Tag: ATO

90% Error Rate in Rental Property Claims

Posted on March 28, 2019 by - Featured Articles, Income Tax & FBT, News

The ATO Commissioner, Mr Chris Jordan, earlier this year stated that following ATO efforts, for the first time in almost 25 years, the average work-related claim decreased over the past 2 years.

The Commissioner said the ATO’s next focus is rental income and deductions. To this end, as part of the ATO’s broader random enquiry program, ATO auditors have now completed over 300 audits on rental property claims and “found errors in almost 9 out of 10 tax returns reviewed”. He said the most common errors the ATO is seeing are:

1.     incorrect interest claims for the entire investment loan where it has been refinanced for private purposes

2.     incorrect classification of capital works as repairs and maintenance, and

3.     taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent.

Regarding the first category of incorrect claims, interest can still be claimed where a loan has been refinanced. However, the borrowed funds must still be used for a deductible purpose (i.e. in relation to the rental property). Where the refinanced amount is used for a non-deductible purposes (for example, to buy a boat or car, or to make repayments towards the family home), the interest that relates to that portion of the refinanced amount will no longer be deductible.

In respect of repairs and maintenance, in a rental property context, repairs generally involve a replacement or renewal of a worn out or broken part, for example, replacing worn or damaged curtains, blinds or carpets. Maintenance generally involves keeping the property in a tenantable condition, for example repainting faded or damaged interior walls. By contrast examples of capital expenditure include:

*         replacing an entire structure or unit of the property (e.g. an entire fence, kitchen cupboards, stove etc.)

*         improvements, renovations, extensions

*         initial repairs to defects that existed when you first purchased the property.

These types of capital expenses are not immediately deductible, but rather must be claimed over a number of years.

The finally category of mistakes, involves claiming a deduction for expenditure relating to the property, even though it is not being rented out, or it is not genuinely available for rent. During these periods, expenses cannot be claimed. To be clear, expenses may be deductible for periods when the property has no tenants and you are not occupying it, providing it is genuinely available for rent. To evidence this, you would need to show that it is being given broad exposure to potential tenants, such as online or newspapers advertisements etc.

Legislation Update 26/02/2019

Posted on February 26, 2019 by - Featured Articles, Small Business, Superannuation

The first sitting of Parliament for 2019 wrapped up last week. While legislation to extend the Single Touch Payroll reporting regime to all employers passed into law (just awaiting Royal Assent), there are a couple of other measures that remain unlegislated which could impact your business. With the full Parliament only expected to sit for three more days (April 2 – 4) until an Election is called, there are now serious doubts surrounding whether these measures will pass into law. In view of this, we put forward the following suggested approach in the meantime: 

  1. Superannuation Amnesty 

The legislation to enact this measure is still before the Senate. To recap, the Superannuation Guarantee Amnesty was to be available for the 12-month period from 24 May 2018 to 23 May 2019. To get the benefits of the Amnesty (set out below) employers must during this 12-month period voluntarily disclose any Superannuation Guarantee underpayments that exist in the past (going back to when Superannuation Guarantee commenced in 1992). 

For an employer, the tax benefits of the Amnesty are: 

* The administration component of the Superannuation Guarantee Charge (SGG) is not payable (this is a $20 per employee, per quarter, for whom there is an SG Shortfall) 

*  Part 7 penalties will not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall that you owe to employees) 

* All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. 

By contrast, under the current law, when superannuation has been underpaid or paid late Superannuation Guarantee Charge that must paid to the ATO is not deductible, and late contributions that an employer has made to an employee’s superannuation and has elected to offset against their SG Charge liability are also not deductible. 

If an employer is contemplating disclosing past superannuation shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for your late contributions) then it may be prudent to hold off until such time that the Amnesty actually becomes law (if at all). We will keep you apprised of the passage of the legislation through Parliament. However, with only a few sitting days remaining for this Parliament, and with the Opposition opposed to this measure, there are serious doubts about it becoming law. 

Irrespective of the Amnesty however, all employers should consider coming forward to disclose and pay past shortfalls to get their Superannuation Guarantee affairs in order. The Government is committing more resources to this area – including requiring Superannuation Funds to report more regularly to the ATO (at least once each month) – therefore non-complying employers may be more easily detected going forward. 

