Why Every Small Business in Melbourne Needs Professional Bookkeeping Services

The post July 2018 Tax Update appeared first on .

June 2018 Monthly Tax Update

admin — Wed, 11 Jul 2018 06:40:30 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

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.

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
Fee Structure

November Tax Update

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May 2018 Tax Update

admin — Wed, 13 Jun 2018 04:02:22 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

MONTHLY TAX UPDATE – MAY 2018

Foreign residents and main residence exemption

There are special capital gains tax (CGT) rules you need to know if you’re a foreign resident. These rules will impact you when you sell residential property in Australia.

In the 2017-18 Budget, the government announced that foreign residents will no longer be entitled to claim the main residence exemption when they sell property in Australia. This change is not yet law and is subject to parliamentary process.

If the law is passed and you are a foreign resident when a CGT event happens to your residential property in Australia, you may no longer be entitled to claim the main residence exemption. This will apply to you:

when you use the exemption as a reason for a variation to your foreign resident capital gains withholding rate
when you lodge your income tax return. You must declare any net capital gain in your income and you can claim a credit for the foreign resident withholding tax paid to ATO.

The change will apply to foreign residents as follows:

for property held prior to 7:30pm (AEST) on 9 May 2017, the exemption will only be able to be claimed for disposals that happen up until 30 June 2019 and only if they meet the requirements for the exemption. For disposals that happen from 1 July 2019 they will no longer be entitled to the exemption
for property acquired at or after 7:30pm (AEST) 9 May 2017, the exemption will no longer apply to disposals from that date.

This change will only apply if you are not an Australian resident at the time of the disposal (contract date).

If you weren’t an Australian resident for tax purposes while living in your property, you are unlikely to satisfy the current requirements for the main residence exemption.

If you are a foreign resident when you die, the changes will also apply to:

legal personal representatives, trustees and beneficiaries of deceased estates
surviving joint tenants
special disability trusts.
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Superannuation Guarantee Amnesty

On 24 May 2018, Minister for Revenue and Financial Services announced the commencement of a 12 month Superannuation Guarantee Amnesty (the Amnesty).

The Amnesty is a one-off opportunity for employers to self-correct past super guarantee (SG) non-compliance without penalty.

Subject to the passage of legislation, the Amnesty will be available from 24 May 2018 to 23 May 2019.

Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty and before the commencement of an audit of their SG will:

not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
be able to claim a deduction for catch-up payments made in the 12-month period.

Employers will still be required to pay all employee entitlements. This includes the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

The Amnesty applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018.

The Amnesty does not apply to the period starting on 1 April 2018 or subsequent periods.

Employers who are not up-to-date with their SG payment obligations to their employees and who don’t come forward during the Amnesty may face higher penalties in the future.

Accessing the Amnesty is a simple process. If you are able to pay the full SG shortfall amount directly to your employees’ super fund or (funds), then complete a payment form and submit it to ATO electronically through the business portal or through a tax agent.

If you are unable to pay the full SG shortfall amount directly to your employees’ super fund or (funds), then complete and lodge a payment form and ATO will contact you to arrange a payment plan. If you chose to, you can start payment before ATO contact you. This will reduce the GIC you would otherwise have to pay.

For further information relating to the following, please contact ATO or your tax agent:

GST at settlement

From 1 July 2018, purchasers of new residential premises or potential residential land will be required to withhold an amount from the price for the supply and pay that amount to ATO on or before settlement.

The property transactions impacted are taxable supplies (for example, sales and supplies by way of long term lease) of new residential premises or taxable supplies of potential residential land where the contract is entered into before on or after 1 July 2018.

To provide certainty to purchasers, a supplier (vendor, seller, etc) of residential premises or potential residential land must notify in writing whether a purchaser is required to withhold an amount. If the purchaser is required to withhold, the supplier must also notify the purchaser what that amount is and when it needs to be paid to ATO.

The general rule is that if the property sale contract specifies an amount that is the price of the supply (for example, the contract price) then the withholding amount is calculated on the contract price. However, there are some situations where the amount to be withheld must be calculated differently.

