Archive for 'Tax'
Fuel tax credit rates have increased on 1 August. The ATO reminds you to use the new rates to calculate claims on your next business activity statement (BAS).
How to simplify fuel tax credit claims
If you claim less than $10,000 in fuel tax credits each year, you can use the ATO’s simplified methods to keep records and calculate your claims. Keep in mind the following tips:
- Keep accurate business records to help you claim all fuel tax credits you are entitled to
- Use the ATO tax fuel credit calculator to work out your claim
- Registered tax agents and BAS agents can help you with your tax
Simplified record keeping strategies
Use the following records to substantiate claims of less than $10,000 per year:
- Contractor statements can be used where an amount for fuel used in performing services is deducted from the amount payable for the services
- Financial institution statements (business or personal credit/debit accounts)- where only the dollar amount is displayed on the statement
- Point-of-sale docket- where the docket either does not itemise the quantity of fuel dispensed or the quality is illegible
- Fuel supplier statement of invoice- where only the dollar amount is displayed on the statement
The ATO has extended the $20,000 threshold to 30 June 2019.
If you buy an asset and it costs less than $20,000, you may write off the business portion in your tax return.
To be eligible to use the simplified depreciation rules and claim an immediate deduction for the business portion of each asset costing less than $20,000, you must:
- Have a business turnover less than $10 million (increased $2 million on 1 July 2016)
- The asset was first used or installed ready for use in the income year you are claiming it in.
If your asset costs more than $20,000, you are not eligible for immediate deduction. They will continue to be deducted over time using the general small business pool. You can write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.
The $20,000 threshold applies from 12 May 2015 to 30 June 2019 and reduces to $1,000 on 1 July 2019. Remember, registered tax agents and BAS agents can help you with your tax.
The ATO is seeking to increase their attention on home office expenses due to the high level of questionable claims made by taxpayers. There has been an increase in the number of Australians claiming deductions for costs incurred from working from home.
The ATO reports that in the last tax year 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, including expenses relating to working from home.
The main mistakes stem from individuals claiming the whole instead of the work-related portion of expenses for bills related to phone, internet, printing and stationery.
The ATO has identified that a separate work area will incur work-related expenses eligible for tax deductions as opposed to answering some emails at a kitchen bench. The ATO has also recommended recording expenses in case of an audit or if the ATO contacts your employer to confirm your claim.
To ensure you do not suffer non-compliance penalties, the ATO recommends you follow the three golden rules for taxpayers working from home. One- you must have spent the money yourself and not been reimbursed, two- the claim must be directly related to earning your income, and three- you need a record to prove it.
The ATO is in the midst of developing advanced data programs to find individuals who are leaving a source of income out of their tax return. Analytical tools have been developed to utilise the amount of data the ATO receives to identify instances where income has gone unreported. This is to address the annual $1.4 billion tax shortfall caused by individuals who leave income out of their return.
The ATO has identified that the most common mistakes are made by taxpayers leaving out cash wages. There are also issues with the non-disclosure of income from second jobs, capital gains on cryptocurrency, the sharing economy, the gig economy and foreign-sourced income.
Concerning foreign sourced income, the ATO has identified that most funds come from the UK, USA, China, Switzerland, Hong Kong, New Zealand and Singapore. In response to this, the ATO is developing a single global standard for collection, reporting and exchange of financial account information on foreign tax residents.
The ATO imposes penalties and interest for a failure to disclose an accurate statement of income tax. The penalties can range from 25 per cent up to 75 per cent of the shortfall, in addition to paying the money owed.
On the 1 July 2018, the Australian Government introduced Single Touch Payroll (STP) for employers with 20 or more employees. The new scheme requires employers to report payment activities each time employees were paid. Authorisations for an agent to act on behalf of an employer to streamline the process of STP are provided below.
STP Engagement Authority
If a registered agent reports through STP for an employer, they can get written authorisation to make this declaration through an annual agreement. This authorisation will allow the registered agent to make the relevant declaration to the Commissioner when they lodge an STP at each pay event. Both parties should have a copy for their records although there is no need to provide a copy to the ATO
The agreement should include:
- An outline of the responsibilities of both parties
- Agreed terms of the employer’s collation of payroll
- Their process for calculating and paying their employees
- Taxation and superannuation obligations
Eligibility for the Authority
For eligibility to provide an agent with the powers given above regarding STP, the employer must not:
- Have any overdue activity statement lodgements
- Have any outstanding debts, unless they are covered by a payment arrangement or subject to review
- Currently be or have been the subject of ATO compliance activity for PAYG withholding in the last two years
The STP engagement authority does not apply to the other approved forms or finalisation declaration. A registered agent must still obtain a signed declaration in writing from an employer before making the finalisation declaration on behalf of the employer at the end of the financial year.
The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.
The requirement of a logbook
New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.
Diversions and private use rules
The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.
The time to report and lodge your annual tax return for your business is fast approaching. Remember, what you must report will depend upon the type of business entity you have.