  1. Enhancing the Instant Asset Write-Off 

Legislation to expand and extend the Small Business Instant Asset Write-Off is still before the House of Representatives. This Bill seeks to extend the write-off by 12 months until 30 June 2020 (currently set to expire on 30 June 2019) and increase the threshold by $5,000 to $25,000; with the increase backdated to 29 January 2019. If passed into law, this would mean that there would be two thresholds for 2018/2019 as follows: 

* $20,000 (for assets installed ready for use between 1 July 2018 and 28 January 2019), and 

* $25,000 (for assets installed ready for use between 29 January 2019 and 30 June 2019. 

Irrespective of the whether the legislation passes into law, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off threshold was $1,000  You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner. Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan. 

Key Dates for January & February 2019

Posted on December 18, 2018 by - Featured Articles, General, News, Small Business

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

January 2019
15 January – Due date for lodgement of income tax returns for companies and trust that were taxable medium to large businesses in the prior year and are not required to lodge earlier. If you fail to lodge by the due date, your 2018/2019 income tax return will be due on 31 October 2019
21 January – Due date for lodgement and payment of December 2018 monthly Activity Statements
28 January – Due date for October-December 2018 Superannuation Guarantee contributions to be made to a complying fund on behalf of your employees
31 January – Final date for lodgement of October-December 2018 TFN report for closely held trust for TFNs quoted to a trustee by beneficiaries

February 2019
21 February – Due date for lodgement and payment of January monthly Activity Statements
28 February – Due date for lodgement and payment of October-December 2018 quarterly Activity Statements, including electronic lodgments
28 February – Due date for lodgement and payment of Annual GST returns or Annual GST information reports – if you do not have an income tax return lodgment obligation
28 February – Due date for lodgement and payment of income tax return for selp-preparing entities that were not due at an earlier date. If you fail to lodge by this date, your 2018/2019 return will be due by 31 October 2019
28 February – Due date for lodgement and payment of income tax returns for medium to large businesses (taxable and non-taxable that are new registrants)
28 February – Due date for lodgement and payment Superannuation Guarantee Charge Statement if you failed to pay Superannuation Guarantee charge on time for the October-December 2018 quarter. Superannuation Guarantee Charge is not deductible.

Where one of these dates falls on a weekend or a public holiday, the due date is extended to the next business day except in the case of Superannuation Guarantee contributions.

INSTANT ASSET WRITE-OFF EXTENDED

Posted on November 23, 2018 by - Featured Articles, Small Business

The extension of the $20,000 instant asset Write-Off has now been passsed into law. 

PASSED
In the May 2018 Federal Budget the Government announced an extension to the Small Business Instant Asset Write-Off that was originally introduced from 1 July 2015. Under the Budget announcement, the Write -Off was to be extended until 30 June 2019 (it was to expire 30 June 2018). On 12 September 2018, The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 was passed by the Parliament into law to give effect to this 12-month extension.


More info? In our exclusive Members Area, watch the Webinar on Instant Asset Write-off (under the useful links tab) and read the full article in your November/December 2018 Bi-Monthly Newsletter, page 15.

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SUPER AMNESTY – TAKE ADVANTAGE!

Posted on September 13, 2018 by - Featured Articles, Superannuation

Could you as an employer benefit from taking advantage of the Government’s new Superannuation Guarantee (SG) Amnesty? This article informs you of how you can wipe your SG slate clean, and enjoy some once-off taxation benefits in doing so.

Subject to the passage of legislation (which is currently before the Senate), the Amnesty will be available for the 12-month period from 24 May 2018 to 23 May 2019.