Table 1: When the amount to be withheld must be calculated differently

Situations where the amount to be withheld must be calculated differently	Amount to be paid by the purchaser
The margin scheme applies to the supply	7% of the contract price or price
The supply is between associates and is without consideration, or is for consideration that is less than the GST inclusive market value of the supply	10% of the GST exclusive market value of the supply
There is a mixed supply, for example only partly a supply of new residential premises or potential residential land	A reduced amount using a reasonable apportionment of the contract price or price multiplied by the applicable rate.
There are multiple purchasers (not joint tenants)	7% (margin scheme) or 1/11th of the contract price or price for their % interest in the property purchased

Note: When none of the circumstances in table 1 apply (that is, the general rule) then 1/11th of the contract price or price is the amount to be paid by the purchaser.

This law change does not affect the supplier’s obligation to lodge their Business activity statement (BAS) and report their GST liabilities or entitlements on taxable supplies of these types of properties.

Once the supplier lodges their BAS and it is processed, the supplier will receive a credit of the amount the purchaser withheld and paid to ATO.

The transfer of the legal title of the property following settlement of a sale is a matter for the parties to the sale contract. The changes do not require the withholding amount to be paid to ATO before a title transfer can be registered with the relevant State or Territory agency.

Purchasers do not need to register for GST just because they have a withholding requirement.

Work-related car expenses television grabs

The Australian Taxation Office (ATO) has announced that it will be closely examining claims for work-related car expenses this tax time and has released video content for television stations interested in covering the story.

The recordings feature Assistant Commissioner Kath Anderson speaking about what to be aware of this tax time.

Source: ATO website

November Tax Update

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April 2018 Tax Update

admin — Thu, 17 May 2018 13:27:41 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

MONTHLY TAX UPDATE – APRIL 2018

· GST and the margin scheme

The margin scheme is a way of working out the GST you must pay when you sell property as part of your business. You can only apply the margin scheme if the sale of the property is taxable.

As a seller you must have made a written agreement with the purchaser, before the settlement date, to sell the property under the margin scheme.

If you purchase property where the margin scheme was applied to the sale, you cannot claim a GST credit for the GST included in the purchase price.

If you were charged the full rate of GST when you originally purchased a property, the margin scheme can’t be used in selling the property. Generally, if you were charged the full rate of GST when you purchased a property as part of your business you would have claimed the GST back.

For further information about the margin scheme contact ATO or your Tax Agent

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GST on low value imported goods

From 1 July 2018, Australian goods and services tax (GST) will apply to sales of low value goods imported by consumers into Australia.

Businesses that meet the registration threshold of A$75,000 will need to:

register for GST
charge GST on sales of low value imported goods (unless they are GST-free)
lodge returns to the ATO.

These businesses may be merchants who sell goods, electronic distribution platform operators or re-deliverers. For goods imported in a consignment over A$1,000, any GST, customs duty and clearance charges will be charged to the importer at the border under existing processes.

This new law is designed so that businesses:

will not charge GST on a sale when GST will be charged at the border, because an item is
- worth over A$1,000
- a tobacco product, or
- alcoholic beverage

will not need to charge GST on a sale if it is clear that multiple goods will be shipped to Australia in one consignment worth over A$1,000 – GST will be charged at the border instead.

· GST and property

GST only applies to the sale of certain property types (for example, vacant land, new residential premises, commercial premises) if the vendor is registered or required to be registered for GST purposes.

Even if you are not in business, if the turnover from your property transactions and other transactions are more than the GST registration threshold and your activities are regarded as an ‘enterprise’ you may be required to register for GST (for example, if you buy land with the intention of developing it for immediate resale at a profit).

Source: ATO website

November Tax Update

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March 2018 Tax Update

admin — Sun, 15 Apr 2018 12:50:25 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

MONTHLY TAX UPDATE – MARCH 2018

Inactive ABNs will be cancelled

To maintain accurate data, the Australian Business Register (ABR) periodically checks its records for Australian business numbers (ABNs) and automatically cancels those that appear inactive. The ABR checks are happening throughout 2018.

Your sole trader, partnership or trust ABN’s cancelled if you have:

told ATO that you have stopped your business activity
declared no business income for the last two years
not lodged business activity statement or income tax returns for more than two years.

To avoid ABN cancellation, your outstanding ATO lodgments need to bring up to date.

