Author: Karen Lau

01 Feb

Posted at 20:09h in Accounting, News, Tax

In 2018, the ATO issued a controversial draft ruling which took a very strict stance on the four-year time limit for claiming input tax credits and fuel tax credits. The ruling had been used by the ATO to deny input tax credits and fuel tax credits where the Commissioner of Taxation made a decision outside the four-year period on an objection or amendment request, even where the objection or request was made within the period. However, a recent observation by a judge ruling on a related matter has put the ATO’s strict stance in doubt and as a result the ruling (Draft Miscellaneous Taxation Ruling MT 2018/D1) has been withdrawn.

Where the Commissioner makes a decision on an objection or requests for amendment in relation to input tax credits and/or fuel tax credits outside the four-year period but the initial objection or amendment request was lodged within the time limit, the taxpayer will no longer be automatically denied the credits in situations where the decision is in the taxpayer’s favour.

As a result, any taxpayer that the draft ruling has affected is encouraged to contact the ATO.

07 Dec

Posted at 08:56h in News, Related Services, Tax

Under the superannuation guarantee framework, employers are required to contribute a minimum percentage (currently 9.5%) of their employees’ ordinary time earnings into superannuation. Employers that fail to do so will be liable for a penalty called the superannuation guarantee charge, payable to the ATO. If you’re a high-income earner with multiple employers, this requirement has the very real chance of pushing you over the concessional contributions cap of $25,000.

To avoid this unintended consequence, laws have recently been passed so that eligible high-income earners with multiple employers can opt out of the super guarantee regime. From 1 January 2020, employees with more than one employer who expect their combined employers’ contributions to exceed the concessional contributions cap can apply for an “employer shortfall exemption certificate” with the ATO.

Tip: It’s a good idea to speak to your employers before deciding to apply for an exemption certificate, as it may impact relevant awards or your workplace agreements.

06 Dec

Posted at 08:49h in News, Related Services, Tax

With drought sweeping across the country, farmers are being offered access to concessional loans, grants and special allowances to help ease the immediate financial burden. While it is difficult to predict when the drought will break, for those who are in the process of navigating their way out of immediate financial strain, there are ways to future proof your farm or primary production business by taking advantage of various tax concessions.

Some of the immediate assistance measures include concessional loans and the farm household allowance, through which lump sum payments of up to $12,000 can be paid to eligible farm households.

The allowance can also be in the form of fortnightly payments for a maximum period of four cumulative years at the same rate as the Newstart allowance. This allowance may be available to both the farmer and their partner, provided certain conditions are met. An activity supplement of up to $4,000 to pay for study, training or professional financial advice may also be available to eligible households.

In addition to the immediate assistance, primary producers can obtain ongoing benefits of various tax concessions, including the instant asset write-off, immediate deductions for fodder storage assets, and income averaging to assist with cash flow.

Tip: If you’re experiencing hardship due to drought, we can contact the ATO on your behalf or assist with your application for farm household allowance to ease the immediate financial burden.

04 Dec

Posted at 08:23h in News, Related Services, Tax

The working holiday tax rate (commonly known as the “backpacker tax”) has generally applied from 1 January 2017 to individuals who have working holiday or work and holiday visas. In essence, the first $37,000 of “working holiday taxable income” is taxed at 15%, and then the balance is taxed at the standard rates applicable to residents.

Thus, working holiday makers are taxed at a higher rate on their first $37,000 than residents, because the holiday makers don’t get the benefit of the Australian tax-free threshold ($18,200 for 2019–2020).

A recent Federal Court case centred on a British citizen, who lived in Australia for almost two years. During most of that time she lived in the same share house accommodation in Sydney, and only left for short stints to travel to other areas. Essentially, the case came down to whether or not she was a resident of Australia and if so, whether the non-discrimination clause in the Australia–United Kingdom double taxation agreement prevented her from being taxed at the higher “backpacker” rate. The Federal Court found that she was an Australian resident for tax purposes, and she should not be taxed at the higher rate.

Some have seen this decision as a win for all working holiday makers, but it’s likely to have a fairly narrow application. Coupled with the ATO still considering an appeal, this area of law is far from settled.

Tip: If you’re unsure whether this decision affects you, we can help you work out whether you’re a tax resident and may be eligible to pay less tax on your working holiday income.

03 Dec

Posted at 08:10h in News, Related Services, Tax

If you have a business in addition to your main employment, the non-commercial loss rules could apply to you, which may prevent you from deducting your business losses against your other income.

Depending on your business activity, as long as you satisfy certain conditions your business will not be subject to the non-commercial loss rules. If your business doesn’t satisfy these conditions, don’t worry – you can also apply to the ATO for an exemption under certain circumstances.

A “non-commercial” business activity in this context is any business where the deductions exceed the assessable income in any particular year.

If you’re a primary producer or a professional artist and your income from other sources unrelated to the business is less than $40,000, the non-commercial loss rules will not apply to you. You will be able to deduct any losses from the business against your other income, but you should be aware of the $40,000 threshold, which may change from year to year based on your personal circumstances.

Tip: If you get the bulk of your income from being an employee and run a business on the side, we can help you figure out if you’re subject to the non-commercial loss rules. We can also help make a formal request to the ATO to allow you an exemption from the rules.

