Author: Accounts

Members Only Tax Helpline

Do you have a tax-related question that you need guidance on? Send us an email.  
Your MTS Members Helpline is staffed by Qualified Accountants who have answered 1000’s of question over time from subscribers on everything from GST, CGT, Superannuation, FBT, Income tax and more.  

Simply email MTS Helpline team at info@mytaxsavers.com.au they are ready to assist you.

Can You Claim GST Credits

To claim GST credits on your purchases, you must be able to demonstrate you’re in business through activities such as: 

  • aiming to make a profit 
  • keeping records and account books 
  • making commercial sales of a product or service 
  • marketing and advertising to attract clients 
  • drafting a business plan. 

It’s more likely you’re not in business and your activities are a hobby if they’re: 

  • not aimed at making a profit 
  • not carried out in a businesslike manner 
  • irregular 
  • done mostly for your own enjoyment and satisfaction. 

If your activities are a hobby rather than a business you can’t claim GST credits on purchases associated with your hobby. You should consider if you have to cancel your ABN and GST registrations. You may also need to amend past activity statements if you have claimed GST credits for purchases associated with your hobby.  

Characteristics of a Business 

There is no single factor that determines if you are in business, but some of the factors you need to consider include: 

  • You’ve made a decision to start a business and have done something about it to operate in a businesslike manner, such as  
    • registered a business name, or 
    • obtained an ABN. 
  • You intend to make a profit – or genuinely believe you will make a profit from the activity – even if you are unlikely to do so in the short term. 
  • You repeat similar types of activities. 
  • The size or scale of your activity is consistent with other businesses in your industry. 
  • Your activity is planned, organised and carried out in a businesslike manner. This may include    
    • keeping business records and account books 
    • having a separate business bank account 
    • operating from business premises 
    • having licenses or qualifications 
    • having a registered business name. 

If you aren’t in business yet, it is important to keep these factors in mind as your activities change or grow, so you’ll know when you need to register for tax and other business responsibilities. 

Hobby 

If you determine your activities are a hobby then you do not have any additional tax or reporting obligations. 

If your activities are a hobby but you supply goods or services to businesses, they may request your ABN when they pay you. 

Because you do not have an ABN and your activity is done as a hobby, you should use the ‘Statement by a supplier’ form. This will avoid the business you are supplying having to withhold an amount from their payment to you. 


Members read all about GST in our Special GST publication, available in your members area.

Single Touch Payroll (STP) Deadline was 30 September!

The ATO recently reminded small employers with 19 or less employees that they needed to move to Single Touch Payroll (STP) by 30 September 2019.  

STP became mandatory for small employers from 1 July this year. The ATO provided a three-month transition period to employers that needed more time to get ready until 30 September. 

Points to note include: 

  • for businesses with five or more employees, their reporting solution will generally be in the form of payroll software 
  • micro employers (one to four employees) can adopt low-cost, simple solutions. Search “STP low cost solutions” on the ATO website for a list of providers and their products. 
  • micro employers may be eligible to report quarterly through their BAS Agent or Tax Agent until 30 June 2021. 
  • smaller employers (less than 20 employees) of closely-held payees (e.g. family members of a family-owned business, directors or shareholders of a company, or trustees or beneficiaries of a trust) may be exempt from reporting these payees until 2020-2021. Other payees must however be reported.  
  • employers may be totally exempt from STP reporting if they have no or low digital capability, no or unreliable internet, irregular employment patterns, or “other extenuating circumstances” (not defined). 

ATO Announces Motor Vehicles Data Matching Program

 

One of the largest claims made by business and by employees for that matter is the use of a vehicle for business or work related purposes.  Much of the claim relates to depreciation on the cost of the vehicle.  As technology continues to advance and with data sharing amongst authorities becoming more prevalent, the ATO together with each of the State motor vehicle registry departments have announced that they have developed a data matching program to assess the overall taxation compliance of individuals and businesses when buying or selling vehicles.

 

Details will be requested by the ATO from the States when a vehicle has been transferred or has been newly registered and where the purchase or transfer price exceeds $10,000.