Sometimes sole traders have forms outstanding because they think they don’t need to lodge if their income is below the tax-free threshold. Please keep in mind that regardless of your income you need to lodge the:

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

It is important ABR information remains current, as the public uses ABN Lookup data to verify business and GST status. If you are no longer operating a business, you can updateExternal Link your business structure and cancelExternal Link your ABN. If you are deciding to start running your business again, you can easily reapply

ATO focus on fringe benefits tax

When it comes to fringe benefits tax (FBT), a simple mistake or omission can attract ATO’s attention. To help you with FBT reporting this year, ATO has highlighted some common errors to avoid. These include:

failing to report an employee’s private use of a company car
claiming exempt food and accommodation in living-away-from-home allowance benefits
undervaluing employee car park benefits
incorrectly claiming employer exemptions and rebates.

Keep in mind ATO focus areas, as these will help you to be clear on obligations and entitlements when reporting FBT

· Nothing to report on your activity statement?

Even if you have nothing to report this quarter, you still have to lodge a nil activity statement.

If you can’t lodge or pay by the due date, contact ATO or your tax agent as soon as you can so that we can reduce the likelihood of any penalties.

Remember, registered tax agents and BAS agents can help you with your tax.

· Making compliance happen

From 1 July 2018 Australian goods and services tax (GST) will apply to sales of low value goods sold to consumers in Australia. Businesses that meet the A$75,000 registration threshold will need to register for GST, charge GST on relevant sales and remit the GST to us by lodging returns.

ATO will take action against businesses who do not meet their GST obligations.

ATO expectations of you

ATO expect that you will:

comply with your obligations under the law
contact ATO or your registered tax agent as soon as possible if you have difficulty in complying.

What you can expect from ATO

ATO will:

treat you fairly, reasonably and consistently
consider your circumstances
work with you to find solutions to issues you are having.

Businesses that don’t do the right thing

Serious consequences, such as interest, penalties and potential prosecution can apply if you:

deliberately fail to register for GST when you need to
intentionally fail to report, or consistently under-report, your tax obligations
conspire with others to evade or avoid tax obligations
intentionally do not meet your tax obligations.

Consequences for non-compliance

The compliance treatments ATO use vary according to the type of behaviour you exhibit. ATO group business behaviours into categories and apply an appropriate approach to each of those categories.

If you choose not to comply with the law, the Commissioner of Taxation can take actions including:

registering you for GST
imposing an additional 75% administrative penalty, which then becomes legally payable
intercepting funds from Australia that are destined for you
registering the debt in a court in your country
requesting the taxation authority in your country to recover the debt on ATO behalf.

Source: ATO website

The post March 2018 Tax Update appeared first on .

February 2018 Tax Update

admin — Wed, 14 Mar 2018 12:10:46 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

MONTHLY TAX UPDATE – FEBRUARY 2018

GST cross-border transactions between businesses

As of 1 October 2016:

some transactions between overseas businesses and Australian businesses are not subject to GST
GST-registered importers have a new option to calculate transport, insurance and ancillary costs.

Non-resident businesses

ATO has made changes so that non-resident businesses don’t have to engage in Australia’s GST system unnecessarily. This will reduce their overall compliance costs.

ATO has:

amended the test for ‘carrying on an enterprise in Australia’
limited the cases where a non-resident entity must pay GST on supplies of things done in Australia
made sure there is no GST liability for certain supplies made between non-residents
extended the GST-free (zero rate) rules for certain supplies made to non-residents
moved liability, in some circumstances, from overseas businesses to the Australian-based business recipients that are already registered for GST.

The test for running an enterprise in Australia

Generally, a non-resident’s enterprise must register for GST if:

it is based in Australia for more than 183 days in a 12-month period, and
has a GST turnover of A$75,000 or more.

If you are an affected non-resident entity, you need to review your enterprise arrangements in Australia to work out if you need to be involved in Australia’s GST system.

This could result in some entities registering for GST and others cancelling their GST registration.

Supplies ‘not connected with Australia’

Generally, for non-resident suppliers who do not run an enterprise in Australia, the following transactions are no longer connected with Australia and therefore will not be subject to GST:

supplies of intangibles (such as services and digital products) which are performed in Australia are not connected if the recipient is an Australian-based business recipient or a non-resident acquiring the intangibles for their overseas enterprise
a transfer of ownership of leased goods which are located in Australia, where the transfer takes places between non-residents that do not have an enterprise in Australia
a supply of goods where the supplier installs or assembles the goods in Australia, but does not import the goods into Australia.

