How to claim working from home expenses Taxpayers who have been working from home this financial year, and who consequently incurred work-related expenses, have two ways to calculate their work from home deduction: the actual cost method; or the fixed rate method. Using the fixed rate method, taxpayers can claim a rate of 67 cents per hour worked at home. This amount covers additional running expenses, including electricity and gas, phone and internet usage, stationery, and computer consumables. A deduction for these costs cannot be claimed elsewhere in their tax return, although taxpayers can separately claim any depreciating assets, such as office furniture or technology. Taxpayers need to have the right records, and the record-keeping requirements differ for the fixed rate method and the actual cost method. If you need more information regarding making these claims, please contact our office. Reminder of March 2024 Quarter Superannuation Guarantee (‘SG’) Employers are reminded that employee super contributions for the 1 January 2024 to 31 March 2024 quarter must be received by the relevant super funds by 28 April 2024 (which is a Sunday), in order to avoid being liable to pay the SG charge. Using the ATO's small business benchmarks The ATO has updated its small business benchmarks for 2021-22. These benchmarks help taxpayers compare their business turnover and expenses with other small businesses in the same industry. Taxpayers can access the benchmarks on the ATO's website, and then calculate their benchmark using the ATO app 'Business performance check' tool. For example, consider Deb who runs a pizza shop as a sole trader. She would like to track her business against other pizza shop businesses, and see how she can improve. Deb downloads the ATO app and opens the 'Business performance check' tool. She uses this tool to work out the cost of sales to turnover benchmark for her pizza shop. It is within the higher end of the range and above the average for pizza shop businesses. Deb works out her main supply costs. She then negotiates a better deal to reduce her business expenses and improve profit. Quarterly TBAR lodgment reminder SMSFs must report certain events that affect any member's transfer balance account ('TBA') quarterly using transfer balance account reporting ('TBAR'). These events must be reported even if the member's total superannuation balance is less than $1 million. SMSF trustees must report and lodge within 28 days after the end of the quarter in which the event occurs, although they are not required to lodge if no TBA event occurred during the quarter. For example, if an SMSF had a TBA event in the quarter ending 31 March 2024, the trustee of the SMSF must lodge a TBAR by 28 April 2024. If an SMSF does not lodge a TBAR by the required date, the member's TBA may be adversely affected. The member may need to commute any amounts in excess of their transfer balance cap and pay more in excess transfer balance tax. If you need assistance in relation to any of these issues, please contact our office. Prepare for upcoming lodgments of SMSF annual returns SMSFs need to appoint an auditor no later than 45 days before they lodge their SMSF annual return ('SAR'). In preparation for lodgment of the SAR, SMSF trustees also need to: complete a market valuation of all the SMSF's assets; prepare the SMSF's financial statements; and provide signed copies of documents to their auditor, so the auditor can determine the SMSF's financial position and its compliance with superannuation laws. If an SMSF's SAR is more than two week's overdue, and the SMSF trustee has not contacted the ATO, the ATO will change the status of the SMSF on Super Fund Lookup to 'Regulation details removed', and this status will remain until any overdue lodgments are brought up to date. Taxpayer who lived and worked overseas found to be tax resident The Administrative Appeals Tribunal ('AAT') recently held that a taxpayer was a tax resident of Australia, even though he was mostly living and working overseas during the relevant period. The taxpayer was born in Vietnam and obtained Australian citizenship in 1978. He was living and working in Dubai, United Arab Emirates from 2015 until 2020. The taxpayer spent less than two months in Australia for each of the 2017 to 2020 income years visiting his family. The AAT nevertheless held that he was a tax resident of Australia for each of the 2016 to 2020 income years, as he "maintained an intention to return to Australia and an attitude that Australia remained his home". The AAT noted in this regard that the taxpayer: left his wife and three daughters in the family home in Australia while he worked in Dubai, continued to fully support his family financially, and chose to spend each of his leave periods with his family in Australia; maintained his vehicle registrations and Australian drivers licence so he could use the vehicles upon his return to Australia; intended to retire in Australia; failed to demonstrate any connection with Dubai outside of his employment; and maintained his private health insurance. Earning income for personal effort Taxpayers should remember that, if over half their income is from a contract for their personal effort or skills, then their income is classified as personal services income ('PSI'). Taxpayers can receive PSI in almost any industry, trade or profession, e.g., as a financial professional, IT consultant, construction worker or medical practitioner. Taxpayers who earn PSI while running a business (e.g., as a contractor) need to work out if they were a personal services business ('PSB') in the year that they received the PSI, as this will affect the deductions they can claim. Taxpayers can self-assess as being a PSB if they: meet the 'results test' for at least 75% of their PSI, or meet one of the other PSB tests (i.e., the unrelated clients test, the employment test, or the business premises test), and less than 80% of their PSI is from the same entity and its associates. Taxpayers who self-assess as a PSB still need to report their PSI in their income tax return and keep certain records. Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
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Super contribution caps to rise The big news story for those contributing to super is that the contribution caps are set to increase from the 2025 income year. The concessional contribution cap will increase from $27,500 to $30,000. This 'CC' cap is broadly applicable to employer super guarantee contributions, personal deductible contributions and salary sacrificed contributions. The non-concessional contribution cap will increase from $110,000 to $120,000. This 'NCC' cap is generally applicable to personal non-deductible contributions. The increase in the NCC cap also means that the maximum available under the three-year bring forward provisions will increase from $330,000 to $360,000. This is provided that the 'bring forward' is triggered on or after 1 July 2024. The 'total superannuation balance' threshold for being able to make non-concessional contributions (and the pension general transfer balance cap) will remain at $1.9 million. Small business concessions The ATO has recently issued a reminder that small business owners may be eligible for concessions on the amount of tax they ultimately pay. This depends on their business structure, their industry and their aggregated annual turnover. For example, small business owners who have an aggregated annual turnover of less than: $2 million