company structure, including:

  • Liability for shareholders is limited.
  • It’s easy to transfer ownership by selling shares to another party.
  • The company can employ shareholders (often family members).
  • The company can trade anywhere in Australia.
  • Taxation rates can be more favourable.
  • You’ll have access to a broader capital and skills base.
  • Reduced personal responsibility for any business debts incurred.
  • Legal liability also becomes reduced since a company is a separate legal entity from you as an individual.
  • Company tax rates are lower compared to higher marginal tax rates.
  • It can be much easier to raise finance and capital to grow and expand your business.

 

Director Liability

Chief among the advantages of company structure benefit these is asset protection. Broadly speaking, company owners are protected from creditors if their company fails. However, there are two notable exceptions!

The first of these is where a director offers a personal guarantee. Companies often require financial support to secure loans, leases, or credit facilities to foster growth and development in the dynamic business world. To assure lenders or creditors, directors of companies in Australia may be asked to offer personal guarantees. These guarantees, known as “Directors’ Guarantees”, play a crucial role in ensuring that the obligations of a company are met.

Such guarantees are essential for three reasons:

  • Access to Funding: By providing a personal guarantee, directors can help their companies access financing that might otherwise be difficult to obtain, especially for new businesses.
  • Credibility: A director’s willingness to guarantee a company’s obligations can enhance the company’s credibility and trustworthiness in the eyes of creditors and prospective business partners.
  • Risk Mitigation: For creditors, a Directors’ Guarantee serves as a safety net, ensuring that someone personally takes responsibility for the company’s obligations, reducing the risk of financial loss.

Directors should know that providing a Directors’ Guarantee carries significant personal risk. If the company defaults on its obligations and the director cannot cover the debt, its personal assets may be at risk. Along with director guarantees, owners of companies may also be personally liable under the director penalty notice regime.

As a company director, you become personally liable for your company’s unpaid amounts of:

  • Pay as-you-go withholding (PAYGW)
  • Gods and services tax (GST)
  • Super guarantee charge (SGC).

These amounts that you are personally liable for are called director penalties. The ATO can recover the penalty amounts once they issue a director penalty notice. To be clear, a director is responsible for ensuring the company meets its PAYGW, net GST and SGC obligations in full by the due date.

If these obligations are not met, directors become personally liable for director penalties unless they take steps to ensure the company lodges and pays its:

  • PAYGW by the due date,
  • Net GST (as well as Luxury Car Tax and Wine Equalisation Tax amounts) by the due date and
  • Superannuation guarantee (SG) to employees’ superannuation funds by the due date – if that doesn’t occur, the company must lodge a superannuation guarantee statement and pay the resulting SGC liability.

Talk to us if you are still determining your director’s liabilities.

 

Business Plan

The upcoming Christmas break is an opportune time to review a business plan.

A business plan can be used to:

  • help you start a new business.
  • help you improve the performance of an existing business.
  • attract funding for an investment.
  • communicate business progress to stakeholders.
  • communicate business goals and objectives to internal staff members.
  • attract potential buyers for the business.

A business plan is a ‘living’ document, so it should evolve and change—think of it an operating guide for your business throughout the start-up, operations and succession phases.

The elements of a business plan will vary depending on:

  • phase of the business is in (starting, running, selling).
  • the industry a business is in.
  • the use of the plan (e.g. for internal development purposes).

Every business plan will be different but generally include the elements below.

  1. Executive summary

This section provides an overview of the business concept. It should be attention-grabbing and concise—the content will be covered in more detail in future sections. While this is the first section of the plan, it can often help to write it last after the other sections have been finalised. This helps to ensure that the executive summary covers all the key information within the plan. It should define:

  • business vision
  • legal structure
  • products and services
  • customers
  • competitors
  • market and products or services
  • operation
  • financial projections
  • evolution of the business and the industry
  • structure of the business
  • short-term and long-term goals
  1. Product, service and market analysis

In this section, you should highlight your business products and services and describe what makes them unique, such as their:

  • features
  • benefits
  • limitations
  • cost and sale price.

You can also include details of any business plans to introduce new products and services. Your market analysis should describe your target market (e.g., local, international) and target customers. Add in the research you have done about your industry and the market trends. In this section, you will also complete a SWOT analysis (strengths, weaknesses, opportunities, threats).

  1. Sales

Explain your sales forecasts and targets in this section and how you will manage customer records and payments—understanding what sales strategies will work for you and the best channels to market your products or services. You will also need to know your current sales, volume and market share and what you expect them to be for the coming year. You should also identify your break-even point – the sales volume required to keep the doors open.

  1. Operating plan

This section will cover all you know about how you do things in your business—for example, your standard operating procedures and how to ensure the quality of your products and services.

  1. Financial plan

Summarise your key financial details, including:

  • costs for establishing or operating the business.
  • sales needed to break even.
  • projected cash flow.
  • funding arrangements.
  • payment plans.
  1. Action plan

The final section of the business plan should include a set of actions to take before you review your business plan and check your progress. This should be over 6–12 months, based on the business goals outlined in your plan.

Set a regular review date for the actions and the business plan. Assess which actions have been completed, which remain outstanding, and require updating to help your business plan remain relevant.

  1. Review

As noted, the Christmas break is an excellent time to review your business plan to ensure that it’s relevant, achievable and up to date with any changes in your business.