BACKGROUND
The latest data indicates that the “SG Gap” or SG Shortfall (the difference between the theoretical amount payable by employers to be fully compliant with their SG obligations and the amount they have actually paid) is $2.85 billion annually. This indicates that a concerning number of employers are not paying sufficient SG to their employees or are not paying it at all. In response to this and in order to recoup this key employee entitlement, the Government in late May 2018, announced a once-off, 12-month Superannuation Amnesty for employers.
BENEFITS
For an employer, the benefits of the Amnesty are:
  • The administration component of the Superannuation Guarantee Charge (SGC) is waived (this is currently a $20 per employee, per quarter charge for whom there is an SG Shortfall)
  • Part 7 penalties will not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall amount that you owe to employees)
  • All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. The amendments also allow contributions that an employer has elected to offset against SG Charge imposed on the SG Shortfall disclosed in accordance with the Amnesty to be deducted from an employer’s assessable income. This ensures commensurate benefits are provided for employers who contribute directly to their employees’ funds when disclosing under the Amnesty as opposed to the benefits for those who instead make payments in relation to SG Charge and leave it to the ATO to distribute the amounts to the relevant funds.
By contrast, under the current law, SG Charge paid to the ATO is not deductible, and late contributions that an employer has made to an employees’ superannuation fund and has elected to offset against their SG Charge liability are also not deductible.
DETAILS
With a Bill to enact the new Amnesty now having been introduced to Parliament, we can reveal the details are as follows:
  • The Amnesty applies to any SG Shortfall from the introduction of SG back on 1 July 1992 to the quarter ending 31 March 2018.
  • You must voluntarily disclose amounts of SG Shortfall relating to the above period. Therefore, if an employer has already lodged an SG Charge Statement (and in that Statment disclosed particular SG Shortfalls), then those particular Shortfalls are not eligible for the Amnesty even if the amount of the Shortfall has yet to be paid. Likewise, Shortfalls that the ATO uncovers during current, future, or past audits of the employer are not eligible for the Amnesty. The disclosure of a new Shortfall must come from the employer, and must occur during the 12-month Amnesty period. By way of background, SG Charge Statements and SG Shortfalls operate under a self-assessment model. The ATO are in most cases unaware that an SG Shorfall exists except in the case where an employee lodges a complaint against their employer themselves, or the Shortfall is uncovered in an ATO audit. This lack of awareness by the ATO of past employer Shortfalls is why eligibility for the Amnesty rests on the disclosure by the employer of new, undisclosed Shortfalls.
  • There is no requirement to actually make a payment to get the benefit of the Amnesty. Rather, you only need to disclose an SG Shortfall. However, where you fail to make a payment during the Amnesty period, you will not receive a deduction for the catch-up payments (which are only available during the Amnesty).
  • Any payments made outside the Amnesty period are not eligible for a deduction. For example, if an employer discloses a Shortfall during the Amnesty period, and then makes a payment arrangement with the ATO to pay the required amounts back in instalments, any amounts paid after 23 May 2019 cannot be claimed as a deduction.
ACCESS
To access the Amnesty, employers or thier Advisors must first calculate the amount payable (the SG Shortfall, plus nominal interest) and lodge one of the following forms:
  • SG Amnesty Fund payment form (where you wish to access the Amnesty and can pay the amount in full (including nominal interest) direct to an employee’s superannuation fund)
  • SG Amnesty ATO payment form (where you wish to access the Amnesty but cannot pay the amount owing in full). If an employer has already lodged an SGC Statment or received an SGC assessment for a quarter, they can only use this form.
Employers need to lodge these completed forms electonically through the Business Portal or their Accountant or Bookkeeper on their behalf via the BAS Agent or Tax Agent Portal respectively. There is now a radio button on all portals. Information that must be provided includes:
  1. Details of Employer
  2. Number of quarters covered
  3. Number of employees, (no employee details are required)
  4. Amount to be paid.
CONCLUSION
Legislation to enact this Amnesty was introduced into Parliment in late May and has been passed by the House of Representatives. It is currently before the Senate. Interestingly, the Opposition have criticised the legislation which it says shows leniency to non-complying employers. Therefore, it is no absolute certainty that the Amnesty will be passed into law over the coming months. For this reason, if you are contemplating disclosing past shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for their late contributions) then it may be prudent to hold off until such time the Amnesty actually becomes law. We will keep you apprised of the passage of the legislation through Parliament.

