Taxation Archives - Page 4 of 6 - Accounts NextGen

Vacant land expenses no longer deductible in “build-to-rent” investments

Vacant land expenses no longer deductible in “build-to-rent” investments

Starting from 1 July 2019, individuals who hold vacant land may not be entitled to claim those costs as an allowable deduction.

Prior to this, claiming tax deductions for holding vacant land was available in certain circumstances. An example of this may have been during the construction phase of a development when no income was being derived.

Changes to payment summaries , income statements are here

How you get your end of financial year information from your employer showing your earnings for the year (also known as a payment summary or income statement) depends on how your employer reports your income, tax and super information to us. You will be provided with either:

  • An income statement – if your employer reports your income, tax and super information to us through Single Touch Payroll (STP) they are no longer required to give you a payment summary, this information will be made available to you through ATO online services via myGov and finalised by 31 July.
  • A payment summary – if your employer is not yet reporting through STP they will continue to provide you with a payment summary by 14 July (as they do now).

Your employer will let you know if they won’t be giving you a payment summary this year. You should talk to your employer if you are unsure how they will be providing this information to you.

If you have more than one employer, you may receive both a payment summary and an income statement. You will need to check that income from your payment summaries is included in your return. This information may be pre-filled for you or you might need to enter it manually.

Your tax agent

Your tax agent will be able to access your payment summary or income statement information through their software or the Tax Agent Portal, this has not changed.

If your employer is reporting through STP, your agent will need to wait until the income statement has been marked as ‘Tax ready’ to prepare and lodge your return. Employers have until 31 July to do this.

We will send a notification to your myGov inbox when all of your income statements are ‘Tax ready’.

Through ATO online services via myGov

If your employer has started reporting through STP, they are no longer required to give you a payment summary. You will instead receive an income statement. You will be able to access this information through your ATO online services via myGov.

Your income statement will show your year-to-date salary and wages, the tax that has been withheld and the reported amounts of your employer super.

Your income statement/s will be ready to use in your tax return when your employer marks it as ‘Tax ready’. They have until 31 July to do this but will often do it earlier. It is important that you don’t use any information that is not marked ‘Tax ready’ as your employer may finalise your income statement with different amounts which means you may have to amend your tax return.

We will send a notification to your myGov inbox when all of your income statements are ‘Tax ready’.

How to access your income statement

If your myGov account is set up and linked to ATO online services, you need to:

  • Log in to myGov using your email address or mobile phone number.
  • Select ATO online services.
  • Select Employment and then view my Income statement.

On the screen you will see the income you have earned from your employer or employers for the financial year, and the tax that has been withheld.

If you can’t access your information via myGov, you can contact us on 13 28 61 for a copy of your income statement.

Superannuation guarantee contributions not payable for additional hours or public holidays

The Full Federal Court has held that superannuation guarantee contributions were not payable by an employer in respect of the “additional hours” and “public holidays” components of employees’ salaries since these components did not form part of “ordinary time earnings”. In doing so, it allowed the employer’s appeal against the primary judge’s decision reported at [2018] FCA 80.

Bluescope Steel (AIS) Pty Ltd v Australian Workers’ Union [2019] FCAFC 84 , Allsop CJ, Collier and Rangiah JJ, 24 May 2019.

Payments made to subcontractors by cleaning services companies subject to payroll tax

The Supreme Court of NSW has concluded that the arrangements between the subcontractors and two companies providing specialised cleaning/housekeeping services were employment agency contracts within the meaning of s 37(1) of the Payroll Tax Act 2007 (NSW). Hence, it held that the payroll tax was correctly imposed on the amounts paid to the subcontractors “in relation to” the procurement of the additional staff.

Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue (NSW)International Hotel Services Pty Ltd v Chief Commissioner of State Revenue (NSW) 2019 ATC ¶20-696; [2019] NSWSC 657; Ward CJ in Eq, 7 June 2019.

Thinking of setting up a self-managed super fund (SMSF)?

