taxcor

Selling your home to a developer or use it to produce income?

Fri, 06 Jun 2025 10:13:00 GMT

The NSW state Government is attempting to help with the housing affordability crisis by making areas around train stations and shopping centres eligible for rezoning for denser development. It will be important to see your tax adviser if you receive a generous offer from a property developer for your home (or rental property) as a result of this rezoning.

This is because you will have to consider the capital gains tax (CGT) – or possible other income tax consequences – of selling your home or rental property in these circumstances – including where you may be forced to sell under some state compulsory acquisition rule (e.g., in relation to strata units).

If it is your home (primary residence) you should be right as your home is exempt from CGT.

But if you have ever used your home to produce assessable income (e.g., rented the whole or a part of it out or used it as a place of business) you will be subject to a partial CGT liability – and calculating the amount of this liability can be quite complex, depending on the exact situation.

For example, if you originally lived in the home and rented it for a period you will ordinarily be able to apply the “absence concession” to continue to treat it as your home and therefore sell it CGT-free. But if you can’t, you will have to reset its cost for CGT purposes by reference to its market value at the time you first rented it and then recalculated its precise cost for the calculation of the partial gain. This includes knowing what range of expenses can be included in this cost!

Likewise, if you use part of your home as a place of business you will have to reset its cost for CGT purposes on the same basis –but in this case you may (and it’s a big “may”) be entitled to the CGT concessions for carrying on a small business. But this is an area ripe with confusion – and controversy (unbeknown to many). And then of course, there is the issue of whether you qualify for the generous 50% CGT discount to reduce any assessable capital gain– and this is often not as simple as it looks.

It may even be the case that you could be assessed on any gain you make on the sale of your property on the basis that it is like taxable business income (and not a concessionally taxed capital gain). And this can potentially happen if you carry out activities in a business-like manner to increase the value of your home in order to fetch a higher price from developers.

So, if for better or worse, if you find yourself being approached by a developer to sell your home (or other real estate), go see your tax practitioner. Or if you decide to use your home to produce income best would be to see your tax practitioner first before you start producing income.

Their advice will be invaluable in perhaps this one-off chance to make a significant gain on your main asset.

Please note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Don't Underpay Your Employees

Mon, 02 Jun 2025 06:26:00 GMT

Underpaying employees occurs when workers are paid less than the minimum wage or are not provided with their correct entitlements and benefits as stipulated by Australian employment laws.

Key factors contributing to underpayments include:

Misclassification: Employers may misclassify workers as independent contractors rather than employees, leading to underpayment of minimum wage, overtime, and leave.
Minimum wage violations: Australia has a legislated minimum wage that employers must adhere to. Underpayment occurs when businesses pay employees less than this minimum wage.
Award and agreement misinterpretation: Many employees are covered by industry awards or enterprise agreements that specify certain minimum conditions (e.g., pay rates, working hours, penalty rates). Employers may misunderstand or intentionally violate these agreements.
Record-keeping issues: Poor record-keeping practices can lead to unintentional underpayment when employers don’t accurately track working hours or fail to apply relevant allowances.
The complexity of Labor laws: The Australian industrial relations system can be complex, and small businesses, in particular, may need help understanding and compliance with all the relevant laws and regulations.
Intentional non-compliance: In some cases, businesses may intentionally underpay employees to cut costs and increase profits, which is illegal and unethical.

The penalties for underpaying employees can include the following:

Back payment: Employers must pay the affected employees the owed wages, including any outstanding entitlements like overtime, penalty rates, or leave entitlements.
Penalty rates: Employers may be required to pay additional penalty rates as compensation for the underpayment.
Interest: Employers may be liable to pay interest on the underpaid wages, calculated from when the underpayment occurred until it is rectified.
Civil penalties: Employers who deliberately underpay their employees can face significant civil penalties.
Legal proceedings: Underpaid employees can take legal action against their employer to recover the unpaid wages and seek additional compensation.
Reputational damage: Underpaying employees can lead to negative publicity and damage the company’s reputation.

We are here to help, call us today for an obligation free consultation!

Year-end Reporting for Your Employees and Contractors

Mon, 02 Jun 2025 06:14:00 GMT

Single Touch Payroll (STP)

Employers reporting through Single Touch Payroll (STP) need to make a finalisation declaration by 14 July each year . Finalising your STP data is how you let ATO know your STP reporting is complete for an employee for a financial year.

The way you finalise your STP data is by making a finalisation declaration. A finalisation declaration is a declaration in the approved form lodged by 14 July each year indicating you have fully reported for the financial year for each employee. You make a finalisation declaration by providing a finalisation indicator for an employee (and directors, contractors, etc) as part of your STP reporting.

Your payroll software will be able to provide you with some guidance on how to finalise STP. However, if you are unsure about the process, please let us know.

Taxable Payments Annual Report (TPAR)

Some businesses need to lodge a Taxable payments annual report (TPAR) for payments made to contractors or subcontractors for certain services during the financial year.

A TPAR must be lodged by 28 August each year .

The services that come under the Taxable payment reporting system (TPRS) are:

building and construction
cleaning
courier and road freight
information technology (IT)
security, investigation or surveillance.

If your business provides these services and pays contractors to deliver them, you may need to lodge a TPAR.

Your bookkeeping software will be able to provide you with some guidance on how to lodge a TPAR. You can also find useful guidance on ATO website. However, if you are unsure about the process, please let us know.

Managing Superannuation for Your Employees: A Guide for Small Business Owners

Fri, 23 May 2025 08:08:00 GMT

If you are an employer, it is your obligation to correctly pay your employees superannuation on time. Ensuring timely and accurate superannuation payments is crucial for compliance with the Superannuation Guarantee (SG) requirements and for the financial well-being your employees.

However, there are additional two areas of superannuation that you need to be mindful of.

Stapled Super Fund

A stapled super fund is an existing super account linked, or 'stapled', to an individual employee so it follows them as they change jobs. This aims to reduce account fees, avoiding new super accounts being opened every time an employee starts a new job. If you don't meet this obligations, penalties may apply.

You can check your employees stapled super fund on your ATO Online Services for Business Account.

Complying Super Fund

Section 290-75 ITAA97 requires that, to deduct a contribution made to a superannuation fund, the fund must be a complying super fund. Otherwise, contributions to non-complying funds are not deductible. The employer will also have a liability to fringe benefits tax, as these contributions to a non-complying superannuation fund are not excluded from the definition of fringe benefit in s 136 Fringe Benefits Tax Assessment Act 1986 (Cth).

In essence, if payment made to complying super fund, employer contributions are eligible to be claimed as an income tax deduction by the employer. There is no actual limit on the amount of the deduction that can be claimed by an employer in relation to contributions made in respect of an employee.

As an employer, you must pay super for eligible employees. To avoid the super guarantee charge (SGC), payments must be received by the employee's fund on or before the quarterly super due dates.

Payments can be made at least 4 times a year. This applies from the day employees start working for you. Payment due dates occur quarterly.

Quarter 1: 1 July – 30 September, Payment due date, 28 October
Quarter 2: 1 October – 31 December, Payment due date, 28 January
Quarter 3: 1 January – 31 March, Payment due date, 28 April
Quarter 4: 1 April – 30 June, Payment due date, 28 July.

When a super due date falls on a weekend or public holiday, your contribution must be received by the fund on or before the next business day.

You can also make payments more frequently than quarterly, for example fortnightly or monthly. If you do, ensure you pay your total super guarantee (SG) contribution for the quarter by the due date.

If you don't pay an employee's super guarantee (SG) amount in full, on time and to the right fund, you must pay the super guarantee charge (SGC).

The SGC includes:

1. The SG shortfall, made up of:

a. SG calculated on salary and wages (including any overtime)

b. any choice liability, based on the shortfall and capped at $500

2. Nominal interest of 10% per annum (accrues from the start of the relevant quarter)

3. Nn administration fee of $20 per employee, per quarter.

ATO can impose penalty and take disciplinary action if you fail to meet the superannuation guarantee obligations. You will be liable for a Part 7 penalty – under Superannuation Guarantee (Administration) Act 1992 (SGAA).

Payday superannuation

From 1 July 2026, employers will be required to pay their employees' super at the same time as their salary and wages. We will publish more information once the legislation is passed.

Six super strategies to consider before 30 June.

Wed, 14 May 2025 04:40:00 GMT

With the end of financial year fast appro aching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2025.

Tip 1 – Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation, you may be able to use the carry forward concessional contribution (CC) rules (otherwise known as “catch-up concessional” rules) to make large CCs this year without exceeding your CC cap.

This strategy can allow you to carry forward any unused CC cap amounts that have accrued since 2018/19 for up to five financial years and use them to make CCs in excess of the general annual CC cap (currently $30,000 in 2024-25 FY).

Tip 2 – Make a personal deductible contribution

Carry-forward contributions may also allow you to make higher amounts of personal deductible contributions in financial years where you may have a higher level of taxable income, for example, due to assessable capital gains.

But if you’re not eligible to use the carry forward rules to make a larger contribution, you can still boost your superannuation by making a personal deductible contribution up to the general CC cap.

You can then make a CC using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) at 30 June 2024 was below $500,000.

It’s important to note that personal deductible contributions are only deductible if you meet all of the following conditions:

You make the contribution to a complying superannuation fund
You are at least age 18 when the contribution is made(unless you derived income from carrying on a business or from employment-related activities)
You make the contribution within 28 days after the month in which you turn 75
You notify your superannuation fund trustee in writing of your intention to claim the deduction
The notice must be given by the earlier of:
when you lodge your income tax return for the year the contributions were made, or
the end of the financial year following the year the contributions were made.
The trustee of your superannuation fund must acknowledge receipt of the notice, and you cannot deduct more than the amount stated in the notice.

