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Tax Tips for small businesses 2022

Tue, 28 Jun 2022 12:20:31 GMT

Tax Tips for small businesses 2022

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides.

Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
Repairs and maintenance to assets and business premises.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.

There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.

What’s on the ATO Radar for 2022?

This year the ATO will be taking a closer look at record keeping, work related expenses, rental property income and deductions and cryptocurrency transactions.

Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
Keep all records relating to employees, contractors and payroll for at least seven years.
If your business is a company, keep all records for at least seven years, including director meeting minutes.

Other Common Tax Return Issues

Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.
Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised. This year you’ll need records of any extra benefits provided to employees because of COVID-19.
Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
Current temporary tax depreciation incentives - There are currently three temporary tax depreciation incentives available to eligible businesses:
Temporary full expensing - for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, from 7.30pm (AEDT) on 6 October 2020 to 30 June 2023.
Increased instant asset write-off - if the asset was purchased by 31 December 2020, and first used or installed ready for use before 30 June 2021. The threshold remains at $150,000.
Backing business investment .

Talk to us about what applies for your business.

Maximise Your Business Deductions

We can check your business’s eligibility for concessions, offsets, employer incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!

With so many businesses still affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner.

Tax Tips for Individuals 2022

Tue, 28 Jun 2022 12:05:06 GMT

The end of the financial year is nearing…have you captured all your work-related deductible expenses to make the most of your 2022 tax return?

Income

The Australian Taxation Office (ATO) automatically receives information from your employers about salary and wages that you have been paid for the financial year. You need to declare all income from other sources on your tax return as well.

Wages and salaries from employment.
Pensions, annuities or government payments such as JobKeeper.
Investment income including interest earned and dividends paid.
Cryptocurrency gains or losses.
Business or hobby income.
Foreign income.
Crowdfunding income.
Sharing economy income such as Uber or Airbnb.
Any other income such as prize money, compensation or insurance payments.

Even if you have only earned a small amount from one of these sources, it still needs to be declared on the tax return. Gather all your records for anything you have earned apart from salary and wage payments from employers.

You will need:

bank statements that show interest income;
proof of earnings from other sources such as crowdfunding or share economy platforms;
records of business or hobby income;
records of government payments received;
records from cryptocurrency wallets showing transactions and the balance of each currency at 30 June;
and records of any other payments received from overseas sources, prize winnings, insurance or investments.

Tax Deductions

Employees are entitled to claim work-related expenses as a tax deduction. To claim a tax deduction, you must have spent the money out of your own funds and not have been reimbursed by your employer. The expenses must relate to your earnings as an employee. Make sure you have invoices and receipts as proof of payment for any work-related expenses.

Expenses you may be able to claim

Vehicle and travel expenses – make sure you have a travel diary to record details of trips taken for your employment.
Clothing, laundry and dry-cleaning expenses – you can claim for occupation specific clothing, uniforms and protective gear.
Home office expenses – the shortcut calculation is still available this year for people who have worked from home due to COVID-19. This allows for a flat rate of 80 cents per hour for work time. You will need records of the hours you have worked from home to claim the ATO special rate. For people who usually work from home, check the ATO home office expenses calculator to maximise the allowable deduction.
Self-education expenses – some education expenses that relate to your current employment are claimable.
Tools and equipment – if you buy gear to help you in your job, these may be claimable. Small tools of trade, protective items, professional references and laptops are some examples of equipment you may be able to claim.

Occupation and Industry Specific Guidelines

The ATO recognises that some occupations and industries have specific requirements that employees need to pay for.

There are handy ATO fact sheets for many industries, including hairdressers, teachers, performing artists, hospitality workers, lawyers, medical professionals and more.

These guides are a great starting point if you are not sure what you can claim, but we can give you information tailored to your situation when you do your tax return.

Superannuation

If you have made personal superannuation contributions separate to your employer’s superannuation guarantee contributions, you may be able to claim this as a tax deduction. You will need to provide a notice of intent to claim form to your super fund and receive acknowledgement from the fund before doing your tax return.

Book a time with us now to prepare for your tax return and we’ll make sure you maximise your allowable tax deductions this year. Contact details below:

2021 COVID-19 BUSINESS SUPPORT GRANTS FOR NON-EMPLOYING SOLE TRADERS

admin@d20digital.com.au (Danny Summers) — Wed, 01 Sep 2021 04:44:40 GMT

Eligibility Requirements

The Queensland Government have released the eligibility requirements for non-employing sole traders looking to receive the 2021 Covid-19 Business Support Grants. The online application form will be available in September. Read through the following important notes to find out more.

To be eligible for this one-off grant, you must:

be an individual operating as a sole trader (this can include a non-employing business operating through a company, partnership or trust structure)
not employ staff
have a current Australian business number (ABN) continuously held since 30 June 2021
be registered for GST
have a principal place of business address in Queensland and the affected business was based and trading in Queensland on 31 July 2021
not be insolvent, or have owners, directors, partners or trustees that are insolvent or an undischarged bankrupt
have an annual turnover of more than $75,000 during any of the 2018-19, 2019-20 or 2020-21 financial years
if you have not been trading for a full financial year, you would be able to provide financial records to show you will reasonably meet this turnover requirement in the 2021-22 financial year
have been required to stop operating or had limited operations because of a Queensland lockdown event – or been affected by a Queensland lockdown event – during a nominated 7-day period (this must include at least 1 full day of a lockdown event)
declare a reduction in turnover of 30% or more during the nominated 7-day period
when comparing against turnover achieved during the same 7-day period in 2019, or;
if the business was not trading during the same period in 2019 or the 2019 period does not indicate a typical weekly turnover, another comparable 7-day period can be used.

You will not be eligible for the grant if:

your income is solely made up of any of the following:
earnings from rental properties
interest earned on investments
dividends.
you have received an Australian Government COVID-19 disaster payment
you have received or are eligible for another COVID-19 business support grant.

How do I check if I'm eligible?

You can check your eligibility by clicking on the button below.

How do I apply?

Further information including grant guidelines, eligibility criteria, and details on how to apply is available at business.qld.gov.au/grants .

2021 COVID-19 BUSINESS SUPPORT GRANTS

admin@d20digital.com.au (Danny Summers) — Thu, 19 Aug 2021 03:49:40 GMT

Important Notes - 2021 Covid-19 Business Support Grants

What payments are available?

