This article examines some topical issues that taxpayers and employers should be aware of at this time. Areas covered include ATO compliance, the instant asset write-off, Airbnb tax consequences, and more.
NEW ATO RULES
The ATO is currently on the look-out for and taking action against employers who are not complying with two new regimes:
Employers who employ workers in Australia on a 417 or 462 visa must now be withholding 15% tax from every dollar that they earn up to $37,000 (from the first dollar that they earn). These workers can no longer claim the tax-free threshold. Beyond $37,000, the normal tax rates apply.
Employers who currently have these workers on their books, must have registered online with the ATO by 31 January 2017 at www.ato.gov.au/twhm/ to be able to withhold at this new rate. Employers who won’t have this class of workers on their books until later in the year can register their business at that time. When you register with the ATO, you will typically not receive an acknowledgement, however the ATO advise that they will eventually include your registration information in your business’s ATO profile. To confirm that your registration has been successful, at this stage you will need to phone the ATO. Employers who cannot register online, can register with the ATO by phoning their business info line on 13 28 66. Employers with this type of worker on their books who do not register with the ATO will be required to withhold at the 32.5% rate and may be subject to ATO penalties.
Despite the deadline having passed months ago, SuperStream non-compliance among employers is still relatively high. By way of background, SuperStream is a Government initiative that aims to improve the efficiency of administering Australia’s superannuation system. The system requires employers to remit employee contributions (including Superannuation Guarantee) and other relevant data in an electronic, standardised format. The data is linked to the payment by a unique payment reference number. All employers are now required to be SuperStream compliant except for:
Fines of up to $8,500 can now be imposed by the ATO on employers who are not SuperStream compliant. For more information on the SuperStream regime including compliance solutions, see the September/October edition of our publication which is available in the subscriber section of our website //www.taxrmytaxsavers.com.aueporter.com.au
- Contributions to your own SMSF (i.e. if you’re a related-party employer) – for example , if you’re an employee of your family business and your Superannuation Guarantee contributions go to your SMSF.
- Personal Contributions – for example, if you’re a sole trader and you contribute to a superannuation fund for yourself.
INSTANT ASSET WRITE-OFF
If you are a small business (aggregated turnover of less that $2 million) contemplating buying machinery or equipment, be aware that these are the final months of the $20,000 instant asset write-off.
With a sunset date of 30 June 2017, small businesses may wish to start considering bringing forward any planned asset investments to the next few months – particularly in this current low interest-rate environment. You can read more about the cashflow benefits of the instant asset write-off in the previous edition of our publication (January/February 2017 ). Note that legislation is currently before the Parliament to increase the turnover eligibility threshold from $2 million to $10 million (to be back dated to 1 July 2016) however at the time of writing this has not yes been passed into law. We will immediately notify subscribers via email if and when this increase becomes law.
RENTING OUT YOUR HOME
With the advent of Airbnb many more residential home owners are now landlords – renting out their entire house, or one or two rooms. The ATO is at the moment,is particularly targeting those that rent out part of their property via Airbnb.
Whether you are renting out your entire home or part of your home through Airbnb or just traditionally by advertising it or through a real estate agent…. the tax consequences are broadly the same as follows:
Any rental income will be assessable. You should keep records of your rental income, even when it is paid by the tenant in cash.
Where your rental income is assessable, you are generally entitled to tax deductions for expenses incurred in deriving that income.For landlords these generally fall in 3 categories:
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SUPERSTREAM – COMPULSORY FOR ALL!
All employers are now required to be SuperStream compliant. The 31 October compliance extension granted by the ATO to smaller employers has now passed. Note that there are no general exemptions from SuperStream – all employers must comply except for:
Fines of up to $8,500 can now be imposed by the ATO on employers who are not SuperStream compliant. For more information on the SuperStream regime including compliance solutions, see the September/October 2016 edition of your ATR Bimonthly newsletter which is available in the Members Area if you are a subscriber.
- Contributions to your own SMSF (i.e.if you’re a related-party employer) – for example, if you’re an employee of your family business and your Superannuation Guarantee contributions go to your SMSF.
- Personal contributions – for example, if you’re a sole trader and you contribute to a superannuation fund for yourself
Still on superannuation… although the ATO allows an extra month for businesses to lodge their December quarterly BAS (the due date is February 28 regardless of whether you are lodging online via the Business Portal, by paper or via a Tax Agent/BAS Agent) there is no equivalent extension for the payment of Superannuation Guarantee.
Superannuation Guarantee for the October-December quarter is still due 28 days following the end of the quarter i.e. 28 January 2017. Failure to pay on time (even if you are just one day late) will result in your business being liable for the Superannuation Guarantee Charge. For this reason, if you are closed throughout January, you may wish to consider making the October-December contribution in December.
Following yet another recent reduction by the Reserve Bank, interest rates in Australia are now at record lows (the cash rate is currently at just 1.50%). With talk that rates will remain relatively low into the future, it’s an opportune time to review if you are making the most of them. Have you considered the following?
Fixed rate options. While rates are at an all-time low there may be opportunities to fix your loans or 3 or 5 years at under 5% per annum. Explore your options. Some borrowers may wish to fix just a portion of their loan.
Review your position. Low interest rates offer an opportunity to refinance or revise your payment schedule to pay your loan off sooner. Talk to your broker to see if there’s a home or business loan that better suits your needs.
Debt reduction. With lower rates, your monthly/fortnightly repayments will be less. Rather than pocketing the difference, if you put the difference into extra repayments, you can shave years off your loan and, in doing so save thousands in interest. For example, a $500,000 home loan at an interest rate of 7% requires repayments of $3,078 per month over 30 years. At 4.5%, the repayments are $2,533, a difference of $545 a month. If you put that $545 into extra repayments, you can potentially take more than 9 years off the home loan term and save almost $140,000 in interest.
Create an offset account. This is effectively a money source sitting beside your mortgage. Any savings inside this account are effectively offset against your loan which in turn reduces the amount of interest you pay.
Of course, low rates will not be around forever. As a borrower it’s important not to become complacent and to make sure that you still have the capacity to meet your repayment obligation in the event that rates increase.
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