Tag: 2017

Travel Allowances – Domestic and Overseas

In TD 2017/19, the ATO has set what is considers ‘reasonable’ limits for allowances paid in connection with overnight travel (see the tables at the end of this spcial edition). In such cases, the employee must sleep away from their home. The amount of the allowance depends on both your destination and your annual salary. Unlike an overtime meal allowance reasonable domestic and overseas travel allowances do not have to be paid under an industrial award or agreement. Reasonable travel allowances are paid in respect of set travel components:

  • Domestic allowances include components for accommodation, meals and incidentals.
  • Overseas allowance include components for meals and incidentals only. They do not include a component for accommodation. Any claim for accommodation, regardless of the value, must be fully supported by written evidence.
The components of demestic travel allowances are set with reference to costs in spectific destinations and according to an employee’s annual slalary. Designated high cost contry centres also have specified accommodation rates.

LIkewise, overseas allowances for meals and incidentals are set with reference to costs in the various countries. Countries are grouped todgether according to the relative cost of living associated with each location.

For example, less expensive countries to travel in, susch as Bolivia and Paraguay, are grouped together (Group 2), while countries that are expensive to travel in, such as Denmark and Norway are grouped together at the other end of the scale (Group 6).

Travel allowances are comprised of the following components:

Accomodation (Domestic Travel Only)
The accommodation reates shown for domestic travel apply only for stays in commercial establishments, such as hotels, motels and serviced apartments. If a dfferent type of accommodation is used, the rates do not apply. Reasonable allowance amounts have not been set for overseas accommodation and written evidence is required for claims made for this time of expense.

Meals
The reasonable amount for meals depends on the period and time of travel. That is, the rates will only apply to meals (ie breakfast, lunch, dinner) that fall within the period from the commencement of travel by the employee to the end of travel covered by the allowance. Therefore, in determining the reasonable amount for meals, one must not only look at the reasonable amount per meal (ie the dollar figure provided in TD 2017/19), but also what meals (ie breakfast, lunch, dinner) it is reasonable to include from the time the travel commences to the end of the travel period covered by the allowance.

Incidentals
……..

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Key Dates for Business Nov-Dec 2017

Many key dates are looming for business including those relating to Activity Statements, superannuation, and more

November 2017

11 November July-September quarterly Activity Statements – due for lodgement and payment (if lodging electronically)
21 November October monthly Activity Statements – due for lodgement and payment
28 November Superannuation Guarantee Charge (SGC) Statement – due for lodgement and payment if insufficient contributions or late contrifutions were made for the July-September quarter

December 2017

01 December Due date for income tax payment for companies that were required to lodge by 31 October 2017
21 December November monthly Activity Statements – due for lodgement and payment

NON-COPRPORTATE TAX CUTS – SBITO

The Government has passed legislation increasing the rate of the Small Business Income Tax Offset (SBITO). This article details this change and its tax impact.

INCREASED OFFSET
Along with companies, the more than 70% of small businesses that are not incorportated will also enjoy additional income tax relief from 2016/2017. In 2016/2017 income and later income years, a higher rate of SBITO will apply:

  • For 2016/2017 to 2023/2024, the SBITO is 8% of an eligible individual’s basic income tax liability that relates to their total net small business income (up from 5% in 2015/2016).
  • For 2024/2025, the SBITO is 10% of an eligible individual’s basic income tax liability that relates to their total net small business income.
  • For 2025/2026, the SBITO is 13% of an eligible individual’s basic income tax liability that relates to their total net small business income.
  • For 2026/2027 and later income years, the SBITO is 16% of an eligible individual’s basic income tax liability that relates to their total net small business income.
Furthermore, the aggregated turnover test for access to the SBITO has been increased from 2016/2017 to $5 million (up from $2 million).

BACKGROUND
By way of background, individuals are entitled to the SBITO if they are an SBE (i.e. sole trader) or they have a share of a smaill business’ net income included in their assessable income (for example, distrbutions from a partnership or trust which themselves are SBEs) provided the small business is not a corporate tax entity (i.e. company). An individual can only claim one SBITO for an income year irrespective of the number of sources of small business income that an individual receives. The maximum amount of the SBITO from all sources of SBE income is $1,000 for an income year which will be claimed in your year-end tax return. 