Eligible applicants will receive grant funding as follows:

$10,000 grant to employing small businesses and not for profit organisations with an annual payroll of less than $1.3 million;
$15,000 grant to employing medium sized businesses and not for profit organisations with an annual payroll between $1.3 million and $10 million (inclusive);
$30,000 grant to employing large sized tourism and hospitality focused businesses and not for profit organisations with an annual payroll of more than $10 million.

Can I apply if I am outside of the SEQ lockdown area or Cairns or Yarrabah lockdown area?

Yes - but please note that other eligibility criteria also apply, such as:

being directly/indirectly impacted by a lock down event;
having a reduction in turnover of 30% or more over a nominated 7-day period (including at least 1 full day of a lock down event) compared against the same 7-day period in 2019;
annual turnover of over $75,000;
etc.

*If your business earns less than $75,000 you are not eligible for a COVID-19 Business Support Grant.

Do I need supplier quotes to support my application?

No. The grant funding may be spent on any business expense, and as such quotes are not required.

When will funding be available and when will the grant close?

Applications are open and will remain open until 16 November 2021 to ensure businesses have time to submit an application.

Is there a cap on the number of grants available?

No - all eligible businesses who apply for a grant during the three-month application period will receive funding.

How do I check if I'm eligible?

You can check your eligibility by clicking on the button below.

How do I apply?

Further information including grant guidelines, eligibility criteria, and details on how to apply is available at business.qld.gov.au/grants .

IMPORTANT UPDATES FOR JOBKEEPER V2

admin@d20digital.com.au (Danny Summers) — Thu, 06 Aug 2020 02:25:18 GMT

IMPORTANT UPDATES FOR JOBKEEPER V2

On 21 July 2020, the Government announced that JobKeeper would be extended to 28 March 2021, but it will have reduced payments to employers and it will be harder to qualify to receive it.

All employers wanting to claim JobKeeper payments from 28 September 2020 will need to reassess their eligibility again and prove that their turnover has declined based on actual figures.

Some businesses that did not qualify for the original JobKeeper payments may find that they now qualify for the new JobKeeper payments.

This email is to update you on what changes for JobKeeper V2.

Our services and advice are very important to you in 2 key ways:

We will assist you to claim the maximum amount available.
We will give you the peace of mind that your JobKeeper application and declarations are correct, avoiding any ATO fines and penalties for incorrect declarations and lodgements.

UP UNTIL 27 SEPTEMBER 2020

Nothing changes. If your business and your employees have passed the original eligibility tests for JobKeeper and you have paid the required wages amounts each JobKeeper fortnight, then you can continue to claim JobKeeper up until 27 September 2020.

28 SEPTEMBER 2020 TO 3 JANUARY 2021

Business Eligibility

All businesses wanting to receive JobKeeper will need to reassess their eligibility. You will need to demonstrate that your ACTUAL GST turnover (as reported on your Business Activity Statement) for BOTH the June 2020 and September 2020 quarters have decreased by the relevant amount when compared to the corresponding June 2019 and September 2019 quarters.

The decline in turnover test remains the same as the existing rules, being:

Entities with turnover greater than $1 billion – 50%.
Entities with turnover less than $1 billion – 30%.
ACNC registered charities (excluding schools and universities) – 15%.

Payment Rates

The payment rate will be reduced from $1,500 per fortnight to $1,200 per fortnight for eligible employees and eligible business participants who work more than 20 hours per week, and to $750 per fortnight for eligible employees and eligible business participants who work less than 20 hours per week.

4 JANUARY 2021 TO 28 MARCH 2021

Business Eligibility

All businesses wanting to receive JobKeeper will need to again reassess their eligibility. You will need to demonstrate that your ACTUAL GST turnover (as reported on your Business Activity Statement) for ALL 3 of the June 2020, September 2020 and December 2020 quarters have decreased by the relevant amount when compared to the corresponding June 2019, September 2019, and December 2019 quarters.

Payment Rates

The payment rate will be reduced $1,000 per fortnight for eligible employees and eligible business participants who work more than 20 hours per week, and to $650 per fortnight for eligible employees and eligible business participants who work less than 20 hours per week.

EMPLOYEE ELIGIBILITY

Employee Obligations

The existing employee eligibility requirements have not changed, and are as follows:

currently employed and were employed by the employer at 1 March 2020;
full time, part time, or long term casuals;
at least 18 years of age or aged 16 to 17 years and independent or not undertaking full time study;
an Australian resident; and
not in receipt of a JobKeeper payment from another employer.

BUSINESS PARTICIPATION ENTITLEMENT

Sole traders and some other entities (such as partnerships, trusts or companies) may be entitled to the JobKeeper Payment scheme under the business participation entitlement. A limit applies of one JobKeeper payment per fortnight for one eligible business participant. Sole traders, one partner in a partnership, one beneficiary of a trust, and one director or shareholder of a company may be regarded as an eligible business participant.

NEXT STEPS

The ATO will release their specific requirements over the next 2 months for us to report on your business eligibility.

We will keep you informed once we receive updates.

ECONOMIC RESPONSE TO THE CORONAVIRUS

admin@d20digital.com.au (Danny Summers) — Wed, 01 Apr 2020 07:52:27 GMT

JOBKEEPER PAYMENT - INFORMATION FOR EMPLOYERS

Obligations on Employers

To receive the JobKeeper Payment, employers must:

Register an intention to apply on the ATO website and assess that they have or will experience the required turnover decline .
Provide information to the ATO on eligible employees . This includes information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired). For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.
Ensure that each eligible employee receives at least $1,500 per fortnight (before tax) . For employees that were already receiving this amount from the employer they will continue to receive their regular income according to their prevailing workplace arrangements. For employees that have been receiving less than this amount, the employer will need to top up the payment to the employee up to $1,500 per fortnight, before tax. And for those employees earning more than this amount, the employer is able to provide them with a top-up.
Notify all eligible employees that they are receiving the JobKeeper Payment .
Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.

Background on JobKeeper Payment

Under the JobKeeper Payment, businesses impacted by the Coronavirus will be able to access a subsidy from the Government to continue paying their employees. Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.

Eligible employers

Employers will be eligible for the subsidy if:

their business has a turnover of less than $1 billion and their turnover has fallen by more than 30 per cent (of at least a month); or
their business has a turnover of $1 billion or more and their turnover has fallen by more than 50 per cent (of at least a month); and
the business is not subject to the Major Bank Levy.