can access the small business CGT concessions; $5 million can access the small business income tax offset; and $10 million can access the small business restructure roll-over. The ATO expects small business owners to check their eligibility each year before they apply for any of these concessions. Furthermore, taxpayers generally need to keep records for five years to prove any claims they make. We are always on the look-out for what tax concessions may be of use to our clients based on their individual circumstances. These small business concessions in particular, can be very beneficial when applicable. FBT time is fast approaching! The ATO has advised employers that 'FBT time' is just around the corner, and they need to stay on top of their fringe benefits tax (FBT) obligations. Employers need to ensure they have attended to the following matters this FBT time: Identify if they have an FBT liability regarding fringe benefits they have provided to their employees or their associates between 1 April 2023 and 31 March 2024. Identify if they have an FBT liability as they will need to lodge an FBT return and pay the amount due by 21 May. Identify if they are currently registered for FBT and let the ATO know if they do not need to lodge an FBT return (Editor: by asking us to lodge an FBT non-lodgment notice) to prevent the ATO seeking a return from them at a later date. Employers should also remember that when the new FBT year starts on 1 April, they can choose to use existing records instead of travel diaries and declarations for some fringe benefits. Furthermore, the ATO has released PCG 2024/2 which provides a short cut method to help work out the cost of charging electric vehicles ('EV') at an employee's home for FBT purposes. Eligible employers can choose to use either the EV home charging rate of 4.2 cents per kilometre or the actual cost. Ultimately, all employers need to make sure they understand their FBT obligations and the records they need to keep to avoid an FBT liability. Jail sentence for fraudulent developer A developer who conspired to lodge fraudulent business activity statements has been convicted and sentenced to 10 years in jail with a non-parole period of six years and eight months. The developer was involved with two companies that formed part of a group known as the 'Hightrade Group' which developed properties such as a hotel and golf course in the Hunter Valley, NSW. The developer fraudulently obtained GST refunds by using three tiers of companies (developers, building companies and suppliers) to grossly inflate the construction costs of his developments. The companies he was involved with also claimed to have purchased goods when no such purchases had occurred. In total, the developer intended to cause a loss to the Commonwealth of more than $15 million. His sentencing has closed a complex case, known as Operation 4. The ATO noted that "Tax crime, like the fraud uncovered in Operation 4, affects the whole community." Penalties soon to apply for overdue TPARs Businesses that pay contractors to provide certain services may need to lodge a Taxable Payments Annual Report (TPAR) by 28 August each year. From 22 March, the ATO will apply penalties to businesses that: have not lodged their TPAR from 2023 or previous income years; have received three reminder letters about their overdue TPAR. Taxpayers that do not need to lodge a TPAR can submit a 'non-lodgment advice form'. Taxpayers that no longer pay contractors can also use this form to indicate that they will not need to lodge a TPAR in the future. Avoiding common Division 7A errors Private company clients who receive payments, benefits or loans from their private companies need to ensure compliance with their additional tax obligations (which are often referred to as their ‘Division 7A' obligations). There are multiple ways in which business owners may access private company money, such as through salary and wages, dividends, or what are known as complying Division 7A loans. Division 7A is an area where the ATO sees many errors and the ATO is currently focused on assisting taxpayers in managing their obligations when receiving payments and benefits from their private companies. In this regard, the ATO has recommended that business owners do the following: keep adequate records; properly account for and report payments and use of company assets by shareholders and associates; and comply with rules around Division 7A loans. Understanding these Division 7A obligations is essential in order to: make informed decisions when receiving private company money and using private company assets; and avoid unexpected and undesirable tax consequences. Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
S.H. Tait & Co Chartered Accountants will celebrate 100 years in business this month. The business was established in 1924 and its century of history included a major transformational shift in its business philosophy 65 years ago. That is when John Tait, the son of founder Stanley Howard Tait, joined the firm in 1959 and S.H. Tait became S.H. Tait and Co. By then the firm had grown to employ 12 and there was a focus on innovation. "Dad had wanted the business to be more than just about doing people's taxes,” John Tait said. It was the vision I had as well," he said. “Our philosophy was to be there to give business owners advice and support. We provided support to develop their business plans and guide people through financial difficulty towards success. “We worked with people to support them in managing their businesses, to keep their financials in order – to offer complete business services.” The new chapter that unfolded in 1959 when John Tait joined the business brought with it another shift. Together, they decided it was time to buy a building to house the expanding accountancy enterprise. Kumara House, located at the intersection of Victoria and Sydney Streets, previously Wills Hotel, became the new location for S.H. Tait & Co. The business moved to its current location at City Plaza in Wood Street in 1984. Throughout the decades, S.H. Tait & Co's evolution continued, with new partners including Greg Whitmore who became a partner in 1968, Michael Casey and Alan Eames, who became partners in 1979. John Tait retired from the practice in June 1988, leaving those three partners to continue on without a Tait for a short time until Peter Tait, John’s son and Stan’s grandson, became a partner in 1995. The firm’s current partners, Adam Parrish, Stephen Amos, Monica McKendry, John Philps, and Kristelle Lamb have continued to grow the business. S.H. Tait and Co now employs 36 staff and lodges more than 5000 income tax returns each year. The firms’ client base includes businesses from a variety of different industries across the Mackay region. The firm also provides pro-bono services to a number of local charities and not-for -profit organizations. Monica McKendry, who has organised a function for staff and clients to celebrate S.H Tait & Co’s 100th year in business, said that the business was all about people and that the services could not be delivered without the skills and dedication of the employees of the business. “The current partners of the firm are proud to be part of the Mackay business community. We have assisted several generations of families with taxation services and business advice. We have six of our staff members with more than 15 years’ service and two of these with more than 40 years of service. We have been around for a long time and will continue to be”.
