Tax

07 May

Posted at 15:29h in News, Tax

The NSW Government has announced that it will introduce new legislation to increase penalties for payroll tax avoidance, as well as providing it with the ability to name taxpayers who have underpaid payroll tax on wages.

The changes are directed at those employers who underpay wages, which of course reduces the employers’ payroll tax liabilities, but also deprives workers of their due wages. Modelling suggests that
this amounts to $1.35 billion in wages per year Australia-wide, and affects some 13% of workers.

Revenue NSW will be able to reassess payroll tax more than five years after the initial tax assessment when wages have been underpaid.

The penalties will be increased five-fold in some instances. For example, penalties for making records known to contain false or misleading information and for knowingly give false or misleading information will both go up from $11,000 to $55,000.

06 May

Posted at 15:27h in Business Advisory, News, Tax

The ATO has announced a new data-matching program that will use information collected from the Department of Home Affairs. It is designed to determine whether business entities and individuals are Australian residents for tax purposes, and whether they’ve met their lodgment and registration obligations.
This is in addition to the existing visa data-matching program, which has been operating for more than 10 years. The new program will include data from income years 2016–2017 to 2022–2023.

According to the ATO, the compliance activities from data obtained will largely be confined to verification of identity and tax residency status for registration purposes, as well as identifying ineligible claims for tax and superannuation entitlement. In addition to compliance activities, the data will be used to refine existing ATO risk detection models, improve knowledge of overall level of identity and residency compliance risks, and identify potentially new or emerging non-compliance and entities controlling or exploiting ATO methodologies.

The data collected will include full names, personal identifiers, dates of birth, genders, arrival dates, departure dates, passport information (including travel document IDs and country codes), and status types (eg visa status, residency, lawful, Australian citizen). It is expected that the personal information of approximately 670,000 individuals will be collected and matched each financial year.

05 May

Posted at 15:26h in Accounting, Business Advisory, News, Tax

April 2021 has been a closely observed month financially, with many government COVID-19 economic supports coming away. There’s no doubt that some businesses will find themselves owed debts that cannot be recovered from customers or other debtors.

If your business is facing this type of unrecoverable debt, commonly known as a “bad debt”, you may be able to claim a tax deduction for the unrecoverable amount, depending on the accounting method you use.

If your business accounts for its income on an accruals basis – that is, you include all income earned for work done during the income year even if the business hasn’t yet received the payment by the end of the income year – a tax deduction for a bad debt may be claimable.

To claim a deduction for a bad debt, the amount must have been included in your business’s assessable income either in the current year tax return or an earlier income year. You’ll also need to determine that the debt is genuinely bad, rather than merely doubtful, at the time the business writes it off. Whether or not a debt is genuinely bad depends on the circumstances of each case, with the guiding principle being how unlikely it is that the debt can be recovered through reasonable and/or commercial attempts.

Tip: According to the ATO, making such attempts doesn’t always mean you need to have commenced formal proceedings to recover the debt. Evidence of communications seeking payment of debt, including reminder notices and attempts to contact the debtor by phone, mail and email, may be sufficient.

The next step in claiming a bad debt deduction is to write off the debt as bad. This usually means your business has to record (in writing) the decision to write off the debt before the end of the income year in which you intend to claim a deduction.

There may also be GST consequences for your business when writing off a bad debt. For example, if the business accounts for GST on a non-cash basis, a decreasing adjustment can be claimed where you have made the taxable sale and paid the GST to the ATO, but subsequently have not received the payment. However, the debt needs to have been written off as bad and have been overdue for 12 months or more.

Businesses that account for income on cash basis cannot claim a deduction for bad debts. This is because these businesses only include an amount in their assessable income when it’s received, which means the bad debts have no direct income tax consequences.

31 Mar

Posted at 11:49h in Accounting, News, Tax

If your business has provided any benefits to your employees, you may be liable for fringe benefits tax (FBT). This includes benefits to current, prospective and former employees, as well as their associates. It’s important to keep in mind that this applies no matter what structure your business has – sole trader, partnership, trustee, corporation, unincorporated association, etc. If a benefit was provided in respect of employment, then it may be a taxable fringe benefit.

Although the Australian income tax year runs from 1 July to 30 June, the FBT year is different, running from 1 April to 31 March the following year – so now is the time to consider your business’s FBT obligations and organise your records for the year 1 April 2020 to 31 March 2021.