To establish that a business has faced either a 30 (or 50) per cent fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier. Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (e.g. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the Coronavirus. The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtailed its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30 (or 50) per cent fall in turnover but actually experience a slightly smaller fall.

The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.

Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligble employees

Eligible employees are employees who:

are currently employed by the eligible employer (including those stood down or re-hired);
were employed by the employer at 1 March 2020;
are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
are at least 16 years of age;
are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
are not in receipt of a JobKeeper Payment from another employer.

If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.

Application Process

Businesses with employees

Initially, employers can register their interest in applying for the JobKeeper Payment via ato.gov.au from 30 March 2020.

Subsequently, eligible employers will be able to apply for the scheme by means of an online application.

The first payment will be received by employers from the ATO in the first week of May.

Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO.

Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax.

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.

Further details for businesses for employees will be provided on ato.gov.au .

Businesses without employees

Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment via ato.gov.au from 30 March 2020.

Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.

People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.

Further details for the self-employed will be provided on ato.gov.au .

Employer with employees on different wages

Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30 per cent in in the coming months. The employees are:

Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.

Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:

The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
The business continues to pay Nick his $1,000 per fortnight before tax salary and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper Payment which will subsidise the cost of Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight of wages that Nick is earning. The business has the option of choosing to pay superannuation on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.

Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

Employer with employees who have been stood down without pay

Zahrah runs a beauty salon in Melbourne. Ordinarily, she employs three permanent part time beauticians, but the government directive that beauty salons can no longer operate has required her to shut the business. As such she has been forced to stand down her three beauticians without pay.

Zahrah’s turnover will decline by more than 30 per cent, so she is eligible to apply for the JobKeeper Payment for each employee, and pass on $1,500 per fortnight before tax to each of her three beauticians for up to six months. Zahrah will maintain the connection to her employees, and be in a position to quickly resume her operations.

Zahrah is required to advise her employees that she has nominated them as eligible employees to receive the payment. It is up to Zahrah whether she wants to pay superannuation on the additional income paid because of the JobKeeper Payment.

If Zahrah’s employees have already started receiving income support payments like the JobSeeker Payment when they receive the JobKeeper Payment, they should advise Services Australia of their change in circumstances online at my.gov.au or by telephone.

Register your interest

You don’t need to phone the ATO. You can register your interest below and the ATO will send you updates.

JOBKEEPER PAYMENT - INFORMATION FOR EMPLOYEES

Employee Obligations

Employees will receive a notification from their employer that they are receiving the JobKeeper Payment. The majority of employees will need to do nothing further.

Employees in the following circumstances will have additional obligations.

Employees that have multiple employers must notify the employer that is their primary employer.
Employees that are not Australian citizens must notify their employer of their visa status, to allow their employer to determine if they are an eligible employee.
Employees that are currently in receipt of an income support payment must notify Services Australia of their new income.

COVID-19 JOBS SUPPORT LOAN SCHEME

admin@d20digital.com.au (Danny Summers) — Mon, 30 Mar 2020 07:22:09 GMT

$500 MILLION COVID-19 JOBS SUPPORT LOANS - APPLICATIONS OPEN

Applications are now open for the Queensland Government’s $500 million COVID-19 Jobs Support Loans.

These loans are available to assist Queensland businesses and non-profit organisations financially affected by COVID-19 to retain employees and maintain their operations.

Eligible business types include sole traders, partnerships, private and public companies and Trusts. Loans may be used to help meet a business’s working capital expenses such as paying employee wages, sundry creditors, rent and rates and other eligible carry-on expenses.

Loan features

$500 million loan scheme
Maximum loan up to $250,000
No repayments or interest charged for the first year
Plus two years interest only
2.5 % fixed interest rate
10-year term of loan
Open until 25 September 2020 or when funding is fully committed

Read Guidelines and FAQs

More information about the loan and full eligibility criteria is available in the Guidelines and Frequently Asked Questions .

Get ready to apply

To make applying online for this loan easier, it’s helpful to have the following documents ready before you apply:

Business Financial Statements for 2017-18 and 2018-19
Personal Taxation Returns for 2017-18 and 2018-19
Bank Account Information
Australian Tax Office (ATO) Integrated Client Account Statement
Aged list of debtors and creditors at time of application
Applicant Identification Information.

This scheme is administered by the Queensland Rural and Industry Development Authority on behalf of the Queensland Government.

Learn more

Apply online

COVID-19 STIMULUS PACKAGE

admin@d20digital.com.au (Danny Summers) — Tue, 24 Mar 2020 07:01:56 GMT

SUMMARY

Business
Individuals

IN DETAIL

Support for business
Tax-free payments up to $100,000 for employers
Solvency safety net
Sole traders and self-employed eligible for Jobseeker payment
Individuals
Early release of superannuation
Temporary reduction in minimum superannuation draw down rates
Time limited fortnightly $550 ‘coronavirus supplement’
Second $750 payment to households
Bankruptcy safety net

The Government yesterday released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.

The stimulus measures are not yet legislated with Parliament to reconvene today.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.

SUMMARY

Business

Tax-free payments up to $100,000 for small business and not-for-profit employers . An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
Temporary relief from some Corporations Act requirements

Individuals

Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
Supplements increased, access extended and eased – for 6 months from 27 April 2020:
A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
Waiting periods and assets tests temporarily waived.
Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages will be required

IN DETAIL

Support for business

Tax-free payments up to $100,000 for employers

From: 28 April 2020 - Comment - due date for March quarter BAS
Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to business.

Now, eligible businesses with a turnover of less than $50 million will

initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000).
However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000. Comment - but you have to survive till then

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system . The support will be provided in two phases.

The first phase ensures that eligible employers receive
a credit equal to 100% of the PAYG amounts
withheld from salary and wages paid to employees
during the relevant period,
up to the maximum amount of $50,000.
Comment - the saving is the PAYG withheld - not the wage itself
The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase.
For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase.
These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees

but is not required to withhold any tax
then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement .

If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020.

The minimum $10,000 payment will be applied to the first lodgement .

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover . We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

See: Cash flow assistance for businesses

Solvency safety net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
The time a company has to respond to statutory demands will increase from 21 days to 6 months.
For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
See also bankruptcy safety net below

It will be more important than ever for business to stay on top of their debtors.

Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

See: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion.