Services or digital products sold to Australian-based business recipients

For services or digital products where the supply is done in Australia (for example, services you perform in Australia), GST does not apply to your sales if all of the following apply:

you are a non-resident
you do not make the sale through an enterprise you carry on in Australia
you make the sale to an Australian-based business recipient that is
- registered for GST
- not buying the item for private use
- carrying on an enterprise in Australia.

As these sales are not connected with Australia, you are not required to charge GST on them. If these types of sales are the only sales you make, you are not required to be registered for GST.

Impacts for Australian-based business recipients if you incorrectly charge GST

If you incorrectly charge GST on these sales, you may disadvantage your customers. This is because your GST-registered customer may need to pay GST on their purchase under the reverse charge rules.

The law is designed to shift any net GST payable for these sales from the supplier to the customer.

The reverse charge applies if the customer would not be entitled to a full GST credit if GST had been charged on the sale. For example, if they are purchasing the item to make input taxed supplies, like financial supplies. Input taxed supplies are equivalent to ‘exempt’ supplies in other jurisdictions.

If so, your customer will need to pay GST in their activity statement lodged with the ATO (they may claim a partial GST credit for the purchase at the same time, to the extent they are entitled to do so).

If you incorrectly charge GST on these sales, your customer will still need to pay GST through our reverse charge rules, if they apply. This can result in your customer paying GST on the sales twice.

As a result, your customers that are Australian-based business recipients will expect that you do not charge GST on sales that are not subject to GST.

If you have incorrectly charged GST on these sales, your customer may seek a refund from you. If you have already paid GST to the ATO on these sales, you can only obtain a refund from the ATO if you have reimbursed your customer.

Non-resident business turnover for GST

GST-free supplies are only included in a non-resident’s GST turnover if the supply is made through an enterprise they carry on in Australia.

Non-resident businesses with an Australian resident agent

Non-resident businesses and their resident agents can agree the resident agent is liable for GST for supplies made through the agent. Both the non-resident supplier and the agent must specifically agree to this in writing.

If there is an agreement in writing between the non-resident supplier and the resident agent, notice must be given to the recipient of the supply if they are an Australian-based business. The notice must be given by the resident agent unless the agreement in writing provides that the non-resident supplier should issue the notice.

The notice must be in the following form, either:

a tax invoice for the supply
a document that shows the
- non-resident supplier’s, or their agent’s, identity and ABN
- price of the supply
- amount of GST included in the price
- date the document is issued, and a brief description of what is supplied.

If there is no agreement in writing between the non-resident supplier and the resident agent, the recipient of the supply may need to account for any GST, see reverse charging below.

Reverse charge for supplies

Generally, business-to-business intangible supplies done in Australia by non-residents will not be connected with Australia. However, the recipient of the supply may be liable to pay the GST. This is the case if the recipient is an Australian-based, GST-registered business and acquires it not wholly for a creditable purpose. You acquire for a creditable purpose if you acquire for the purpose of your enterprise and the acquisition does not relate to making input-taxed sales. This is known as reverse charging.

Australian businesses

More supplies of services by Australian businesses to non-resident businesses will now be GST-free. This reduces the need for a non-resident business to interact with the Australian GST system to claim input tax credits.

Examples of supplies that may now be GST-free include:

when an Australian business makes a supply of training services to an overseas company, but provides those services to one of the company’s employees in Australia
when an Australian business supplies repair services to an overseas company, but the supply is provided to an entity in Australia in order to fulfil the overseas company’s obligations under a warranty.

GST-registered importers

If you are a GST-registered importer, to calculate the value of the taxable importation for GST purposes, you are no longer required to identify the exact amount paid for:

international transport
insurance
loading or handling
service costs for the transport.

You may opt to use an uplift factor, which is currently 10% of the customs value of the imported goods.

The Department of Immigration and Border Protection has issued an Australian Customs Notice that further explains this process.

Source: ATO website

The post February 2018 Tax Update appeared first on .

January 2018 Tax update

admin — Wed, 07 Feb 2018 12:43:43 +0000

QuickN Accu Tax is a registered Tax agency in Melton, Melbourne west. Tax returns from $110 and Business Activity Statements from $110 . Call us @ 0487 310 617

Private use of exempt motor vehicles for FBT

ATO has released a draft practical guideline on the private use of eligible motor vehicles by employees. Where private use of these vehicles by your employees is limited, some fringe benefits tax (FBT) car-related exemptions may apply.