Government announces changes to proposed 'Stage 3' tax cuts Despite previous assurances, and after much speculation, the Government has announced tweaks to the 'Stage 3' tax cuts that will apply from 1 July 2024. More particularly, the Government proposes to: reduce the 19% tax rate to 16%; reduce the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000 threshold; increase the threshold at which the 37% tax rate applies from $120,000 to $135,000; and increase the threshold at which the 45% tax rate applies from $180,000 to $190,000. The Medicare levy low-income thresholds for the 2024 income year will also be increased. Changes in reporting requirements for sporting clubs Not-for-profits ('NFPs'), including sporting clubs, societies and associations with an active ABN, need to lodge an annual NFP self-review return to continue accessing their income tax exemption. The main purpose of a sporting organisation must be the encouragement of a game, sport or animal racing. Any other purpose of the organisation must be incidental, ancillary or secondary. The organisation's governing documents will help identify the purpose for which it was set up, and the organisation's activities in the year of income must then demonstrate that the main purpose is the encouragement of its game, sport or animal racing. NFP organisations need to lodge their first NFP self-review return for the 2024 income year between 1 July and 31 October 2024. NFP organisations with their own ABN need to complete their own NFP self-review return even if they are affiliated with a broader sporting group. If an NFP organisation does not lodge the return, they may become ineligible for an income tax exemption and penalties may apply. If you need more information about this recent development, please contact our office. Deductions denied for work-related expenses The Administrative Appeals Tribunal ('AAT') recently held that a taxpayer should not be allowed deductions for various work-related expenses, largely because the substantiation requirements had not been satisfied. The taxpayer, a real estate salesperson, claimed tax deductions for the 2018 to 2020 income years, during which time he derived income from his employment with a real estate company. However, the ATO disallowed the taxpayer's claims for various work-related expenses, including car expenses, and gifts and donations. The AAT agreed with the ATO, and held that the expenses claimed were not deductible and that the taxpayer had failed to substantiate his claims. The taxpayer had claimed deductions for car expenses using the logbook method, but the AAT noted that the car was owned by a company and was not leased to the taxpayer. Therefore, the car was not 'held' by the taxpayer, as required by the logbook method. The taxpayer's logbook also lacked "sufficient specificity" for this method. While the taxpayer produced credit card statements and telephone tax invoices (in relation to credit card interest and telephone expenses), it was not clear from these documents whether the costs claimed related to work expenses. The taxpayer sought to rely on bank transaction statements in relation to other expenses, but they were considered to be insufficient, as it was unclear from these statements what the relevant expense was, how the expense was incurred in earning the taxpayer's assessable income, and any apportionment between business and personal use. There were also no receipts or tax invoices for any of the claimed donations. Sale of land subject to GST The AAT recently held that the sale of land by a taxpayer was subject to GST, as it was a supply made in the course of an enterprise being carried on by the taxpayer. The taxpayer purchased a single parcel of land in 2013 for $1.6 million, and he subsequently took steps for the land to be subdivided and rezoned. He then sold the land in 2021 for $4.25 million before the subdivision was completed. The ATO advised the taxpayer that the sale of the land was subject to GST as a taxable supply under the GST Act. The taxpayer objected to the GST assessment on the following grounds: the sale of the property was not made by him in the course of his enterprise; and as the property was the taxpayer's residential premises, it was an input taxed supply, so no GST should apply anyway. However, the AAT agreed with the ATO that the sale of the property was subject to GST as a supply made in the course of the taxpayer's enterprise. The AAT first noted that the sale of the property was not an input taxed supply of residential premises because the buildings on the property were uninhabitable, and so the property did not meet the definition of 'residential premises' in the GST Act. The AAT also held that the taxpayer's development works were in "the form of a business", even if he was not in the business of being a property developer. Relevant factors included the scale of the operations that the taxpayer was involved in (including rezoning and subdividing the property), as well as the amount of capital invested by him in the purchase of the property and development works. The taxpayer's "series of activities" throughout his ownership of the property therefore amounted to the carrying on of an enterprise, and the taxpayer was liable to pay GST on the sale of the property. Melbourne man sentenced to jail for attempting to defraud the ATO A Wheelers Hill man was recently sentenced to three years and six months imprisonment for defrauding the ATO of nearly $35,000 and attempting to defraud the ATO of a further $458,000, following a joint investigation by the Australian Federal Police ('AFP') and ATO's serious financial crime taskforce. The investigation began in June 2020, after the ATO linked the man to a number of suspicious claims, including 40 fraudulent applications for JobKeeper. New ATO guidance on "who is an employee?" The ATO recently issued a ruling which explains when an individual is an 'employee' of an entity for pay as you go ('PAYG') withholding purposes. A useful approach for establishing whether or not a worker is an employee of an engaging entity is to consider whether the worker is working in the business of the engaging entity, based on the construction of the terms of the relevant contract. Importantly, the fact that a worker may be conducting their own business, including having an ABN, is not determinative. If you need help with this important issue, please contact our office. Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