Tip 3 – Spouse contribution splitting

You can split up to 85% of your 2023/24 concessional contributions to your spouse’s superannuation before 30 June 2025, provided your spouse is:

Under preservation age, or
Between preservation age and 65 years, and not retired at the time of the split request.

This is an effective way of building superannuation for your spouse and can manage your TSB which can have several advantages, such as:

Equalising your balances to maximise the amount you both have invested in tax-free retirement phase income streams, or
Optimising both of your TSBs to access a higher NCC, etc.

Tip 4 – Superannuation spouse tax offset

If your spouse is not working or earns a low income, you may want to consider making a NCC into their superannuation account. This strategy could benefit you both by boosting your spouse’s superannuation account and allowing you to qualify for a tax offset of up to $540.

You may be able to get the full offset if you contribute$3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer superannuation contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.

Tip 5 – Maximise non-concessional contributions (NCC)

Another way to boost your superannuation is to make a NCC with some of your after-tax income or savings. The general NCC cap for 2024/25 is $120,000, and eligibility to utilise the cap depends on your TSB.

Although NCCs don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that is paid on superannuation on investment earnings. This tax rate may be lower than what you might pay if you held the money in other investments outside superannuation.

Tip 6 – Receive the government co-contribution

If you're a low or middle-income earner with a total income of less than $60,400 in 2024–25, and at least 10% of that income is from employment or running a business, you may benefit from making a non-concessional (after-tax) contribution to your superannuation before 1 July 2025.

If eligible, the Government may make a co-contribution of up to $500 directly into your super account.

The maximum co-contribution of $500 is available if:

You contribute $1,000 of your own after-tax money to super, and
Your total income is $45,400 or less for the year.

You may receive a reduced co-contribution if:

You contribute less than $1,000, and/or
Your total income is between $45,401 and $60,400.

As with the spouse superannuation tax offset, the definition of “total income” includes:

Assessable income,

Reportable fringe benefits, and
Reportable employer superannuation contributions.

Need help?

You’ll need to meet certain eligibility conditions before benefiting from any of these strategies. Contact us before 30 June if you’re thinking about investing more in superannuation so we can help you decide which strategies are most appropriate to your circumstances.

Understanding Fringe Benefits Tax (FBT)

Fri, 09 May 2025 10:09:00 GMT

Fringe benefits are taxed under specific legislation, the Fringe Benefits Tax (FBT) Assessment Act 1986 (Cth) (FBTAA), separate from the Income Tax Assessment Act 1936 (Cth) (ITAA36) and the Income Tax Assessment Act 1997 (Cth) (ITAA97).

FBT is a tax paid by employers on certain benefits provided to their employees or their associates in place of salary or wages. Its purpose is to prevent employers providing non-cash benefits to their employees and associates/family members without anyone being taxed on these benefits.

These benefits can include:

Car fringe benefits
Car parking fringe benefits
Entertainment-related fringe benefits
Expense payment fringe benefits
Debt waiver fringe benefits
Loan fringe benefits
Housing fringe benefits
Board fringe benefits
LAFHA fringe benefits
Property fringe benefits
Residual fringe benefits

Who Pays FBT?

FBT is paid by the employer, not the employee, and it is separate from income tax. If you provide non-cash benefits to your employees and associates/family members, you may have an FBT liability.

The FBT year runs from 1 April to 31 March, and the return is generally due by 21 May (or later if lodged through a tax agent).

Employers can reduce FBT by:

Using employee contributions
Providing exempt or concessional benefits (e.g., portable electronic devices for work)
Structuring benefits carefully under the current ATO rules

10 Common Errors in FBT Return Preparation

Missing Odometer Readings: Failing to record odometer readings at both 1 April and 31 March can invalidate logbooks and lead to incorrect car fringe benefit calculations.
Incorrect or Outdated Logbooks: Using a logbook older than five years or one that doesn’t reflect current usage may result in an inaccurate business use percentage.
Not Accounting for Employee Contributions: Overlooking after-tax contributions made by employees can lead to overstated fringe benefits and excess FBT liability.
Incorrect Valuation of Benefits: Using market value instead of statutory methods, or failing to apply correct valuation methods (e.g., statutory formula vs. operating cost method) for car benefits.
Omitting Minor Benefits Exemption: Not applying the minor benefit exemption correctly for infrequent, irregular benefits under $300, potentially resulting in unnecessary FBT payable.
Incorrect GST Treatment: Not grossing-up correctly using Type 1 or Type 2 rates depending on whether the benefit entitles the employer to a GST credit. Another common error is failing to include GST-inclusive figures when calculating benefits.
Failing to Identify Reportable Benefits: Not reporting certain benefits on the employee’s PAYG summary (e.g., car benefits, loan benefits), which is required if they exceed $2,000 in a year.
Assuming All Benefits Are Exempt: Misapplying exemptions such as work-related items, travel expenses, or relocation benefits without checking conditions under the law.
Not Keeping Adequate Records: Incomplete documentation such as travel diaries, invoices, or signed declarations can result in denied exemptions or deductions.
Missing the FBT Return Deadline: Not lodging the FBT return or paying the liability on time can lead to interest charges and penalties from the ATO.

Choosing Between a Company and a Trust for Your Business: What You Need to Know

Thu, 01 May 2025 03:24:00 GMT

When starting or growing a business, choosing the right structure is one of the most important decisions you will make. Two of the most common structures used in Australia are discretionary trusts and companies. Each comes with its own set of advantages and disadvantages, and the right choice will depend on your goals, risk profile, funding needs, and long-term plans.

Understanding the Key Differences

Companies, provide a more straightforward and structured approach. They are taxed at a lower flat rate, profits can be retained in the company to fund future growth, and they make it easier to introduce new investors or sell the business. However, companies may have fewer tax concessions available compared to trusts, particularly for capital gains.

Discretionary Trusts, on the other hand, offer flexibility when it comes to distributing income and capital to beneficiaries. They are often used for family businesses and can provide strong asset protection. However, they also come with obligations, such as the requirement to distribute income annually, and are subject to increasing scrutiny from tax authorities.

When a Company Might Be Suitable

Using a company to run your business might be better if:

You want to retain profits in the business to fund growth.
You are seeking third-party investors or planning to raise capital.
You prefer a clearer and simpler structure.
You want to limit ongoing tax planning complexity.

In particular, having a company operate the business with a discretionary trust as the shareholder allows a balance between commercial benefits and family wealth planning. This setup provides the flexibility of income distribution with fewer direct tax complications. It also enhances asset protection and succession planning options.

When a Trust Might Be More Effective

A discretionary trust could be the right choice if:

You want to distribute income flexibly among family members.
Asset protection is a priority.
You plan to access certain tax concessions available to trusts.
Your business generates regular profits that you want to distribute.

It is worth noting that using a trust with a corporate beneficiary (to cap tax at the company rate) has become more complex. Retaining those funds in the trust for business use can now trigger tax issues unless specific arrangements are followed. This adds an administrative burden and cash flow consideration for businesses.

A Holding Company: An Advanced Option

For growing businesses with more complex needs, introducing a holding company structure can add another layer of flexibility and protection. In this setup, the operating company is owned by a holding company, which in turn is owned by a discretionary trust. This structure:

Provides strong asset protection by separating business risks from retained profits.
Allows better management of funds between group companies.
Enhances flexibility for future sale, succession, or expansion.
Reduces exposure to tax complications from loans or distributions within the group.

Planning for the Long Term

It is important not to choose a structure based only on short-term tax savings. The right structure should support:

Business growth and funding strategies.
Risk management and asset protection.
Succession planning for children or other family members.
Future sale of the business or exit strategies.

If you are considering restructuring your existing business, there are pathways available to move from a trust to a company structure (or vice versa) without triggering immediate tax costs. However, these must be carefully planned to avoid unexpected tax or legal consequences.

There is no one-size-fits-all answer when it comes to choosing between a trust and a company. Your decision should be based on your business goals, family situation, and plans for the future. Given the continuous changes in how trusts are viewed and taxed, it is now more important than ever to seek professional advice before making a decision.

In addition, Personal Services Income (PSI) refers to income that is mainly a reward for an individual’s personal efforts or skills. PSI rules may limit the deductions you can claim and require the income to be attributed directly to the individual performing the work, regardless of the business structure used. If your offering Professional Services, such as an IT specialist, you will be subject to additional rules and regulations, and this article may not be applicable to you.

If you would like help assessing which structure is right for your business, please contact us today for an obligation free consultation.

Operating a Business as a Sole Trader: Advantages and Disadvantages

Wed, 16 Apr 2025 03:09:00 GMT

When starting a business in Australia, many individuals choose to operate as a sole trader due to its simplicity and low cost. While this structure can offer several benefits, it also comes with certain risks and limitations.

What is a Sole Trader?

A sole trader is the simplest form of business structure. It involves one individual operating the business and assuming full control and responsibility for all aspects of the operation. There is no legal distinction between the business and the owner.

Example

Sarah is a migration agent based in Sydney. She decides to operate as a sole trader to keep things simple and cost effective. She sets up an ABN and begins offering her services to clients all over Australia. Sarah enjoys keeping all profits and making her own business decisions. However, as her client base grows, and she begins to hire employee. Later on, she starts to consider changing her business structure to a company in order to limit her personal liability and better manage her tax obligations.

