Tax compliance and the sharing economy

The ATO is reminding those who work in the sharing economy to be aware of their tax obligations.

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The sharing economy connects buyers (users) and sellers (providers) through a facilitator who usually operates an app or a website. Some popular examples include Airbnb, Stayz, Uber, Deliveroo, Airtasker and so on. It is often overlooked by providers of these services that money earned as a result of using them is taxable income. Different rules apply, depending on what type of sharing economy activities are undertaken by an individual.

Tax responsibilities will vary depending on the services taxpayers engage with. Those who rent out part or all of their home are reminded to:

• declare what they earn in their tax return;

• apportion related expenses as appropriate before claiming deductions and

• understand it may affect their capital gains tax if they sell their home in the future.

Individuals who participate in ride-sourcing activities need an ABN, to register for GST from the day they start, to pay GST on the full amount of every fare and to keep records of income and expenses for both GST and income tax purposes. GST credits associated with your ride-sourcing enterprise are deductible.

Those providing other goods and services through the sharing economy need to remember to declare what they earn and apportion related expenses.

While there are a number of compliance issues to consider, there are also a number of deductions users and providers of the sharing economy can claim, but rarely do. According to the ATO, to be eligible to claim a deduction:

• Appropriate records must be kept

• You must not have been reimbursed for the money spent

• Cost must relate to the job/service and not a private expense

• Accurately calculate how much of the total expense is business related and only claim from this portion.

If you have any queries please contact our office on (03) 9728 1448

Have a great day,

The team at TAS Tailored Accounting Solutions 

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

ATO targeting fringe benefits tax

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The ATO has fringe benefits tax (FBT) in its sights this tax time with a crackdown on employers that are deliberately avoiding or minimising their tax payable.

The specific areas of focus include:

Motor vehicles
Situations where an employer-provided motor vehicle is used, or available, for private travel of employees. This constitutes a fringe benefit and needs to be declared in the fringe benefits tax return (if lodgment is required). There are circumstances where this may be exempt,
i.e., where the entity was tax exempt of  the private use of the vehicle was exempt. Some employers fail to identify or report these fringe benefits or incorrectly apply exemption provisions.

Employee contributions

The Tax Office is focusing on situations where employee contributions that have been paid by an employee to an employer are declared in both the fringe benefits tax return (if lodgment is required) and the employer’s income tax return. Focusing on this issue helps to ensure that the employer does not fail to report these contributions as income in their income tax return and that the employer does not incorrectly overstate employee contributions in their fringe benefits tax return to reduce the taxable value of benefits provided.

Non-lodgment

Employers who provide fringe benefits must lodge a fringe benefits tax return unless the taxable value of all benefits has been reduced to nil. Common errors include failure to identify fringe benefits provided and incorrect calculation of benefit values or reduction amounts.

Employer rebate

The ATO is cracking down on employers that apply for a fringe benefits tax rebate when they are not eligible. Rebatable employers are certain non-government, non-profit organisations.

Car parking valuation

The validity of valuations provided in relation to car parking fringe benefits is also under ATO scrutiny. Errors that attract the Tax Office’s attention include:

  • market valuations that are significantly less than the fees charged for parking within a one kilometre radius of the premises on which the car is parked
  • the use of rates paid where the parking facility is not readily identifiable as a commercial parking station
  • rates charged for monthly parking on properties purchased for future development that do not have any car park infrastructure
  • insufficient evidence to support the rates as the lowest fee charged for all day parking by a commercial parking station.

Feel free to contact our office on (03) 9728 1448 with any queries.

Thank you,

The team at TAS Tailored Accounting Solutions

A guide to negative gearing

Negative gearing is a common tax strategy used by property investors to offset the costs of owning a property against assessable income.

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The strategy is arguably one of the most generous tax breaks available to Australian property investors. It allows investors to claim the shortfall between a property’s associated expenses and its rental income as a deduction against their total taxable income – resulting in a lower annual income tax bill. Where the other income is not sufficient to absorb the loss it is carried forward to the next year.

