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NO TAX ON BUSHFIRE DISASTER PAYMENTS
$2 billion recovery fund
8th January, the Morrison government announced that Australians will not pay tax on federal disaster assistance they receive (Effective as of 4th February 2020)
SIMPLIFIED DEPRECIATION RULES – INSTANT ASSET WRITE-OFF
Instant Asset write off in its 4th year of operation
From 2 April 2019, the instant asset write-off has been expanded to include business with a turnover from $10 million to less than $50 million
As of 1st July 2020, the threshold for instant asset write-off will revert to $1,000
INCREASED SMALL BUSINESS INCOME TAX OFFSET
To increase to 13% in 2020-21
To increase to 16% from the 2021-22 income year
Capped at $1,000
LOWER COMPANY TAX RATE CHANGES
For the 2018-2019 income year, company base rate to be 27.5% if they are a base rate entity
The below conditions must be met for a company to be considered a base rate entity
- Turnover less than the threshold – $50 million for the 2018-2019 income year
- 80% or less of their assessable income is base rate entity passive income
INCREASED USE OF CONTRACTORS OVER THE HOLIDAYS MAY LEAD TO TPAR REPORTING
You may be required to lodge a Taxable Payments Annual Report (TPAR) in August 2020 if you have used more courier or cleaning contractors over the Christmas period
You will be required to report a TPAR if you:
- Have an Australian Business Number (ABN)
- Pay Contractors to provide courier or cleaning services
- Are providing cleaning or courier services
CHECKLIST: 2019/20 TAX PLANNING OPPORTUNITIES FOR INDIVIDUALS
Use this checklist as a guide to the 2019/20 year-end tax planning opportunities with a particular focus on superannuation
- Personal superannuation contributions
- Catch-up superannuation contributions
- Superannuation government co-contribution
- Nearing retirement
CHECKLIST: CHANGING RESIDENCY
If you become an Australian Resident, or stop being one, the range of assets on which you pay Capital Gains Tax (CGT) in Australia Changes
- Becoming an Australian resident
- Ceasing to be an Australian resident
- Choosing to disregard capital gains and losses
DEDUCTIONS FOR PAYMENTS TO WORKERS
Employers cannot claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations
Applies to income tax returns lodged for the 2020 income year onwards
To claim a deduction for a payment to a worker, you must:
- Withhold the amount from the payment before the worker is paid
- Report that amount to the ATO
WORK CHRISTMAS PARTIES DUTY OF CARE AND HOW TO AVOID DISASTERS
The festive season can be a happy and joyful time, but it can also be a period when unruly staff behaviour can ruin careers and damage working and business relationships.
The festive season and end-of-year celebrations should be enjoyed, but the work Christmas party can be a source of anxiety for employers who are unsure of their obligations to their workers.
The Christmas and New Year period are notorious for employee related incidents that can have a major detrimental impact on an organisation no matter what size or configuration.
Particularly if the event is organised and paid for by the employer, the duty of care to workers remains the same as it would if they were at work.
We suggest that if you are holding a staff Christmas Party that prior to the event all staff are notified either by a general communication to staff, email prior to the event or at the event by a Senior Manager that:
“While the organisation welcomes you to the annual Christmas party you are reminded that all attendees are required to abide by normal acceptable social and legal conventions and laws including applicable Company Policies.
This includes your treatment of other staff and your behaviour in general, and while the organisation is supplying some alcoholic beverages, it is your responsibility to ensure that you drink and drive responsibly and that you remain within legal limits.
We hope that you are able to enjoy the end of year celebrations and thank you for your contributions over the last year.”
SALARY SACRIFICE SUPER DISCONNECTED FROM THE SUPERANNUATION GUARANTEE FROM 1 JAN. 2020
Effective from 1.1.2020, salary sacrificed super contributions to an employee’s superannuation fund will no longer count as an employer contribution for the purposes of the employer’s minimum SG obligations; and can no longer be used to reduce ordinary time earnings (OTE) on which the SG obligation is calculated.
These changes have rectified deficiencies in the previous law.
REMOVING TAX DEDUCTIBILITY OF NON-COMPLIANT PAYMENTS
You can only claim deductions for payments you make to your workers (employees or contractors) from 1.7. 2019 where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.
Any payments you make to a worker where you haven’t withheld or reported the PAYG amounts are called non-compliant payments. you won’t be able to claim a deduction if you are required to withhold an amount and you don’t withhold or report any amount to the ATO, unless you voluntarily tell the ATO before they advise that they have commenced an audit or other compliance activity.