TIP: Business FBT returns and payments are generally due by 21 May if you lodge yourself, or by 25 June if we lodge electronically as your registered tax agent.

In total, there are 13 different types of taxable fringe benefits, each with their own specific valuation rules. The FBT tax rate of 47% may seem fearsome, but there are ways to reduce the amount of FBT your business may have to pay where a benefit has been provided.

One of the simplest ways to reduce the amount of your business’s FBT liability is for your employees to make payments towards the cost of providing the fringe benefit. This is known as employee contribution, and certain conditions still apply.

Your business can also take advantage of various exemptions and concessions to reduce FBT liability, but you’ll need to keep specific and careful records, including employee declarations and invoices and receipts. As a general rule, you should keep these documents for at least five years after the relevant FBT return is lodged.

29 Mar

Posted at 11:57h in Accounting, News, Tax

A number of important COVID-19 related government stimulus and support measures are now coming to an end, and some others have begun phasing out, which will occur over a slightly longer period.

This means that businesses and individuals need to prepare for an environment where the government safety net is not as wide.

TIP: If you or your business need information on managing your financial arrangements as you face the winding down of these government supports, we’re here to help – contact us today.

The following are, at the time of writing, among the measures that will cease at the end of March 2021:

  • JobKeeper (ends 28 March);
  • Coronavirus Supplement (ends 31 March);
  • the temporary COVID-19 qualification rules for JobSeeker payment and youth allowance (end 31 March);
  • HomeBuilder (ends 31 March); and
  • some apprenticeship wage subsidies (end 31 March).

26 Feb

Posted at 14:39h in Accounting, Tax

With insecure, contract and casual work becoming increasingly common, particularly in the current COVID-19 affected economy, it’s no surprise that many young and not-so-young Australians may have income from more than one job. If you are working two or more jobs casually or have overlapping contract work, you need to be careful to avoid an unexpected end of financial year tax debt.

This type of debt usually arises where a person with more than one job claims the tax-free threshold in relation to multiple employers, resulting in too little tax being withheld overall. To avoid that, you need to look carefully at how much you’ll be making and adjust the pay as you go (PAYG) tax withheld accordingly.

Currently, the tax-free threshold is $18,200, which means that if you’re an Australian resident for tax purposes, the first $18,200 of your yearly income isn’t subject to tax. This works out to roughly $350 a week, $700 a fortnight, or $1,517 per month in pay.

When you start a job, your employer will give you a tax file number declaration form to complete. This will ask whether you want to claim the tax-free threshold on the income you get from this job, to reduce the amount of tax withheld from your pay during the year.

A problem arises, of course, when a person has two or more employers paying them a wage, and they claim the tax-free threshold for multiple employers. The total tax withheld from their wages may then not be enough to cover their tax liability at the end of the income year. This also applies to people who have a regular part-time job and also receive a taxable pension or government allowance.

The ATO recommends that people who have more than one employer/payer at the same time should only claim the tax-free threshold from the employer who usually pays the highest salary or wage. The other payers will then withhold tax from your payments at a higher rate (the “no tax-free threshold” rate).

If the total tax withheld from of your employer payments is more than needed to meet your year-end tax liability, the withheld amounts will be credited to you when your income tax return is lodged, and you’ll get a tax refund. However, if the tax withheld doesn’t cover the tax you need to pay, you’ll have a tax debt and need to make a payment to the ATO.

Tip: If you have two or more incomes, for example from casual or contract jobs or because you get a pension and have part-time employment income, we can help you figure out your tax withholding arrangements and avoid a surprising bill at tax time.

03 Feb

Posted at 16:16h in Accounting, News, Tax

If you own a small business still recovering from the COVID-19 induced downturn, remember that you can take advantage of FBT concessions to lower the amount of FBT you may need to pay. The concessions include exemptions for car parking in some instances, and work-related portable electronic devices.

All this could mean more cash to invest in the revitalisation and ultimate success of your business.

Tip: Even if your business was not considered a “small business entity” a few years ago, it may be worth a reassessment, because the turnover threshold has recently changed, and will soon increase once more.

For small business employers, the car parking benefits provided to employees could be exempt if the parking is not provided in a commercial car park and the business satisfies the total income or the turnover test. This is the case if the business is not a government body, listed public company or a subsidiary of a listed public company.

