Uber Is Not A Taxi Service for Fringe Benefit Tax purposes

By Heaney Business Group

Good News, the outdated FBT rules for Uber Drivers are set for a legislative change.

Treasury has released an exposure draft under the Treasury Laws Amendment Bill 2019.  It seeks to replace the word “taxi” and change it to read “a car used for taxi travel (other than a limousine)”.

The ATO confirmed that the ruling needed to be more exact and therefore required a change. The ruling in question is that the FBT taxi travel exemption only applies to travel undertaken in vehicles licensed to operate as a taxi. This does not extend to a ride-sharing service who provide vehicles that are not licensed as a taxi.

Just to be clear, this does not directly affect Uber drivers themselves. There are no changes to the GST obligations for Uber drivers.  The 2017 Federal Court case that held that Uber drivers were required to be registered for GST, on the basis that they were supplying taxi travel remains unaltered.

The Institute of Public Accountants general manager of technical policy Tony Greco said the proposed legislative fix would end the “red-tape nightmare” for employers.

“The inconsistent treatment of Uber and other ride-sharing services for FBT and GST purposes has created lots of practical issues for employers,” Mr Greco said.

Ride-sharing services do not qualify as taxi travel for FBT purposes, and therefore, the costs of the services are not exempt from FBT, as the FBT legislation turns on whether the vehicle is licensed to operate as a taxi.

As the ATO could not fix it in an administrative manner, it now needs to be changed via a legislative change

Good News Ahead

The good news is the change will mean there will be one less FBT issue to combat for employers. With the modern world changing so fast these antiquated FBT rules could need a bigger overhaul.

Consultation for the draft bill is currently open until 27 September.

Interested stakeholders can provide their views on the proposed amendments on the Treasury’s website, www.treasury.gov.au

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The team at HBG Tax and Accounting are your local Rockingham Accountants. With extensive experience in all areas of Accounting and Tax.

Call us on 08 9594 1963 or visit us at Unit 7, 12 Belgravia Terrace, Rockingham.

Our purpose is to build healthy long-lasting relationships with our clients, staff and within the local community.

At HBG Tax and Accounting, we are passionate about giving our clients that extra much needed support.

HBG Tax and Accounting
www.hbgtax.com.au
https://www.facebook.com/hbgtax
17th September 2019.

The material and content provided in this article is of informative nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained. 

Diversity in Self Managed Superannuation Funds (SMSFs)

By Heaney Business Group

Making a deliberate decision to have little diversity in Self Managed Superannuation Funds (SMSFs) is a choice many trustees make. Choosing to do this is acceptable however you must be able to prove this was an active decision and be able to justify your reasoning. The Australian Taxation Office (ATO) has stated: “a lack of diversification or concentration risk can expose the SMSF and its members to unnecessary risk if a significant investment fails.” The ATO has recently contacted over 17,500 trustees with concerns of a lack of asset diversity in Self Managed Superannuation Funds (SMSFs).  Trustees contacted hold 90% or more of the fund’s assets in a single asset or single asset class.

The Superannuation Industry (Supervision) Regulations state in section 4.09 that trustees must “formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity.”

In regards to the investment they must:

  • Evaluate the diversity of the strategy and the subjection of a lack of diversity
  • Evaluate  liquidity and the funds’ cash flow requirements
  • Understand the risks involved, its objectives and the cash flow of the fund
  • Evaluate the funds’ ability to release its liabilities and
  • Evaluate and have suitable insurance cover for members and assets

Area of concern

One area of concern being assessed by the ATO is property as low property prices have caused the asset value of many funds to decrease.

Recently, debt incurred by SMSFs has significantly risen. The number of SMSFs using Limited Recourse Borrowing Arrangements (LRBAs) to buy property has risen from 13,929 (or 2.9% of all SMSFs) in 2013 to 42,102 (or 8.9% of all SMSFs) in 2017. In regard to SMSFs that have bought a property through an LRBAs. These LRBAs amounts to an average of 68% of the fund’s total assets.

