MONTHLY TAX UPDATE – FEBRUARY 2020

•  Taxable payments reporting for businesses hiring cleaning or courier contractors

Over the summer holidays season some businesses use more cleaning and courier contractors, and therefore may need to lodge a Taxable payments annual report (TPAR) in August 2020.

At this time of year we see some types of businesses making increased contractor payments to cleaning and courier services, especially:

• event management and building maintenance, property management businesses engaging contractors to provide cleaning services
• florists and other retail businesses engaging contractors to provide courier services.

In these circumstances, your business will need to report if they:

• have an Australian business number (ABN)
• pay contractors to provide courier or cleaning services on their behalf
• provide cleaning or courier services, and the payments they receive for these services make up 10% or more of their total GST turnover, even if their business is not registered for GST.

If you’re not sure whether your business needs to complete a TPAR, check our website or talk to your tax professional.

• Taxable payments annual report (TPAR)

You may need to lodge a Taxable payments annual report (TPAR) by 28 August each year if you are a:

• business providing
  • building and construction services
  • cleaning services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • courier services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • road freight services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • information technology (IT) services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • security, investigation or surveillance services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • mixed services (a business that provides one or more of the services listed above)
•  government entity.

The TPAR tells us about payments that are made to contractors for providing services. Some government entities also need to report the grants they have paid in a TPAR.

Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.

The details you need to report about each contractor are generally found on the invoice you should have received from them. This includes:

• their Australian business number (ABN), if known
• their name and address
• gross amount you paid to them for the financial year (including any GST).

We use this information to identify contractors who haven’t met their tax obligations.

Mixed services

If your business provides one or more of the relevant services listed above, you may need to lodge a TPAR.

Each financial year, you’ll need to work out what percentage of payments you receive are from any of the above services.

If the total payments are 10% or more of your GST turnover (or if you are primarily in the building and construction industry) – you must lodge a TPAR.

Even if you are not registered for GST, you’ll still need to check if you need to lodge a TPAR. All businesses have a GST turnover, regardless of whether or not they are registered for GST.

Examples of the types of mixed businesses that may need to lodge a TPAR include:

• florists
• building maintenance
• franchisees and retailers
• event management.

Select your business type from this list and use our three-step guide to work out if you need to lodge.

• Cleaning
• Couriers
• Road freight
• IT
• Security, investigation and surveillance.

• Do you import goods and services?

If your business imports goods and services, it’s important to be aware of your goods and services tax (GST) obligations.

GST applies to most goods imported over $1,000. The amount of GST is 10% of the value of the taxable importation and is generally required to be paid to the Department of Home Affairs before the goods are released.

If you are registered in the deferred GST scheme, payment is automatically deferred until the first activity statement you lodge after the goods are imported.

GST also applies to consumer purchases of digital products or services like movie subscriptions and low value imported goods under $1,000 from offshore.

Not all purchases from overseas include GST, for example:

• some overseas merchants may not be required to register for GST because they don’t reach the A$75,000 GST registration threshold (in sales to Australia)
• some goods may also be GST-free items, such as some food or medical supplies.

Australian GST-registered businesses making purchases of low value imported goods or digital products or services for business purposes should not be charged GST if you provide your supplier your ABN and a statement that you are registered for GST.

You may be able to claim a GST credit for any GST paid if you’re a GST-registered business and the goods you import are part of your business activities.

Source: ATO website

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MONTHLY TAX UPDATE – JULY 2018

• Changes to company tax rates

There are changes to the company tax rates. The full company tax rate is 30% and the lower company tax rate is 27.5%. Following shows when to apply the lower rate and how to work out franking credits.

Company tax rates apply to:

• companies
• corporate unit trusts
• public trading trusts.

The full company tax rate of 30% applies to all companies that are not eligible for the lower company tax rate. Eligibility for the lower company tax rate depends on whether you are a:

• base rate entity from the 2017–18 income year
• small business entity for the 2015–16 and 2016–17 income years.

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·          Department of Human Services – specified benefits and entitlements 2017–18 to 2019–20 financial years data matching program protocol

At a glance

This protocol has been prepared to meet the Guidelines on Data Matching in Australian Government Administration 2014 (Guidelines) published by the Office of the Australian Information Commissioner (OAIC).

The Australian Taxation Office (ATO) will collect information from the Department of Human Services (DHS) for the following benefits and entitlements:

• Paid parental leave scheme.
• Medicare entitlement statements.