To access negative gearing on a property, the for this visa will pay a levy; generating revenue for the Skilling Australians Fund which will replace the existing unsuccessful training benchmarks. The Skilling Australians Fund assists financing apprenticeships and traineeships while allowing for employers to meet critical needs for their businesses where Australian skill sets are not available.To access negative gearing on a property, the owner must have borrowed money to purchase the property and the net rental income must be less than the costs of maintaining the property.

For example, if the rent of a property was $500 per week, and the property was fully tenanted for a full financial year, the rental income would be $26,000. If the deductible expenses for that year were $40,000, the net rental loss would be $14,000. The $14,000 loss can then be applied to reduce the property owner’s taxable income.

Although negative gearing is helpful for those owners experiencing a net rental loss, the strategy is not without flaws. An underperforming property is still making a loss, and ideally, investors would prefer to have a positively geared property where rental income exceeds expenses.

Investors who have long term negatively geared properties are generally hoping to incur long term profits from capital growth. Even if you think that your investment property will be positively geared, understanding the benefits of negative gearing can give you a little peace of mind knowing that if the property does lose money, you will be able to offset the loss against your taxable income.

When a property is positively geared, the income earned is added to your total taxable income. As such, it is taxed at your marginal tax rate. The same applies to any capital gain that you make from selling a property.

If you have any queries please do not hesitate to contact our office on (03) 9728 1448.

Many thanks,

TAS Tailored Accounting Solutions

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

 

ATO to report unpaid debts

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The Mid-Year Economic and Fiscal Outlook 2016-17 announced that from 1 July 2017, the ATO will disclose business tax debt information to credit reporting bureaus.

The new measure is geared to enhance the integrity of the tax system and ensure businesses who are not compliant do not gain an unfair competitive advantage over those businesses who are. The ATO will initially pass on unpaid debts from businesses with an Australian Business Number and with a tax debt of more than $10,000 which is at least 90 days overdue. Taxpayers will be notified by the ATO before the information is passed on to a credit reporting bureau.

In addition, a special Taskforce specifically aimed at dealing with the cash economy has been developed as an innovative, whole-of-government policy response to this problem. Activities under scrutiny are those which disadvantage honest taxpayers, undermine the integrity of Australia’s tax and welfare systems and reduce the amount of revenue collected by governments.

Have any queries? Contact our office on (03) 9728 1448.

Many thanks,

TAS Tailored Accounting Solutions

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

Rates increase for fuel tax credits

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Fuel tax credit rates increased on 1 February 2017. These rates are indexed twice a year, in February and August, in line with the consumer price index (CPI).

The rates vary depending on when you acquire the fuel, the type and quantity of fuel you use, and the activity you use it for. Rates may also change for fuel used in a heavy vehicle for travelling on public roads. This is due to changes to the road user charge which is reviewed annually.

If you claim less than $10,000 in fuel tax credits each year, there are now simpler ways to record and calculate your claim. For the BAS period ending 31 March 2016 and onwards, you can:

• Use one rate in a BAS period – the rate that applies at the end of the BAS period

• Work out your litres based on the cost of the fuel you purchased.

To check which rate applies for your business, visit the Australian Tax Office (ATO) website or contact our office. Remember, there are time limits for claiming fuel tax credits, making adjustments and correcting errors – generally, you must claim or amend your claim within four years.

Have any queries in respect of the above? Feel free to contact our office on (03) 9728 1448.

Many thanks,

TAS Tailored Accounting Solutions

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

CGT events affecting shareholders

There are a number of capital gains tax (CGT) events that could affect you as a shareholder.

Capital gain tax (CGT) events include various transactions resulting in a capital gain or capital loss. CGT is the tax paid on any capital gain made. This is worked out by deducting capital losses and any CGT discounts from the total annual capital gains.

A CGT event occurs if you have sold (or otherwise disposed of) your share or units or other assets. However, there are a number of other CGT events that can result in capital gains or capital losses. According to the ATO, a CGT event may also occur where an individual:

• switches units between managed funds to redeem said units

• attains a distribution from either a managed fund or a unit trust (not including dividends)

• receives payments from a trust or company that are non-assessable

• is the owner of shares in a company where shares have been declared worthless

• owns shares in a company that are cancelled because the company is wound up.