To help you review your plan, ask yourself the following questions:

  • What will the review schedule be?
  • Is the plan up to date?
  • Have the business goals changed?
  • Does the plan still match the business goals?
  • Are market trends changing?
  • Have significant political, environmental, social or technological changes affected your business?
  • Have there been significant changes in your finances or need for capital?

 

Benchmarking your business

Have you benchmarked the performance of your business?

The ATO provides a high-level benchmark tool for business owners to compare their company’s performance to a broader range of similar businesses. There are essentially three purposes behind the ATO Small Business Benchmark Tool. These are:

  1. encourage business owners to perform annual health checks to see if their costs are above or below their peers.
  2. enable businesses to assess whether any discrepancies may be flagged for an audit by the ATO and
  3. to alert the ATO to investigate businesses outside the benchmarking norm.

Financial benchmarking has been a valuable tool for businesses across various industries for decades, as it is an effective way of identifying issues and facilitating sound business decisions.

The ATO says: “When we see a business significantly outside the key benchmark range for their industry, it doesn’t necessarily mean you have done anything wrong. But it indicates something unusual and may prompt us to contact you for further information”.

In conclusion, the ATO Benchmark Tool is a valuable resource for small businesses to see how you’re tracking against businesses of a similar type. Access the benchmarks on the ATO website and contact us if you have any questions.

Practice Update September 2025

2 September 2025
Land tax in Australia: exemptions, tips and lessons Land tax is one of those quiet state-based taxes that does not grab headlines like income tax or GST, but impacts property owners once thresholds are crossed. It applies when the unimproved value of land exceeds a certain amount, which differs from state to state. Principal places of residence are usually exempt, but investment properties, commercial holdings, and certain rural blocks may be subject to taxation. For individuals and small businesses, land tax is worth paying attention to because exemptions can make the difference between a manageable annual bill and a nasty surprise. A recent case in New South Wales (Zonadi case ) has sharpened the focus on when land used for cultivation qualifies for the primary production exemption. The lessons are timely for farmers, winegrowers and anyone with mixed-use rural land. The basics of land tax Each state and territory (except the Northern Territory) imposes land tax. Key features include: Assessment date : Usually determined at midnight on 31 December of the preceding year (for example, the 2026 assessment is based on ownership and use as at 31 December 2025). Thresholds : Vary across jurisdictions. For example, in 2025, the NSW threshold is $1,075,000, while in Victoria it is $300,000. Exemptions : Principal place of residence, primary production land, land owned by charities and specific concessional categories. Rates : Progressive, with higher landholdings paying higher rates. Unlike council rates, which fund local services, land tax is a revenue measure for states. It is payable annually and calculated on the total taxable value of landholdings. Primary production exemption Most states exempt land used for primary production from land tax. The policy aim is precise: farmers should not be burdened with land tax when using their land to produce food, fibre or similar goods. However, the details of what constitutes primary production vary. Qualifying uses generally include: cultivation (growing crops or horticulture) maintaining animals (grazing, dairying, poultry, etc.) commercial fishing and aquaculture beekeeping Sounds straightforward, but the catch is in how the land is used and for what purpose. Lessons from the Zonadi case The Zonadi case involved an 11-hectare vineyard in the Hunter Valley. The land was used for: 4.2ha of vines producing wine grapes a cellar door and wine storage area a residence and tourist accommodation some trees, paddocks and access ways During five land tax years in dispute, the taxpayer sold some grapes directly but used most of the crop to make wine off-site, which was then sold through the cellar door. Income was derived from grape sales, wine sales and tourist accommodation. The NSW Tribunal had to decide whether the land’s dominant use was cultivation for the purpose of selling the produce of that cultivation (a requirement under section 10AA of the NSW Land Tax Management Act). The outcome was a blow for the taxpayer. The Tribunal said: Growing grapes was indeed a form of cultivation and amounted to primary production. But cultivation for the purpose of making wine did not qualify, because the exemption only applies where the produce is sold in its natural state. Wine is a converted product, not the product of cultivation. Although some grapes were sold directly, the bulk of the financial gain came from wine sales. Therefore, the dominant use of the land was cultivation to make and sell wine, which is not exempt. The exemption was denied, and the taxpayer was left with a land tax bill. Why this matters For small businesses, especially those that combine farming with value-adding activities such as processing or tourism, the case serves as a warning. The line between primary production and secondary production can determine whether a land tax exemption applies. If most income comes from a cellar door, farmstay, or product manufacturing, the exemption may be at risk, even though cultivation is occurring on the land. Different rules in Victoria Victoria takes a broader view. It defines primary production to include cultivation for the purpose of selling the produce in a natural, processed or converted state. In other words, grapes sold for wine production would still be considered primary production. The only further hurdle is the “use test”, which depends on location: outside Greater Melbourne: land must be used primarily for primary production within urban zones: land must be used solely or mainly for the business of primary production Had Zonadi been in Victoria, the outcome could have been very different. The vineyard would likely have been exempt from this requirement. State-based comparisons Here’s a snapshot of how land tax treatment differs across states when it comes to cultivation and primary production:

Practice Update July 2025

10 July 2025
Shila is taking the leap

Practice Update June 2025

10 July 2025
Key concerns when selling a business in: A strategic guide for business owners