These loans are

new
short-term
unsecured loans
to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

Maximum total size of loans of $250,000 per borrower.
The loans will be up to three years , with an initial six month repayment holiday.
The loans will be in the form of unsecured finance , meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure small business can access capital, including:

An exemption to the responsible lending obligations to enable financial institutions to provide new credit, credit limit increases, and credit variations and restructures,
$15bn to the Australian Office of Financial Management to invest in wholesale funding markets used by small banks and non-banks to enable these lenders to support SMEs, and
Australian Banking Association members will defer loan repayments for 6 months for small businesses (affected small businesses will need to apply for relief).

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

you are unemployed ; or
you are eligible to receive a job seeker payment , youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
on or after 1 January 2020 :
you were made redundant ; or
your working hours were reduced by 20% or more; or
if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

Early access to superannuation

Temporary reduction in minimum superannuation draw down rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.

Comment - given the savage fall in ASX, this allows for market to recover before forced sale

More: Providing support for retirees

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

Jobseeker payment (and those transitioning to the jobseeker payment)
Youth allowance jobseeker
Parenting payment
Farm household allowance
Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

Permanent employees who are stood down or lose their job
Casual workers
Sole traders
The self-employed
Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply .

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More: Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here ). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
Payment 2 from 13 July 2020 : Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More: Payments to support households

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More: Temporary relief for financially distressed businesses

COVID-19 - HOW IT AFFECTS YOU AND YOUR BUSINESS

admin@d20digital.com.au (Danny Summers) — Thu, 19 Mar 2020 07:01:48 GMT

7 Things you need to know about COVID-19

What is COVID-19?
What is the Australian Government doing about the situation?
Will the stimulus package affect individuals and households?
Will the package offer support for your business?
Is any tax support for businesses included in the package?
What are your WHS obligations?
What’s next for your business?

1. What is COVID-19?

COVID-19 is a coronavirus strand and severe acute respiratory virus first discovered in December 2019 in Wuhan, China. Since then, the virus has spread to countries all over the world, including Australia, and has been classified as a pandemic by the World Health Organisation.

While the COVID-19 mortality rate hovers at a global average of 3-4%, it is not to be taken lightly as the virus poses a great threat to older populations and those with underlying medical problems such as diabetes, heart failure, and other serious health matters. With the virus slowing economic activity, governments around the world have aimed to create policies that will help strengthen their economies at a time of crisis and recession.

2. What is the Australian Government doing about the situation?

As a result of COVID-19 and its potential impact on Australia’s already slowing economy, the Morrison Government has announced the release of a $17.6 billion coronavirus stimulus package.

$11 billion is scheduled to be injected into the economy by July 2020 in the hope of an immediate upturn in economic activity in Australia. A notable feature in the stimulus package is its tax relief and asset write-off expansions for small businesses, taxfree payments to pensioners and welfare recipients, and funds to support businesses in retaining apprentices.

The Government has also separately announced a $2.4 billion COVID-19 health package which is set to create up to 100 pop-up fever clinics and a Medicare item for telehealth consultations aimed at slowing the spread of COVID-19.

3. Will the stimulus package affect individuals and households?

Pensioners and welfare recipients will be provided with tax-free payments of $750 starting from 31 March 2020. This is aimed at helping them through the COVID-19 crisis and boosting economic activity. The payments will be given to around 6.5 million lower income Australians, totalling to a $4.67 billion budget.

The payments will automatically be made to social security, veteran and income support recipients including old-age pensions, carers, disabled pensioners, youth allowance recipients as well as family units receiving family tax benefits.

4. Will the package offer support for your business?

The Federal Government’s stimulus package aims to encourage business spending in an effort to increase cash flow, stave off an economic recession, boost consumption and protect employment.

The instant asset write-off threshold has been increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 30 June 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.

In addition, the Government is introducing a 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

Up to 700,000 small businesses will also benefit from the package’s payments. Business will receive these payments based on 50% of their PAYG withholding obligations for the 6 month period ending 30 June 2020, with a minimum benefit of $2,000 and maximum of $25,000. These payments make up $6.7 billion of the package and will assist businesses in paying wages and employing extra staff.

Businesses employing apprentices will also largely benefit from the Federal Government’s stimulus package. As part of the package, 117,000 apprentices will be supported by the Government with its $1.3 billion funds in wage subsidies.

Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). The subsidy will be available to small businesses employing fewer than 20 employees who retain an apprentice or trainee. In the event that an employer is unable to retain an apprentice, the subsidy can be transferred to a new employer who will employ the apprentice.

Recent apprenticeship rule changes have also meant that there will be no financial penalties if apprenticeships get delayed because of issues caused by COVID-19. Breaking in learning (BIL) rules have also been loosened and providers will no longer be fined in BIL cases.

5. Is any tax support for businesses included in the package?

As a result of the negative economic impacts of the coronavirus, the ATO is showing greater leniency to tax debt deferment requests from small businesses who are up to date with their tax returns and Business Activity Statements (BAS) and have a plan of when tax payments will likely return to normal.

The ATO is also offering administrative relief for certain tax obligations for those in regions affected by COVID-19 on a case-by-case basis. Currently, the ATO are working with other government agencies and local organisations to alleviate the tax strain on impacted communities. This includes a temporary shop front in Cairns dedicated to helping small businesses, with additional shop fronts in other regions also being considered.

6. What are your WHS obligations?

Works Health and Safety (WHS) laws require a person conducting a business or undertaking (PCBU) to ensure the health and safety of their workers and others at the workplace. WHS laws also require PCBUs to identify any coronavirus-related hazards and their associated risks in the workplace and to undertake reasonably practicable measures to eliminate or minimise those risks.

Businesses who physically interact with their customers and clients should review their infection control policies and procedures and to take extra care to implement safe systems of work. Workers also have WHS obligations to protect themselves and others and if they believe they are at risk of infection, they should raise the issue with their manager or WHS representative.

7. What’s next for your business?

Businesses should consider implementing some structural changes and preventative measures to their workplace to protect the safety of employees and minimise the risk of the coronavirus spreading. Here are some suggestions:

Allowing employees to work from home and providing them with the resources to do so (e.g. VPN, computers, etc.).
Becoming more flexible with working hours and dividing employees into different time slots to avoid contagion.
Promote frequent and methodical handwashing. Consider putting up posters on how to wash your hands properly.
Practicing social distancing (e.g. no handshaking).
Encourage staff to sneeze or cough into their elbow rather than their hand.
Reviewing insurances for staff required to travel (domestically and internationally).