The guideline explains when the Commissioner will not apply compliance resources to determine if the private travel was limited to travel:

between employees’ home and workplace; and
that is minor, infrequent and irregular

for the purposes of the car-related FBT exemptions.

When finalised, this guideline will apply from the 2018 FBT year and onwards.

· Can you claim GST credits?

If you are registered for GST and you charge GST on supplies of property you make – eg sales of new residential premises, subdivided vacant land, sale or lease of commercial property – you may be entitled to claim GST on your related costs.

If your supplier is GST registered and charged you GST on things purchased in order to make those property supplies, you will be entitled to claim GST credits (refunds).

You can check if your suppliers are registered for GST through the:

ABN Lookup External Link tool which can be accessed through ato.gov.au
ATO app which can be downloaded and is compatible with most smart phones and tablets.

If you are claiming GST credits in your BAS or annual GST return, you must hold a valid tax invoice for your purchase.

There are also special rules for specific GST credit claims, including purchases of vacant land under standard land contracts, property acquired under the margin scheme, or if you intend to make supplies of residential rent.

What you intend to do with the property affects your eligibility to claim GST credits, so if in doubt, seek advice.

Time limits on GST credits and refunds

If you’re entitled to a GST credit or indirect tax refund, you need to claim it within four years.

Your entitlement to a GST credit ends four years from the due date of the earliest activity statement in which you could have claimed it (setting aside any requirement to hold a tax invoice). You can claim the credit in any activity statement lodged in this period.

Generally, if you have a refund resulting from a GST error, you can:

revise the activity statement you made the error in
request an amendment in writing
correct the error in a later one.

You have four years and one day from when you lodged the activity statement to do this. This time limit is called the period of review.

Different time limits apply to refunds for tax periods starting before 1 July 2012.

· GST for food retailers – simplified accounting methods

Five simplified accounting methods (SAMs) have been designed for food retailers who buy and sell a mixture of products, where some are taxable and some are GST-free. You use a SAM to estimate your GST at the end of each tax period.

You cannot use the averaging involved in these methods to set your prices – set your prices in line with the Australian Competition and Consumer Commission’s (ACCC’s) guidelines.

Stock purchases method

The stock purchases method is designed for businesses that are resellers, not converters.

You can only use the stock purchases method if you meet all of the following conditions:

GST registration: Required
Required transactions: Sell both taxable and GST-free food
Turnover threshold: SAM turnover of $2 million or less
Point-of-sale equipment: Inadequate
Nature of business: Reseller only.

If you are a converter (you buy GST-free ingredients and convert them into taxable items), you cannot use this method.

You may be eligible to use this method if you operate a business such as a:

grocery store or supermarket
convenience store or milk bar
video hire outlet
health food shop
continental delicatessen
butchery
service station
newsagency
greengrocer’s store.

How it works

Using the stock purchases method, the percentage of your GST-free sales is taken to be the same as the percentage of your GST-free purchases.

There are three ways you can use the stock purchases method:

Every tax period – you work out your percentage of GST-free purchases accurately then use this percentage to estimate your sales.
Two four-week sample periods – you reduce your administrative workload further by estimating both your GST-free sales and purchases.
5% GST-free stock estimation basis – you track only the GST-free goods that you purchase and resell (such as bottled water, pure fruit juice, milk or fresh fruit). This reduces your administrative workload even further as you only track your GST-free purchases and estimate your GST-free sales.

You must complete a daily worksheet detailing your transactions. If you choose to use every tax period or two four-week sample periods, this worksheet should contain a breakdown of your total purchases for the period. It should distinguish between your taxable and GST-free purchases.

If you choose to use the 5% GST-free stock estimation basis, your worksheet should show only the GST-free purchases that you resell GST-free for each tax period.

Every tax period

Using this option, you calculate the GST credits on your purchases but only estimate the GST you are liable to pay on your sales. You do this in four steps:

Step 1 – record your total stock purchases.
Step 2 – record your total GST-free stock purchases.
Step 3 – divide your GST-free stock purchases by your total stock purchases to calculate your percentage of GST-free purchases.
Step 4 – apply this percentage to your total stock sales to estimate your total GST-free sales for the period.

You must complete these four steps for every tax period.

Source: ATO website

The post January 2018 Tax update appeared first on .