Irrespective of the Amnesty however, all employers should strongly consider coming forward to disclose and pay past shortfalls to get their Superannuation Guarantee affairs in order. The Government is committing more resources to this area – including requiring Superannuation Funds to report more regularly to the ATO (at least once each month) – meaning non-complying employers may be easily detected going forward.

For more on this subject: Members – login to the members area, Useful Links tab – watch the Tackling Tax video ‘Superannuation Amnesty’ presented by our CEO Kelvin Deer. //mytaxsavers.com.au/

Drought Assistance

Posted on September 10, 2018 by - Blog, Featured Articles, Income Tax & FBT

With large swathes of Eastern Australia in the midst of one of the most severe droughts in years (indeed Autumn rainfall was the least since 1902). Be mindful that there are a number of assistance measures open to affected clients across a range of Government departments. On the ATO front, they can help by giving affected taxpayers more time to pay, waiving penalties or interest charged at a time a client was affected by drought, offering payment plans with interest free periods, and adjusting PAYG instalments to better suit the circustances. Furthermore, in special circumstances the ATO can release clients from paying some taxes, if the paying of those taxes would cause serious financial hardship.

SINGLE TOUCH PAYROLL

Posted on July 23, 2018 by - Featured Articles, News, Uncategorized

STP if fnally here! 
From 1 July 2018, all employers with 20 or more employees (as at 1 April 2018), must report their payroll information to the ATO via Single Touch Payroll. STP is a reporting change for employers. Essentially, STP requires that each time an employer pays their employees, they will have to instantly report to the ATO information such as the salaries and wages, pay as you go (PAYG) withholding and superannuation. The information will need to be reported from software, which is STP-enables. Eventually this will mean:

  • Employers will not need to provide Payment Summaries to their employees for the payments reporter through STP.
  • Employees will be able to view their payment information in ATO online services, which they will access through their myGov account.
  • Some labels on Activity Statements will be pre-filled with the information already reported.

NB employers with less than 20 employees (as at 1 April 2018) your STP start date will be 1 July 2019.

To finish reading this article – log into the Members Area and see your July/Aug Newsletter edition page 11

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GST SBE Concessions

Posted on March 15, 2018 by - GST

SMALL BUSINESS ENTITIES

Small Business Entities have access to a range of GST concessions including accounting on a cash basis, paying GST by instalments, an annual apportionment of GST credits, and a new Simplified BAS. Are you taking advantage of these concessions?

SBE Defination Extended!
New law has now been passed by Parliament expanding the definition of Small Business Entity (SBE).

Backdated to 1 July 2016, to qualify as an SBE you must be carrying on a business and have an annual turnover of less than $10 million – including the turnover of any connected entities or affiliates. This is up from the previous turnover threshold of $2 million. Treasury estimates that this change will open the way for an additional 90,000 to 100,000 businesses (i.e. those with a turnover of between $2 million and $10 million) to access the following GST SBE concessions:

New Law – Simper BAS
SBEs  may now be eligible to complete a simplified Business Activity Sttement (BAS) under the new Simpler BAS rules.

At its core Simpler BAS involves the reduction in the number of labels on the BAS. Under Simpler BAS SBEs now only need to report the following GST information on their BAS:
  • GST on sales (label 1A)
  • GST on purchases (1B)
  • Total sales (G).
SBEs are no longer required to report Export saels (G2), other GST-free sales (G3), Capital purchases (G10), and Non-capital purchases (G11). These labels are removed from the BAS altogether. Simpler BAS is aimed at simplifying BAS preparation, but also account set-up within a software file, and GST bookkeeping. To this end, the ATO has worked closely with software companies to streamline the coding of transaction for users of Simpler BAS. Within the software under Simpler BAS, you will only have three tax codes to choose from which wil generally be: GST, GST-free or Out of Scope. This may assist by making it easier to classify transactions with the other tax codes not relevant (e.g. Capital Purchases etc.).

ACTION POINT
  • SBEs do not need to opt-in to Simpler BAS – it is compulsory. The ATO will automatically send out these streamlined BAS to eligible SBEs. If you are an eligible SBE and you do not receive the simplified BAS, you should contact the ATO.