IMPORTANT CHECKS FOR EMPLOYERS WHEN HIRING A CONTRACTOR
There’s not just one deciding factor that makes a worker you hire an employee or contractor for tax and superannuation purposes. As an employer, it’s a decision you can only make once you’ve reviewed the entire working arrangement.
To get to the right answer, you need to consider a number of factors. Before hiring a contractor review the following case scenarios:
- Ability to subcontract or delegate– if they pay someone else to do the work.
- Basis of payment– if they will be paid based on an agreed quote, they provided.
- Equipment, tools and other assets– if they are providing their own tools and equipment needed to get the job done.
- Commercial risks– if they are legally responsible for their work and liable for fixing mistakes or defects.
- Control over the work– if they decide how the work gets done subject to specific terms in any contract or agreement.
- Independence– if they operate their own business independently of your business.
If the answer is no to some or all of these scenarios, you need to seek further information and advice before treating your worker as a contractor.
THE FIRST HOME LOAN DEPOSIT SCHEME BILL PASSES THE SENATE
The First Home Loan Deposit Scheme will assist an eligible first home buyer to purchase a house with a 5% deposit. The government will provide a loan guarantee of up to 15% of the property’s value to individuals earning up to $125,000, or couples earning up to $200,000, per year. The scheme could also save you up to $10,000 in lender’s mortgage insurance.
Eligibility for the scheme depends on where you live, value of the home (determined on regional basis).
The scheme is expected to be open on 1.1.2020 with further details on eligibility, participating financial institutions; and the application and assessment process.
AIRBNB HANDS OVER DATA ON HOSTS TO ATO
In October Airbnb has defended its decision to hand over the data of 190,000 property owners and hosts to the ATO about the income they have received from the platform.
If you have rented out your property even for part of the year or few weeks, please advise us at the time of tax return preparation. As the sourced data from AIRBNB may trigger mismatch against your profile if you do not declare your income properly.
IF YOU CHANGE YOUR BUSINESS STRUCTURES, YOU MAY NEED TO APPLY FOR A NEW ABN
Some of the situations may be as follows when you are moving from one business structure to another. In such situations, you may need to cancel your existing ABN and apply for new ABN.
- individual/sole trader to partnership or trust;
- individual/sole trader to company or trust;
- partnership to company or trust.
Also, ensure your details are updated on tax invoices, this is important as ABN is used to identify your business identity to others when ordering and invoicing and claim GST credits.
CHANGES FOR PROPERTY INVESTORS
Holding costs on vacant land being held with the intention to derive future income (including an investment property) will no longer be tax deductible under a current bill before Federal Parliament.
The new rules will remove the subjective intention to derive future income from holding vacant land – as mentioned this will affect the deductibility of holding costs such as interest, land tax and rates.
Vacant land is defined as having no substantial and permanent building or other structure that is in use or available for use on the land. land would be considered vacant until the premises are lawfully able to be available for rent or hire.
These measures apply from 1.7.2019. Individuals, SMSF and family trusts are to be affected from such changes whilst these changes will not apply to corporate tax entities, non SMSF Superannuation plans, managed and public unit trusts.
The new legislation does not apply where the land is used to carry out a business.
WORKING OUT IF YOU HAVE TO PAY SUPER
Generally, if you pay an employee $450 or more (before tax) in a calendar month, you have to pay them super guarantee (SG) on top of their wages.
CONTACTING EMPLOYERS ABOUT LATE OR UNDER-PAID SG
Single Touch Payroll (STP) reporting, combined with improvements in super funds’ reporting through the Member Account Transaction Service (MATS) means the ATO now has near real-time data to show employers’ compliance with their super guarantee (SG) obligations.Read Newsletter
FBT EXEMPTION ‘TAXI TRAVEL’ BETWEEN WORK & HOME
On 2.9.2019 the ATO indicated they would not consider whether this exemption could be extended to ride sourcing vehicles simply stating their position was outlined in chapter 20 of their guide to fringe benefits tax.
DEDUCTIONS FOR A COMPANY OR TRUST HOME-BASED BUSINESS
If you run business from home as a company or trust, there should be a market-rate rental contract in place to determine which expenses business can clam as a deduction. Absence of market-rate rental contract may cause tax implications for you and business.
Also, if you earn Personal Service Income (PSI), you may not be able claim some of occupancy expenses.