Individuals must also consider whether they are entitled to any income tax deductions. This occurs when a listed investment company (LIC) pays a dividend where a LIC capital gain amount is indicated.

There are certain occurrences where special capital gains tax rules apply, including:

• attaining bonus shares and/or units and rights and/or options to acquire shares or units from a company or trust

• entering into employee share scheme or dividend reinvestment plan or through buying convertible notes.

If an individual has held a share for 12 months or more, they can use the ‘CGT discount method’ that allows them to reduce their capital gain currently by 50 per cent. In this instance, the cost base is subtracted from capital proceeds, then capital losses are deducted and then reduced by the relevant discount percentage.

If you have any queries in respect of the above please do not hesitate to contact our office on (03) 9728 1448.

Many thanks,
TAS Tailored Accounting Solutions
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This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

Federal Budget: Keeping taxpayers honest

The Budget focuses on maintaining the integrity of Australia’s tax system to ensure it is fair and secure to all and covers five key areas.

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Avoidance

The Government will continue to crack down on the cash economy with additional funding for the Tax Office’s Black Economy Taskforce extended until 30 June 2018.

The taxable payments reporting system will be expanded to ensure payments made to contractors in the courier and cleaning industries are reported from 1 July 2018. Anti-avoidance tax behaviours will also be targeted as the Government intends on banning technology that modifies or deletes sales records for the purpose of minimising tax.

Finally, aggressive tax structuring where hybrid instruments are used to exploit the tax differences between countries are on the Government’s radar, and the Multinational Anti-Avoidance Law will be strengthened to ensure corporate structures, i.e. foreign partnerships or foreign trusts, are compliant with the law.

Residential property

Deductions for travel expenses for a residential investment property will be disallowed. This measure addresses issues with investors that have been claiming travel costs for private purposes or who have not properly apportioned their costs. Additionally, deductions for plant and equipment in residential property investments will be limited to expenses directly incurred by investors.

Goods and services tax (GST)

GST law will be strengthened to prevent some property developers from avoiding GST obligations by ensuring GST is paid directly to the ATO when purchasing newly constructed residential properties or new subdivisions.

Capital gains tax (CGT)

From 1 July 2017, small business capital gains tax (CGT) concessions will be amended to ensure that concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

Tighter capital gains tax rules for foreign and temporary residents will deny access to the main residence exemption when they sell Australian property. Furthermore, the foreign resident capital gains tax withholding regime will see the withholding rate rise to 12.5 per cent, and the threshold will reduce from $2 million to $750,000.

Superannuation

The Government intends on bolstering the integrity of the super system by including limited recourse borrowing arrangements (LRBA) in a member’s total superannuation balance and transfer balance cap, effective from 1 July 2017. Also, on the cards is the tightening of related party transactions on non-commercial terms to help increase super savings from 1 April 2018

If you have any queries in respect of the above, feel free to contact our office on (03) 9728 1448.

Many thanks,

TAS Tailored Accounting Solutions

 

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

Federal Budget: A continued commitment to growth

The Government has taken a two-prong approach in this year’s Federal Budget to stimulate growth in the economy by providing targeted spending and business incentives.cq5dam.web.512.341

Regional infrastructure:
A key feature of this year’s Budget is the commitment to investing in regional growth to better the Australian economy. A $472 million Regional Growth Fund will be set up to invest in regional infrastructure projects. An additional $8.4 billion will be allocated to fund the Melbourne-to-Brisbane Inland Rail in 2017-18. The Inland Rail will provide significant employment in regional areas as well as increased export opportunities.

Company tax plan:
The Government’s promise to small and medium businesses in last year’s Budget continues through its Ten Year Enterprise Tax Plan to reduce the company tax rate for all companies to 25 per cent by 2026-27. Incorporated small businesses with a turnover less than $10 million will have their tax rate reduced to 27.5 per cent in 2016-17. Once legislated, the tax cut will be passed on to companies with an annual turnover less than $50 million by 2018-19. A lower corporate tax rate will help permanently broaden the economy by just over one per cent in the long term and effectively promote business investment by raising the investment return in Australia.

The Government acknowledges the major role small businesses play in the Australian economy and is committed to supporting small businesses to continue to grow and flourish.