CAUTION
In theory, with the reduction in labels, Simpler BAS will make GST reporting and bookkeeping requirements simpler. This may encourage SBEs to bring the BAS function in-house rather than pay a Bookkeeper or Accountant to prepare your BAS. However, a word of caution! Although for GST purposes there will only be 3 classification, complexities will still arise in determining which supplies and purchase attract GST and which do not. A reduction in reporting labels does not change the complex GST law that sits behind thoise labels. Therefore, while moving the BAS function in-house may be appealing in terms of cost, you may wish to leave BAS preparation in the hands of your Bookkeeper or Accountant and enjoy the peace of mind and time savings that this brings.

Accounting on a Cash Basis
SBEs can elect to account on a cash basis. This means they can:
  • Claim GST credits on business purchases in the tax period in which you pay for those purchases. If you pay only part of the cost of a business purchase in a tax period and have a valid tax invoice, you will only claim GST credits for that part of the cost you payed for in that tax period.
  • Account for the GST payable on your sales in the tax period in which you receive payment. If you only receive part payment for a sale in the tax period, you will account only for the part of the GST payment that relates to that part of the sale in that tax period.

To continue to read this article in full & other similar articles, please log in to your members area – Special Editions – GST //mytaxsavers.com.au/app/uploads/2017/07/2017-Specials-GST.pdf
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Key Dates for Business Mar-Apr 2018

Posted on February 27, 2018 by - Blog, Business Tax, General, Key Dates for Business

March 2018

21 March
February monthly Activity Statements – due for lodgement and payment.

April 2018

21 April
March monthly Activity Statements  – due for lodgement and payment.
21 April
Quarter 3 (January-March) PAYG instalment Activity Statments for head companies of consolidated groups – due for lodgement and payment.
28 April
Quarter 3 (January-March) Activity Statements – due for lodgement and payment (if lodging by paper).
28 April
Quarter 3 (January-March) PAYG instalment notices (forms R and T) – final date for payment and, if varying the instalment amound, lodgment.
28 April
Quarter 3 (January-March) GST instalment notices (forms S and T) – final date for payment and, if varying the instalment amount, lodgement.
28 April
Quarter 3 (January-March) superannuation guarantee contributions to be made to a complying fund on behalf of your employees.
30 April
Quarter 3 (January-March) TFN Report for closely held trust for TFNs quoted to a trustee by beneficiaries – fiinal date for lodgement.


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

Key Dates for Business Jan-Feb 2018

Posted on February 27, 2018 by - Blog, Business Tax, General, Key Dates for Business

January 2018

15 January 
Due date for lodgement of income tax returns for companies and trusts that were taxable medium to large businesses in the prior year and are not required to lodge ealier. If you fail to lodge by the due date, your 2017/2018 income tax return will be due on 31 October 2018.
21 January
Due date for lodgement and payment of December 2017 monthly Activity Statements.
28 January
Due date for October-December 2017 Superannuation Guarantee contributions to be made to a complying fund on behalf of your employees.
31 January
Final date for lodgement of october-December 2017 TFN report for closely held trusts for TFNs quoted to a trustee by beneficiaries.

February 2018

21 February
Due date for lodgement and payment of January monthly Activity Statements.
28 February
Due date for lodgement and payment of October-December 2017 quarterly Activity Statements, including electronic lodgments.
28 February
Due date for lodgement and payment of Annual GST returns or Annual GST information reports – if you do not have an income tax return lodgment obligation.
28 February
Due date for lodgement and payment of income tax return for self-preparing entities that were not due at an earlier date. If you fail to lodge by this date, your 2017/2018 reutrn will be due by 31 October 2018.
28 February
Due date for lodgement and payment of income tax returns for medium to large businesses (taxable and non-taxable that are new registrants)
28 February
Due date for lodgement and payment Superannuation Guarantee Charge Statement if you failed to pay Superannuation Guarantee Charge on time for the October-December 2017 quarter. Superannuation Guarantee Charge is not deductible.

Where one of these dates falls on a weekend or public holiday, the due date is esxtended to the next business day except in the case of October-December 2017 Super Guarantee contributions – these are due on Sunday 28 January 2018.