WHEN YOU ARE BOTH BUSINESS OWNER AND EMPLOYEE
If you are an employee of your own business and receiving reimbursement from business for running business from home, you can’t claim such deductions in your individual tax return.
Certain reimbursements to employees by business may trigger FBT liability though certain exemptions and concessions may be available to reduce your FBT liability.
If you require guidance in this area, please contact us.
HIRING WORKING HOLIDAY MAKERS
If new employee ticks box at question 8 on their tax file number declaration form declaring they’re ‘Working Holiday Maker’, you need to:
- Register : Any one can hire a working holiday maker, but you need to register and declare that you’re aware of your obligations. This includes compliance with the Fair Work Act 2009 (where applicable).
- Check Visa : You as an employer can verify visa status using Visa Entitlement Verification Online (VEVO) service or alternatively your employee can do online or via my VEVO app and send you an email verifying their details.
- 15% working holiday maker tax rate and super : Once you’re registered you can withhold 15% from every dollar your working holiday maker earns up to $37,000. The tax rates change for amounts above this. Super contributions apply as it applies normally.
if you require assistance, please contact us.
LOW INCOME EARNERS MAY NEED TO LODGE
You may be required to lodge tax return even your income is under tax-free threshold of $18,200 (before offsets) if following applies:
- had pay as you go (PAYG) withheld from payments received during the year
- had a reportable fringe benefits amount on their income statement or PAYG payment summary;
- had reportable employer superannuation contributions on your income statement or PAYG payment summary;
- made a loss or can claim a loss made in a previous year;
- were an Australian resident for tax purposes and had exempt foreign employment income and $1 or more of other income;
- were entitled to the private health insurance rebate but did not claim your correct entitlement as a premium reduction;
- were a liable or recipient parent under a child support assessment unless both of the following applied: You received one or more Australian Government allowances, pensions or payments (listed on the Individual tax return instructions 2019. And Your income was less than$25,038.
AUSTRALIANS TURN TO STORING THEIR TAX RETURN INVOICES DIGITALLY
Many Australians are doing away with tucking their receipts into a shoebox and instead now store them digitally.
The myDeductions app can be used to take photos of receipts and note relevant information relating to expenses.
ATO PUTS THE BRAKES ON DODGY CAR CLAIMS
The ATO’s sophisticated analytics compares taxpayer claims with others earning similar amounts in similar jobs.
It is clear that simply driving between work and home is not enough to warrant a deduction. You must have a work-related need to travel while performing your job, like traveling from site to site or be required to transport bulky tools.
CONTACTING SMALL EMPLOYERS ABOUT STP
In August, the ATO started writing to small employers who have yet to start reporting or apply for a deferral, to remind them of their STP obligations.
Small employers have until 30 September 2019 to start reporting or apply for extra time to get ready. We can assist you in this regard.
ATO’S $50 THRESHOLD CUTS PAPERWORK FOR EMPLOYERS
With more employers encouraging flexible working from home, the reimbursement of home office expenses has been reviewed.
The ATO has introduced a $50 threshold which will be used to determine the record keeping requirements for the purpose of applying the otherwise deductible rule to expense payment fringe benefits for the cost of home phone and internet expenses.
SALARY SACRIFICING SUPER
Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.
Be cautious with your salary sacrifice, as only first $25000 a year including 9.5% compulsory super paid by employer has concessional tax at 15 %, anything in excess will be taxed at higher tax rates.Read Newsletter
In the 2019-20 Budget, the Government announced additional tax relief to ensure that hard-working Australians are rewarded for their effort.
From the 2018–19 income year:
Taxpayers with a taxable income:
- of $37,000 or below can now receive a low- and middle-income tax offset of up to $255;
- above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080;
- above $48,000 and below $90,000 are now eligible for the maximum low- and middle-income tax offset of $1,080;
- above $90,000 but is no more than $126,000 are now eligible for a low- and middle-income tax offset of $1,080, less an amount equal to three per cent of the excess.
Fees charged on super accounts are capped starting 1st July 2019 for accounts having balance of less than $6,000.00 with no exit fees, allowing members to switch their superfunds without any financial loss if they choose to.
TAXI TRAVEL EXPENSES EXEMPTION
Any benefit arising from taxi travel by an employee is exempt from fringe benefits tax (FBT) if the travel is a single trip beginning or ending at the employee’s place of work.
this may be a consideration for employers who regularly provide taxi travel to staff.
