High on the list in terms of financial impact will be the denial of deductions for the ATO general interest charge (GIC) and shortfall interest charge (SIC) incurred in income years starting on or after 1 July 2025.

GIC is incurred when tax debts have not been paid on time while SIC is charged when a tax liability has been incorrectly self-assessed and resulted in a shortfall of tax paid. Both charges have increased in line with rising interest rates and are adjusted quarterly but compound daily. The SIC for January to March next year will be 7.38 per cent and for GIC 11.38 per cent.

The MYEFO said removing tax-deductibility would “enhance incentives for all entities to correctly self-assess their tax liabilities and pay on time, and level the playing field for individuals and businesses who already do so”.

The measure was estimated to increase receipts by $500 million over the five years from 2022–23.

Canberra would also supplement its recently announced increased fees for foreign real estate investment with a rise in the foreign resident capital gains withholding tax rate from 12.5 per cent to 15 per cent and reduction in the threshold from $750,000 to zero.

The tax applies when a foreign resident sells real estate and requires the purchaser to withhold a percentage of the price and remit that to the ATO.

“The measure will complement the government’s initiatives to improve housing affordability for Australians,” the MYEFO said.

The changes would apply to contracts entered into from 1 January 2025 and was forecast to increase receipts by $150 million, and increase payments by $5.9 million, over the five years from 2022–23.

Meanwhile, for those eligible to hold an Australian passport application fees would increase by 15 per cent from 1 July 2024, raising $349 million over three years that would be “redirected to support priorities in the Foreign Affairs and Trade portfolio”.

To encourage the take-up of “fuel-efficient vehicles” the government would tighten the definition for the purposes of the Luxury Car Tax, reducing the maximum fuel consumption from 7 litres per 100km to 3.5.

Luxury cars that meet the definition have a higher threshold for LCT, which is levied at 33 per cent.

The government would also update the indexation rate of the LCT value threshold for other luxury vehicles from headline CPI to the motor vehicle purchase sub-group CPI, aligning it with the indexation of the LCT value threshold for fuel-efficient vehicles.  

The measures would apply 1 July 2025 and increase receipts by $155 million over the five years from 2022–23.

Also in line for an increase was the Commonwealth penalty unit, which would rise by 5.4 per cent from $313 to $330 starting four weeks after passage of legislation.

The increase would apply to offences committed after the relevant legislative amendment came into force and the amount would continue to be indexed every three years in line with the CPI as per the pre-existing schedule.

Penalty units are used to describe the amount payable for fines under Commonwealth laws, including in relation to communication, financial, tax and fraud offences.

“This measure ensures that financial penalties for Commonwealth offences continue to remain effective in deterring unlawful behaviour,” the MYEFO said and was estimated to increase receipts by $4.5 million over five years from 2022–23.

Philip King
14 December 2023
accountantsdaily.com.au