The second exemption relates to work-related devices. Small businesses can to provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, with all devices being exempt from FBT. Note, however, that this only applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigations receivers and mobile phones.

02 Feb

Posted at 16:12h in News, Tax

With a range of government COVID-19 economic supports such as the JobKeeper and JobSeeker schemes winding down in the next few months, businesses that are seeking to employ additional workers but still need a bit of help can now apply for the JobMaker Hiring Credit Scheme. Unlike the JobKeeper Payment, where the money has to be passed onto your employees, the JobMaker Hiring Credit is a payment that your business gets to keep. Depending on new employees’ ages, eligible businesses may be able to receive payments of up to $200 a week per new employee.

TIP: The scheme started on 7 October 2020, and employers will be able to claim payments relating to employees hired up until 6 October 2021. The first claim period for JobMaker starts on 1 February 2021 and businesses must first register with the ATO. To claim the payment in the first JobMaker period, your business must register by 30 April 2021.

To be eligible for the scheme, you need to satisfy the basic conditions of operating a business in Australia, holding an ABN, and being registered for PAYG withholding. Your business will also need to be up to date with its income tax and GST obligations for two years up to the end of the JobMaker period you claim for, and satisfy conditions for payroll amount and headcount increases. Non-profit organisations and some deductible gift recipients (DGRs) may also be eligible.

Beware, however, that businesses receiving the JobKeeper Payment cannot claim the JobMaker Hiring Credit for the same fortnight.

For example, businesses that wish to claim the payment for the first JobMaker period must not have claimed any JobKeeper payments starting on or after 12 October 2020, and employers currently claiming other wage subsidies – including those related to apprentices, trainees, young people and long-term unemployed people – cannot receive the JobMaker subsidy for the same employee.

If you think your business may be eligible, the next step is to determine whether you are employing eligible additional employees.

Generally, the employee needs to:

  • be aged 16–35 when their employment started (payment rates are $200 per week for 16 to 29 year-olds and $100 for 30 to 35 year-olds);
  • be employed on or after 7 October 2020 and before 7 October 2021;
  • have worked or been paid for an average of at least 20 hours per week during the JobMaker period;
  • have not already provided a JobMaker Hiring Credit employee notice to another current employer; and
  • received a JobSeeker Payment, Parenting Payment or Youth Allowance (except if they were receiving Youth Allowance due to full-time study or as a new apprentice) for at least 28 consecutive days in the 84 days before to starting employment.

Since the aim of JobMaker is to subsidise an increase in the number of employees a business hires – not to reduce the cost of replacing employees – businesses wishing to claim the payment must also demonstrate increases in both in headcount and employee payroll amount.

This is meant to reduce instances of rorting by businesses that might replace existing non-eligible employees with eligible employees. Employers will need to send information such as their baseline headcount and payroll amounts to the ATO for compliance purposes.

01 Feb

Posted at 16:10h in Accounting, News, Related Services, Tax

The ATO advises that the “shortcut” rate for claiming work-from-home running expenses has been extended again, in recognition that many employees and business owners are still required to work from home due to COVID-19. This shortcut deduction rate was previously extended to 31 December 2020, but will now be available until at least 30 June 2021.

Eligible employees and business owners therefore can choose to claim additional running expenses incurred between 1 March 2020 and 30 June 2021 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.

The expenses covered by the shortcut rate include lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

Tip: This shortcut rate will suit many people, but if you choose to use it for your additional work-from-home running expenses, you can’t also claim any further deductions for the same items. We can help you decide whether the shortcut rate is the best option for your situation.

31 Jan

Posted at 16:07h in Business Advisory, News, Tax

The Federal Minister for Families and Social Services has now registered the legal instrument that ensures the COVID-19 Supplement will continue to be paid until 31 March 2021 for recipients of:

  • JobSeeker Payment;
  • Parenting Payment;
  • Youth Allowance;
  • Austudy Payment;
  • Special Benefit;
  • Partner Allowance; and
  • Widow Allowance.

It will be paid at the rate of $150 a fortnight (down from the previous $250 a fortnight) from 1 January 2021 to 31 March 2021.

The period for which people are considered as receiving a social security pension or benefit at nil rate, meaning they keep their access to benefits such as concession cards, has also been extended until 16 April 2021.

A number of other temporary social security measures will also remain until 31 March 2021, including waivers of waiting periods for certain payments, some requirement changes and exemptions, and more permissive income-free areas and payment taper rates.