FRINGE BENEFITS TAX (FBT) ISSUES ON THE ATO’S RADAR
The ATO have identified six items that specifically relate to fringe benefits tax (FBT). The information in newsletter may help you to avoid making costly mistakes.
SMALL BUSINESS HOME-BASED BUSINESS EXPENSES
This is a very common question as to what can be claimed. This information is based on ATO summaries and we hope you find it useful.
- Your business structure affects your entitlements and obligations when claiming deductions for your home-based business expenses.
- If you operate your business as a sole trader or partnership, you can claim a deduction for the costs of running your business from home.
- There are two types of expenses for your home-based business – running expenses and occupancy expenses. Whether you can claim running expenses only, or both running and occupancy expenses, depends on whether you have an area of your home set aside as a ‘place of business’.
- If you were entitled to claim occupancy expenses or you own your home and receive rental income from your business, there may be CGT implications when you sell your home. The main residence exemption may not apply for the proportion of your home and the periods that you used it for your business.
As the owner of a small business, you can claim a deduction for expenses that you incur when you travel for your business. Common expenses include: Airline, bus, train, tram and taxi or ride-sourcing fares, car hire fees and the costs you incur (such as fuel, tolls and car parking) when using a hire car for business purposes, accommodation and meals if you are away overnight.
You cannot claim a deduction for any travel undertaken before you started running your business.
ATO TO IRON OUT FALSE LAUNDRY CLAIMS
The ATO intends to target false clothing and laundry work-related expense claims this Tax Time. In 2018, around six million people claimed work-related clothing and laundry expenses totalling nearly $1.5 billion.
CASH IN HAND PAYMENT TO WORKERS NO LONGER TAX DEDUCTIBLE
The ATO has reminded employers that any ‘cash in hand’ payments made to workers from 01.07. 2019 will not be tax deductible.Read Newsletter
AUSTRALIAN TAXATION OFFICE (ATO) SCAMS
Scammers are using technology to make it look like the calls originate from a legitimate ATO phone number. Most frequently the numbers appearing are 6216 1111 and 1800 467 033, but numbers for individual ATO staff members have been used as well.
While these scam calls may appear to be from the ATO with a spoofed caller ID, it is important to remember that a legitimate caller from the ATO will never:
- threaten you with arrest
- demand immediate payment, particularly through unusual means such as bitcoin, pre-paid credit cards or gift cards
- refuse to allow you to speak with a trusted advisor or your regular tax agent
- or present a phone number on caller ID
Never call a scammer back on the number they provide. If you are in any doubt about an ATO call hang up and phone the ATO on 1800 008 540 to check if the call was legitimate or report a scam.
SMALL BUSINESS ENTITIES
Records are required to be retained for tax purposes for between two and five years, depending on class of taxpayer. For taxpayers lodging tax returns under the SBE rules, the retention period for records is two years.
Included in this newsletter are details regarding the deductibility of different expenses for small business such as:
- Interest on Loans
- Bad debts
- Staff Leave and bonus
- Director Fees
- Motor Vehicles
- and more
THE $30,000 SMALL BUSINESS TAX BREAK TRICKS AND TRAPS
Using the instant asset write-off, you can claim a deduction for each asset that cost less than the threshold that applied when the asset was first used or installed ready for use. Different thresholds apply, so make sure you check which one applies to your asset:
- $30,000 from 7.30pm AEDT on 2 April 2019
- $25,000 from 29 January 2019 until before 7.30pm AEDT on 2 April 2019
- $20,000 before 29 January 2019.
GIC AND SIC RATES FOR THE 2019 JUNE QUARTER
The ATO has published the 2019 June quarter rates for the General Interest Charge (‘GIC’) and the Shortfall Interest Charge (‘SIC’):
- GIC annual rate 8.96%
- GIC daily rate 0.02454794%
- SIC annual rate 4.96%
- SIC daily rate 0.01358904%
2020 SUPERANNUATION RATES AND THRESHOLDS RELEASED
The ATO has published the key 2020 superannuation rates and thresholds. These include:
- concessional contribution limit $25,000
- Non-concessional contribuiton limit $100,000
- CGT cap limit $1,515,000
- Division 293 tax threshold $250,000
TD 2019/2 – VALUE OF GOODS TAKEN FROM STOCK FOR 2018/19
This Determination provides the amounts the Commissioner will accept for 2018/19 as estimates of the value of goods taken form trading stock for private use by taxpayers in certain specified industries these amounts are unchanged from the 2017/18 year.Read Newsletter