ATO's lodgment penalty amnesty is about to end The ATO is remitting failure to lodge penalties for eligible small businesses. Businesses which have not yet taken advantage of the ATO's lodgment penalty amnesty only have until 31 December 2023 to do so. Businesses must meet the following criteria in order to be eligible for the amnesty: had an annual turnover under $10 million when the original lodgment was due; have overdue income tax returns, business activity statements or FBT returns that were due between 1 December 2019 and 28 February 2022; and lodge between 1 June and 31 December2023. When taxpayers lodge their eligible income tax returns, business activity statements and FBT returns, failure to lodge penalties will be remitted without the need to apply. The amnesty does not apply to privately owned groups or individuals controlling over $5 million of net wealth. Directors who bring their company lodgments up to date can also have penalties remitted and, if they are reliant on company lodgments to finalise their own tax affairs, any failure to lodge penalties will be remitted. This also applies to eligible lodgments made between 1 June and 31 December 2023. Notice of officeholder datamatching program The ATO will acquire officeholder data from ASIC, the Office of the Registrar of Indigenous Corporations and the Australian Charities and Not-for-profits Commission for the 2024 and 2025 income years, including details such as: their name, address and date of birth; email address and contact phone number; organisation class, type and status, and state of incorporation; and officeholder type, role type, and officeholder role start and end dates. The ATO estimates that records relating to approximately 11 million individuals will be obtained. This program aims to (among other things) enable the Australian Business Registry Services to increase uptake of the director ID, and better utilise registry data to combat unlawful activity. ATO warning regarding prohibited SMSF loans Loans to members continue to be the highest reported contravention of the superannuation laws that the ATO sees in auditor contravention reports. SMSF trustees should remember that they cannot loan money or provide other forms of financial assistance to a member or relative, and if they do, they can incur a penalty of up to $18,780. They may also be disqualified as a trustee. SMSF trustees also cannot loan money to a related party, such as a business, where the value of the loan exceeds 5% of the value of the fund's total assets, as this is a prohibited 'in-house asset' investment. If the SMSF's in-house assets exceed 5% of the total value of its assets at the end of the financial year, the trustee must prepare a plan to reduce their in-house assets to less than 5%, which must be implemented by the end of the following financial year. If a trustee has made a prohibited loan from their SMSF, the loan must be repaid as soon as possible. Don't forget the two further 'boosts'! Although the 'Technology Investment Boost' has come to an end (it provided a bonus deduction for eligible expenditure incurred until 30 June 2023), it is important to remember that there are two further 'boosts' providing bonus deductions for small businesses, and both apply to eligible expenditure incurred up until 30 June 2024. The Skills and Training Boost provides small or medium businesses with a bonus 20% deduction for eligible expenditure incurred on external training for employees, to support such businesses to train and upskill their employees. This boost applies to eligible expenditure incurred from 29 March 2022 until 30 June 2024. The Small Business Energy Incentive (Boost) is designed to support small business electrification and more efficient energy use, and will apply to eligible expenditure incurred between 1 July 2023 and 30 June 2024 (once the relevant legislation is passed). This boost provides small or medium businesses with a bonus 20% deduction for the cost of: eligible depreciating assets; and/or eligible improvements incurred in relation to existing depreciating assets, that support electrification or energy efficiency. To be eligible for either of the above 'boosts', a business taxpayer must satisfy a number of conditions Claiming deductions in relation to a holiday home Taxpayers should remember that they can only claim deductions for holiday home expenses to the extent they are incurred for the purpose of gaining or producing rental income. They need to consider the following in determining whether the deductions they wish to claim are valid rental deductions: How many days during the income year did they use or block out the property for their own use? Taxpayers cannot claim deductions for the periods the property was used or blocked out by them. How and where did they advertise the property for rent, and is the rent in line with market values? If they only used obscure means of advertising, or put unreasonable restrictions or conditions in the advertisement, they may not be entitled to claim deductions. Will any restrictions, or the general condition of the property, reduce interest from potential holiday makers? If their property is not in a tenantable condition, they may not be entitled to claim deductions. Has the taxpayer or their family or friends used the property? Taxpayers cannot claim for periods of private use or when the property is kept vacant for personal reasons. Is any part of the property off limits to tenants? When taxpayers claim deductions, they should ensure they calculate and apportion deductions in relation to the part of the property that is available for rent. Reminder of December 2023 Quarter Superannuation Guarantee ('SG') Employers are reminded that, in relation to their SG obligations for the quarter ending 31 December 2023, the due date is 28 January 2024. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component. The SG rate is 11% for the 2024 income year. Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Tax issues for businesses that have received a support payment Taxpayers who have received a government support grant or payment recently to help their business recover from COVID-19 or a natural disaster should check if they need to include the payment in their assessable income. Grants are generally treated as assessable income, and taxpayers may be able to claim deductions if they use these payments to: purchase replacement trading stock or new assets; repair their business premises and fit out; or pay for other business expenses. However, some grants are declared nonassessable, non-exempt ('NANE') income. This means taxpayers don't need to include them in their tax return if they meet certain eligibility requirements. NANE grants include but are not limited to: COVID-19 business support payments; natural disaster grants; and water infrastructure payments. Taxpayers can only claim deductions for expenses associated with NANE grants if they relate directly to earning their assessable income, including wages, dividends, interest and rent. Taxpayers cannot claim expenses related to obtaining the grant, such as accountant's fees. Care required in paying super benefits Generally, before SMSF trustees pay a member's super benefits, they need to ensure that: the member has reached their preservation age; the member has met one of the conditions of release; and the governing rules of the fund (e.g., the trust deed) allow it. Benefit payments to members who have not met a condition of release are not treated as super benefits. Instead, they will be taxed as ordinary income at the member's marginal tax rate. If a benefit is unlawfully released, the ATO may apply significant penalties to: the SMSF trustee; the SMSF; and the recipient of the early release. The ATO may also disqualify the trustee(s) involved. Investment restrictions and other rules that apply to SMSFs in the accumulation phase continue to apply when members begin receiving a pension from the SMSF. Where a member has met a condition of release, the trustee can either pay the benefit as a lump sum or super income stream (i.e., a pension). If a member has died, the trustee will generally pay a death benefit to a dependant or other beneficiary of the deceased, subject to the applicable rules. Notice of visa data-matching program The ATO will acquire visa data from theDepartment of Home Affairs for the 2024 to 2026 income years, including the following: address history and contact history for visa applicants, sponsors, and migration agents; active visas meeting the relevant criteria, and all visa grants; visa grant status by point in time; migration agents who assisted the processing of the visa; all international travel movements undertaken by visa holders; and sponsor details, and visa subclass name. The ATO estimates that records relating to approximately nine million individuals will be obtained each financial year. The objectives of this program are to (among other things) help ensure that individuals and businesses are fulfilling their tax and super reporting obligations, and identify potentially new or emergent approaches to fraud and those entities controlling or exploiting the visa framework. ATO says: "Be cyber wise, don't compromise" Throughout the 2022 income year, one cybercrime was reported every seven minutes. The ATO encourages taxpayers to implement the following four quick steps to protect themselves. Step 1: Install updates for your devices and software Regular updates ensure taxpayers have the latest security in place which can help prevent cyber criminals from hacking their devices. They should also make sure they are downloading authorised and legitimate programs. Step 2: Implement multi-factor authentication Multi-factor authentication ('MFA') is a security measure that requires at least two proofs of identity to grant access. Businesses as well as individuals should implement MFA wherever possible. MFA options can include a physical token, authenticator app, email or SMS. Step 3: Regularly back up your files Backing up copies of files to an external device or the 'cloud' means taxpayers can restore their files if something goes wrong. It is a precautionary measure that can help avoid costly data recovery. Step 4: Change your passwords to passphrases By using passphrases, taxpayers can boost the security of their accounts and make it harder for cyber criminals to access their information. Passphrases use four or more random words and can include symbols, capitals and numbers. A password manager can help generate or store passphrases. Losses in crypto investments for SMSFs Over the last few income years, the ATO has seen some instances of SMSF trustees losing their crypto asset investments. These losses have been caused by: crypto scams, where trustees were conned into investing their superannuation benefits in a fake crypto exchange; theft, where fraudsters would hack into trustees' crypto accounts and steal all their crypto; collapsed crypto trading platforms, many of which were based overseas; and lost passwords, resulting in trustees being locked out of their crypto account and being unable to access their crypto. Trustees thinking of investing in crypto need to be aware of the ways that crypto can be lost, including through scams, and how these scams can be avoided. Many crypto assets are not commonly considered to be financial products, which means the platform where crypto is bought and sold may not be regulated by ASIC. Therefore, trustees may not be protected if the platform fails or is hacked. When a crypto platform fails they will most likely lose all of their crypto. Investing in crypto can be complex and risky, and so the ATO recommends that trustees seek financial advice before investing. Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Appointing an SMSF auditor The ATO reminds SMSF trustees that they need o appoint an approved SMSF auditor for each income year, no later than 45 days before they need to lodge their SMSF annual return. An SMSF’s audit must be finalised before the trustees lodge their SMSF annual return, as the trustees will need some information from the audit report to complete the annual return. An SMSF’s auditor is to perform a financial and compliance audit of the SMSF’s operations before lodging. An audit is required even if no contributions or payments are made in the financial year. An approved SMSF auditor must be independent, which means that an auditor should not audit a fund where they hold any financial interest in the fund, or have a close personal or business relationship with members or trustees. If a fund doesn’t meet the rules for operating an SMSF, the auditor may be required to report any contraventions to the ATO. ATO gives 'green light' to lodge The ATO is giving taxpayers with simple affairs the ‘green light’ to lodge their annual income tax returns. ATO Assistant Commissioner Tim Loh said that most taxpayers with simple affairs will find the information they need to lodge has now been prefilledvin their tax return. Mr Loh also reminded taxpayers that some income may need to be manually added – for example, income from rental properties, some government payments or income from ‘side hustles’. As taxpayers prepare to lodge, they should keep ‘Tim’s tax time tips’ in mind: Include all income: If a taxpayer picked up some extra work, e.g., through online activities, the sharing economy, interest from investments, etc, they will need to include this in their tax return; Assess circumstances that occurred this year: If a taxpayer’s job or circumstances have changed this year, it is important they reflect this in their