As a sole trader, you are required to lodge a tax return even if your income is below the tax-free threshold. This will include:
– tax return for individuals including the supplementary section
– business and professional items schedule for individuals.
You must report:
– The business income minus the business deductions you are eligible to claim.
– The other income like wages and salary (from a payment summary), rental income and dividends, minus deductions against this income.
Partnerships and partners
The partnership must lodge a partnership tax return. This will include the partnership’s net income (assessable income less allowable expenses and deductions).
The ATO does not require the partnership to pay tax on the income it earns. Rather, every partner must pay tax on the share of net partnership income you each receive.
For you (as an individual partner) you must report:
– Your share of the partnership net income or loss.
– Any other assessable income like wages and salary (shown on a payment summary), dividends and rental income.
Trusts and Beneficiaries
When you operate your business through a trust, the trustee will be required to lodge a trust tax return. The trust reports its net income or loss (the trust’s assessable income minus deductions).
Each trust beneficiary must lodge their tax return, i.e., an individual or company tax return.
As a beneficiary of a trust, you must report:
– Income received from the trust.
– Other assessable income including dividends, salary and wages (on an individual’s payment summary), and rental income.
You must lodge a company tax return. The company is required to report its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is required to pay on that income or the amount that is refundable. Your personal income is kept separate from the company’s income.
With deregistered companies – ensure you lodge a final company tax return before it is deregistered by the Australian Securities and Investments Commission (ASIC). The ATO will be unable to process a company tax return if the company is deregistered.
From 1 July 2018, businesses that supply cleaning or courier services must report payments made to contractors (if payments are for cleaning or courier services) via the Taxable payments annual report (TPAR) each year.
However, the ATO does not require taxpayers to lodge their TPAR during the period up until the proposed law change is passed by Parliament.
Instead, they are expected to keep appropriate records to ensure a TPAR could be prepared and lodged as soon as practical (after the law is enacted).
After the new law is enacted taxpayers will need to check payments, they have made to contractors from 1 July 2018 and then complete and lodge a TPAR for the 2018-19 income year.
The ATO does not require those taxpayers who recorded their payments and lodged their TPAR (in accordance with the changes) to do anything else. Those who did not record their payments (to contractors) must review their records and form a summary of all payments made after 1 July 2018 and the required details for each payment.
Businesses who also supply road freight, security, investigation, surveillance or IT services must report payments made to contractors (if payments are for road freight, security, investigation or IT services) from 1 July 2019.
Similar to cleaning or courier service payments, taxpayers are expected to report these payments using the TPAR each year.
You may be able to claim a tax deduction for capital expenditure on a landcare operation in Australia in the year it is incurred. Providing you are a primary producer, a rural land irrigation water provider who incurred the expenditure on or after 1 July 2004, or a business using rural land for taxable uses (excluding mining and quarrying businesses) you are eligible to claim a deduction.
Many operations fall under the category of a landcare operation.
For instance, when you primarily and principally:
– eradicate, exterminate or destroy plant growth detrimental to the land.
– put in fences to keep animals from areas affected by land degradation to prevent or limit further damage and assist in reclaiming the areas.
– eradicate or exterminate animal pests from the land.
– construct drainage works to control salinity or assist in drainage control.
– prevent or combat land degradation by means other than fences.
Other operations the ATO defines as a landcare operation include:
– constructing a levee or similar improvement
– erecting fences to separate different land classes as set out in an approved land management plan
– for expenditure incurred on or after 1 July 2004, a structural improvement or alteration, addition, extension or repair to a structural improvement that is reasonably incidental to the construction of a levee or drainage works.
When you claim a deduction and receive recoupment, the recoupment is assessable income. However, you cannot claim a deduction if the capital expenditure is on plant unless you incurred the costs on certain fences, dams or other structural improvements.
If landcare expenditure is incurred by a partnership, each partner is entitled to claim the relevant deduction for their share of the costs.
The Tax Office is reminding individuals who either own or are looking to purchase a rental property that there are essential record-keeping and taxation obligations that they must meet.
Examples of records to keep (for the period the individual owns the property for and up to five years after it is sold), include:
– Rental income
– Contract of purchase and sale
– Loan and refinancing documents
– Periods when the property was used for private use (i.e., family use)
– Steps taken to rent out the property (i.e., advertising)
Individuals must also declare all income they receive from renting out their property.
Examples of income may include:
– Rent received (before fees or expenses)
– Reimbursement for deductible expenditure
– Any fees collected from cancelled bookings
– Insurance payouts
– Booking or letting fees
Individuals can claim many expenses related to the property as immediate tax deductions or deductions over a number of years.
Immediate expense deductions include:
– Repairs and maintenance on the property
– Loan interest
– Property management fees
Expenses to claim as deductions over a number of tax returns include:
– Depreciating assets
– Capital works or improvements
– Borrowing expenses
Expenses accrued in buying or selling the property, using the property for personal use or travelling to inspect the property will not qualify for tax deductions.
While individuals can not claim expenses relating to buying or selling the property, these will form part of the Capital gains tax (CGT) calculations.