If you set up a self-managed super fund (SMSF), you’re in charge – you make the investment decisions for the fund and you’re held responsible for complying with the super and tax laws. It’s a major financial decision and you need to have the time and skills to do it. There may be better options for your super savings.

An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Don’t set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.

It’s best to see a qualified, licensed professional to help you decide. The Australian Securities and Investments Commission website has information about choosing a financial adviser

 

*News Source (ATO) – https://bit.ly/2wpb0Ob

Why you should keep record for Capital Gain Tax

You must keep records of every transaction, event or circumstance that may be relevant to working out whether you’ve made a capital gain or loss from a capital gains tax (CGT) event. Generally you need to keep your records for at least five years after the year when the CGT event happened.

Keeping adequate records will help you work out your capital gain or loss correctly when a CGT event happens.

Good records can also help your beneficiaries deal with the impact of CGT. If you leave an asset to another person, it may be subject to CGT if they dispose of it in the future. For example, if your daughter sells shares you’ve left her in your will, she will need your records to work out her cost base for the shares and how much CGT she has to pay.

You should also keep records for a net capital loss in a year, which you may be able to offset against a capital gain in a later year. (There’s no time limit on how long you can carry forward a net capital loss.)

Once you’ve offset the loss against a capital gain, you should generally keep your records of the CGT event that resulted in the loss for a further two years (for individuals and small businesses; four years for other taxpayers).

On this page:

  • Records to keep
  • It’s never too late

Records to keep

Your records must be in English (or be readily accessible in or translatable to English) and must show:

  • the nature of the transaction, event or circumstances
  • the date it happened
  • the parties to the transaction
  • how the transaction, event or circumstances are relevant to working out the capital gain or loss.

These are the kind of records you’ll need to keep:

  • receipts of purchase or transfer
  • details of interest on money you borrowed relating to the asset
  • records of agent, accountant, legal and advertising costs
  • receipts for insurance costs, rates and land taxes
  • any market valuations
  • receipts for the cost of maintenance, repairs and modifications
  • accounts showing brokerage fees on shares.

You should also keep records to establish whether you’ve claimed an income tax deduction for an item of expenditure. If you’ve claimed a deduction for an amount, you can’t also include the amount in the cost base of the asset.

It’s never too late

If you haven’t kept records of your CGT assets, or your records have inadvertently been destroyed, you can still do something about it.

If you bought real estate, your solicitor or estate agent may be able to give you copies of most of the records you need.

If you made improvements to an investment property – for example, if you built an extension – ask the builder for a copy of the receipt for payment.

If you bought shares in a company or units in a unit trust, your stockbroker or investment adviser may be able to give you the information you need.

If you received an asset as a gift and didn’t get a market valuation at the time, a professional valuer can tell you what its market value was at the relevant date.

If you lost your records in a natural disaster, we can help you reconstruct them.

The main thing is to get as many details as possible so you can reconstruct your records.

 

*News Source ATO – https://bit.ly/2YZyxS1

Work related deductions you can claim

When completing your tax return, you’re entitled to claim deductions for some expenses, most of which are directly related to earning your income.

Work-related expenses

To claim a work-related deduction:

  • you must have spent the money yourself and weren’t reimbursed
  • it must directly relate to earning your income
  • you must have a record to prove it.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. Work expenses reimbursed to you by your employer are not deductible.

We can seek information from your employer if we think you have claimed a deduction for an expense that you have already been reimbursed for.

You may be able to claim a deduction for expenses that directly relate to your work, including:

  • Vehicle and travel expenses
  • Clothing, laundry and dry-cleaning expenses
  • Home office expenses
  • Self-education expenses
  • Tools, equipment and other assets
  • Other work-related deductions

Employees (including casuals) can claim work-related expenses in the financial year they are incurred. This is the case even if you start employment in June but don’t receive income until the next financial year, you can claim deductions for work-related expenses incurred in June.

If you employ someone to assist you in your employment, you can’t claim a deduction for employing that person.