claims; Records, records, records: To claim a deduction for a work-related expense, taxpayers must have a record to prove it. Wait for notice of assessment: Taxpayers should wait for their notice of assessment before making plans for how they will use any expected tax refund this year; Stay alert to scams: The ATO would never send taxpayers a link to log into the ATO’s online services or ask them to send personal information via social media, email or SMS. The ATO advises that, when taxpayers lodge their own return, the due date for payment is 21 November, regardless of when they lodge, but If they use a registered agent, their due date can be much later. Different meanings of 'dependant' for superannuation and tax purposes On a person’s death, their superannuation benefits can only be paid directly to one or more ‘dependants’ as defined for superannuation purposes, unless they are paid to the deceased’s legal personal representative to be distributed in accordance with the deceased’s Will. Super death benefits can be tax-free to the extent that they are paid (either directly or indirectly) to persons who are ‘dependants’ for tax purposes. However, the meaning of ‘dependant’ differs slightly for superannuation and tax purposes. For superannuation purposes, a ‘dependant’ of the deceased comprises: their spouse (including de facto spouse); their child (of any age); a person in an ‘interdependency relationship’ as defined with the deceased; and a person who was financially dependent on the deceased. However, for tax purposes, a ‘dependant’ (or ‘death benefits dependant’) of the deceased includes their spouse or former spouse (including de facto spouse) and only children under the age of 18. Therefore, super death benefits generally cannot be paid directly to a former spouse, as they are not a dependant for super purposes. Also, while a child of any age is a dependant for super purposes, only children under the age of 18 are dependants for tax purposes. This means that, while a child of any age may receive super death benefits directly, those benefits will generally only be tax-free if the child is under 18. NALI provisions did not apply to loan structure The Administrative Appeals Tribunal (‘AAT’) has held that interest income derived by a selfmanaged superannuation fund (‘SMSF’) as the sole beneficiary of a unit trust was not non-arm’s length income (‘NALI’), and so this income could still be treated as exempt current pension income. During the 2015, 2016 and 2017 financial years, the unit trust lent money through two related entities to independent third parties who undertook development activities, through a series of loan arrangements. The interest income derived by the unit trust through these loan arrangements was distributed to the SMSF as sole unitholder and was treated as exempt current pension income. Following an audit, the ATO determined that the income was NALI, and therefore should not have been included as exempt current pension income. The ATO then issued amended assessments for the relevant financial years, along with penalties. While the AAT found that the parties were not dealing with each other at arm’s length, it also concluded that the income that the unit trust derived was not more than the amount it might have been expected to derive if the parties had been dealing at arm’s length. Accordingly, the relevant interest income received by the SMSF was not NALI, and so the taxpayer’s objections to the amended tax assessments and penalties were allowed. Luxury car tax: determining a vehicle's principal purpose The ATO recently explained how to determine the principal purpose of a car for ‘luxury car tax’ (‘LCT’) purposes (since LCT is not payable on the supply or importation of cars whose principal purpose is the carriage of goods rather than passengers). Broadly, a luxury car (i.e., a car subject to LCT) is a car whose LCT value exceeds the LCT threshold. However, a commercial vehicle that is not designed for the principal purpose of carrying passengers is specifically excluded as a luxury car. The ATO’s new determination sets out various factors to be considered in determining the principal purpose of a car, as well as factors to consider when assessing a car’s modifications. The determination states that commercial vehicles are unlikely to have the body types of station wagons, off-road passenger wagons, passenger sedans, people movers or sports utility vehicles, and the supply of these vehicles for an amount above the LCT threshold without LCT being paid may well attract the ATO’s scrutiny. Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Claiming GST credits for employee expense reimbursements Employers may be entitled to claim GST input tax credits for payments they have made to reimburse employees for expenses that are directly related to their business activities. A 'reimbursement' is provided when a taxpayer pays their employee the amount, or part of the amount, of a particular work-related purchase they make. Employers are not entitled to a GST input tax credit if they pay their employee an allowance, or make a payment based on a notional expense, such as a cents-per-kilometre payment, travel or meal allowance. An 'allowance' is provided when a taxpayer pays their employee an amount for an estimated expense without requiring them to repay any excess. Taxpayers are expected to hold sufficient evidence to substantiate their claim, such as a tax invoice for the purchase that is being reimbursed. Lodging of Taxable payments annual reports The ATO reminds taxpayers that it is now time for them to check if their business needs to lodge a Taxable payments annual report (‘TPAR’) for payments made to contractors providing the following services: (a) building and construction; (b) cleaning; (c) courier and road freight; (d) information technology; and (e) security, investigation or surveillance. TPARs are due on 28 August each year and penalties may apply if they are not lodged on time. Taxpayers can help prepare for their TPAR by keeping records of all contractor payments. Taxpayers that do not need to lodge a TPAR this year can submit a TPAR non-lodgment advice form to let the ATO know and avoid unnecessary follow-up. Taxpayers can refer to the ATO’s website for more information about TPARs, including who needs to report and how to lodge. Changes to deductions this tax time Taxpayers who are small business owners operating from home, or who use a vehicle for business purposes, need to be aware of some changes when claiming deductions this tax time, including the following. Cents-per-kilometre method – The cents-perkilometre method for claiming car expenses increased from 72 cents to 78 cents per