Advantages of Operating as a Sole Trader

1. Easy and low-cost setup

Registering as a sole trader is quick, simple and inexpensive. You only need to apply for an Australian Business Number (ABN) and register a business name if required.

2. Full control

As the owner, you make all decisions and retain complete control over the direction and management of the business.

3. Retain all profits

All business profits go directly to you as the owner. You are not required to share income with other business partners or shareholders.

4. Simple tax obligations

Sole traders report business income as part of their individual tax return. You may be eligible for the small business tax offset and can claim business expenses accordingly.

5. Fewer compliance requirements

Sole traders face fewer reporting and regulatory obligations compared to companies or trusts. This makes it easier to manage day-to-day administration.

Disadvantages of Operating as a Sole Trader

1. Unlimited personal liability

You are personally responsible for all business debts and liabilities. If the business is sued or cannot pay its debts, your personal assets may be at risk.

2. No income splitting

You cannot share business income with a spouse or family member for tax purposes, which may result in higher tax obligations compared to other structures such as a trust. However, it is important to note that, not all busineses operating under a trust can split income. Some professional businesses may fall under the PSI / PSB rules that may prevent the trust from splitting income or retain profit in a company.

3. Reliance on the individual

If you fall ill or take leave, the business may stop operating. This structure often depends heavily on your personal effort and availability.

4. Limited growth potential

While suitable for small businesses, a sole trader structure may not support large-scale growth or expansion. Transitioning to a company or trust may be required as the business grows. Raising finance can be more challenging as lenders may view sole traders as higher risk. Investors are also less likely to invest in this structure.

Operating as a sole trader is an excellent starting point for many small businesses. However, it is important to consider your long term goals and risk tolerance. As your business evolves, you may need to revisit your structure to ensure it continues to meet your needs.

If you need help deciding which structure is right for you, please contact us today for an obligation free consultation.

Understanding Business Structures

Thu, 10 Apr 2025 06:56:00 GMT

When starting or restructuring a busines s, choosing the right structure is essential. In Australia, the most common business structures are sole trader, partnership, company, and trust. Each has its own legal, financial, and tax implications. This guide explains the differences among these structures, with simple examples.

Sole Trader

A sole trader is the simplest and most cost-effective business structure. The business is owned and operated by one individual who is legally responsible for all aspects of the business.

Features:

Ownership: Owned by one person.
Liability: Unlimited liability; personal assets may be at risk.
Taxation: Business income is reported as personal income on the individual’s tax return.
Control: Full control over decisions.
Setup Cost: Low.

Example:

John operates a photography business where he personally handles all the operations, from taking photos, editing them to managing customer bookings and payments. John is solely responsible for all profits, debts, and liabilities.

Advantages:

Simple and affordable to establish.
Full control over business decisions.
Minimal reporting requirements.

Disadvantages:

Unlimited personal liability for debts.
Limited access to capital.
Reliance on one person’s skills and capacity.

Partnership

A partnership involves two or more people (up to 20 in most cases) who share ownership, profits, and responsibilities of the business.

Features:

Ownership: Shared among partners.
Liability: Unlimited liability for general partnerships; limited partnerships offer limited liability for some partners.
Taxation: Income is distributed to partners and taxed at their individual rates.
Control: Shared decision making among partners.
Setup Cost: Moderate.

Example:

Sarah and Emily jointly run a café in the Partnership structure. Sarah manages the kitchen and menu, while Emily handles customer service and financial management. Both share profits and are jointly liable for debts incurred by the business.

Advantages:

Shared responsibilities and skills.
Increased access to capital.
Relatively simple to establish.

Disadvantages:

Unlimited liability for general partners.
Potential conflicts among partners.
Joint liability for actions of other partners.
Difficult to add or remove partners.

Company

A company is a separate legal entity from its owners (shareholders). It can incur debts, sue, and be sued in its own name.

Features:

Ownership: A separate legal entity, owned by shareholders.
Liability: Limited to the value of shares held.
Taxation: Pays a flat corporate tax rate (25%-30%, depending on turnover).
Control: Directors manage the company on behalf of shareholders.
Setup Cost: Higher than sole traders and partnerships.

Example:

Tech Innovators Pty Ltd is a software development company owned by three shareholders. The company has a board of directors who make strategic decisions, while the shareholders receive dividends from profits.

Advantages:

Asset protection.
Limited liability for shareholders.
Easier to raise capital through share issuance.
Perpetual succession (business continues if ownership changes).

Disadvantages:

Complex setup and compliance requirements.
More expensive to establish and maintain.
Directors can be personally liable in certain circumstances.

Trust

A trust is an arrangement where a trustee holds and manages assets on behalf of beneficiaries.

Features:

Ownership: Trust is not a separate legal entity, it is a relationship between the Trustee and the beneficiaries, which is bound by the trust deed. Trustee legally owns assets and manages them for beneficiaries.
Liability: Depends on the type of trust; trustees can be personally liable.
Taxation: Income is distributed to beneficiaries and taxed at their marginal tax rates.
Control: Trustee has significant control, governed by a trust deed.
Setup Cost: Higher than sole traders and partnerships.

Example:

The Smith Family Trust is established to manage rental properties. The trustee ensures rental income is distributed to family members (beneficiaries) according to the trust deed.

Advantages:

Asset protection.
Flexible income distribution.
A careful structure can provide tax benefits in certain circumstances.

Disadvantages:

Complex to set up and administer.
High setup and ongoing costs.
Trustees have fiduciary responsibilities and potential liabilities.

Conclusion:

Choosing the right structure depends on factors such as liability tolerance, tax implications, management preferences, and future growth plans.

For personalised advice, consult with us for a tailored advise.

The Hidden Dangers of DIY Bookkeeping for Small Business Owners

Wed, 09 Apr 2025 07:34:00 GMT

In the age of Social Media, it is tempting for small business o wners to handle their bookkeeping themselves. While this might seem like an efficient move, if you are not skilled enough DIY bookkeeping can quickly become a costly mistake.

Let’s take a closer look at the risks and why professional bookkeeping is a smarter investment.

Misclassification of Accounts

One of the most common DIY mistakes is misclassifying transactions. This might seem harmless, but incorrect categorisation can affect your:

Profit and loss accuracy;
GST reporting;
Fringe Benefits Tax (FBT) obligations;
Income Tax obligations;
Employee entitlements;
Payroll tax, and so on.

While this may seem like a minor mistake to the untrained eye, such errors can lead to:

ATO Penalties and interest;
Regulatory Investigations (i.e. Fair Training, ASIC);
Reputational Damage;
Legal action.

Missing Key Deadlines

We see this all the time that DIY bookkeeping often leads juggling numbers after hours, increasing the chance of missing:

BAS lodgement dates;
Superannuation guarantee payment due dates;
STP reporting deadlines;
Annual TPAR submissions and so on.

Missing these can result in ATO penalties, interest charges, and even loss of tax deductions (e.g., for late super payments).

Incorrect GST Treatment

GST calculation can be very complex. Common errors include:

Claiming GST credits on non-taxable purchases
Failing to report GST on income
Incorrectly reporting GST on imports and exports

Mistakes here can result in amended activity statements, audits, and ATO penalties.

Lack of Real-Time Financial Insight

When you are managing your own books, the numbers are often updated irregularly. This leads to a lack of visibility over your cash flow, profitability, and upcoming liabilities. Inaccurate records can also affect your ability to make informed business decisions.

Risk of ATO Audit

Inconsistent or incomplete records are a red flag. The ATO has increased its use of data-matching technology and AI to identify anomalies in tax returns and BAS. If your DIY bookkeeping doesn’t align with industry benchmarks or bank data, an ATO audit could trigger and you will require clean, reconciled records to defend your position.

How We Can Help

At Taxcor Business Accountants, we offer tailored bookkeeping solutions that:

Ensure full compliance with regulatory requirements;
Keep your records ATO audit ready at all times;
Give you real time insights into your financial performance through our monthly management report;
Free you up to focus on what you do best; Running your business.

Our team is across the latest updates to tax legislation and compliance requirements, so you can rest easy knowing your books are in safe hands.

DIY bookkeeping might seem manageable in the early days, but as your business grows, so do the risks. .

Avoid unnecessary stress, costly mistakes, and time consuming errors. Trust a qualified professional to keep your financial records accurate, compliant, and ready for whatever the future holds.

Get in touch with Taxcor Business Accountants today for an obligation free consultation.

ATO Motor Vehicle Logbook Requirements

Thu, 03 Apr 2025 04:33:00 GMT

If you use your personal car for work-related purposes, it is likely that you can claim your car expenses on your individual income tax return. It is important to note that to and from work is not considered as work-related travel.

There are two methods to calculate car expense claims on your tax return:

Cents per km method, or
Car Logbook method.

This article will discuss the ATO’s requirement for the logbook method.

The car logbook method is a good way to track your car expenses. In many cases, it can give you a higher deductions compared to the cents per km method.

When using the logbook method, you must record every trip in your vehicle (both private and business) for a 12-week period. Your logbook is then used to calculate the “business use percentage” of your car across the year. Your business use percentage is the percentage of kilometres you travel in your car for work-related purposes. It’s also the percentage of all of your car expenses you paid during the year that you can claim on your return.

It's crucial to keep accurate records to support your tax deductions in case of an audit. You must record every trip (business and personal) you make in your car for 12 weeks – not just work trips.