With fears of COVID-19 on the rise and more people choosing to drive over using public transport, problems of traffic congestion and lack of parking are likely to arise. This will also pose as a significant problem for companies specialising in delivery services. It is thus important to recognise these flow-on effects as a result of the coronavirus and remain flexible with your daily business operations.

If you are concerned about any of the issues raised, please call us on (07) 4697 9332 - we would be happy to help you.

Kind Regards,

Carmel Summers and the team.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Your Knowledge - July 2019

admin@d20digital.com.au (Danny Summers) — Thu, 01 Aug 2019 06:17:50 GMT

SUMMARY

60,000 tax cheat tip-offs
Super, insurance and exit fees: The 1 July changes
Single touch payroll exemption for directors and family members
Who owns the assets of a trust?
Laundry expenses hung out to dry
New pay rates from 1 July

60,000 tax cheat tip-offs

Tip-offs to the Australian Taxation Office (ATO) have reached an all-time high with close to 60,000 tip-offs received between June and May 2019 – almost double the number of the previous year. The ATO thinks the number of tip-offs will reach around 70,000 for the full financial year.

Common problem areas that people feel obliged to report include suspected tax evasion, illegal phoenix activity, and the black economy. More than half of all tip-offs received were for suspected under reporting of income or about the cash economy, for example businesses demanding cash from customers or paying their workers cash in hand.

The effectiveness of the tip-off line has led the ATO to dub it the “crime stoppers” for tax.

ATO Assistant Commissioner Peter Holt suggests that the people doing the right thing “…have had enough of competitors cheating the system and getting an unfair advantage.”

The tip-off line has been so successful that a new and improved “Tax Integrity Centre” launched this month to provide a single point of contact for reporting suspected tax evaders.

The top 5 ‘tip-offs’ to the ATO

Under-reported income 31%
cash economy 27%
non-lodgment 25%
inadequate or no superannuation paid 8%
over-stating expenses 3%

Some of the typical behaviours reported include:

Discounts for cash, cash deals without a receipt or a discount for cash/mates rates
Jobs paying cash wages without payslips or superannuation entitlements
Not ringing up a sale on the till or keeping the till drawer open
Having two sets of books
Deleting transactions on the point of sale system
Claiming work-related expenses the taxpayer is not entitled to
Attempts to avoid paying child support or other obligations by appearing to earn less income than what the person receives
Failing to lodge returns or keep records
Arrangements that promise tax benefits like fabricated deductions or schemes out of step with the intention of the law

Business owners are reported for:

Claiming personal expenses on a business account so they can claim deductions
Paying employees late or less than they should
Not paying superannuation or other employee entitlements

Super, insurance and exit fees: The 1 July changes

From 1 July 2019, new laws prevent superannuation providers from eroding member balances with unwanted or unnecessary insurance and exit fees. Plus, inactive accounts with low balances will be moved to the ATO to try and unite the unclaimed super with its owner.

These changes do not apply to self-managed superannuation funds or small APRA funds.

Insurance inside your fund

Up until 30 June 2019, superannuation providers were required to provide members with appropriate life and total and permanent disability (TPD) insurance inside superannuation on an ‘opt out’ basis. That is, the insurance was automatically put into place when you became a member of the fund.

The problem is that for a lot of people, such as young people with no dependants and those with insurance cover elsewhere, these default insurance premiums are a key factor in eroding their superannuation balances. And in many cases, people simply did not realise they had insurance inside their funds.

New laws that came into effect on 1 July 2019 prevent superannuation providers from maintaining ‘default insurance’ for any member with an account that has been inactive for a continuous period of 16 months unless that person has elected to maintain the insurance. An inactive account is one where no contributions or rollovers have been received in the previous 16 month period.

For everyone else, insurance will remain a default on new and existing superannuation funds unless you specifically opt out.

What to do if you are affected

If you are affected, you need to make a decision about whether the insurance held in your fund is valuable to you. Often insurance cover through superannuation is cheaper than what you might be able to access elsewhere. Also, the premiums come out of your fund so they don’t impact on your cashflow. However, if the insurance is unnecessary or duplicated, the premiums will simply erode your account.

Employer default super funds generally provide death and TPD cover. This basic cover may be available without health checks. You can usually increase, decrease, or cancel your default insurance cover. Your super fund's website will have a product disclosure statement (PDS) which explains the insurer they use and details of the cover available.

If you are affected, the insurance you hold inside your super fund may be cancelled unless you take action. If you choose to, you can keep your insurance by contacting your insurer (login to your insurer’s website and follow the links or call them to find out how to make the election) or by making a contribution. The election cannot be made over the phone to your fund.

Your superannuation provider is obliged to let you know if your insurance is about to be cancelled.

Low balance super accounts moved to ATO

Australians have over $17.5 billion in unclaimed superannuation. From 1 July 2019, superannuation providers will be required to report and pay inactive low-balance accounts to the ATO. Twice a year, super funds will report and pay:

unclaimed super of members aged 65 years or older, non-member spouses and deceased members.
unclaimed super of former temporary residents.
small lost member accounts and insoluble lost member accounts.
inactive low-balance accounts.

A low balance account is one with less than $6,000. These new rules mean that if your superannuation account has less than $6,000, and the account has been inactive for 16 months, the balance will be transferred to the ATO who will attempt to consolidate your superannuation.

Reducing fees and charges

From 1 July 2019, exit fees including fees on partial withdrawals have been abolished for all superannuation fund members regardless of their superannuation account balance.

Where a superannuation fund member’s final account balance is less than $6,000 in a year, new caps apply to the fees that providers can charge. From 1 July 2019, administration and investment fees and other prescribed costs on these accounts will be capped at 3%. If the fund has charged more than 3%, the excess needs to be refunded within 3 months.

Single touch payroll exemption for directors and family members

The ATO has provided a concession from single touch payroll for payments by small employers to closely held payees.

Single touch payroll (STP) was extended to cover all employers on 1 July 2019. For directors of their own company or for family businesses employing family members, there are some practical problems with STP - sometimes they don't know exactly what their salary or wages are for the year until just after the end of the financial year. STP however demands that payments are reported to the ATO in real time.

A new concession allows payments made by small employers with 19 or less employees to closely held payees, such as directors and family members, to be exempt from STP until 1 July 2020. Payments to arm’s length employees will need to be reported using STP.

There is no need for entities to apply to the ATO for the concession, although the ATO will need to be notified of closely held payees. For 2019-20, employers using the concession will report as they have in the past, issuing payment summaries at year end to affected employees.