Instant asset write-off:
A further boost will be provided for small businesses as the Government is extending the $20,000 instant asset write-off for a further 12 months until 30 June 2018. Small businesses with an aggregate annual turnover less than $10 million can access the concession to help improve their cash flow and invest in the assets they need to grow.

Reducing red tape:
The Government will provide $300 million over two years to states to help reduce the red tape for small businesses. The removal of unnecessary restrictions for small businesses will help level the playing field and lessen regulatory burden.

If you have any queries in respect of the above and how these changes will affect your business – contact our office on (03) 9728 1448.

Many thanks,
Dorothea
TAS Tailored Accounting Solutions

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

Claiming depreciation on investment property

Rental property investors have access to a range of tax strategies. One such strategy, which is often underutilised, is claiming depreciation as a tax deduction.

House and money

Property expenses, such as depreciation and capital works expenditure, can be deducted over a number years, adding to a significant return for property investors come tax time. Property investors can utilise the services of a qualified quantity surveyor to inspect their property and prepare a depreciation schedule to ensure they are maximising these deductions.

In addition, the cost of a depreciation schedule is tax deductible. A quantity surveyor will focus on two main elements in a depreciation schedule:

Depreciating assets
Rental property investors can claim a deduction for the decline in value of certain items (depreciating assets) acquired as part of the purchase of the property or subsequently purchased for the property. The ATO considers a depreciating asset as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used, for example, freestanding furniture, stoves, washing machines and television sets. For assets costing $300 or less, investors can claim an immediate deduction for the entire cost. However, this deduction cannot be claimed if the asset is one of a set of assets that together cost more than $300. Depreciating assets valued at less than $1,000 can be grouped in a low-value asset pool and depreciated together.

Capital works deductions
If you own a residential rental property which was built after 17 July 1985, you may be able to claim capital works deductions for construction cost. Capital works deductions are income tax deductions that can be claimed for expenses such as: • building construction costs – for example, adding a room, garage, patio or pergola • the cost of altering a building – i.e., removing or adding an internal wall • the cost of capital improvements to the surrounding property.

These deductions are usually spread over a period of 40 years. A deduction may also be available for structural improvements, such as sealed driveways and retaining walls, if work began after 26 February 1992. Depending on the date the capital works began, the deduction rate is 2.5 per cent or 4 per cent (adjusted for part-year claims).Capital works deductions can only be claimed for the period in which the property is rented or is available for rent and cannot exceed the construction expenditure.

If you have any queries please contact our office on (03) 9728 1448

Have a great day,

The team at TAS Tailored Accounting Solutions

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

CGT exemptions for depreciating assets

 

 The disposal of a depreciating asset may incur capital gains tax (CGT) if the asset has been used for a non-taxable purpose (i.e. private purposes).

CGT

There a number of CGT exemptions that may apply to a capital gain or capital loss made from the disposal of a depreciating asset:

 Pre-CGT assets: you disregard a capital gain or capital loss from a depreciating asset if the asset was acquired before 20 September 1985.

Small business entity assets: if you are a small business entity you disregard a capital gain or capital loss from a depreciating asset and you can deduct an amount for the depreciating asset’s decline in value under the small business entity capital allowance provisions for the income year in which the balancing adjustment event occurred.

Personal use asset: if a depreciating asset is a personal use asset (one used or kept mainly for personal use and enjoyment), you disregard any capital loss from CGT event K7. You also disregard a capital gain under CGT event K7 from a personal use asset costing $10,000 or less.

Collectables: you disregard a capital gain or a capital loss from a depreciating asset that is a collectable costing $500 or less.

Balancing adjustment event and CGT event: you only include a balancing adjustment event that gives rise to a capital gain or capital loss under CGT event K7. However, capital proceeds received under other CGT events, for example, CGT event D1, may still be relevant for a depreciating asset as CGT events are not the equivalent of balancing adjustment events.

If you have any queries please contact our office on (03) 9728 1448.

Have a great day!

Isabella Farmakis Buckosvky

TAS Tailored Accounting Solutions

(03) 9728 1448

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication. Publication February 2017.

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