Although capped at $1,000 per individual, serveral individuals within the one structure can enjoy their own SBITO (not just the business owner) provided at the end of income year they are assessed on income from an SBE. The discount is applied to your net small business income’ as follows:

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DEPRECIATION FOR NON-BUSINESS TAXPAYERS

For individuals not in business, who are preparing their tax return over the coming months, depreciable items you acquire for work purposes can in certain circustances be claimed outright. This means you get an immediate deduction for the cost of the asset to the extent that you use it to generate assessable income during the income year:

The immediate deduction is availasble when you start to hold a depreciating asset in an income year and the asset costs $300 or les, and:
  • Is used predominantly for the purpose of producing assessable income that is not derived from carrying on a business
  • Is not part of a set of assets you start to hold in that year that costs more thant $300 , and
  • Is not one of a number identical or substantially identical assets acquired in the same year that together cost more than $300.

Examples of depreciating assets which could be eligible for the immediate deduction are:
  • Tools of trade acquired by a tradesman
  • A briefcase purchased by a salary and wage earner for their job; and
  • Furniture purchased for a rental property.

Farm Management Deposits

Introduced in 1999, Farm Management Deposits are seen to be an important part of risk management for primary producers. What are they and do they work? This article takes a close look at the Farm Management Deposits Scheme, some of the commonly asked questions and works through a case study to determine the answers.

BASICS

In simple terms, the Farm Management Deposit (FMD) scheme is intended to allow Primary Producers the opportunity to shift “before-tax’ income to a later year where they may offset losses due to unfavourable climatic or market conditions. FMDs are considered an important risk management tool for the Primary Producer to ‘even out’ what could otherwise be extremely uneven income years.
The scheme works by allowing Primary Producers to claim an income tax deduction for an actual cash deposit into an FMD scheme in the year the deposit is made. As a result, this reduces the Primary Producer’s taxable income in the deposit year and hence any income tax payable on the deposit amount. In a later income year, when the Primary Producer’s income may be low due to a downturn in market or climatic conditions, the Primary Producer can apply to the FMD scheme for a withdrawal. The amount is then included in the Primary producer’s assessable income for that year and taxed accordingly.

The scheme is cash-flow driven; in a bountiful year, the surplus cash is deposited in a FMD held with a financial institution. In a lean year the cash is withdrawn from the FMD to assist the Primary Producer to pay for business expenses.

 ELIGIBILITY

THE OWNER

The owner of an FMD is a person on whose behalf the deposit is made. The owner must be a Primary Producer at the time the deposit is made. The owner cannot be a joint ownership or a Company but, rather, the scheme is restricted to ownership by individuals (including Partners in a Partnership). The only exception of this rule is where a Trustee is acting on behalf of a beneficiary who is presently entitled to a share of the income of a Trust estate, but is under legal disability (for example, a minor under the age of 18 years)

DEPOSIT-TAKING INSTITUTION

You must make your deposits with an FMD Provider that is an authorised deposit-taking institution or an entity that has a Commonwealth, State, Territory guarantee for deposits. This includes any bank, building society or credit union. You can make deposits with more than one of these institutions.

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Key Dates for Business Sept-Oct 2017

Many key dates are looming for business including those relating to Activity Staterments, GST, Superannuation, Income Tax Returns, and more….

September 2017 

21 September 
August monthly Activity Statements – due for lodgement and payment.
30 September Annual TFN withholding report for closely held trust where a trustee has been required to withhold amounts from payments to beneficiaries during 2016/2017 – due for lodgement.

October 2017

21 October September monthly Activity Statements – due for lodgement and payment.
28 October Final date for eligible quarterly GST reporters to elect to report GST annually.
28 October Due date for Superannuation Guarantee contributions for July-September to be made to employee funds.
31 October PAYG Withholding Where ANB Not Quoted – Annual Report – due date for lodgement. These amouns are also reported at W4 on your Activity Statement.
31 October Due date for 2016/2017 individual tax returns (unless you are lodging via a tax agent and are on their lodgement list by this date).

Where the due date falls on a weekend or public holiday, it is deferred until the next business day, (except in the case of Superannuation Guarantee deadlines).

Key Dates for Business July & August 2017

Many lodgement and payment deadlines are looming for business including those relating to Activity Statements, Superannuation, and more….

July 2017

1 July First day of the 2017/2018 financial year
14 July 2016/2017 Payment Summaries – due date to issue to employees
21 July Monthly Activity Sttements (July 2017) due for lodgement an payment
28 July Quarterly Activity Statements (April-June) due for lodgement and payment (if lodging by paper)
28 July Superannuation Guarantee Contributions (April-June) due for payment to superannuation funds or clearing houses

August 2017

11 August Quarterly Activity Statements (April-June) due for lodgement and payment (if lodging electronically)
14 August PAYG Withholding Payment Summary Annual Reports due for lodgement
21 August Monthly Activity Statements (July 2017) due for lodgement and payment
21 August Final day for eligible monthly GST reporters to elect to report annually
28 August Contractor Taxable Payments Annual Report due for lodgement

Company Tax Rate Clarification

The Government has just announced that it will introduce legislation into Parliament to clarify confusion around the applicable tax rate for companies.