Who is a closely held employee?

A closely held payee is someone who receives non-arm’s length payments, that is, they are directly related to the entity from which they receive payment. For example:

family members of a family business
directors or shareholders of a company
beneficiaries of a trust

What happens after 1 July 2020?

From 1 July 2020, employers making payments to closely held employees will have the option of reporting these payments quarterly. The ATO expects the employer to make a reasonable estimate of year-to-date amounts up to and including the last pay day of the relevant quarter. Three methods could potentially be used for this purpose:

Withdrawals taken by the payee (but don’t include payments of dividends or payments which reduce liabilities owed by the business to the closely held payee).
Calculating 25% of the total salary or director fees from the previous year or the year of the last lodged tax return of the closely held payee.
Vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary or directors fees for the current financial year.

If a business chooses to report closely held payees quarterly, they will have until the due date of their 2021 tax return to finalise the information that has been reported for the year and make any adjustments to the amounts that have been reported.

There are some practical problems still to be worked through, like what happens if you overestimate income and pay too much superannuation? Unlike tax payments, superannuation cannot normally be refunded if contributions exceeded the amount that was required to be paid.

Who owns the assets of a trust?

It’s not uncommon for people to put assets such as their family home into a trust, particularly professionals working in litigious fields or family groups wanting to protect assets. A recent case highlights some of the tax problems that can occur.

The taxpayer in this case had become the owner of their main residence as a result of a Family Court order. At that time, they caused the property to be held in the name of a trust (with a corporate trustee of which the taxpayer was a director).

4 years later when the property was sold, the taxpayer sought to access the main residence exemption to exempt the property from capital gains tax (CGT). Afterall, it was their main residence. However, the ATO saw it a different way. Instead, they saw the proceeds of the sale of the property as a distribution from the trust to the beneficiary. Therefore, the main residence exemption could not apply as it generally only applies to an individual taxpayer.

The ATO has previously indicated that the main residence exemption can apply in situations where a property is held in trust but the individual living in the dwelling is “absolutely entitled” to the property as against the trustee.

The taxpayer argued that the property was not an asset of the trust but was held by the trustee in a different capacity (effectively as a bare trustee) and that the taxpayer was absolutely entitled to the asset – citing the terms of the Family Court order as evidence.

However, the Federal Court agreed with the ATO.

The decision relied heavily on the evidence surrounding the transfer of the property to the trustee. While the Family Court orders allowed the property to be transferred to the taxpayer or a nominee, rather than specifically providing that the taxpayer was to have ownership of the property, there was not enough evidence to prove that the property was held under a bare trust arrangement and that the taxpayer was an absolutely entitled beneficiary.

Working against the taxpayer was the evidence that suggested that the property was a trust asset. The taxpayer had agreed to the transfer, had signed financial statements that identified the property as a trust asset, the proceeds from the sale were accounted for as an asset of the trust, and there was a valid resolution by the trustees distributing the net capital gain to the taxpayer.

In effect, without explicit documentation stating that the property was held on bare trust for the taxpayer at the time of the transfer, it did not matter that all the parties involved thought things were structured differently. The case also shows how important it is for everyone to understand the implications of what is presented in the financial records. The actions of the taxpayer in this case when they signed off the accounts was a factor that led to the Court to determine that the property was an asset of the trust.

Laundry expenses hung out to dry

The ATO is airing the ‘dirty laundry’ on work-related clothing and laundry expenses warning that it is closely reviewing claims.

“Last year around 6 million people claimed work-related clothing and laundry expenses, with total claims adding up to nearly $1.8 billion. While many of these claims will be legitimate, we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing,” Assistant Commissioner Kath Anderson said.

Clothing claims are up nearly 20% over the last five years and the ATO believes taxpayers are making common mistakes and errors like claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated. In some cases, the ATO will ask employers if they require their employees to wear a uniform to check the validity of claims made.

In one case highlighted, a car detailer claimed work related laundry expenses of over $20,000 per year over two years. It seems that the taxpayer worked out how many hours he spent doing his laundry then multiplied that by what he thought was a reasonable hourly rate ($227 per hour because his personal time was valuable). Needless to say, the taxpayer’s claim was reduced to $0.

It’s not just large claims that the ATO is reviewing but claims up to the $150 substantiation threshold. Claims over $150 have to be substantiated with receipts for expenses. Below this level taxpayers are not required to keep normal records. The ATO believes that a lot of taxpayers are simply ticking the box thinking that the claim is a ‘standard deduction’ but it’s not an automatic entitlement.

“Just to be clear, the $150 limit is there to reduce the record-keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation-specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim,” Ms Anderson said.

New pay rates from 1 July

New pay rates came into effect from 1 July 2019 with the minimum wage increasing by 3% from the first full pay period. The new national minimum wage is now $740.80 per week or $19.49 per hour. The national minimum wage applies to employees who aren’t covered by an award or agreement.

Penalty rates have also changed in the Hospitality and Fast Food awards.

If you are concerned about any of the issues raised, please call us on (07) 4697 9332 - we would be happy to help you.

Kind Regards,

Carmel Summers and the team

Your Knowledge - June 2019

admin@d20digital.com.au (Danny Summers) — Tue, 09 Jul 2019 14:49:39 GMT

SUMMARY

Tax time: Are you in the ATO’s sights?
What’s new
For you
Your business
Your trust
Your superannuation
How to Prepare for a Tax Office Visit
Quote of the month

Tax time: Are you in the ATO's sights?

A consistent theme this tax time is overclaiming and under reporting. With the Australian Taxation Office (ATO) getting more and more sophisticated in its data matching approaches, taxpayers can expect greater scrutiny where their claims are more than what is expected. We take a look at the key issues for you, your business and your SMSF.

What's New

Live reporting through Single touch payrollLive reporting through Single touch payroll

Single touch payroll (STP) reporting has changed the way businesses report salary and wages, PAYG withholding and superannuation contribution information to the ATO. For the 2018-19 financial year, only businesses with 20 or more employees were required to use STP. From 1 July 2019, all businesses will need to use STP although there is some leniency for micro businesses struggling with implementation.

STP means that employers will no longer issue Payment Summaries, instead a finalisation declaration will generally need to be made by 14 July (the deadline is 31 July 2019 for businesses using single touch payroll for the first time in 2018-19).

