Changes to FBT for Utes
Posted by Anthony
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 logbookNew 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 rulesThe 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 […]
Employer super obligations reminder
Posted by Anthony
The Australian Tax Office (ATO) is reminding employers to check they are meeting their obligations when it comes to paying super to their workers. To help you make sure you are meeting your requirements, consider this checklist: Are you paying the correct amount? You are required to pay a minimum of 9.5 per cent of their ordinary time earnings to their superannuation fund. Are you keeping correct and up-to-date records? It is important to maintain accurate record-keeping procedures, so you have evidence to prove you have been meeting your employer super obligations. Are you paying super to all eligible workers? Like your employees, some contractors you hire may also be eligible for super contributions. Are you making payments to the right fund? Unless a worker has not provided their details, you should be paying into their fund of choice instead of your default fund. Are you making payments on time? The ATO allows employers to make contributions quarterly. Always ensure you make payments on time as late payments can incur a superannuation guarantee charge, which is not tax deductible. When making payments on time, they are tax deductible against your business income. Are you paying the right way? It is […]
Income tax return: what to report
Posted by Anthony
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. Sole traders 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), […]
Winding up a SMSF
Posted by Anthony
The Tax Office is reminding individuals winding up a self-managed super fund (SMSF) that before lodging your final SMSF annual return, you must first have an audit completed by an approved SMSF auditor. When lodging your SMSF annual return, answer Question 9 in Section A: ‘Was the fund wound up during the income year?’. You should also look to complete Question M in Section D: Supervisory levy adjustment for wound up funds. By doing so, you will reduce the SMSF supervisory levy you must pay, so you do not have to pay the levy the following year. Remember also to pay any outstanding tax liabilities and lodge any outstanding returns. Otherwise, you may be subjected to compliance assessments and risk penalties. The Tax Office will send you a letter of confirmation of your wound up fund, which will include: – confirmation your SMSF’s ABN is cancelled, and – your SMSF’s record is closed on the ATO’s system. Avoid closing your bank accounts until all expected final liabilities have been settled and requested refunds received. You can pay outstanding tax liabilities, including the supervisory levy when you lodge your final SMSF annual return.
What is exempt current pension income?
Posted by Anthony
Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI). This form of income does not include assessable contributions or non-arm’s length income. Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase. There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method. Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.
TPRS extension to contractors
Posted by Anthony
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 […]
Avoid being short changed with your super
Posted by Anthony
With recent regulatory changes to super contributions, it is easier than ever to ensure your employer is paying you the super you are entitled to. There are specific steps you can take to ensure you are being paid correctly. Consider the following: Understand your entitlements Employers have to put 9.5 per cent of an employee’s wage into their superannuation account. As of July 2017, these contributions must be made quarterly through the super clearing house. This was introduced by the ATO to prevent dishonest employers from ripping off their employees. If you have not received a quarterly payment by the 28th of the following month, contact the ATO, and they will investigate this on your behalf. Consolidate your accounts If you have had various jobs throughout your working life, there is a good chance you have more than one super account. If you do, you will be paying excess account fees. You should look to roll over your funds into one account and close the leftover accounts. Research It is advantageous to do your research and be informed regarding your super. This will guarantee you a fund that will provide you with the financial security you deserve when it comes […]
Tax deduction for landcare operations
Posted by Anthony
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 […]
Super contribution caps: the basics
Posted by Anthony
Making contributions to your superannuation fund is a great way to grow your nest egg, however, there are caps on the amount you can contribute every financial year to be taxed at lower rates. Once you go over these caps, you may be required to pay additional tax. The cap and extra tax amount will vary depending on your age, the financial year the contributions relate to, and whether the contributions are concessional (before tax) or non-concessional (after tax). Concessional contributions Concessional contributions include compulsory employer contributions and salary sacrifice amounts. There is a cap on the amount you can make, and payments are taxed at 15 per cent. Non-concessional contributions These are after-tax income contributions and are not taxed in your super fund. However, like concessional contributions, caps also apply to non-concessional payments. From 1 July 2017, the cap was reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years providing they meet the work test. The cap is indexed in line with the concessional contributions cap. The non-concessional cap is also nil for a financial year if you have a total super balance greater than or equal to the […]
Rental property and tax
Posted by Anthony
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 – Expenses – 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 […]