If you don’t do this, the ATO will consider your logbook as invalid and may reject all of your car expense claims.

The key logbook requirements are:

A separate logbook must be kept for each vehicle for a continuous 12-week period and must document.
When the logbook period begins and ends.
The car’s odometer readings at the start and end of the logbook period.
The total number of kilometres the car travelled during the logbook period.
The number of kilometres travelled for each journey (business & personal).
The odometer readings at the start and end of each subsequent income year your logbook is valid for.
The business-use percentage for the logbook period based on the business use of the vehicle.
The make, model, engine capacity and registration number of the car.

These entries must be made as soon as possible after the trip. Simply stating ‘business trip’ may not suffice as the ATO require more detailed information in relation to the journey to establish whether the purpose of the trip was for business or private purposes. It is best practice to include further details (e.g. name of client, supplier etc.). Keep in mind that each motor vehicle logbook you have is valid for five years, but you can start a new one at any time.

If the 12-week period is not representative of the whole year, you may have to adjust your business percentage (i.e. upward or downward). If your pattern has changed substantially during the year, the logbook may no longer be valid, and you may need to keep a new logbook.

You may use certain mobile apps to assist you provided they satisfy all the requirements in being able to calculate business usage on trips over a 12-week period (as outlined above).

Alternatively, you can also request us to send you a copy of our MS Excel logbook.

Selling a Business as a Going Concern: Key Considerations and GST Implications

Wed, 02 Apr 2025 18:02:00 GMT

For many business owners, selling a business can be both an exciting and complex milestone. One important concept to understand when selling a business is whether it qualifies as a “going concern” for Goods and Services Tax (GST) purposes. Selling a business as a going concern can have GST exemption on the sale.

What is a "Going Concern"?

Under the Goods and Services Tax Act 1999 (Cth), commonly referred to as the GST Act, section 38-325 provides a GST exemption for the supply of a going concern.

In simple terms, a “going concern” refers to a business that is operating and will continue to operate after the sale. The exemption allows the seller to avoid charging GST on the transaction, which can improve cash flow for both parties and reduce stamp duty exposure in certain states.

Legislative Requirements – Section 38-325 of the GST Act

The requirements for a supply to be GST-free as the supply of a going concern (SOGC) are contained in s 38-325 GSTA, which states that a supply of a going concern is GST-free if:

The supply is for consideration;
The recipient is registered or required to be registered for GST;
Both the supplier and the recipient have agreed in writing that the supply is of a going concern.

The supply of a going concern is defined in s 38-325(2) GSTA as a supply under an arrangement under which:

The supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise;
The supplier carries on, or will carry on, the enterprise until the day of the supply.

Example

Jenny owns a café in Sydney, operating as a sole trader and registered for GST. She decides to sell her business to Mark, who is also registered for GST.

The sale includes:

The lease of the premises;
Equipment and furniture;
Stock on hand;
The transfer of employee contracts (if agreed);
Existing supplier arrangements.

The business continues to trade right up until settlement, and both parties sign a written agreement that the sale is of a going concern.

The sale can qualify as a GST-free transaction under section 38-325 of the GST Act, provided all conditions are met.

ATO debunks Division 7A 'myths'

Sat, 29 Mar 2025 06:04:00 GMT

What is Division 7A?

Division 7A is a section of the Income Tax Assessment Act 1936 designed to prevent private companies (or their associates) from making tax-free payments to shareholders (or their associates). It treats certain payments, loans, or forgiven debts to shareholders as unfranked dividends, meaning they’re taxed in the hands of the recipient—even if no money was formally declared as a dividend.

ATO debunks Division 7A 'myths'

The ATO has recently published a document 'debunking' various Division 7A 'myths'.

Division 7A of the tax legislation is intended to prevent profits or assets being provided to shareholders or their associates tax free.

A payment or other benefit provided by a private company to a shareholder or their associate can be treated as a dividend for income tax purposes under Division 7A, even if the participants treat it as some other form of transaction (such as a loan, advance, gift or writing off a debt).

Division 7A can also apply if a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate (as well as in other circumstances).

Myth 1: If I own a company, I can use the company money any way I like.

ATO response: A company is a separate legal entity, and there will be consequences every time the taxpayer takes money or accesses other benefits from their private company.

Myth 2: Division 7A only applies to the shareholders of my private company.

ATO response: Division 7A applies to both shareholders and their 'associates'. The definition of an 'associate' is broad.

Myth 3: I don't need to keep records when my private company makes payments, loans or provides other benefits to other entities.

ATO response: Taxpayers are legally required to keep records of all transactions relating to their tax affairs when they are running a business.

Myth 4: I can avoid Division 7A by temporarily repaying my loan before the private company lodges its tax return, and using the company’s money to make my repayments.

ATO response: A repayment made on a loan may not be taken into account if similar or larger amounts are reborrowed from the same company after making the repayment.

Myth 5: There are no tax consequences if I use my private company's money to fund another business or income earning activity.

ATO response: Division 7A may apply to any loan a private company makes to its shareholders or their associates, regardless of what the loan recipient uses the amounts for.

Example

Sarah owns 100% of a private company, SarahCo Pty Ltd. The company has $200,000 sitting in retained earnings.

Sarah decides to take out $50,000 from the company to buy a car in her personal name, but instead of declaring a dividend or paying herself a wage, she takes it as a "loan" without any formal agreement or repayments.

Under Division 7A, that $50,000 could be treated as a deemed dividend and taxed in Sarah’s personal tax return, unless:

It’s repaid before the company's tax return is due, or
A Division 7A loan agreement is put in place (with required interest and minimum yearly repayments).

Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek independent professional advice.

PAYG Income Tax Instalments

Sun, 19 Jan 2025 06:42:00 GMT

The Pay As You Go (PAYG) instalment system requires certain taxpa yers deriving business or investment income to pay instalments progressively towards their income tax liability. These instalments are prepayments of your expected income tax for the year. PAYG Instalments paid during the year are credited against your income tax liability when your tax return is lodged.

The calculation of these PAYG instalments, and the number of instalments required in a year, is dependent upon a taxpayer’s circumstances. Taxpayers can vary the amount of a PAYG instalment if the total does not reflect their expected income tax liability for the year.

A taxpayer only needs to pay PAYG instalments if they have been notified by the ATO. However, voluntary registration to the PAYG Instalments System is available.

Taxpayers are automatically entered into the PAYG Instalments System if their instalment income (business and investment income, excluding GST and any capital gains) is above the ATO’s entry thresholds.

Individuals (including sole traders) are automatically entered into the PAYG Instalments System if they have all of the following:

Instalment income of $4,000 or more from your latest tax return lodged;
Tax payable on your latest notice of assessment of $1,000 or more;
Estimated (notional) tax of $500 or more.

Companies and superfunds are automatically entered into the PAYG Instalments System if any of the following apply:

Instalment income of $2 million or more from your most recent tax return lodged;
Estimated (notional) tax of $500;
If the entity is the head company of a consolidated group.

The ATO will issue a letter to taxpayers when they have been enrolled into the PAYG Instalments System.

A new business will not be entered into the PAYG instalment system until its first income tax return has been assessed. Taxpayers that are new to business can start voluntary PAYG instalments to help smooth out their cashflow and avoid a large tax bill in their second year of business.

Taxpayers may be required to make PAYG instalments on a monthly, quarterly or annual basis. The ATO will advise a taxpayer of how often they need to pay PAYG instalments at the time they are first entered into the PAYG instalment system. However, most taxpayers make PAYG instalments on a quarterly basis.

FBT and Entertainment

Fri, 10 Jan 2025 04:20:00 GMT

Mainly duri ng December/January holiday seasons, many employers plan to reward staff with a celebratory party or event. However, there are important issues to consider, including the possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.

Using the actual method

Under the actual method, entertainment costs are normally split up between employees (and their family) and non-employees (e.g., clients).

Such expenditure on employees is deductible and liable to FBT. Expenditure on non-employees is not liable to FBT and not tax deductible.

Using the 50/50 method

Rather than apportioning meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible.

However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;
the minor benefit exemption* cannot apply; and
the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.

(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.

The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.

However, entertainment expenditure that is FBT-exempt is also not deductible.

P.S: 'Less than' $300 means no more than $299.99! A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all. The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used:

For all 40 employees and their spouses – no FBT is payable (i.e., if the minor benefit exemption is available), however, the party expenditure is not tax deductible.

If the 50/50 method is used:

The total expenditure is $10,000, so $5,000 (i.e., 50%) is liable to FBT and tax deductible.

Example: Christmas gifts

Gifts that are considered to be non-entertainment

These generally include a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers or a pen set, etc.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – a non-entertainment gift valued at less than $300 given to an employee and their family members are exempt from FBT and will be tax deductible to the employer. Non-entertainment gifts that are more than $300, liable for FBT and tax deductible;
gifts to clients, suppliers, etc. – no FBT, and tax deductible.

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie, etc, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
gifts to clients, suppliers, etc. – no FBT and not tax deductible.

Non-entertainment gifts at functions

What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under the actual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (i.e., the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible .

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible ; and
in relation to the gifts:
the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and
as the gifts are not entertainment, the cost is tax deductible.

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How to make your end of year function a tax write-off

Thu, 05 Dec 2024 03:18:00 GMT

Holding an end of year function on business premises during work hours is the most tax effective option for businesses. The cost of a light meal and drink will be tax deductible to the employer with no FBT liability incurred. The meal can be several courses and include a variety of foods, but must exclude alcohol. In addition, the food must not be so lavish, such as a 10-course degustation, that it turns into entertainment.