02 Dec

Posted at 08:04h in News, Related Services, Tax

Crowdfunding has fast become a go-to strategy for people in need of large amounts of money quickly, but is the money raised considered to be income and therefore taxable?

Crowdfunding is when an individual or business (the promoter) uploads a description of a campaign (eg to fund an activity, a project or a new invention) along with the amount they want to raise to a platform like Kickstarter, GoFundMe, Indiegogo or Pozible.

Other people online (the contributors) can then choose to support the campaign or cause by pledging money.

Many campaigns are donation-based. This is where contributors pledge an amount of money without receiving anything in return. If you’re a contributor in this case, you won’t be able to deduct an amount contributed in a crowdfunding campaign as a “donation” in your Australian tax return unless the cause you’ve donated to is an endorsed or legislated deductible gift recipient (DGR).

Other campaigns can be rewards-based. In these cases, the promoter provides a reward, such as goods, services or rights, to contributors in return for their payments. For example, differing levels of campaign-related merchandise may be available. Usually, your acquisition of goods or services for making a contribution means the payment is considered private in nature and not deductible.

As the promoter of a campaign (either donation-based or rewards-based), whether the money you receive is considered to be taxable depends on the circumstances. Generally, if the campaign is related to running/furthering your business or is a profit-making plan, then any money received would be classed as income.

Tip: If you’re thinking of starting a crowdfunding campaign or have already had success with one, we can help you deal with all the tax consequences, so you can concentrate on making your business or project a success.

01 Dec

Posted at 07:58h in News, Tax

Businesses with tax debts need to be aware that the ATO will now be able to disclose the details of their tax debts to credit ratings agencies, which could potentially affect the ability of the business to obtain finance or refinance existing debt.

Generally, only businesses with an ABN and debts over $100,000 and that are not “effectively engaged” with the ATO will be affected. The ATO is planning a phased implementation, which will consist of undertaking education efforts before it targets companies, followed by partnerships, trusts and sole traders.

The aim of the laws, according to the government, is to encourage more informed decision-making within the business community by making large overdue tax debts more visible, and to reduce the unfair advantage obtained by businesses that do not pay their tax on time.

Tip: Are you unsure if you have a tax debt, or perhaps you need help with working out a payment plan with the ATO for your existing debt? We can help you with all of this and more.

10 Nov

Posted at 23:22h in News

Since July this year, super funds have been required to cancel insurance on accounts that have not received any contributions for at least 16 months unless the member elects to continue the cover. In addition, inactive super accounts with balances of under $6,000 will either be automatically consolidated by the ATO with other accounts you may hold or transferred to the ATO. If your super is transferred to the ATO, any insurance will also be cancelled.

This applies to life insurance, total and permanent disability (TPD) insurance and income protection (IP) insurance that you may have with your super fund.

Another change coming to super funds in the not too distant future of 1 April 2020 is opt-in insurance for members under 25 years old and those with account balances of less than $6,000. From that date, members under 25 who start to hold a new choice or MySuper product will need to explicitly opt-in to insurance. Currently, the onus is on the member to opt out of insurance if they do not want it.

08 Nov

Posted at 23:17h in News, Related Services, Tax

The ATO has announced that it will scrutinise every tax return lodged during Tax Time 2019 as part of its ongoing focus on “closing tax gaps”.

Assistant Commissioner, Karen Foat, said taxpayers who have done the wrong thing may be subject to an audit, even if the over-claim of deductions is minor. Third party data indicating under reported income, and deductions that appear high compared to people with a similar job and income level, tend to raise concerns, Ms Foat said.

If you’re subject to an audit, it’s not always doom and gloom. In some cases, you may get a higher deduction if the ATO discovers that you haven’t claimed something you’re entitled to. For example, you may be entitled to a deduction for depreciation on a laptop or other technology used for work but had incorrectly calculated the claim or omitted it altogether.

In the event of an audit and you’re found to have over-claimed, the ATO may apply penalties depending on your behaviour. If you’re found to have over-claimed based on a genuine mistake, for example, if you’ve claimed the costs which are private and domestic in nature that are sometimes used for work or study (eg sports backpack or headphones), the ATO may choose not to apply penalties.

07 Nov

Posted at 23:14h in Accounting, Related Services, Tax

Whether you own just a few listed shares or have an extensive portfolio, understanding how capital gains tax (CGT) applies when you sell your shares can help you plan your trades effectively. If you trade shares on a scale that amounts to a business of share trading, talk to your tax adviser about the different tax regime that applies.

Each time you sell a parcel of shares, you trigger a “CGT event” and you must work out whether you’ve made a capital gain on that parcel (where the proceeds you receive exceed the cost base) or capital loss (where the cost base exceeds the proceeds). You also trigger a CGT event if you give the shares away as a gift – perhaps to a family member. For tax purposes, you’re deemed to have disposed of the shares at their full market value.

All of your capital gains for the income year are tallied and reduced by any capital losses. This includes your gains and losses from all of your assets that year, not just shares. If you have an overall “net capital gain”, this is included in your assessable income and taxed at your marginal tax rate. If you have a “net capital loss”, you can’t offset this against ordinary income like salary or rental income. Instead, a net capital loss can be carried forward to future years to apply against future capital gains.