kilometre in the 2023 income year. For taxpayers using this method, the 78 cents per kilometre rate covers all their vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. Taxpayers using this method cannot claim these costs separately. Car limit for business owners – The car limit has also increased to $64,741 for the 2023 income year. The car limit is the maximum value taxpayers can use to work out the depreciation of passenger vehicles (excluding motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. Work from home business expenses – For the 2023 income year, the 'fixed rate method' (for taxpayers operating their business from home) increased from 52 cents to 67 cents per hour worked from home, and taxpayers are no longer required to have a dedicated home office space. The fixed rate method covers electricity, gas, stationery, computer consumables, internet, and phone usage. Taxpayers can also claim separate deductions for expenses not included in the hourly rate, such as the decline in value of depreciating assets, e.g., laptops or office furniture. Please contact our office for any help with these claims, including record-keeping requirements. Downsizer contribution measure eligibility has been extended The downsizer contribution concession was introduced to allow older Australians selling an eligible dwelling to make additional contributions into their superannuation fund. Broadly, the downsizer contribution concession allows eligible individuals to make non-deductible contributions of up to $300,000 (or up to $600,000 per couple) from the sale of an eligible dwelling that was used as their main residence. The downsizer contribution concession is an attractive option for eligible individuals to boost their superannuation entitlements, as it is not counted towards an individual's standard contribution caps. Also, the total superannuation balance restriction does not apply in respect of a downsizer contribution (so an eligible individual can make a downsizer contribution into their super fund, regardless of their total superannuation balance), and it is not included in the assessable income of the receiving fund. However, there are various eligibility requirements that need to be satisfied in order for a downsizer contribution to be made, and professional advice should be sought in this regard as required. Importantly, as from 1 January 2023, the Government has broadened access to the downsizer contribution concession by reducing the minimum age requirement for accessing this concession from age 60 to age 55. This means that individuals aged 55 to 59 years who were not previously eligible to make downsizer contributions due to their age are now eligible to make downsizer contributions if they satisfy all the eligibility requirements. Reallocation of excess concessional contributions denied The Administrative Appeals Tribunal (‘AAT’) has held that there were no special circumstances in relation to a taxpayer who made excess concessional contributions in a financial year, such that the ATO could allocate some of those contributions to the previous financial year. On Wednesday, 26 June 2019, the taxpayer arranged for contributions totalling just under $25,000 to be made to his superannuation fund, via a direct debit from his bank account to a clearing house used by his fund. However, the relevant contribution was received by the superannuation fund on Monday 1 July 2019. The taxpayer then made further contributions totalling just under $25,000 to his superannuation fund on 5 August 2019, which meant that he had made excess concessional contributions for the 2020 financial year. The AAT confirmed the ATO’s decision that the circumstances did not justify some or all of the contributions made by the taxpayer on 26 June 2019 being reallocated to the 2019 financial year. That is, there were no ‘special circumstances’ (as required by the relevant legislation) that would justify the exercise of the ATO’s discretion to allocate the contributions to the previous financial year. While the AAT accepted that the taxpayer genuinely intended that his contribution would be received by his superannuation fund by 30 June 2019, he should not have waited until 26 June 2019 to make the contribution, as “there was nothing unusual about the time taken to process the ... payment made on 26 June 2019.” Also, in relation to various events and actions of other parties that the taxpayer submitted constituted ‘special circumstances’, the AAT noted that “an error on the part of a third party will not on its own amount to special circumstances.” Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Court penalises AMP $24 million for charging deceased customers The Federal Court has found that four companies that are or were part of the AMP Group breached the law when charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers. The Federal Court ordered two of these AMP companies to pay a combined penalty of $24 million for the breaches. Both AMP Life Limited and AMP Financial Planning admitted that they engaged in unconscionable conduct by deducting and/or failing to properly refund insurance premiums and advice fees respectively from superannuation members after being notified of their deaths. Both companies also admitted that they accepted insurance premiums and advice fees despite there being reasonable grounds for believing that they would not be able to supply the insurance or advice. The Court also found all four AMP companies contravened their overarching obligations as Australian financial services licensees to act efficiently, honestly and fairly. The super guarantee rate is increasing Businesses that have employees, or hire eligible contractors, will need to ensure that their payroll and accounting systems are updated to reflect the new super guarantee rate of 11% for payments of salary and wages that are made from 1 July 2023. Businesses need to calculate super contributions at 11% for their eligible workers for payments of salary and wages they make from this date. Super contributions for the quarter ending 30 June (due by 28 July 2023) are still calculated at the 10.5% rate for payments of salary and wages made prior to 1 July. Minimum annual payments for super income streams The ATO reminds taxpayers that an SMSF must pay a minimum amount each year to a member who is receiving a pension that commenced on or after 20 September 2007 (e.g., account based pensions). If the minimum payment is not made by 30 June, this can result in adverse taxation consequences for the member. In response to COVID-19, the government temporarily reduced superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2020, 2021, 2022 and 2023 financial