In reality, most Christmas parties are not held on business premises, but at a restaurant. If the cost of food, drinks and alcohol is kept to less than $300 per employee, no FBT is payable by the employer. Unfortunately for the employer, they will not be able to claim a tax deduction or GST credit for the cost.

However, a non-entertainment gift valued at less than $300 given to an employee will be tax deductible to the employer.

Tax deductible gifts include:

A coffee machine.
Books or novels.
Flowers or chocolates.
Christmas or gift hamper.
Bottle of wine, spirits or liqueur.
A bottle of perfume or aftershave.
Vouchers for retailers e.g. David Jones, Myers, Jack London, etc.
Watch, handbags or wallets.

Here are 10 reasons why you must have an end of year function for your business:

End of year functions boost positivity.
Reward hard work and build staff morale leading to increased productivity, retention, and attendance.
Demonstrate your appreciation as a business.
Giving your staff a chance to blow off steam together can help improve staff relations, increase collaboration and in turn boost productivity.
Celebrate success and learn from failure.
Create a sense of unity by reflecting on the past and looking to the future.
Company values are reinforced.
Team spirit goes through the roof increasing staff loyalty.
Throwing a great end of year bash says a lot about what kind of leader you are and can foster respect and comradery.
Everyone needs a break and a chance to have fun!

Binding Death Benefit Nominations

Mon, 23 Oct 2023 22:39:00 GMT

A ‘death benefit nomination’ is a legal document that allows a superannuation fund member to specify who should receive their superannuation benefits in the event of their death. When a superannuation fund member passes away, their superannuation account balance, along with any associated life insurance benefits, becomes part of their estate. A death benefit nomination is used to specify the beneficiaries who should receive the proceeds to ensure that these benefits are distributed according to their wishes.

There are two main types of death benefit nominations:

Binding death benefit nomination: This nomination is legally binding on the superannuation fund trustee, who must follow these instructions. It specifies the individuals or entities (such as family members or a legal representative) who should receive the death benefits upon the member’s death.
Non-binding death benefit nomination: This nomination guides the trustee about the member’s preferences for distributing death benefits, but it is not legally binding. The trustee has the discretion to consider the nomination but can also consider other factors, such as the member’s financial dependents and other relevant circumstances.

Without a binding death benefit nomination, the following problems can arise:

Uncertainty in beneficiary designation: Without a BDBN, the superannuation fund trustee can determine how the death benefits will be distributed among the member’s potential beneficiaries. This can lead to uncertainty about who will receive the funds and may result in disputes among family members or other potential claimants.
Delays in distribution: The absence of a BDBN could lead to delays in distributing the death benefits to the intended beneficiaries. The trustee may need to investigate the member’s family and financial circumstances to determine the appropriate beneficiaries, which can take time and may cause financial strain on the surviving family members.
Legal disputes: Without clear instructions from the member, disputes may arise among family members or other parties claiming a right to death benefits. This can result in costly legal proceedings, which can further delay the distribution of the funds and potentially lead to strained relationships within the family.
Tax implications: The tax treatment of death benefits can vary based on the relationship between the deceased member and the beneficiary. A BDBN can help ensure that the benefits are distributed in a tax-efficient manner based on the member’s intentions.
Inequality: If there are specific individuals or dependents the member wants to provide for, such as a surviving spouse, children, or other dependents, a BDBN can ensure that their financial needs are addressed. Without a BDBN, the trustee might not consider these preferences when distributing the benefits.

We are here to help, call us today for an obligation free consultation!

Read our recent posts here .

Superannuation Changes - 01 July 2022

Mon, 30 May 2022 22:35:00 GMT

Removal of $450 monthly income threshold

From 1 July 2022, employees can be eligible for super guarantee (SG), regardless of how much they earn. This is because the $450 per month eligibility threshold for when SG is paid is being removed. Up until 1 July 2022, if you pay an employee $450 or more (before tax) in salary or wages in a calendar month, you will generally also need to pay super guarantee for them. Salary or wages includes any overtime. After 1 July 2022, you will need to pay their super regardless of how much they have earned in month.

An increase in the Super Guarantee rate

The super guarantee (SG) rate will also increase from 10% to 10.5% on 1 July 2022. You’ll need to use the new rate to calculate super on payments you make to employees on or after 1 July, even if some or all of the pay period is for work done before 1 July. The SG rate is legislated to increase to 12% by 2025.

Make sure you update your payroll and accounting systems so that you continue to pay the right amount of super for your employees.

New age threshold for downsizers

The eligibility for downsizer contributions will be lowered from age 65 to 60, allowing retirees to contribute up to $300,000 to their super following the sale of their home. Couples will be eligible to contribute up to $300,000 each.

It’s important to note that proceeds from the home sale that are transferred to super accounts will be included in the asset test for the Age Pension.

The principal place of residence will remain exempt from the asset test.

Read our recent posts here .

Tax Updates and Important Changes - May 2022 Edition

Sat, 21 May 2022 22:33:00 GMT

Concessional superannuation contributions

Concessional superannuation contributions include employer contributions (both super guarantee contributions and employee salary sacrifice contributions) and personal contributions claimed as a tax deduction by the taxpayer.

From 1st July 2021, the concessional superannuation cap is $27,500. It is not tax effective to make contributions above the contribution cap as the excess contributions are refunded to the taxpayer and taxed at the taxpayer’s marginal tax rates.

Making $27,500 concessional superannuation contributions annually is very tax effective as the super fund is only taxed at 15%. In contrast, an employer or taxpayer will be in a higher tax bracket (up to 47%) (so there can be up to a 32% tax saving on the contributions made).

Where a taxpayer’s taxable income is more significant than $250,000, the tax payable on the super contributions increases from 15% to 30% (so the maximum tax savings on the contributions is reduced to 17%).

Private company loans and division 7A

The economic impacts of the pandemic may have led to you borrowing funds from your private company or may have impacted your ability to repay loans from your company. This may inadvertently lead to adverse tax impacts under Division 7A (the section of the Tax Act that contains provisions aimed at preventing private company owners accessing company profits without paying tax on those amounts). The ATO has released new draft guidance on the application of Division 7A to unpaid present entitlements (UPE) to private companies, treating the UPE’s as simply loans for Division 7A. The intention is that from 1 July 2022, 7 or 10 year-year interest only ‘sub-trust’ arrangements will be a thing of the past.

Trust distributions

The ATO has also announced a major crackdown on the taxation of family trusts, in particular where they are used to make distributions to adult dependent children paying tax at lower rates, or company beneficiaries. Many family groups will urgently need to reconsider how they are using their family trust. While some of the ATO view has been released in draft form (or is not proposed to apply until 1 July 2022), other parts of the ATO view could apply retrospectively.

Disclosure of business tax debts

The ATO is in the process of writing to taxpayers that may be eligible to have their tax debts disclosed to credit reporting bureaus (‘CRBs’). The ATO can potentially report outstanding tax debts to a CRB where the following criteria are satisfied:

The taxpayer has an Australian Business Number and is not an excluded entity.
The taxpayer has one or more tax debts and at least $100,000 is overdue by more than 90 days.
The taxpayer is not engaging with the ATO to manage their tax debt.
The taxpayer does not have an active complaint with the Inspector-General of Taxation about the ATO’s intent to report its tax debt information.

Excluded entities are a deductible gift recipient, a complying superannuation fund, a registered charity and government entities. The purpose of this letter from the ATO is to raise awareness of the actions that the ATO can now take under the Disclosure of Business tax debts measure. The letter will be sent to all taxpayers with business tax debts that currently meet the criteria (discussed above) for disclosure. This letter from the ATO provides business taxpayers with information on how to effectively engage with the ATO to manage their tax debt.

Taxpayers can avoid disclosure to a CRB by making payment in full or negotiating a payment plan. If an eligible taxpayer does not take steps to actively manage their debt, they will remain eligible for disclosure. Before the ATO takes any final action to disclose a tax debt, it will issue the taxpayer with a formal Intent to Disclose Notice. If a taxpayer receives an Intent Notice asking them to ‘Act now or your debt will be disclosed to credit reporting bureaus’, the taxpayer or their tax agent must contact the ATO within 28 days of receiving the notice to discuss how the taxpayer will manage their debt. It is crucial for taxpayers to engage with the ATO early before their debts become unmanageable.

Temporary full expensing of depreciating assets

From 6 October 2020 to 30 June 2023 businesses with a turnover of up to $5b may take immediate deduction for assets installed and ready for use by 30 June 2023. The applicable thresholds to be eligible for the instant asset write-off in recent years are as follows:

Asset acquired and first used or installed ready for use between 2 April 2019 to 12 March 2020, entity with aggregated turnover Less than $50 million, can instant write-off an asset cost up to $30,000.
Asset acquired and first used or installed ready for use between 12 March 2020 to 6 October 2020, entity with aggregated turnover Less than $500 million, can instant write-off an asset cost up to $150,000.
Asset acquired and first used or installed ready for use between 6 October 2020 to 30 June 2023, entity with aggregated turnover Less than $5 billion, can instant write-off an asset up to any values.

After 30 June 2023, under the current rules, the immediate deduction threshold for depreciating assets will return to $1,000 for small businesses. Where the asset acquired is a car, the immediate deduction is capped at the car limit ($59,136 for 30 June 2021). The balance of the cost of the car is not deductible. For businesses using the small business pool for depreciation, from 6 October 2020, any balances of pooled assets may be fully depreciated.

