Two hundred Outlaw Motor Cycle Gang members have been served notices by the Australian Taxation Office (ATO) for failing to comply with their tax obligations. We hope for the sake of the ATO staff the notices were delivered by mail!
There are not a lot of details about exactly what type of income the ATO is targeting but tax law does not differentiate between legally and illegally earned income: If you earn income, you pay tax. Simple. An English tax law case back in 1886 set the precedent with Justice Denman stating, “In my opinion if a man were to make a systematic business of receiving stolen goods, and to do nothing else, and he thereby systematically carried on a business and made a profit of 2000 per year, the Income Tax Commissioners would be quite right in assessing him if it were in fact his vocation.”
The difference between legally and illegally derived income is that you can’t claim losses or expenses if you have been convicted of an indictable offence related to that business activity.
The operation targeting the bikers is part of a joint taskforce with the Australian Federal Police. Data matching technology in recent years has helped identify movements of cash and income from undeclared and often illegal activities. The ‘follow the cash’ philosophy works well and often results in frozen bank accounts, disrupted cash flows and supply chains, which impacts on the overall viability of illegal activities.
A deduction is generally available for purchases your business makes. The instant asset write-off however changes the speed at which you can claim a deduction. Since 7.30pm, 12 May 2015, small businesses have been able to immediately deduct business assets costing less than $20,000. On 30 June 2017, this $20,000 deduction limit reduces back to $1,000. When we say “immediately deductible” we mean that your business can claim a tax deduction for the asset in the same income year that the asset was purchased and used (or installed ready for use). The deduction is claimed on the business’s tax return.
If your business is registered for GST, the cost of the asset needs to be less than $20,000 exclusive of GST. If your business is not registered for GST, it is $20,000 including GST.
Assets costing $20,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter.
The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc., that don’t qualify – check with us first if you are uncertain.
Also, you need to be sure that there is a relationship between the asset purchased by the business and how the business generates income. You can’t for example just go and purchase multiple television sets if they have no relevance to your business.
For more information on how you can access the $20,000 instant write-off, call your accountant on 08 9594 1963 or send us an email at email@example.com.