This data will be compared with claims made in income tax returns for the invalid and invalid carer tax offset and for exemptions from paying the Medicare levy and Medicare levy surcharge.

In recent years there have been a number of legislative changes for invalid and invalid carer tax offset. The invalid and invalid carer tax offset is reduced for any year the claimant received paid parental leave. The paid parental leave data will allow the ATO to ensure the offset is correctly claimed.

Medicare provides Australian residents access to health care. To help fund the scheme, most taxpayers pay a Medicare levy of 2% of their taxable income. Medicare levy is payable by individuals residing in Australia who are eligible for Medicare benefits.

Individuals who are not entitled to Medicare benefits can claim an exemption from the Medicare levy in their income tax return. To obtain an exemption, taxpayers must not be eligible for Medicare benefits and apply for a Medicare entitlement statement.

The DHS Medicare Entitlement Statement Unit process Medicare entitlement statement applications. The Medicare entitlement statement is applied for using the approved form and must be reapplied for each financial year. Individuals may have a Medicare entitlement statement for multiple periods in the same financial year. Exemption from the Medicare levy extends to the Medicare levy surcharge.

Taxpayers who don’t have private hospital health insurance, may have to pay the Medicare levy surcharge in addition to the Medicare levy. Medicare levy surcharge depends on the period without appropriate private hospital health insurance and your income.

The program will enable the ATO to avoid any unnecessary contact from ATO for those that are genuinely entitled to claim these offsets and exemptions.

ATO have been undertaking this data matching program for nine years and intend to continue conducting this data matching program for a further three years.

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·                                  GST at settlement – a guide for purchasers and their representatives

The following information explains GST at settlement to purchasers of certain types of property and to their representatives.

On or after 1 July 2018, if you purchase new residential premises or potential residential land you may be required to withhold an amount from the price of the supply and pay it to the Australian Taxation Office.

Your supplier is required to provide you with information to assist you comply with your withholding obligation.

You can incur penalties if you fail to pay the required withholding amount to ATO.

Transitional arrangements apply to contracts entered into before 1 July 2018.

Note: When ATO refer to purchasers they are also referring to lessees under long-term leases.

·                                  GST at settlement – a guide for suppliers and their representatives

On or after 1 July 2018, if you are a supplier of residential premises or potential residential land you may be required to notify your purchaser in writing as to whether or not they have a withholding obligation. If your purchaser does have a withholding obligation you must provide additional information, in writing, to your purchaser.

You can incur penalties if you fail to provide the required notice.

Note: When ATO refer to purchasers they are also referring to lessees under long-term leases.

Transitional arrangements apply to contracts entered into before 1 July 2018.

Source: ATO website

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• ATO guide to the 5 most common Tax Time mistakes

At tax time 2018 Australian Taxation Office (ATO) has profiled the five most common mistakes and the personalities most likely to have tax time troubles.

It’s often simple mistakes and misunderstandings that trip people up. “While we know most people want to get it right, ATO audits and reviews show that there are five main areas where taxpayers are most likely to get it wrong.”

The top five mistakes include taxpayers who are:

• leaving out some of their income – maybe forgetting a temp job or money earned from the sharing economy
• claiming deductions for personal expenses – home to work travel, normal clothes or personal phone calls
• forgetting to keep receipts or records of their expenses
• claiming for something they never paid for – often because they think everyone is entitled to a ‘standard deduction’
• claiming personal expenses for rental properties – either claiming deductions for times when they are using their property themselves or are claiming interest on loans used to buy personal assets like a car or boat.

Many of the mistakes are avoidable and there are a few things taxpayers can do to make sure their tax time experience is stress-free.

“Know what you can legitimately claim. There are three golden rules for work-related expenses. You must have spent the money yourself and not have been reimbursed, it must be directly related to earning your income, and you must have a record to prove it.

“This tax time ATO will be paying close attention to claims for private expenses like home to work travel, plain clothes, and private phone calls. ATO will also be paying attention to people who are claiming standard deductions for expenses they never paid for.”

Tax can sometimes be tricky, but it’s not tricky to keep good records.

“Around half of the adjustments ATO make are because the taxpayer had no records, or they were poor quality. Yet it’s so easy to keep your records, using the myDeductions tool in the ATO app. Just take a photo, record a few details and then at the end of the year upload the information to your agent.