Get on top of your record keeping and tax governance

Are your records in good order? Do you have good systems in place to show how you have reported and calculated your income? The rapid rate of change the past couple of years may have led to an ‘act now, document later’ attitude which is understandable, but may cause you headaches down the track. A return to ‘business as usual’ should include taking the time to review your record keeping and ensuring you hold sufficient appropriate documentation to support any positions you have adopted. As in previous years, this will continue to be important if you have accessed any government incentives. While the ATO and other regulatory bodies have expressed a certain leniency around honest mistakes, they are returning to ‘business as usual’, and clear and detailed documentation to support decisions made will still be vital in the event of a review or audit by the ATO or other body. Depending on the size of your income or business activities, you also need to be aware that the ATO is increasingly examining how taxpayers put together the information they use to prepare their tax returns under ‘Tax Governance’ principles. In simple terms, the ATO wants to know what processes you go through to prepare and collate the records you need to complete your tax return. For a straightforward business this may be simple as ensuring reported income reconciles to bank statements and keeping proof of a contemporaneous reconciliation process. For more complex businesses, you may have to show how your internal processes are set-up to capture and record information accurately, and how you identify transactions that give rise tax risks, or uncertain tax positions.

Read our recent posts here .

5 Year Catch-up Super Contributions

Sun, 20 Mar 2022 22:29:00 GMT

Catch-up concessional contributions

From 1st July 2018 fund members with a fund balance of less than $500,000 can make additional catch-up super contributions. The catch-up super contributions are made from unused super contribution caps accruing from 1st July 2018 and can be either personal or salary sacrifice.

As the deductible super contribution cap is now $27,500 per year (previously $25,000), the maximum five-year catch-up super contributions are allowed over a rolling five year period and amounts that have not been used after five years expire.

For example, if a taxpayer has a fund balance of less than $500,000, and made no super contributions in 2019, 2020, 2021, and 2022, then they could make up to $130,000 super contributions in 2023 (year 5).

The catch-up super contributions are most attractive to the following taxpayers:

Women who have been on maternity leave so have not been using their deductible superannuation contribution caps.
Farmers or business owners who have inconsistent income.
Taxpayers are inheriting funds that can be contributed to super while saving themselves tax.
Taxpayers who have made a substantial capital gain on property or shares.

However, you can’t access your super until you meet a condition of release such as reaching preservation age and retiring.

Read our recent posts here .

Single Touch Payroll (STP) Phase 2

Fri, 11 Mar 2022 22:15:00 GMT

In the 2019–20 Budget, the Government announc ed that Single Touch Payroll (STP) would be expanded to include additional information, also known as STP Phase 2. To support the businesses, ATO’s approach to STP Phase 2 will be flexible, reasonable and pragmatic based on the business readiness/individual circumstances.

What is STP Phase 2

STP Phase 2 is the expansion of STP to include additional information.

The way you submit STP reports won’t change. However, where STP Phase 1 was a way of reporting employees’ tax & super to the ATO, STP Phase 2 expands the program to capture more information.

Benefits of STP Phase 2

STP Phase 2 will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies such as Centrelink.

STP Phase 2 will permit all relevant information to be reported through the payroll system and allow agencies to collect this information directly from the ATO. It will also help Services Australia’s customers, who may be your employees, get the right payment at the right time.

What isn’t changing

While employers will need to report additional information in STP report, there are many things that will stay the same, such as:

the way STP is currently lodged;
the due date;
the types of payments that are needed;
tax and super obligations;
end of year finalisation requirements.

When STP Phase 2 starts

The mandatory start date for STP Phase 2 reporting is 1 January 2022. Consult with your software provider about implementing STP Phase 2.

Summary of STP Phase 2 reporting

Disaggregation of gross – components of gross earnings will now be itemised separately
Income types – closely held payees (e.g., family members), working holidaymakers & labour-hire
Employment and taxation conditions – employment basis, information on TFN declaration, details of when and why they leave
Country codes – for Australian residents working overseas
Child support garnishees and child support deductions – Phase 2 will allow employers to report child support deductions/garnishees via pay events thus removing the need to report separately monthly
Reporting previous Business Management Software IDs and Payroll IDs – This replaces the need for manual adjustments to ensure employee YTD earnings are not overstated.

Read our recent posts here .

Director Identification Number

Thu, 21 Oct 2021 22:12:00 GMT

The director identification number (director ID) is a unique identifier that a director will apply for once and will keep forever. If you’re a director or a corporate trustee of a self-managed super fund (SMSF) you will need to apply for a director ID.

You will be able to apply for a director ID from November 2021 on the new Australian Business Registry Services (ABRS) online and will log in using the myGovID app.

When you must apply for a director ID, depends on the date you became a director. You will need to apply for your director ID yourself to verify your identity. No one can apply for it on your behalf.

The introduction of director ID will create a fairer business environment by helping prevent the use of false and fraudulent director identities. This will go a long way to better identifying and eliminating director involvement in unlawful activity.

For more information visit ABRS website.

Wealth Generation Guide – August 2021

Wed, 25 Aug 2021 22:07:00 GMT

Structured Settlement Contributions

Structured settlement contributions are payments an individual has received and contributed into their super fund. Structured settlement payment is a payment arising from a personal injury claim where two legally qualified medical practitioners have certified that it is unlikely the individual can ever be gainfully employed in a capacity for which they are reasonably qualified or trained.

Structured settlement contributions can be contributed to a super fund as non-concessional contributions (NCC). The NCC caps and $1.6 million superannuation balance restriction does not apply. Tax savings apply by having the structured settlement payment in the no (or low tax) super environment.

How to take advantage of this tax strategy

Establish SMSF.
Contribute the structured settlement contributions to the fund.

Your financial strategy should change as you age. Here is a general guideline for each stage of your life.

Earn, growth invest and save in your 20’s

Your twenties should be focused on:

Earning money.
Investing in a long-term diversified growth portfolio.

Earn, growth invest, leverage and reduce in your 30’s

Your thirties should be focused on:

Earning money.
Investing in a long-term diversified growth portfolio.
Using some of your earned capital for a property deposit if buying a property is part of your financial goals.
Paying down your mortgage.

Earn, income invest and reduce in your 40’s

Your forties should be focused on:

Earning money.
Weighting your investment portfolio towards income (dividend) earning shares and ETF’s whilst remaining diversified.
Paying down your mortgage.

Earn, income invest and reduce in your 50’s

Your 50’s should be focused on:

Earning money.
Investing in an income earning portfolio.
Paying off your mortgage.

Debt free income living in your 60’s

Your 60’s should be focused on:

Earning money if you still wish to.
Living off the income streams from your investments.
Living debt free.

Real Cost of Buying Cheap

A decision we all must make. Do I buy a 20-year-old car for $5,000 or a new car for $25,000 with free servicing and a 7-year warranty? Do I go with a cheap do it yourself kitchen or spend the money and choose premium materials, finishes and workmanship?

To help us decide it’s important to calculate the long-term real cost of the purchase.

Using the car as an example, $5,000 looks like the better choice upfront. However, looking long term, the old car is likely to cost around $4,000 per year in maintenance and servicing and may only last another 5 years. So, if the car needs replacing in every 5 years, your 20-year cost is $5,000 x 4 (replacements) + $80,000 (maintenance + servicing) = $100,000.

The new car is likely to cost around $1,000 per year in maintenance and servicing for the first 7 years and then around $3,000 per year after that. The new car should last for at least 20 years. The real cost of the new car is ($1,000 x 7) + ($3,000 x 13) = $46,000.

Clearly, the new car is the right choice when we consider the real long-term cost. Over 20 years, the new car will save you $29,000.

Similarly, you are less likely to want to replace a premium kitchen 5 years from now and in addition, the property resale value will be higher than a cheap do it yourself kitchen. Spending a few extra thousand dollars on a kitchen may seem excessive now but buying quality vs cheap is often the right choice for wealth generation.

Disclaimer: It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.

Read our most recent posts here .

Covid-19 Support Package in NSW

Sat, 17 Jul 2021 21:54:00 GMT

Scott Morrison and Gladys Berejiklian have jointly ann ounced a raft of new support measures for the state of NSW in response to the prolonged lockdown in Greater Sydney.

The Federal and NSW Governments will jointly fund a new Small and Medium Business Support Payment for eligible NSW businesses. In addition, the NSW Government has expanded the previously announced grants and introduced some additional support measures for businesses.

In his announcement, the Prime Minister declared that the Commonwealth support packages would be available to any state or territory that experienced an extended lockdown.

We’ve summarised some of the support available to businesses and how you can access it:

SMALL AND MEDIUM BUSINESS SUPPORT PAYMENTS

The Commonwealth and NSW Governments will jointly fund a new Small to Medium Business Support payment to eligible (non-employing and employing) entities in NSW, including not for profits.

Eligibility

Entities will be eligible if:

Their turnover is 30 per cent lower than an equivalent two-week period in 2019
Their annual turnover is between $75,000 and $50 million
They maintain their full time, part time and long-term casual staffing level as of 13 July 2021

Payment Amount

Eligible entities will receive 40% of their NSW payroll payments, at a minimum of $1,500 and a maximum of $10,000 per week
For non-employing businesses, such as sole traders, the payment will be set at $1,000 per week

NSW GOVERNMENT’S SMALL BUSINESS GRANTS

The NSW Government has extended and expanded the previously announced grants program with grants between $7,500 and $15,000 available to eligible businesses with annual Australian wages up to $10 million.