This data is going to allow the ATO to do a range of compliance audits on taxpayers in relation to Fringe Benefits Tax, fuel scheme claims as well as legal ownership of vehicles impacting the entitlement to make a claim for a tax deduction or under declaring income if a vehicle is sold.  The ATO advised in their press release that they anticipate this will impact around 2 Million taxpayers per year that acquire or transfer vehicles.

The takeaway this week is to ensure that if you are purchasing, selling or having a vehicle transferred for business or work related purposes that you ensure the correct entity is the registered owner of the vehicle and that any cost base used for making a claim uses the true cost of the vehicle adjusted for the luxury car tax limit or that the selling price is accurately recorded with any GST correctly accounted for. 

Does Your SMSF Investment Strategy Meet Diversification Requirements?

On the 9th August, the ATO announced it will contact, at the end of August, about 17,700 self-managed super fund (SMSF) trustees and their auditors where their records indicate the SMSF may be holding 90% or more of its funds in one asset or a single asset class.  

They are concerned some trustees haven’t given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk.  

Lack of diversification or concentration risk, can expose the SMSF and its members to unnecessary risk if a significant investment fails.  

They will ask trustees to review their investment strategy and clearly document the reasons behind the investment decisions.  

They will also ask trustees to have their documentation ready for their SMSF’s approved auditor for their next audit to help the auditor form an opinion on the fund’s compliance with these requirements

Reminder – 2018/2019 Contractor Taxable Payments Annual Reports (TPAR) – due for lodgement 28th August 2019

Taxable Payments Annual Reports (TPAR) are due by 28 August this year, with businesses that provide cleaning or courier services set to lodge for the first time, joining businesses in the building and construction industry who have been doing so since 2012. 

Cleaning services 

Businesses providing cleaning services must report the total payments made to contractors providing cleaning services on their behalf by 28 August each year. 

//www.ato.gov.au/Business/Reports-and-returns/Taxable-payments-annual-report/Work-out-if-you-need-to-report/Cleaning-services/  

Published: 12/08/2019 

Courier services 

Businesses providing courier services need to report on the Taxable payments annual report (TPAR) by 28 August each year the total payments they make to each contractor they have paid for courier services your behalf. 

//www.ato.gov.au/Business/Reports-and-returns/Taxable-payments-annual-report/Work-out-if-you-need-to-report/Courier-services/

Published: 12/08/2019 

Resources to help you 

Resources to help you understand the Taxable payments annual report (TPAR) and what you need to do. 

//www.ato.gov.au/Business/Reports-and-returns/Taxable-payments-annual-report/Resources-to-help-you/

Published: 12/08/2019 

Record Keeping is King

From an income tax standpoint, it’s in your interests to keep good records of your transactions and activities. Keeping good records is not only required by law, but it makes your accountant’s job easier – this can result in both decreased fees (an accountant will take less time in preparing returns etc.) and increased deductions (claims cannot be made without having the required records). Aside from this, by keeping good income tax records: 

*                     You can demonstrate your financial position – this is particularly important where a business wishes to obtain finance from banks, or the business is being sold 

*                     You can better monitor the overall health of your business, especially its true cash position, and 

*                     You can more easily complete paperwork, including Activity Statements. 

The ATO last year issued contemporary guidance – in the form of Taxation Ruling TR 2018/2<//www.ato.gov.au/law/view/document?docid=TXR/TR20182/NAT/ATO/00001> – which deals with electronic records. This is welcome, as the ATO’s previous ruling was issued some 23 years ago and carries reference to cheque butts and receipt books! 

You should also utilize the ATO’s Record Keeping Evaluation Tool.<//www.ato.gov.au/Calculators-and-tools/Record-keeping-evaluation/> After asking you a series of questions, the tool culminates in a report which details to you how well your business is keeping records. Suggestions for improvement are also made if appropriate. 

 

Low and Middle Income Tax Offset Now Law

The Federal Government’s Personal Income Tax Plan is now officially law. For 2018/2019 (the financial year just gone) the centrepiece of this plan was an increase to the low and middle income tax offset (LMITO) from a maximum $530 to $1,060. 

Taxpayers with a taxable income:  

  *   of $37,000 or below can now receive a LMITO of up to $255  

  *   above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080  

  *   above $48,000 and below $90,000 are now eligible for the maximum LMITO of $1,080  

  *   above $90,000 but is no more than $126,000 are now eligible for a LMITO of $1,080, less an amount equal to three per cent of the excess.  