Other deductions

You may also be able to claim a deduction for:

  • ATO interest – calculating and reporting
  • Cost of managing tax affairs
  • Gifts and donations
  • Interest charged by the ATO
  • Interest, dividend and other investment income deductions
  • Personal super contributions
  • Undeducted purchase price of a foreign pension or annuity

Occupation and industry specific guides

To find out more about income, allowances and deductions you can claim for work-related expenses in your industry or occupation, see Occupation and industry specific guides.

 

*News Source (ATO) – https://bit.ly/2VVT1cx

Increased and extended Instant asset write – off

You can choose to use the simplified depreciation rules if you have a small business with an aggregated turnover (the total normal income of your business and that of any associated businesses) of less than:

  • $10 million from 1 July 2016 onwards
  • $2 million for previous income years.
Under these rules, if you purchased assets from 7.30pm (AEST) on 12 May 2015 and first used or installed them ready for use:
From 7.30pm (AEST) on 12 May 2015 until 28 January 2019From 29 January 2019 until before
7.30pm (AEDT)
2 April 2019
From 7.30pm (AEDT) on
2 April 2019 until 30 June 2020
You can immediately deduct the business portion of most depreciating assets costing less than $20,000 each (the instant asset write-off threshold).You can immediately deduct the business portion of most depreciating assets costing less than $25,000 each (the instant asset write-off threshold).You can immediately deduct the business portion of most depreciating assets costing less than $30,000 each (the instant asset write-off threshold).

If you’re a business with a turnover from $10 million to less than $50 million you may be eligible for the instant asset write-off for assets purchased from 7.30pm (AEDT) on 2 April 2019. Visit the general depreciation rules for more information.

Small businesses can also:

  • pool the business portion of most higher cost assets (those with a cost equal to or more than the relevant instant asset write-off threshold) and claim:
    • a 15% deduction in the year you start to use them or have them installed ready for use
    • a 30% deduction each year after the first year
  • deduct the balance of the small business pool at the end of the income year if the balance at that time (before applying the depreciation deductions) is less than the instant asset write-off threshold.

If you choose to use the simplified depreciation rules, you must:

  • use them to work out deductions for all your depreciating assets except those specifically excluded
  • apply the entire set of rules, not just individual elements (such as the instant asset write-off)
  • only claim a deduction for the portion of the asset used for business or other taxable purposes and not for the portion for private use.

If you choose to stop using the simplified depreciation rules or become ineligible to use them, you must use the general depreciation rules. However, any assets in your small business pool will continue to be depreciated in the pool, even if you stop using the simplified depreciation rules.

Cost

The cost of an asset includes both the amount you paid for it and any additional amounts you spent on transporting and installing it ready for use.

If you are registered for the goods and services tax (GST) and can claim the full GST credit, you exclude the GST amount you paid on the asset when you calculate your depreciation amounts (and your instant asset write-off threshold is exclusive of any GST).

If you are not registered for GST, you include the GST amount you paid on the asset in your depreciation calculations (and your instant asset write-off threshold is inclusive of any GST).

If you are only able to claim a portion of the GST credit then the cost is reduced by the portion you can claim.

Trade-ins

When you trade-in a car or any other asset, typically the agreed price of your trade-in is deducted from the cost of your new asset. The sale and purchase of the two assets may appear as one transaction.

There are two transactions, the purchase of a new asset and the disposal of an existing asset. If the purchase price of your asset (irrespective of the amount you were paid for your trade-in) is equal to or more than the relevant threshold, then it needs to be added to the small business pool and can’t be immediately written-off.

Business vs private use

Your depreciation deduction is limited to the percentage your asset is used for business or other taxable purposes (for example, to manage your investments or rental properties). You cannot claim a deduction for the portion of the asset used for private purposes.

In determining whether the instant asset write-off applies, you must take into account the full cost of the asset, but your deduction is limited to an estimate of how much you use the asset in earning assessable income.

For example, if you buy a car for $19,000, and you estimate it is used 50% for business purposes and 50% for private purposes, it is immediately written-off, but your deduction is $9,500.

Asset sales and disposals

If an asset is part of the small business pool and you sell it (or it is lost or damaged and you receive a compensating insurance payout), the balance of the pool is reduced by the amount of the sale proceeds or insurance payout – to the extent the asset has been used and depreciated for taxable purposes.