If your employer has used STP in 2018-19, you can access your Income Statement from myGov. Through your myGov account, you will be able to see your year to date tax and superannuation information within a few days of your employer paying you.

For you

Work related deductions

Last financial year, over 8.8 million taxpayers claimed $21.98 billion in deductions for work related expenses. It’s an area under intense review by the ATO. If you claim work-related deductions, it’s important to ensure that you are able to substantiate any claim you make.

To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, in most cases you need a record proving you incurred the expense, and the expense has to be directly related to how you earn your income – that is, the expense is directly (not sort of) related to your work. This also means ensuring that you only claim the work-related portion of items you use personally, such as mobile phones or internet services.

When you don’t have to keep records

If your claim for work related deductions is below $300 you do not have to keep a record of the expense, such as a receipt. Work related clothing has a $150 record keeping limit. However, the ATO is concerned that taxpayers are ‘automatically’ claiming these deductions without incurring any expenses because of a belief that you don’t have to support the claim. If you have claimed an amount up to the record keeping threshold, you may find that the ATO will ask you to explain how you came to that amount. If you don’t have diary entries or a good explanation, your claim might be denied.

Working from home

If you don’t have a dedicated work area but you do some work on the couch or at the dining room table, you can claim some of your expenses like the work-related portion of your phone and internet expenses and the decline in value of your computer. If you have a dedicated work area, there are a few more expenses you can claim including some of the running costs of your home such as a portion of your electricity expenses and the decline in value of office equipment.

If your home is your principal place of business, you might be able to claim a range of expenses related to the portion of your home set aside for your business. What the ATO is looking for is an identifiable area of the home used for business.

Ensure any claims are in proportion to the work related use. You can’t, for example, claim all of your internet expenses because you do a bit of work from home in the evenings and need the internet.

Work related clothing

In general, you cannot claim the cost of your work clothes or dry cleaning expenses unless the clothes are occupation specific, such as chefs whites or a uniform with a logo, or protective gear because your workplace has hazards (jeans don’t count as protective wear).

Just because you have to wear a suit to work does not make it deductible.

Cryptocurrency

The ATO has a special taskforce dealing specifically with cryptocurrency. Cryptocurrency is considered an asset for tax purposes, rather than a form of currency. This means that gains or losses made on disposal or exchange of cryptocurrency will often be captured under the tax system – regardless of whether you're switching between currencies or 'cashing out' your asset into AUD.

You will need to keep records of all of your trades in order to work out whether you've made a taxable gain or loss each time you dispose of an asset.

Capital gains tax can be complex and this is an area that the ATO is looking very closely at, particularly where taxpayers are claiming large losses. Also, some disposals can be taxed as ordinary income which means the CGT discount cannot apply and capital losses cannot be applied against the gains that have been made.

Rental property deductions

In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and the ATO believes that is too much - one in ten is estimated to contain errors.

What you can claim for your rental property has been significantly curbed. For example, you can no longer claim deductions for the cost of travelling to inspect the property. And, you can no longer claim depreciation deductions for second hand plant and equipment. Previously, you could for example, buy a rental property from someone else and then claim depreciation on the assets already in the property such as the kitchen appliances and carpet. From 1 July 2017, you can only claim deductions for new assets you purchase and install in the property.

4,500 audits of rental property deductions will be undertaken this year with the focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing. Deliberate cases of over-claiming are treated harshly with penalties of up to 75% of the claim.

When you own a share in a property

For tax purposes, rental income and expenses need to be recognised in line with the legal ownership of the property, except in very limited circumstances where it can be shown that the equitable interest in the property is different from the legal title. The ATO will assume that where the taxpayers are related, the equitable right is the same as the legal title (unless there is evidence to suggest otherwise such as a deed of trust etc.,).

This means that if you hold a 25% legal interest in a property then you should recognise 25% of the rental income and rental expenses in your tax returns even if you pay most or all of the rental property expenses (the ATO would treat this as a private arrangement between the owners).

The main exception is that if the parties have separately borrowed money to acquire their interest in the property then they would claim their own interest deductions.

Earning money from the sharing economy

Income earned from the sharing economy, AirBNB, Uber, AirTasker etc., must be declared in your tax return. But you may also be able to claim proportional expenses associated to providing the service. Ensure that any deductions you claim are related to providing the service itself (not just switching on the app or making yourself available).

If you are a driver with Uber or another platform, you will need to be registered for GST regardless of how often you drive.

Your business

There are around 3.8 million small businesses, including 1.6 million sole traders in Australia. They employ around 5.5 million people and contribute $380bn to the economy. Small business is also in debt to the ATO to the tune of $15bn.

This tax time, the ATO has stated they are looking closely at taxpayers:

setting up or changing to a company structure
claiming motor vehicle expenses
who may not be correctly apportioning between personal and business use

There are a multitude of data-matching programs and benchmarks to catch out those attempting to rort the system.

For wealthy groups and medium businesses, the focus is on structuring to avoid tax:

international risk - international profit shifting and corporate restructuring
inappropriate arrangements that seek to extract profits or capital without the right amount of tax being paid
high risk trust arrangements attempting to gain advantage beyond ordinary trust arrangements or tax planning associated with genuine business or family dealings.

If the ATO suspect there is a problem, you may be contacted to justify why decisions were made to structure your affairs or the affairs of your company in a particular way.

No tax deductions if you don’t meet your tax obligations

From 1 July 2019, if taxpayers do not meet their PAYG withholding and reporting obligations, they will not be able to claim a tax deduction for payments:

of salary, wages, commissions, bonuses or allowances to an employee;
of directors’ fees;
to a religious practitioner;
under a labour hire arrangement; or
made for services where the supplier does not provide their ABN.

The main exception is where you realise there is a mistake and voluntarily correct it before the ATO begins a review or audit. In these circumstances, a deduction may still be available if you voluntarily correct the problem but penalties may still apply for the failure to withhold the correct amount of tax. There is also an exception for situations where you make payments to a contractor but then later realise that they should have been paid as an employee, as long as the worker has provided an ABN.

The Government has also proposed that from 1 July 2021, the ABNs of those required to lodge a tax return but have not done so will be cancelled, and from 1 July 2022, ABN holders will be required to confirm the accuracy of their Australian Business Register details each year.

Recording payments to contractors

The taxable payments reporting system requires businesses in certain industries to record and report payments made to contractors to the ATO.