Available Grants Include:

Small Business COVID-19 Support Grant
Hospitality and Tourism COVID-19 Support Grant (note this grant may become redundant – we are awaiting more details)

The NSW Government has also announced a Micro Business Grant of $1,500 per fortnight for eligible businesses with turnover between $30,000 and $75,000.

COVID-19 DISASTER PAYMENT

The Federal Government has expanded the existing COVID-19 Disaster Payment support available to individuals living in a declared COVID-19 hotspot.

From week 4 of the lockdown, weekly payments can be claimed by individuals who have lost more than 8 hours or a full day of work in a week. The payments are as follows:

lost 20 hours or more – $600 (previously $500)
lost between 8 and 20 hours – $375 (previously $325)

Individuals will need to meet additional eligibility criteria.

PAYROLL TAX DEFERRAL AND RELIEF

All businesses paying payroll tax in NSW will be able to defer their payroll tax payments until 7 October 2021.

Businesses with annual payrolls between $1.2m and $10m may be eligible for a payroll tax relief of 25% of the business’ annual liability.

LANDLORD SUPPORT

Land Tax relief of up to 100% of the land tax liability will be available to residential and commercial landlords that pay land tax and reduce rents for their tenants.

For residential landlords that reduce their tenant’s rent and not liable to land tax, a grant of up to $1,500 may be available on application if qualifying criteria are met.

COMMONWEALTH BUSINESS TAX RELIEF

Additional Commonwealth tax relief was also announced:

NSW small business grants will be tax exempt
Administrative relief will be provided to NSW taxpayers facing hardship. This includes reduced payment plans, no interest charged on late payments and varying instalments on request.

YOUR NEXT STEPS

Register your expression of interest on the Service NSW website so that you are notified when available.
Consult with us in regards to the various eligibility requirements including decline in turnover calculations.
Apply via the Service NSW website from 19 July (Small Business COIVD-19 Support Grant) or 26 July (Micro Business Grant).
Covid-19 Disaster Payment, assess your eligibility against the criteria and apply via Services Australia website.

For more information visit Service NSW Website , or contact us.

Read our recent posts here .

Low and Middle Income Earner Tax Offsets

Mon, 14 Jun 2021 21:50:00 GMT

Low And Middle Income Earner Tax Offsets

A tax offset reduces the tax you pay (known as your tax payable) on your taxable income. Your taxable income is your total income minus any deductions you claim.

The low income tax offset and the low and middle income tax offsets can only reduce the tax you pay to $0 (zero). Any offset amount that remains once your tax payable is zero isn’t refunded to you.

Low and middle income earners may be eligible for the low income tax offset and the low and middle income tax offset. ATO will work out the offset amounts when you lodge your tax return.

To be eligible for one or both of these tax offsets:

you need to be an Australian resident for income tax purposes and pay tax on your taxable income
your taxable income needs to be below certain income thresholds.

You don’t need to complete a section in your tax return to get these tax offsets. If you meet the conditions above, your entitlement to any offset amount is added to your tax return. You can see the amount on your notice of assessment (you won’t receive the offset as a separate payment).

Any questions about Tax Offsets? Please call us today for an obligation free consultation, or visit ATO website .

Read our recent posts here .

Superannuation for Contractors

Thu, 10 Jun 2021 21:47:00 GMT

Superannuation for Contractors

Generally, employers are not required to pay superannuation to contractors who are bona fide contractors. When you engage independent contractors to work in your business, you need to be aware of whether they are contractors or are actually employees. This will affect your obligations to pay superannuation. The Australian Taxation Office (ATO) is actively targeting employers who aren’t paying employees and certain contractors their full compulsory superannuation guarantee entitlements.

Contractor vs Employee

You must pay superannuation for anyone who is an employee. ATO has taken steps to increase investigations of businesses who engage contractors. They are investigating whether contractors engaged independently are being paid appropriate superannuation payments if they are entitled to them.

The ATO views that whether a person is an employee, is a question of fact, which can only be answered through the consideration of the employment contract’s terms and circumstances.

The key indication can be found here .

Your business must pay superannuation to everyone you engage who is entitled to it. In most cases, these will be employees. However, in some cases, you may still need to pay superannuation to contractors, such as when they provide substantial labour under a contract. The ATO has extensive powers to enforce superannuation laws. It is vital that you are clear on your obligations.

Any questions about Superannuation? Please call us today for an obligation free consultation, or visit ATO website .

Read our recent posts here .

NSW Payroll Tax

Tue, 18 May 2021 21:35:00 GMT

Overview

Payroll tax is a state or territory tax. It’s calculated on the total wages you pay each month. The state or territory that your employees are located in collects the tax. Not all businesses have to pay payroll tax. You pay when your total Australian wages are over the tax-free threshold for the relevant state or territory. Thresholds and tax rates vary between states and territories.

The NSW Government has announced a reduction in the payroll tax rate to 4.85 per cent for the 2020/21 and 2021/22 financial years. The threshold has also increased to $1.2 million for the 2020/21 and subsequent financial years. These changes apply retrospectively from 1 July 2020.

If you’re an employer who pays wages in NSW, you must register for payroll tax if your total Australian wages exceed the relevant monthly threshold.

NSW Payroll Tax Rebates

All wages – including superannuation, allowances and fringe benefits – paid to apprentices and trainees are liable for payroll tax and must be included in your returns.

You can claim a payroll tax rebate on wages paid to approved apprentices and new entrant trainees who are recognised by Training Services NSW.

Contractors

Payments to contractors are liable for payroll tax unless an exemption applies. To determine if an exemption applies, first check:

if the contractor is an employee, even if they have an ABN or call themselves a contractor or
if your contract is an employment agency contract.

You cannot claim an exemption if the contractor is an employee or if you have an employment agency contract.

Refer to the ATO employee or contactor decision tool and Revenue Ruling PTA 038 to help you decide if the contractor is an employee.

Grouping

For payroll tax purposes, businesses can be grouped with other businesses if there is a link between the companies. Grouping can occur regardless of where the businesses operate. Grouping has important implications for calculating threshold entitlements.

Where a group exists:

the threshold entitlement is based on the proportion of NSW wages against total Australian wages
a single threshold deduction applies to the group
every member of the group is liable for any outstanding payroll tax of other group members.

Any questions about Payroll Tax? Please call us today for an obligation free consultation, or visit Revenue NSW website .

Read our recent posts here .

2021 - 22 Federal Budget Summary

Sun, 16 May 2021 21:30:00 GMT

Overview

This year’s budget was heavily focussed on ensuring Australia’s post-COVID economic recovery continues. A better than expected jobs market and record prices for the country’s key commodities meant the budget outlook was much stronger than perhaps was expected a matter of months ago. The 2021-2022 budget aims to return much of the unexpected windfall back into the economy with spending in the areas of aged care, childcare as well as the consumer and infrastructure sectors.

It was a relatively simple budget in terms of changes to tax and superannuation legislation, with no changes that we could label as a negative when compared to current legislation. Many of the changes increase flexibility within the superannuation system, provide an opportunity to boost superannuation benefits, and leave individuals in a better net position from a tax perspective.

Superannuation Reforms

Extending Access to the Downsizer Contribution

Currently, individuals over the age of 65 that meet a number of other eligibility requirements are able to make a $300,000 contribution to superannuation with the proceeds of the sale of their home with that contribution counting towards the standard contribution limits.

It is proposed that from 1 July 2022 this measure will be available to those over the age of 60.

Removal of the Work Test

For individuals over the age of 67 to be eligible to make voluntary superannuation contributions they must meet a work test, which involves being gainfully employed for 40 hours in a 30 day period in the financial year in which they wish to make the voluntary contribution. It is proposed that from 1 July 2022 this work test will be removed with regard to making non concessional (including bring forward amounts) and salary sacrifice contributions. The work test will still apply to those looking to make personal concessional contributions. This measure will allow older individuals to continue boosting their superannuation balances from personally held assets, and will also provide additional opportunities to eliminate the taxable component of their superannuation balances via a recontribution strategy.

Removal of Lower Threshold on Superannuation Guarantee

Superannuation Guarantee is only payable by an employer when the employee’s earnings excess $450 per month. It is proposed this lower threshold will be removed from 1 July 2022.

Increase to Superannuation Guarantee Rate

It was confirmed that from 1 July 2021 the rate of 9.5% for Superannuation Guarantee will increase to 10%, and then by 0.5% every year thereafter until it reaches 12% in 2025. Individuals may need to periodically update their salary sacrifice amounts to avoid exceeding their concessional cap.

First Home Saver Superannuation Scheme

There is currently a limit of $30,000 on voluntary contributions that can be released under the First Home Saver Super Scheme. It is proposed that from 1 July 2022 this will be increased to $50,000.

Self Managed Superannuation Funds

Legacy Product Conversions

Many older Self Managed Superannuation Funds have legacy retirement products such as marketlinked, life expectancy and lifetime pensions or annuity products that have become expensive to manage and often do not deliver the tax or social security benefits they once did under old legislation. These products have been difficult and/or costly to exit. The proposal is to introduce a two-year period to allow SMSF to exit these products. However, it is still unclear exactly what the repercussions of e xiting these products will be.

Relaxing Residency Requirements

It is proposed the from 1 July 2022 the rules surrounding self-managed superannuation funds and residency will be relaxed to provide more flexibility for SMSF members that work overseas for a period of time. The active member test will be removed, which will allow a non-resident to contribute to their SMSF, and the safe-harbour rules around the Central Management and Control test will include a 5 year timeframe instead of 2 years when determining what is reasonable as a “temporary” absence from Australia.