years. However, for the 2024 financial year, the 50% reduction in the minimum pension drawdown rate will no longer apply. This means that, from 1 July 2023, when taxpayers calculate the minimum annual payment for their pension, the 50% reduction will not apply to the calculated minimum annual payment. Contact our office if you require assistance in determining the minimum pension payment that must be made in the 2024 financial year. Know your private company loan arrangements before you lodge The ATO advises taxpayers that, if they or an associate take a loan from their private company, they should not forget the requirements of repaying a private company loan for income tax purposes. Otherwise, they could find the loan treated as a Division 7A deemed dividend and included in their, or their associates', assessable income. Taxpayers should consider the following in particular before lodging their private company tax return: ensure their loan is a Division 7A complying loan and make minimum yearly repayments; and they can’t borrow further money or assets from the same company, directly or indirectly, to make minimum yearly repayments or repay the loan – if they do, these payments may not be taken into account and could result in an assessable deemed dividend. The ATO encourages taxpayers to check their loan repayments and, if they are concerned a payment will not be taken into account, they should speak to their registered tax adviser or contact the ATO. Proportional indexation of transfer balance caps from 1 July 2023 The ATO reminds taxpayers that, on 1 July 2023, the general transfer balance cap will be indexed. Individuals will have a personal transfer balance cap between $1.6 and $1.9 million, based on the highest ever balance of their transfer balance account between 1 July 2017 and 30 June 2023. While indexation will occur on 1 July 2023, the ATO won't be displaying member’s updated personal transfer balance caps until 11 July 2023. The ATO encourages all SMSFs to report any events that occurred prior to 1 July 2023 by 30 June 2023, to ensure member’s personal transfer balance cap calculations are based on correct and up to date information. From 11 July, both members and their agents will be able to view the member’s personal transfer balance cap on the ATO’s website. After 11 July 2023, a member's personal transfer balance cap will be recalculated if the ATO receives reporting of events effective prior to 1 July 2023. Individuals can continue to report transfer balance cap information to the ATO between 1 July 2023 and 11 July 2023, however these will not be processed until after this period. This means the ATO won't be able to issue or revoke excess transfer balance determinations it has sent to a member, or commutation authorities it has sent to a fund. Processing of any reported events will continue as normal after 11 July 2023. Masters course fees not deductible as self-education expenses The Administrative Appeals Tribunal (‘AAT’) has held that tuition fees for a public policy Masters course were not deductible, on the basis that the course did not relate to the taxpayer's work as a music teacher. The taxpayer was a qualified teacher who specialised in teaching music. He had commenced a Masters Course at the University of Melbourne (the Masters course), and subsequently claimed a deduction for workrelated education expenses in relation to the subject tuition fees. The taxpayer submitted that the Masters course would expand the breadth of subjects he could teach and therefore help him secure management positions. However, the ATO disallowed the deduction as it was not satisfied that a real and direct connection existed between the study and the taxpayer's work. The AAT confirmed the ATO’s decision that the fees were not deductible as self-education expenses, as the tuition fees were not incurred in gaining or producing the taxpayer's assessable income. The subjects undertaken by the taxpayer in the 2021 year, for which he was seeking to claim a deduction, "did not maintain or improve his skills or knowledge as either a music teacher or relief teacher". The AAT also noted that, in incurring the claimed self-education expenses, the taxpayer’s intention “of being able to expand his ability to teach in subjects outside of music and to gain leadership positions relate to new employment or new income-earning activities and as such is not sufficient basis for those expenses to be deductible”. Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
The end of the financial year is fast approaching, and it's time to get your financial affairs in order. As June 30 draws near, preparing for your personal tax return becomes essential. To help you navigate this process smoothly, we've compiled a handy guide with tips on what you need to have ready. Let's dive in and ensure a stress-free tax season!
Organise Your Documentation Gather all the necessary paperwork to support your tax deductions and income records. This includes your bank statements, rental property records, dividend statements, and any other relevant financial documents. Having these organised and easily accessible will save you time and effort when completing your tax return. Review and Pre-fill Your Information The Australian Taxation Office (ATO) pre-fills some information in your tax return, such as salary and wage details, interest income, and government benefits received. Check the accuracy of this information and make any necessary adjustments. By using pre-filled data, you can minimise errors and ensure the completeness of your tax return. You can check your pre-filling information through your myGov account. Explore Deduction Opportunities Take advantage of eligible deductions to reduce your taxable income. Common deductions include work-related expenses (e.g., uniforms, professional development), self-education expenses and charitable donations. Keep receipts and supporting documentation for these expenses to substantiate your claims. Consider Superannuation Contributions Boost your retirement savings while potentially reducing your tax liability by making additional concessional (before-tax) or non-concessional (after-tax) contributions to your superannuation fund. Consult with a financial advisor to determine the best strategy for your circumstances. Seek Professional Guidance If you have complex financial circumstances or are unsure about specific tax matters, consulting a qualified tax professional can provide valuable insights and ensure compliance with relevant regulations. They can assist in maximising your deductions, optimising your tax position, and navigating any changes in tax laws. |
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