With Tax Time 2019 just over a week old, 810,000 individual tax returns have now been lodged, an 88% increase from the same time last year – an increase largely attributable to anticipated refund as a result of the increased LMITO. 

Despite the increase, ATO commissioner Chris Jordan has sought to reassure taxpayers that returns will begin flowing through from the end of this week. 

“We were able to work over the weekend to make changes to our systems once the legislation was passed last week,” Mr Jordan said on Tuesday. 

“All safety nets have been lifted from our processing, so our processing is now working absolutely full bore, 100%.” 

“People do not need to do anything special; they just put their return in, and we will calculate their offsets and money will be hitting people’s bank accounts by Friday this week.” 

Now the law has been passed, you may wish to get your 2018/2019 records to your Tax Agent and instruct them to lodge early rather than in the first part of next year (which is the normal lodgement time if lodging with a Tax Agent). By doing so, all other things being equal, you will bring forward your LMITO entitlement with a potential additional refund of up to $1,080 (subject to the above income limits, and subject to not otherwise having underpaid tax during the year). 

If you lodge your own tax return, then remember you do not need to claim the LMITO separately – rather the ATO will process your claim automatically upon lodgement. 

Single Touch Payroll for Micro Employers

If as an employer you are not ready for Single Touch Payroll (STP) don’t panic!   Although 1 July has rolled around, smaller employers (those with less than 19 employees) have three months from this date (until 1 October 2019) to be STP-compliant. Furthermore, no penalties will be imposed during the initial 12 months of STP, therefore there is no need to be worried. 

While for many employers, their STP solution will be to adopt STP-compliant software or outsource their payroll to their registered Accountant or Bookkeeper, many very small employers may be eligible for the micro-employer concessions including: 

  • Reporting quarterly through their registered accountant or bookkeeper for two-years until 30 June 2021 (instead of reporting each time you pay your employees) 
  •  Adopting a free or low-cost, simplified STP solution (as opposed to payroll software). 

Micro employers are those with less than five employees at the time of application. Virtually all employees are counted (including casuals, those on leave, and employees working overseas), however closely-held payees are excluded – namely, family members of a family business, directors or shareholders of a company, and beneficiaries of a trust. 

In the event that a business is currently a micro employer but later no longer qualifies as it puts on extra staff, the ATO adopts a different approach in respect continued eligibility for the above concessions. While eligibility for quarterly reporting will be unaffected by an increase in staff above four, the ATO expects employers to cease using the simplified, low cost STP reporting solutions if they later cease to qualify as a micro employer. This would then generally mean adopting STP-compliant software, or lodging via your registered accountant or bookkeeper. 

In respect of the low-cost, simplified STP solutions, an updated list of products now available and currently in development is maintained on the ATO website.  <//www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/> There are a wide range of products available including free solutions such as apps to install on your phone that allow employers to simply key in employee payroll information (gross amounts per pay, and tax withheld etc.) and send it to the ATO (and thereby maintain your manual payroll systems if you so choose). 

Of course, micro employers can opt to disregard these free or low-cost solutions and instead adopt STP-compliant software and, in doing so, enjoy the advantages of computerizing your payroll processes. 

 

 

 

SINGLE TOUCH PAYROLL

1 July Employers with less than 20 employees should start transition to Single Touch Payroll (STP)

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO.

If you are using a solution that offers STP reporting, such as payroll or accounting software, you will send your employees’ tax and super information to the ATO each time you run your payroll and pay your employees.

The information is sent to the ATO either directly from your software, or through a third party – such as a sending service provider.

If you have a software provider, they can tell you more about the type of STP solution they offer. For a list of available STP solutions visit the //api.gov.au/productregister/

There will also be a number of options available for employers who do not use payroll software, such as //No-cost and low-cost Single Touch Payroll solutions.

Options will depend on your number of employees:

  • Large employers with 20 or more employees should now be reporting through STP, or have applied to the ATO for a later start date.
  • Small employers with 19 or less employees will need to report through STP from 1 July 2019. This is a gradual transition, and the ATO is providing flexible options.
    • If you’re an employer with four or less employees you will have additional options.