December 2017 Tax update

admin — Sat, 13 Jan 2018 05:55:53 +0000

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MONTHLY TAX UPDATE – DECEMBER 2017

What’s new for small business

Tax concession rules for small businesses have changed. The changes are effective from 1 July 2016, and will apply from your 2017 tax return.

When we say ‘turnover’, we mean aggregated turnover.

Lower company tax rate changes

2016–17 income year

For the 2016–17 income year, the lower company tax rate decreased to 27.5%. Companies are eligible for this rate if they are a small business that:

has a turnover less than $10 million, and
operates a business for all or part of the income year. See Draft Taxation Ruling 2017/D7 for what it means for a company to be ‘carrying on a business’.

The maximum franking credit that can be allocated to a frankable distribution has also been reduced to 27.5% for these companies – in line with the company tax rate.

2017–18 income year

From the 2017–18 income year, a base rate entity is eligible for the lower 27.5% company tax rate. However, you still need to be a small business to be eligible for other small business tax concessions.

A base rate entity is a company that:

has a turnover less than the turnover threshold – which is $25 million (increased from $10 million) for the 2017–18 income year, and
operates a business for all or part of the income year – See Draft Taxation Ruling 2017/D7 for what it means for a company to be ‘carrying on a business’.

To work out the rate you use when franking your distributions you need to assume your aggregated turnover will be the same as the previous income year.

The lower 27.5% company tax rate will progressively apply to base rate entities with a turnover less than $50 million by the 2018–19 income year. From 2024–25, the lower company tax rate will reduce each year until it is 25% by 2026–27.

Note:

A Bill was tabled on 18 October 2017 proposing to change the definition of a base rate entity from the 2017–18 income year. Under the proposed law, the carrying on a business test will be replaced with an 80% passive income test.
A Bill was tabled on 11 May 2017 to gradually extend the lower company tax rate to all companies.

Simplified depreciation rules – instant asset write-off

The $20,000 instant asset write-off threshold has been extended until 30 June 2018.

If you are a small business, you can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased:

from 1 July 2016 to 30 June 2018, and your turnover is less than $10 million
from 7.30pm on 12 May 2015 to 30 June 2016, and your turnover is less than 2 million.

This deduction is used for each asset that costs less than $20,000, whether new or second-hand. You claim the deduction through your tax return, in the year the asset was first used or installed ready for use.

Expanded access to small business concessions

More businesses are now eligible for most small business tax concessions.

From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold). Previously the turnover threshold was $2 million.

The $10 million turnover threshold applies to most concessions, except for:

the small business income tax offset, which has a $5 million turnover threshold from 1 July 2016
capital gains tax (CGT) concessions, which continue to have a 2 million turnover threshold.

The turnover threshold for fringe benefits tax (FBT) concessions increased to $10 million from 1 April 2017.

Increased small business income tax offset

You can claim the small business income tax offset if you are a small business sole trader, or have a share of net small business income from a partnership or trust.

From the 2016–17 income year, the small business income tax offset:

increased to 8%, with a limit of $1,000 each year
applies to small businesses with turnover less than $5 million.

The tax offset increases to 10% in 2024–25, to 13% in 2025–26 and to 16% from the 2026–27 income year.

ATO works out your offset based on amounts shown in your tax return.

Bottom of Form
Rental properties – travel expenses

Residential rental property travel expenses

From 1 July 2017, travel expenses relating to a residential investment property are not deductible.

A residential premise (property) is land or a building that is:

occupied as a residence or for residential accommodation
intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

Under the new legislation, you are no longer able to claim any deductions for the cost of travel you incur relating to a residential rental property unless you are carrying on a business of property investing or are an excluded entity.

As with prior years, the travel expenditure cannot be included in the cost base for calculating your capital gain or capital loss when you sell the property.

In the business of property investing

Generally, owning one or several rental properties will not be considered being in the business of rental properties.

The receipt of income by an individual from the letting of property to a tenant, or multiple tenants, will not typically amount to the carrying on of a business as such activities are generally considered a form of investment rather than a business.

Excluded entities

An excluded entity is a:

corporate tax entity
superannuation plan that is not a self-managed superannuation fund
public unit trust
managed investment trust
unit trust or a partnership, all of the members of which are entities of a type listed above.

Example: An individual with residential investment property in 2017-18

Sarah rented out her residential rental property 2017-18. She travelled to the property to repair damages caused by tenants during the year.