If an asset has previously been written-off (either under the instant asset write-off or as part of a low value pool), the proceeds from the asset’s sale must be added to your assessable income – to the extent the asset has been used and depreciated for taxable purposes.

*News Source (ATO) – https://bit.ly/2XisUhi

Update on reporting of Contractors-from ATO

In the most recent Federal Budget, Government announced these three additional industries to lodge taxable payments reports with the ATO. Now you have to lodge a Taxable payments annual report (TPAR) by 28th August 2020 & then each year, if you are in the following business-

These industries were already covered & applicability was there from 01st July 2018.

What is TPRS ?

Under the taxable payments reporting system (TPRS), targeted businesses need to report information to ATO about the payments they make to contractors for services. This additional reporting to the ATO is in the form of an annual report and put this reporting in line with payments made for salaries and wages to employees. This needs to be reported annually.

A purchaser that makes, or is liable to make, a payment for a specified supply during a year must give a report (the “taxable payments annual report”) to the Commissioner. It can be done and lodged from XERO itself.

What details needs to be reported ?

  • ABN
  • Name (business name or individual’s name)
  • Address
  • Gross amount & GST for the financial year

 

All these must be there in the Invoice received from the contractors.

What if ABN of contractor, not quoted ?

If purchaser/businesses failed to quote ABN of any of the contractors, PAYG withholding with specified rate prescribed by ATO (say 20%) needs to be deducted from their payments. An intention of this type of policy is to ensure the industry at large is doing the right thing and paying workers appropriately.

Note-There are heavy penalties for the businesses who are in agreement with the individuals to provide services as a contractor when the law would state that they are employees.

If you are looking for some more information regarding this update then you can get in touch with your tax accountant for more update and how it will affect you.

Proposed changes for personal tax offsets

A new non-refundable personal tax offset is due to commence from 1 July 2018, in accordance with legislation passed in June 2018 (TLA (Personal Income Tax Plan) Act 2018).

The Low and Middle Income Tax Offset, or LAMITO, provides taxpayers under $125,333 in taxable income between $0 and $530 in additional tax offsets. The base amount of $200 is available to low income earners for the life of the offset, which is four years. After the four years, the LAMITO base of $200 will be absorbed into the current Low Income Tax Offset.

Proposed changes

The proposed changes to LAMITO come from the 2019 federal budget announcement. The announcement has been described as part of a package of three changes, titled “Building on the Personal Income Tax Plan” (Budget Paper No. 2, p 17).

The table of the current law next to the proposed changes, as it relates to the 2018/19 and following income years, is below:

 

Taxable income Current law Proposed law
Less than $37,000$200$255
Between $37,000 and $48,000Increase 3c per $1,

capped at $530

Increase 7.5c per $1,

capped at $1,080

Between $48,000 and $90,000Maximum $530Maximum $1,080
Between $90,000 and $126,000Reducing from

maximum at 1.5c per $1

Reducing from

maximum at 3c per $1

Above $126,000$0$0

In both scenarios, taxpayers between $48,000 and $66,667 will have a reduced Low Income Tax Offset with the maximum level of LAMITO.

LAMITO available until 2021/22 income year

The proposed changes announced in the 2019 federal budget only increase the base rate and maximum level of non-refundable offset. There has been no announced change to the length of time the offset is available, which is four years from 2018/19 to 2021/22 financial years.

Beginning with the 2022/23 financial year, the base rate of LAMITO is due to be absorbed with the Low Income Tax Offset. Also announced as part of the overall income tax package, the low income tax offset will increase from $645 to $700 (being the LAMITO change). Further changes to personal tax rates have also been proposed from 2022/23 to 2024/25 income years.

Client opportunities

Where clients are requesting information surrounding these proposed changes, and their effect on their tax bill, the following practical tools will be made available:

Worked example: Finding the franking credits sweet spot for the 2018/19 income year

Calculator: How the LAMITO change will look based on taxable income for the 2018/19 income year (coming soon)

 

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