Practice Update January 2024

31 January 2024

ATO Debt Alert

The federal government’s Mid-Year Economic and Fiscal Update (MYEFO), released in December, announced that the general interest charge (GIC) would soon no longer be deductible for individuals and businesses.

By way of background, GIC is imposed by the ATO, and it applies to unpaid tax liabilities, such as when:

  • an amount of tax, charge, levy or penalty is paid late (or is unpaid)
  • there is an excessive shortfall in an incorrectly varied or estimated income tax instalment.

GIC is calculated on a daily compounding basis on the amount outstanding.

Generally, the amount of GIC applied is notified in a:

  • statement of account
  • late payment notice
  • GIC notice.

The annual rate of GIC is 11.15%, increasing to 11.38% for the January to March 2024 quarter. With such a high-interest rate and daily compounding, it is prudent to prioritise ATO debts over other debts.

This new MYEFO measure means taxpaying entities, including individuals and small businesses, will have to face up to their GIC penalties without the prospect of a tax deduction.

The federal government states the changes will enhance incentives for all entities to self-assess their tax liabilities and pay on time correctly and level the playing field for individuals and businesses who already do so.

In effect, removing tax-deductible status will eke away at what is left of the ATO’s leniency towards overdue tax obligations.

The change is expected to result in extra tax revenues of $500 million annually from 1 July 2025.

TIP

After an extended period of leniency shown to individuals and businesses struggling through COVID-19 and its aftermath, 2022 and 2023 marked a reversion to the norm. If taxpayers fail to engage with the ATO to satisfy their outstanding debts, enforcement actions may be escalated accordingly. In that respect, the ATO has the discretion to:

  1. Issue garnishee notices and director penalty notices (‘DPNs’)
  2. Report outstanding tax debts to a Credit Reporting Bureau if action to manage the debt is not taken within 28 days of receipt of a notice of intent. This can have a crippling effect on your and your business’s ability to borrow and
  3. Otherwise, commence legal action, including issuing summons for non-lodgements, and otherwise progressing personal and caproate insolvency action, including creditors’ petitions and winding-up proceedings.

The surest way to prevent the above action from being taken is to enter into (and comply with) a payment arrangement with the ATO about your debts. Contact us if you would like us to do this on your behalf.

Christmas Shutdowns

With Christmas on our doorstep, some new rules exist around annual leave during business shutdowns.

To recap, a shutdown is when a business temporarily closes during specific periods, such as between Christmas and New Year. By contrast, a stand down is when an employer tells employees not to work because they can’t be usefully employed for reasons outside the employer’s control.

Reasons for a stand down can include:

  • equipment breakdown if the employer isn’t responsible for it.
  • industrial action, when the employer does not organise it.
  • a stoppage of work for a reason the employer can’t be held responsible, such as a natural disaster.

An employee can be directed to take annual leave during a shutdown if their award or registered agreement allows it. Suppose an Award or registered agreement does not cover an employee. In that case, they can be ordered to take annual leave if it is reasonable in the circumstances and their employment instrument (such as a contract) does not prohibit it.

From 1 May 2023, many awards have updated the rules on taking annual leave during a shutdown. The new rules mean:

  • employers may require employees to take paid annual leave during a temporary shutdown.
  • employers must provide at least 28 days written notice of the temporary shutdown period to all impacted employees.
  • the requirement to take annual leave must be reasonable.
  • the notice period can be reduced through an agreement between the employer and most impacted employees.
  • an employee who doesn’t have enough paid annual leave to cover the whole period can form an agreement with their employer for other options for the days not covered, such as:
  • using accrued time off.
  • annual leave in advance, or
  • leave without pay.

Note that during shutdowns, the employee must be paid for any public holidays during the shutdown period that fall on days they would typically work. These new rules apply to employees and employers covered by one of the affected awards.

Fair Work has updated its website with directions to take annual leave during a shutdown. This includes popular awards and industries like:

  • building and construction
  • hair and beauty
  • hospitality (including fast food and restaurants)
  • real estate.

Access your industry from Fair Work’s Direction to take annual leave during a shutdown page. Just select your industry from the drop-down menu to get award-specific information.

Christmas Tips for Retail Businesses

Here are some tips to employ this holiday season for businesses operating in the retail sector as follows:

  1. Last-minute adjustments to inventory.

Executive director for the Australian Retailers Association says now is an ideal time to ensure you have the right balance of stock on hand to meet your customers’ needs:

“Whether you’re a single shopfront or a nationwide chain, you probably should have planned your inventory up to five or six months in advance.

But now is a great time to make tweaks to your inventory.”

  1. Carefully balance foot traffic, wages, and opening hours

Retailers in shopping centres generally must play by the facility’s rules; otherwise, every retailer should try to assess their opening hours according to their needs.

Everyone knows to expect extended shopping hours generally begin in December, but that doesn’t mean every business should attempt to match those hours.

Wages increase by up to 25% after 6 pm, and there’s no point paying those extra wages if you won’t realise a proportional increase in foot traffic.

Christmas is also the ideal time to trial new and junior staff members who can help with odd jobs like stacking and packing.

  1. Make the most out of digital marketing

Modern marketing techniques like email direct marketing, search engine marketing and social media can all achieve great results – even if you’re not selling online.

Social media is how to get advertising out there at a minimal price.

All retailers should ensure they’re present and active on their local community Facebook page to promote their offerings, hours and any special events they might have come up with.

  1. Review your pricing strategy – it’s not always about the most significant discount

With the likes of Amazon in the market, many retailers are responding by dropping their prices – but that’s not always the best approach.

For example, suppose you are looking to buy a nice shirt. In that case, you may be happy to pay a little extra at your local store if it can offer free alterations with the purchase, which is generally better value than spending a little less at one of the more prominent brands that don’t provide this service.

People are likely to look at different products for different reasons, which must be considered when determining how to price your products.

Most importantly, retailers must know the consumer law around advertising discounts.

The ubiquitous “WAS $X, NOW $Y” is something that can catch retailers out because the ‘was’ price must be proven to be offered in the store or at some point sold at that price; otherwise, you may get stung by the Australian Consumer and Competition Commission (ACCC).

  1. Share the Festive Cheer – Especially With your best customers

It’s an age-old retail tenet, and it’s as accurate today as it ever has been, it’s much cheaper to retain an existing customer than to acquire new ones.

Christmas is the ideal time to celebrate the people who support you, and it doesn’t have to be a costly exercise.

Rather than offering special customer discounts, consider adding something to your regular customers’ basket at no cost.

The customer may see an extra 10 dollars of retail value in their basket, but that item probably only cost your business five dollars – and the more thought you’ve put into the gift, the more they’ll appreciate you for it.

Other Festive Season Tips

  • From a tax standpoint, keep good records of your work Christmas party – receipts, cost per head, who attended, the venue, etc. This will significantly assist your accountant in determining the party’s tax deductible and any potential fringe benefits tax (FBT) liability, including any applicable exemptions.
  • Notify critical customers and suppliers of the dates of any shutdown period that your business may have.
  • All staff should set up automatic, out-of-office replies on their email, notifying recipients of their leave dates over Christmas and noting that the leave period may differ between employees.
  • Make a mental note of your computer passwords. These are easy to forget if you are away for a few weeks. However, please don’t make a handwritten note and leave it on your desk ready for your return!
  • Use your phone mainly just for texting and calling over the holidays – allowing you to give your full attention to the family and friends you are with over the break. In other words, reconnect!

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
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