LRBAs are prevalent in SMSFs with a net fund size ranging from $200,000 and $500,000. The net fund size is inclusive of total assets, but excluding the value of the amount borrowed. The mean borrowing under an LRBA in 2017 was $380,000 and the average value of assets was $768,600

Need professional taxation advice? – Contact HBG Tax and Accounting

The team at HBG Tax and Accounting are your local Rockingham accountants with extensive experience in all areas of accounting and tax. Call the team on 08 9594 1963 to discuss your tax needs or call in and speak to the team at Unit 7, 12 Belgravia Terrace, Rockingham.

The material and content provided in this article is of informative nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Contact Heaney Business Group today to talk about your SMSF

ATO Cracks Down on Foreign Income

By Heaney Business Group

The Australian Taxation Office (ATO) has identified under-reporting of foreign income is an issue.  5 years ago, the ATO gave a reprieve for those who should have been penalised for not disclosing foreign income. But this time it’s not being treated lightly, as the ATO Cracks Down on Foreign Income

If you have foreign income to be reported it is important to know:

  • Your resident status for tax purposes
  • How your money is being monitored
  • Declaration Requirements

Your resident status for tax purposes

This determines how and what you are taxed. It can often cause confusion as there can be a status difference between tax residency and general residency meaning it’s important to ensure your understanding is correct.

For tax purposes, an Australian resident is taxed on income received anywhere in the world (yes! that includes overseas) This income can come from various sources including employment, director and consulting fees, investment and rental income plus earnings from the sale of assets.

A foreign resident for tax purposes is only taxed on income received in Australia (usually from rental income and work done in Australia) plus some capital gains. There is no tax-free threshold meaning tax is paid on every dollar of taxable income earned in Australia starting at 32.5%. Income received from investments such as interest and dividends may have lower rates.

Generally, those who have come to Australia on a temporary visa to work and whose spouse isn’t a permanent Australian resident or citizen are regarded as temporary residents for tax purposes. These residents pay tax on any income originating from Australia only, are not taxed on any income received gains from property not in Australia and are exempt from capital gains tax (CGT)

Earnings from international investments must also be considered. An asset located overseas isn’t exempt from the Australian tax law. Even if classified as an exemption, foreign income can be taxed twice – both overseas and in Australia.

How your money is being monitored

Many Australians have dealings with overseas countries for various purposes. Details on account holders, balances, interest and dividend payments, earnings from the sale of assets plus other income is given by the ATO to more than 65 foreign tax jurisdictions regarding foreign tax residents as the ATO Cracks Down on Foreign Income.

The Australian Transaction Reporting and Analysis Centre (AUSTRAC) give data to the ATO and the Department of Human Services to enable them to identify those failing to pay their taxes and/or declare income.

Foreign income received from an investment such as a business or rental property can be an oversight and not declared with issues often arising only when that income is bought into Australia. AUSTRAC or the ATO’s has data matching technology able to identify this and as a result, the taxpayer is contacted with a please explain.

Declaration Requirements

Unless a set exemption is applicable, all worldwide income is required to be declared when Australian residents lodge a tax return. Generally, income is anything earned from employment (including consulting) plus pensions. Annuities and payments received from the government plus income received from a business, partnership or trust. Other income includes crowdfunding, sharing economy and some insurance and workers compensation payments (generally for loss of income).

Also required to be declared are some prizes and awards (including if it was sold for a financial gain). Prizes received from lotto or game shows or ad-hoc gifts are not required to be declared. If you received money as a gift, this is generally not taxable but limits do apply.

In terms of foreign income, this must be declared including pensions and annuities. Income earned from the business, income earned from employment (including consulting). Assets and investment income (including offshore bank accounts, and capital gains on overseas assets)

If you have overseas assets not declared you can choose to do nothing. However, be ready to face the applicable penalties or co-operate with the ATO and disclose the assets which in turn can greatly reduce potential penalties and charges.

Prior to transferring funds from an overseas account, company or trust it is important to make sure you are aware of the implications. Both Australia and the overseas country. To prevent surprising and costly consequences, careful thought and professional advice is advised.

Are you unsure of your tax residency status? Need professional advice on foreign income? – Contact HBG Tax and Accounting

The team at HBG Tax and Accounting are your local Rockingham accountants.  With extensive experience in all areas of accounting and tax. Call the team on 08 9594 1963 to discuss your tax needs. You can call in and speak to the team at Unit 7, 12 Belgravia Terrace, Rockingham.

The material and content provided in this article is of informative nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

If you need Tax AdviseGet in touch now

  Category: Tax
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