As the investment is a residential property, Sarah cannot claim travel expense.

Example: An excluded entity in 2017-18

Terry’s Tyres incurred travel expenses in 2017-18 when the property manager was tasked with inspecting a residential property investment that is currently tenanted. Terry’s Tyres is a corporate tax entity and can claim a deduction for rental travel costs.

Changes to company tax rates

Company tax rates apply to:

companies
corporate unit trusts
public trading trusts.

The full company tax rate is 30% and 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 for the 2015–16 and 2016–17 income years.

From the 2016–17 income year, the company tax rate has also changed slightly for:

not-for-profit companies
retirement savings account providers
pooled development funds.

For 2014–15 and prior income years, the company tax rate is 30%.

Lodging your 2017 company tax return

When lodging your 2017 company tax return:

if you’re a small business, use the lower 27.5% rate
if your turnover is $10 million or more, use the 30% rate.

Base rate entity company tax rate

From the 2017–18 income year, companies that are base rate entities must apply the lower 27.5% company tax rate.

A base rate entity is a company that:

has an aggregated turnover less than the turnover threshold – which is $25 million for the 2017–18 income year, and
is carrying on a business.

For more information about what it means for a company to be carrying on a business, see Draft Taxation Ruling 2017/D7 Income tax: when does a company carry on a business within the meaning of section 23AA of the Income Tax Rates Act 1986?

Future year company tax rates

The lower company tax rate will apply to base rate entities with a turnover less than $50 million in the 2018–19 income year. The rate will then reduce to 25% by the 2026–27 income year.

Table 1: Progressive changes to the company tax rate

Income year	Turnover threshold	Tax rate for base rate entities under the threshold	Tax rate for all other companies
2017–18	$25m	27.5%	30.0%
2018–19 to 2023–24	$50m	27.5%	30.0%
2024–25	$50m	27.0%	30.0%
2025–26	$50m	26.0%	30.0%
2026–27	$50m	25.0%	30.0%

Proposed law changes

Bills were tabled on:

18 October 2017, proposing to change the definition of a base rate entity from the 2017–18 income year. Under the proposed law, the carrying on a business test will be replaced with an 80% passive income test
11 May 2017, proposing to gradually extend the lower company tax rate to all companies.

Lodging your 2018 company tax return early

Use the existing law if you need to frank your 2017–18 distributions or lodge your 2018 company tax return early. If the proposed changes come into effect, you may need to amend your company tax return or distribution statements.

Small business company tax rate

For the 2016–17 income year, the lower company tax rate is 27.5%. This lower rate must be applied by small businesses that:

have an aggregated turnover of less than $10 million, and
are carrying on a business.

For the 2015–16 income year, the lower company tax rate was 28.5% for small businesses with an aggregated turnover less than $2 million.

Maximum franking credits

To work out the company tax rate you use when franking your distributions you need to assume the aggregated turnover will be the same as the previous income year.

For the 2017–18 income year, your company tax rate will be 27.5% if either:

the aggregated turnover is less than $25 million, and you are carrying on a business
this is the first year you are in business.

Otherwise, the company tax rate you will use when franking your distributions will be 30%.

2016–17 distributions issued using incorrect rate

If you are a small business and have already issued your 2016–17 distributions based on the 30% company tax rate, you need to notify your members of the correct dividend and franking credit amounts based on the 27.5% company tax rate.

You can do this by sending a letter or email to your members, or a revised distribution statement. You also need to ensure the correct amounts are reflected in your franking account. For more information about this, see PCG 2017/D7 Enterprise Tax Plan: Small business over-franking in 2016–17 income year because of tax rate change.

Previous years

For the 2015–16 and previous income years, the maximum franking credit that can be allocated to a frankable distribution for all companies was 30%. This included small businesses, even though their company tax rate was 28.5%.

Industry assistance payments to taxi licence holders

If you hold a taxi licence (including a hire car licence) and you receive an industry assistance payment from your State Government in relation to the licence (excluding a licence surrender payment), it’s probably not a capital receipt. It’s more likely to be ordinary income. There are no GST consequences.

We want to help you to understand your tax obligations by providing guidance on what to look out for and where to go for help.

Taxi industry assistance payments

In response to the arrival of new ride-sourcing arrangements (including Ingogo, GoCatch, and UberX), State Governments have announced reforms to the regulation of their taxi and ride-sourcing industries.