By way of background, in recent times the Government has passed legislation to progressively reduce the company tax rate for companies with a turnover of up to $50 million as follows:

 

Income year

 

Turnover threshold

Company tax rate for entities under the threshold

Company tax rate for entities over the threshold

 

2015–2016

$2m

28.5%

30.0%

2016–2017

$10m

27.5%

30.0%

2017–2018

$25m

27.5%

30.0%

2018–2019
to
2023–2024

$50m

27.5%

30.0%

2024–2025

$50m

27.0%

30.0%

2025–2026

$50m

26.0%

30.0%

2026–2027

$50m

25.0%

30.0%

 

It appears that the Government’s intention in making these reductions was to encourage small to medium businesses to reinvest the tax savings in their business, and in turn promote employment and investment growth.  

However, this intent became clouded recently when the ATO issued a draft Taxation Ruling in which it stated that, in its opinion, companies that were engaged in passive investments in shares and property could be seen to be carrying on a business, and thus eligible for the reduced company tax rate.

In response to this, the Government has stated that it will soon move to introduce legislation clarifying that only active trading companies qualify for the lower tax rate (and therefore not bucket companies or passive
investment companies).

Accordingly, if your company because of its turnover currently qualifies for the 27.5% tax rate and you are varying or otherwise calculating its PAYG Instalments, these should be calculated based on the reduced 27.5% tax rate only where the company is actively trading.

Bucket companies and companies that are solely engaged in passive investments in shares and property should operate (and calculate their PAYG Instalments) on the basis of the 30% rate applying; irrespective of the level of turnover.  

https://www.ato.gov.au/Business/Small-business-entity-concessions/Concessions/Income-tax-concessions/Small-business-company-tax-rate/


Payment Summaries Due 14 July 2017

With the end of financial year fast approaching, be mindful that Payment Summaries must be provided to employees by 14 July for 2016/2017. This date is not just a guideline but is actually stipulated by law (Section 16- 155 of the Tax Administration Act). Two of the most common errors made in preparing the Individual Non-Business Payment Summary for employees are:

 

  • Misstating reportable employer superannuation contributions – ensure that you exclude Superannuation Guarantee amounts from this label. Salary sacrificed superannuation amounts must however be included.

 

 

This year there are special rules for Working Holiday Makers. A reduced tax rate applies for employers who registered with the ATO from 1 January 2017 — 15% up to $37,000 and 32.5% from $37,001. For registered Working Holiday Makers who worked both before and after 1 January 2017, two Payment Summaries must be issued, with the two different tax rates applying to the gross payments, depending upon the time of payment.

 

On the other hand, employers who did not register with the ATO for the reduced tax rate and continued to withhold at the foreign resident rate of 32.5% are required to issue the standard single Payment Summary per employee.

 

The Payment Summary for 2016/2017 includes a new section for overseas workers. In the Gross Payments Type box you must now indicate a type – this will be either S (salary), or H (registered Working Holiday Makers).

 

 

 

KEY DATES FOR BUSINESS – May/June 2017

Many lodgement and payment deadlines are looming for business including those relating to Activity Statements, Superannuation, and more.

MAY 2017

21 MAY – April 2017 monthly Activity Statements – due for lodgement and payment.
21 MAY – 2017 FBT Annual Return – due for payment.
26 MAY – 3rd Quarter 2017 Activity Statements – due for lodgement and payment (for those lodging via Electronic Commerce Interface (ECI), Electronic Lodgement Service (ELS), Tax Agent Portal, BAS Agent Portal, or Standard Business Reporting (SBR)).
28 MAY – Due date for lodgement and payment of the Superannuation Guarantee Charge Statement if you failed to pay Superannuation Guarantee on time for the January-March quarter. Superannuation Guarantee Charge is not deductible.

JUNE 2017

21 JUNE – Mary 2017 monthly Activity Statements – due for lodgement and payment.
30 JUNE – Superannuation Guarantee payments must be received by Superannuation funds by this date in order to be deducted in 2016/2017.

*Where one of these dates falls on a weekend or a publice holiday, the due date is extended to the next business day*