Other Proposals

Improving the Pension Loans Scheme (PLS)

The PLS is available to Centrelink recipients who wish to enhance their income levels by way of effectively “borrowing” from Centrelink and using their home as security. The loan amounts can be received fortnightly as long as the total payment does not exceed 150% of the maximum Age Pension rate. From 1 July 2022 it is proposed that this scheme be improved by introducing a No Negative Equity Guarantee and providing access to two lump sum advances in any 12 months up to 50% of the maximum annual rate of Age Pension.

Maintaining the Low and Middle Income Tax Offset

The low and middle income tax offset will be retained for the 2022 financial year. This offset has a maximum of $1,080 and is received on lodgement of the tax return for eligible individuals.

It is important to note that many of the proposals do not take effect until 1 July 2022, however, maximising the benefits provided by a number of these changes may take careful planning in the lead up to this date of effect.

If you believe you may be able to take advantage of any of these measures we recommend you contact us discuss in detail.

Read our recent posts here .

More details of this federal budget can be found here .

Superannuation Contributions

Wed, 28 Apr 2021 21:25:00 GMT

Superannuation Contributions – Your super is your future. The superannuation choices you make today will help shape your lifestyle in retirement. There are limits on how much you can contribute to your super fund each financial year without having to pay extra tax. These limits are called ‘contribution caps’.

How much you can contribute to your super fund and whether your fund is allowed to accept your contribution may also depend on your age and total super balance.

Contribution caps apply to all super funds. If you have more than one super fund, all your contributions are added up and count towards your caps. If you exceed these caps, you may need to pay extra tax. You can avoid this by becoming familiar with your own contribution caps.

There are two types of superannuation contributions you (or others) can make into your super fund:

Concessional – These contributions come from income that has not yet been taxed. They are also called ‘before tax’ contributions. Once the concessional contributions are in your super fund, they are taxed at a rate of 15%. You may need to pay extra tax if you exceed the concessional contribution cap.
Non-concessional – These contributions come from income that has already been taxed. They are also called ‘after tax’ contributions. These contributions are not taxed once received by your super fund. However, you may pay tax on them if you exceed your non-concessional contribution cap.

Any questions about superannuation? Please call us to day for an obligation free consultation, or visit ATO Website .

Read our recent posts here .

Lost Superannuation

Tue, 27 Apr 2021 21:23:00 GMT

Lost superannuation or ATO-held super refers to super money ATO hol ds for you. This includes amounts paid by employers, super funds, retirement savings accounts (RSA) providers or the government on your behalf.

Generally, lost superannuation money will be transferred to ATO from super providers for any of the following:

unclaimed super for members aged 65 years or older, non-member spouses and deceased members
small lost member accounts and insoluble lost member accounts
inactive low-balance accounts
super for temporary residents who have left Australia for six months or more
accounts held in eligible rollover funds that are transferred to ATO before they wind up
amounts your fund transferred to ATO on a voluntary basis when it determined this was in your best interest.

If ATO holds your super, you can consolidate or claim it from once you’ve met certain conditions.

It is important to track your lost superannuation

Keeping track of your super will help you stay informed about:

how much super you’re being paid
how many super accounts you have
any insurance provided with your super.

Knowing how many super accounts you have is important. Having multiple super accounts could mean you are paying fees you are unaware of, which could reduce your retirement savings.

If you’ve ever changed your name, address or job, your fund or the ATO may not have your current details, which can result in your super becoming lost or unclaimed.

Super is your money. You should check it regularly.

Any questions about lost superannuation? Please call us to day for an obligation free consultation, or visit ATO Website .

Read our recent posts here .

Jobkeeper Overpayment

Sat, 24 Apr 2021 21:20:00 GMT

You have received an overpayment if you incorrectly assessed yourself (or your employees) as eligible for the JobKeeper payment.

If an overpayment is identified, one of the following will occur:

ATO may decide the overpayment does not have to be repaid (typically if you made an honest mistake)
ATO may decide the overpayment needs to be repaid by you
ATO may decide that another entity that directly or indirectly benefited from the overpayment is also liable to repay the overpayment – when another entity is also liable, ATO may pursue:
the entire repayment from you
the entire repayment from the other entity, or
payments from you and the other entity until the overpayment is repaid in full.

When overpayments don’t need to be repaid

Due to the extraordinary circumstances in the early stages of the JobKeeper program, overpayments may have been made in error as businesses moved quickly to access JobKeeper payments.

If a JobKeeper overpayment is identified, ATO may decide the overpayment does not have to be repaid, particularly if there was an honest mistake. This decision is made on the facts and circumstances of each case.

Factors ATO may consider include whether:

you relied in good faith on a statement made by an employee in their nomination notice
you fully passed on the benefit of the JobKeeper payment to the relevant employee
the mistake was made earlier in JobKeeper when there was less public guidance.

When overpayments need to be repaid

If ATO identifies you have received an overpayment of JobKeeper that you need to repay, ATO will write to you to let you know:

why they think there has been an overpayment
how much you need to repay, and
how you can make the repayment.

If you can’t pay on time, ATO may help you.

If you do not agree with ATO’s decision to require repayment, you can lodge an objection.

Need help? Please call us today for an obligation free consultation.

Are you a social media influencer? Know your tax obligations.

Thu, 08 Apr 2021 21:16:00 GMT

A new study has found that 86% of young Aussies would like to have a full-time career as a social media influencer. This career certainly has its upside, however often newcomers struggle to understand their tax obligations. It is relatively a new profession, and there is very little guidance provided from the Australian Taxation Office (ATO). So, here’s our simple guide for you to navigate your tax compliance.

Understand the differences between your hobbies and your business as an influencer?

Travel, fitness, beauty, fashion and food are the top five social media influencer categories. If you are operating in one of these categories, consider these:

Are you doing it for leisure activities or it is a form of business?
Do you send invoice to your clients?
Are you making money from this activity consistently?
Do you incur any expenses directly related to this activity, and you got proper documentation to support this claim?

If it is satisfied that you are running a business as a social media influencer, you will be forced to pay tax on income made through sponsorships and endorsements including non-cash benefits you received during performing these activities.

It’s not all bad news, you will also be able to claim certain expenses that are related to your business, i.e.

advertising and promotion expenses
travel expenses
office expenses / home office expenses
computer equipment and internet cost
communications-related expenses
office supplies and stationery
you will also be able to claim deductions for certain assets cost up to $30,000.

However, it is also important to note that you will not be able claim certain travel expenses, meal expenses, gym membership expenses. The ATO will almost certainly say no to all of these because despite the costs being incurred in your business activity, they’re mainly private or domestic in nature.

As experienced tax accountants, we can help you to comply with your tax matters. Please contact us on 1300 (TAXCOR) 829 267 for an obligation free consultation.

Motor vehicle expenses for businesses

Thu, 08 Apr 2021 21:12:00 GMT

This information will help you when claiming a deduction for motor vehicle expenses for your business.

The way to calculate your claim depends on your business structure and how you use the vehicle. Sole traders and partnerships use common methods of calculating the deductions. If you are running a business as sole trader or partnership, you can use the cents per kilometre method or the logbook method. If you are a company or trust you cannot use the cents per kilometre or logbook method to calculate your claim. Please also note, these methods are only applicable for cars. For all other vehicles, your claims must be for actual costs for expenses you incurred, based on receipts.

Cents per kilometre method

You can claim a maximum of 5,000 business kilometres per car. The rate per kilometre (66 cents in 2017–18 and 68 cents in 2018–19) takes into account your car running expenses, including depreciation. You can’t make a separate claim for depreciation of the car’s value. You don’t need written evidence, but you must be able to show how you worked out your business kilometres (for example, calendar or diary records). For claims above 5,000 kilometres you must use the logbook method to claim the entire amount.

Logbook method

You can claim the business-use percentage of each car expense, based on logbook records. You must record:

when the logbook period begins and ends
the car’s odometer reading at the start and end of the logbook period
details of each journey including
start date and finishing date
odometer readings at the start and end
kilometres travelled
reason for the journey.

You must keep the logbook for a period (at least 12 continuous weeks) that is representative of your travel throughout the year. You can then use this representative period to calculate your claim for 5 years if you:

keep the logbook
take odometer readings at the start and end of each year that you use it

If you change your business structure, your entitlements and obligations may change. You must apportion your expenses between business and private use. You must keep records for five years to prove your expenses.

Investment Property Owners? Reduce common errors

Thu, 08 Apr 2021 21:08:00 GMT

You can’t claim initial repairs or improvements as an immediate deduction in the same income year you incurred the expense.

Repairs must relate directly to wear and tear or other damage that happened as a result of you renting out the property. Initial repairs for damage that existed when the property was purchased, such as replacing broken light fittings and repairing damaged floor boards are not immediately deductible. Instead these costs are used to work out your profit when you sell the property.
Ongoing repairs that relate directly to wear and tear or other damage that happened as a result of you renting out the property such as fixing the hot water system or part of a damaged roof are classed as a repair and can be claimed in full in the same income year you incurred the expense.
Replacing an entire structure like a roof when only part of it is damaged or renovating a bathroom is classified as an improvement and not immediately deductible. These are building costs which you can claim at 2.5% each year for 40 years from the date of completion.
If you completely replace a damaged item that is detachable from the house and it costs more than $300 (e.g. replacing the entire hot water system) the cost must be depreciated over a number of years.