Some of these reforms, which differ across states, include industry assistance payments to taxi licence holders. These are to help offset the impacts of new regulatory regimes and help taxi licence holders compete under new industry arrangements.

Depending on the state, some industry assistance payments to eligible taxi licence holders include:

one-off transitional assistance payments to help transition to the new regulatory arrangements
recurring hardship or income support payments (that are means-tested in some states).

Some states have further announced that their industry assistance payments are to be funded through the introduction of a passenger movement levy on metropolitan taxi and ride-sourcing trips.

Tax treatment of industry assistance payments

Income tax

The transitional assistance and hardship payments are generally not capital receipts, but are income. Where a government payment is made to an industry to assist businesses within that industry to continue operating or to compensate for loss of income, the payment is assessable income of the recipient. The payment is not capital in nature because the payments do not require licence holders to give up or sell their taxi licence plate or otherwise bring their business or income-earning activity to an end.

On this basis:

the transitional assistance and hardship payments will generally be assessable as ordinary income to the licence holder
the licence holders are required to include the full amount of the payment in their assessable income.

The nature of a payment is objectively determined by the character of the payment in the hands of the recipient. Where a licence holder has permanently and completely exited the taxi industry, or has evidence that they have undertaken a process to permanently and completely exit the taxi industry, at the time of receiving the transitional assistance or hardship payment, the payment may be included in the calculation of the capital gain or capital loss that is made by that holder on the surrender, sale or disposal of the taxi licence(s) of that holder. These outcomes also apply to equivalent State Government payments made to hire car and limousine licence holders.

You can claim a tax deduction for costs you incur for seeking legal or professional tax advice in relation to the taxation of the payment.

GST

Generally, there are no GST consequences in relation to the receipt of transitional assistance and hardship payments. GST only applies when the licence holder supplies something for the payment. If the licence holder need only meet eligibility criteria, and does not do or refrain from doing anything for the payment, no GST applies.

Passenger movement levies

In states or territories that are introducing passenger movement levies to fund industry assistance packages, additional income tax and GST issues arise.

Income tax

In some states the levy is imposed on the umbrella taxi network and levied on each metropolitan trip they coordinate and at a specified flat rate (for example, $1 per leviable trip under the NSW scheme). To recoup the levy the taxi network may charge an equivalent fee to taxi operators with the possibility that the fee will be further on-charged to passengers as part of their total taxi fare.

If you are a taxi operator:

include the amount of the fee charged to passengers in your assessable income in that income year
you can claim an income tax deduction for the fee the taxi network charged you in that income year.

The same tax outcomes apply to the taxi network: the fee that flows to them from taxi operators is assessable income, and the levy returned to the State Government is deductible.

GST

As a passenger movement levy is an Australian tax, the payment of the levy does not attract GST.

However, if the taxi network or operator chooses to on-charge the levy to passengers, it is treated solely as an increase in price for the supply between those parties. For example, the on-charged amount will form part of the fare paid by a passenger for the taxi services. The GST to be remitted is calculated as 1/11th of the increased price.

The taxi operator may be entitled to a GST credit for the GST payable on the supply between the parties, including the increased price as a result of the on-charge of the levy. This will depend on whether the supply is a creditable acquisition to the taxi operator.

Pay as you go (PAYG) instalments

Where a payment is considered as taxable income, there may be implications for PAYG instalments as it would be considered as instalment income.

For current PAYG instalment clients:

If you pay using the rate method, you will need to include this payment on the relevant activity statement within your instalment income. If you have forgotten to put it in a past activity statement, you can amend the instalment income for that statement prior to lodging your tax return.
If you pay using amount method, you can continue to pay the normal amount, but remember to set money aside to pay at the time of your income tax return.
This payment will be included in the calculation of your next year’s instalments after you lodge your tax return. If the amount or rate is too high as you won’t be receiving more payments you can vary the instalment rate or amount you pay. If you are not currently required to pay PAYG instalments, this payment may bring you into instalments after you lodge your tax return. If this occurs, you will receive information notifying you of your options.

Labels to use in your tax return

For annual income tax returns, individuals should include the payment in the same label that you have previously used to declare your income from holding your taxi licence (for example, Item 15 Net income or loss from business or Item 24 Label Y Other income). In the case of companies, the payment should be included in Label 6 Q Assessable government industry payments.

Source: ATO website