From 1 July 2019, security providers and investigation services, road freight transport, and computer system design and related services businesses will need to collect specific information in relation to payments made to contractors (individual payments and total for the year). These businesses will need to lodge an additional report to the ATO with this information. The first report will be due by 28 August 2020.

Businesses within the building and construction industry, cleaning, and courier services need to report payments to contractors in the year ending 30 June 2019 by 28 August 2019.

This reporting requirement is focussed on industries identified as active participants in the black economy, raising around $2.7bn per year in income and GST liabilities.

Your trust

Timing of resolutions

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest (the trust deed may actually require this to be done earlier). Decisions made by the trustees should be documented in writing, preferably by 30 June 2019.

If valid resolutions are not in place by 30 June 2019, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

TFN reporting

Has your trust lodged TFN reports for all beneficiaries?

Trustees of closely held trusts have some additional reporting obligations outside the lodgement of the trust tax return each year. The ATO is currently reviewing trustees to ensure their compliance with these obligations, particularly the requirement to lodge TFN reports for beneficiaries.

Where beneficiaries have quoted their TFN to the trustee, trustees are required to lodge a TFN report for each beneficiary. The TFN report must be lodged by the end of the month following the end of the quarter in which a beneficiary quoted their TFN. For example, if the trustee receives a beneficiary’s TFN in April, they must lodge a TFN report by the end of July.

Where a TFN has not been provided by a beneficiary, the trustee is required to withhold tax at a rate of 47% and pay this to the ATO. The trustee must also lodge an annual report of all amounts withheld.

Failure to comply with the TFN reporting and withholding requirements may incur penalties.

Your superannuation

Not making your full superannuation contribution? Now you can catch up

This year is the first year of new measures that enable people who have been out of the work force, like new Mums, to top up their superannuation.

If you have:

A total superannuation balance below $500,000 as at 30 June; and
Not utilised your entire concessional contributions cap ($25,000) for the year

then you can ‘carry forward’ the unused amount on a rolling 5 year basis.

For example, if your total concessional contributions in the 2018-19 financial year were $10,000 and you meet the eligibility criteria, then you can carry forward the unused $15,000 over the next 5 years. You may then be able to make a higher deductible personal contribution in a later financial year. If you are selling an asset and likely to make a taxable capital gain, a higher deductible personal contribution may assist in reducing your tax liability in the year of sale.

Remember:

Your total superannuation balance must be below $500,000 as at 30 June of the prior year before you utilise any carried forward amount (within the 5 year term); and
In some cases, an additional 15% tax can apply (30% total) to concessional contributions made to super where income and concessional contributions exceeds certain thresholds ($250,000 in 2018-19). Your income could be higher than usual in the year when you sell an asset for a capital gain.

How to Prepare for a Tax Office Visit

The Tax Office is actively targeting geographic areas for special visits as part of a nationwide crackdown on the black economy.

This financial year, the ATO has visited 22 regions with another four in progress. Next financial year they plan on visiting over 10,000 businesses.

The ATO is seeking to identify businesses that are hiding sales, paying cash in hand, or are underpaying workers. We have all seen businesses that prefer cash payments (and give discounts for cash), or do not run sales through the cash register. It’s likely that in many of these cases this income is not being reported.

The ATO has a plethora of case studies to support these visits, like the $2 million in undeclared income for a series of nail salons owned by the one taxpayer. The ATO’s interest was initially piqued by anomalies between the owner’s lifestyle and assets, and the income being declared from the salons. In another case a restaurant owner was only declaring eftpos payments and not cash payments received (the cash was kept in a shoe box). An audit revealed unreported income and overclaimed expenses of around $1.1m.

So why these areas? The ATO says these areas exhibit some statistical anomalies, for example, a higher number of businesses not registered for PAYG or GST. Other indicators that set off the ATO ‘alarm bells’ include businesses that:

operate and advertise as 'cash only' or mainly deal in cash
ATO data matching suggest don’t take electronic payments
are part of an industry where cash payments are common
indicate unrealistic income relative to the assets and lifestyle of the business and its owner
fail to register for GST or lodge activity statements or tax returns
under-report transactions and income according to third-party data
fail to meet super or employer obligations
operate outside the normal small business benchmarks for their industry
are reported to the ATO by the community for potential tax evasion – the number of reports received by the ATO shows that the community is less tolerant of unfair practices in these industries.

While it is ok for your business to be outside of the statistical norm, you need to be able to explain why. For example, you might be a gardener with very high deduction claims for equipment outside of what is normal for your industry, but a recent large contract meant that you had to upgrade all of your equipment.

If ATO officers turn up at your business, they may ask you to show them how you record your sales and ask to see the records for the past day or so. If there appear to be anomalies in your reporting, further action might be taken.

They may also check payroll records to ensure that staff are ‘on the books’ and superannuation entitlements are being met. A classic problem area is cash payments or poor records of family members working in the business. If a family member is employed, unless they are a Director of the business, you need to meet the same standards as if they were not related including minimum wage, PAYG withholding and superannuation guarantee payments.

What you can do to prepare for an ATO visit:

Have great records, particularly if your business predominantly uses cash
Make sure your paperwork is up to date - invoicing for services provided, recognition of expenses (with receipts), salaries and cash taken out of the business by the owners
Ensure staff are recording sales and expenses correctly
Ensure your business has a separate bank account – it cannot be your personal bank account.

Quote of the month

" We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. "

–Winston Churchill

If you are concerned about any of the issues raised, please call us on (07) 4697 9332 - we would be happy to help you.

Kind Regards,

Carmel Summers and the team

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COVID-19 STIMULUS PACKAGE

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IN DETAIL

COVID-19 - HOW IT AFFECTS YOU AND YOUR BUSINESS

7 Things you need to know about COVID-19

1. What is COVID-19?

2. What is the Australian Government doing about the situation?

3. Will the stimulus package affect individuals and households?

4. Will the package offer support for your business?

5. Is any tax support for businesses included in the package?

6. What are your WHS obligations?

7. What’s next for your business?

Your Knowledge - July 2019

60,000 tax cheat tip-offs

Super, insurance and exit fees: The 1 July changes

Single touch payroll exemption for directors and family members

Who owns the assets of a trust?

Laundry expenses hung out to dry

New pay rates from 1 July

Your Knowledge - June 2019

Tax time: Are you in the ATO's sights?

What's New

For you

Your business

Your trust

Your superannuation

How to Prepare for a Tax Office Visit

Quote of the month