Another tip is to include all your income. “A temp job, cash jobs, capital gains on cryptocurrency, or money earned from the sharing economy is all income that must be declared. ATO is constantly improving their data matching tools and even a one-off payment may be enough to raise a red flag.

Some people lodge early because they want their refund, and that’s fair enough. But ATO amend returns for thousands of taxpayers that leave out some of their income. This can delay your refund or even see you owing money to the ATO. If you wait until mid-August, ATO will have pre-filled most of your income information for you, to help you get it right to start with.

Pre-fill is available whether you choose to lodge online with myTax, or with a registered tax agent.

For those intending to push the boundaries, or perhaps fudge some parts of their return, the ATO has you in its sights.

Finally, if you make a mistake, don’t panic.

ATO know people sometimes make mistakes or forget to include something on their return. If you’re in that situation, try to fix it as soon as you can to minimise any interest and penalties. Contact your agent and lodge an amendment online.

Whether you use a tax agent or lodge it yourself, you are responsible for the claims you make. Take the time to check your deductions are legitimate and you have listed all your income before lodging.

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• Applying GST to low value imported goods

From 1 July 2018, businesses that sell goods into Australia and meet the goods and services (GST) registration threshold of A$75,000 will need to register and pay GST on goods that are:

• less than A$1,000
• imported into Australia
• not GST-free items (for example, items of food).

This change also means Australian-based retailers that drop-ship goods will need to charge GST from 1 July 2018.

Those who buy low value imported goods should not be charged GST if they:

• are registered for GST
• import the low value goods for business use in Australia
• provide their Australian business number (ABN) to the supplier, along with a statement declaring they are registered for GST.

If you are incorrectly charged GST, you should initially seek a refund from the supplier. In some situations, you may be entitled to claim a GST credit instead.

When claiming a GST credit, you should have a valid tax invoice. Only receipts which contain an ABN are valid tax invoices – even if they apply GST. Some overseas suppliers may be registered in the simplified GST system and have an Australian Taxation Office reference number (ARN) instead of an ABN.

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• Income tax return

What you need to report and how you lodge your annual tax return for your business depends on your type of business entity.

Sole traders

If you operate your business as a sole trader, you must lodge a tax return even if your income is below the tax-free threshold. This includes:

• tax return for individuals including the supplementary section
• business and professional items schedule for individuals.

In your return, report:

• your business income less the business deductions you can claim
• other income, such as salary and wages (from a payment summary), dividends and rental income, less any deductions against this income.

If you have paid PAYG instalments during the income year, these will be automatically credit to you in your assessment.

Partnerships and partners

If you operate your business as a partnership, the partnership lodges a partnership tax return, reporting the partnership’s net income (assessable income less allowable expenses and deductions).

As an individual partner, you report on your individual tax return:

• your share of any partnership net income or loss
• any other assessable income, such as salary and wages (shown on a payment summary), dividends and rental income.

The partnership doesn’t pay income tax on the income it earns. Instead, you and each of the partners pay tax on the share of net partnership income you receive.

Trusts and beneficiaries

If you operate your business as a trust:

• the trustee lodges a trust tax return, and
• each trust beneficiary lodges an individual tax return.

The trust reports its net income or loss. This is the trust’s income less expenses and deductions.

As a trust beneficiary, you report on your individual tax return:

• any income you receive from the trust
• any other assessable income, such as salary and wages (shown on a payment summary), dividends and rental income.

Companies

If you operate your business as a company, you need to lodge a company tax return.

The company reports its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is liable to pay on that income or the amount that is refundable.

The company’s income is separate from your personal income.

• Avoid being incorrectly charged GST from overseas

GST on low value goods imported into Australia commences from 1 July 2018.

Low value imported goods are physical goods – excluding tobacco, tobacco products and alcoholic beverages – with a customs value of A$1,000 or less.

If you’re an Australian GST-registered business, you should not be charged GST when purchasing these goods for your business use, if you provide your supplier with both:

• your Australian business number (ABN)
• a statement that you are registered for GST.

If you’re charged GST incorrectly, you should speak to your supplier about a refund.

Note that not all receipts that have GST applied will be tax invoices. To be considered a tax invoice, they will need to contain an ABN. Overseas suppliers may be registered in the simplified GST system and have an ATO reference number (ARN) instead of an ABN.

Source: ATO website
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