Tax Alert March 2024

New controls for ATO Online and tax charges non-deductible.

Following the use of stolen personal data to access ATO Online accounts, the federal government has tightened access rules to online tax accounts as part of an increased focus on the vulnerability of small and medium businesses to cyber incidents.

ATO interest non-deductible

From 1 July 2025, taxpayers will no longer be able to claim tax deductions for ATO interest charges.ⁱ

Although not yet law, the government made the announcement in its 2023-24 Mid-Year Economic and Fiscal Outlook.

Since deductions for general interest charges (GIC) and shortfall interest charges (SIC) will not be permitted after July 2025, any GIC or SIC later remitted by the ATO need not be included in assessable income.

New fraud controls

Tighter controls for taxpayers’ ATO online accounts will make it more difficult for criminals to commit identity fraud using stolen personal information such as bank and ATO statements and tax file numbers.

The changes mean taxpayers who use their myGovID to log into the ATO will need to use myGovID for all future logins. This will leave criminals unable to access ATO accounts without myGovID details.

The government is urging Australians to upgrade to myGovID when interacting with government agencies online and has released its new Cyber Security Strategy to support small and medium businesses vulnerable to cyber incidents.

Holiday home claims

The ATO is continuing its crackdown on tax deductions for holiday homes by encouraging tax professionals to check how clients are using their property and if they are correctly apportioning deductions in line with the time period the property is producing income.ⁱⁱ

Some holiday homeowners are not reducing deduction claims if they reserve their property during peak periods or place unreasonable conditions restricting the likelihood the property will be rented.

Homeowners have been requested to check the number of days the property is blocked out for the owners, how and where the property is being advertised, whether family or friends use the property, and if any parts of the property are off-limits to tenants.

Checking R&D claims

Working in conjunction with the Department of Industry, Science, and Resources, the ATO will be undertaking random reviews of companies taking advantage of the government’s R&D tax incentive.

The reviews will assess the eligibility of companies’ R&D tax incentive activities and expenditure, with selected companies being contacted directly for review.

If common errors are identified during the review process, the ATO will share them with all program participants.

Tough times may mean a payment plan

With some small businesses facing difficult trading conditions, the ATO is reminding taxpayers in financial distress that they may be eligible to set up a payment plan if they are unable to pay their tax bill in full and on time.

Eligible taxpayers who have a tax bill of up to $200,000 may be able to set up their own payment plan using the ATO online or self-help phone services.

Payment plan eligibility requires the business to be viable and able to make an upfront payment with completion within the shortest possible timeframe to minimise accruing General Interest Charge (currently 11.15 percent).

Medicare safety net thresholds increase

Thresholds for the Medicare safety nets rose from 1 January 2024, resulting in an increased amount taxpayers need to spend on out-of-hospital medical expenses before qualifying for a higher rebate.

The increase is in line with indexation based on inflation and rose to $560.40 on the original Medicare safety net for both concessional and non-concessional individuals and families.

The extended Medicare safety net increased to $811.80 for concessional individuals and families, and to $2,544.30 for non-concessional individuals and families.

Translated cybersecurity guides available

The government’s Australian Cyber Security Centre has released five popular cyber security guides in more than 20 languages to help business owners from non-English speaking backgrounds to improve their cyber security knowledge.

The five free guides include a small business cyber security guide, personal and top tips for cyber security, easy steps to securing devices and accounts, and a seniors guide to securely using the internet.

By taking proactive measures, staying informed and seeking professional financial advice, you can navigate the evolving landscape of personal and business tax compliance with confidence. Our accounting team can work with you to understand your tax situation and safeguard your financial wellbeing.

i https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/deny-deductions-for-ato-interest-charges
ii https://www.legacy.ato.gov.au/Tax-professionals/Newsroom/Income-tax/Do-your-clients-have-a-holiday-home-/