Category: Tax


The ATO airs ‘Dirty Laundry’ on Laundry Expenses

By Heaney Business Group
Laundry
Laundry business

The ATO (Australian Taxation Office) has issued a warning that it is scrutinising claims for work-related clothing and laundry expenses.  The ATO Assistant Commissioner Kath Anderson stating “Last year around 6 million people claimed work-related clothing and laundry expenses, with total claims adding up to nearly $1.8 billion. While many of these claims will be legitimate, we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing.”

Over the last 5 years, clothing claims have jumped nearly 20%. Occasionally, the ATO will even ask employers if they require their employees to wear a uniform to justify claims. The ATO deems taxpayers are making common errors including:

  • Claiming clothing that is unacceptable
  • Not buying something but still attempting to make a claim
  • Being unable to justify the basis for how the amount of the claim was calculated

One scenario saw work related laundry expenses of $20,000 per year over a 2 year period be attempted to be claimed by a car detailer. It appeared the taxpayer calculated the hours he spent doing his laundry then multiplied that by what he considered to be a fair hourly rate ($227 per hour because he regarded his personal time of high value). Suffice to say, his claim was reduced to $0.

Claims over $150 are to have supporting receipts, however claims below $150 don’t require taxpayers to have records leading the ATO to assume many taxpayers are ticking the box assuming the claim is a standard deduction and it’s not only sizeable businesses they are scrutinising.

“Just to be clear, the $150 limit is there to reduce the record keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim,” Ms Anderson said.

This article was written based on information supplied from Knowledge Shop Newsletter July 2019.

The material and contents provided in this article is of an 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.

  Category: Tax
  Comments: None

ATO Changes That Will Affect Your Business

By Heaney Business Group
Tax
Creative People Busy Working in Meeting

Payment Summaries are No Longer Required

20 Employees or More

If you are a business with 20 employees or more, you will no longer need to issue Payment Summaries and you have until 14th July to have your declarations finalised.

Less Than 20 Employees

If you are a smaller business of less than 20 employees, you are required to start using STP as of the 1st of July 2019; you will also no longer need to provide Payment Summaries if you have started using STP already and have until 31st July 2019 to have your declarations finalised. Micro businesses have extra time concessions so speak to your accountant in regards to your circumstances.

Employees whose employer has already started using STP will be able to access their Income Statement from myGov; which will also show their superannuation information and tax that has been paid on their behalf.

Small Businesses Owe the ATO $15 billion

In Australia there are 3.8 million small businesses which includes 1.6million sole traders many of who are employers and collectively they owe the ATO $15 billion, so this tax season the ATO is looking at trying to recover some of its debt. Areas the ATO are targeting include:

  • setting up or changing to a company structure
  • claiming motor vehicle expenses
  • business expenses that may not be correctly apportioning between personal and business use

The ATO are using data matching software and benchmarking to analysis the data and are clamping down on business owners trying to make unwarranted claims.

To Receive a Tax Deduction, You Must Meet Your Tax Obligations

From 1 July 2019, if you have not met your PAYG withholding payments and reporting obligations then you will not be able to claim a tax deduction for payments of the following things:

  • salary, wages, commissions, bonuses or allowances to an employee;
  • directors’ fees;
  • to a religious practitioner;
  • under a labour hire arrangement; or
  • made for services where the supplier does not provide their ABN.

There are exceptions in some instances so speak to us if you are unsure.

From 1st July 2021 the Government has proposed that ABNs of taxpayers who are required to lodge a tax return but haven’t done so will be cancelled. Also from 1 July 2022, ABN holders will be asked to confirm that their Australian Business Register details are correct each year.

Increased Reporting of Payments to Contractors for Some Industries.

From 1 July 2019, increased reporting of payments made to contractors who work within certain business sectors that have the potential to be active in the black economy will be required. This ATO requirement is said to collect approximately $2.7bn per year in lost in income and GST liabilities.

Businesses that will be affected are:

  • security providers and investigation services
  • road freight transport
  • computer system design and related services businesses

Businesses in the building and construction industry, cleaning, and courier services already had to report payments to contractors and will need to do so by 28 August 2019 for the 2018 -2019 Tax Period.

Trust Distributions Must be Completed on Time

Distribution decisions for your trust must be made in writing by 30th June 2019 or you may risk the trusts income going to the default beneficiary or the trustee which could result in tax implications. If you have not completed and signed your trust minute for 2019 we will be reminding you soon.

Have You Paid Your Superannuation?

The ATO now allows for people who have been out of the work force this year, like new Mums or Students to top up their superannuation contributions. Small Business Owners often forget to pay super for themselves as well.

You can top up your super if you have a total superannuation balance below $500,000 as at 30 June 2019; and have not utilised your entire concessional contributions cap ($25,000) for the year. You can ‘carry forward’ the unused amount  of the yearly contributions on a rolling 5 year basis.

“For example, if your total concessional contributions in the 2018-19 financial year were $10,000 and you meet the eligibility criteria, then you can carry forward the unused $15,000 over the next 5 years. You may then be able to make a higher deductible personal contribution in a later financial year. If you are selling an asset and likely to make a taxable capital gain, a higher deductible personal contribution may assist in reducing your tax liability in the year of sale.”

Some conditions apply so please check with us.

If you have any questions or are unsure how any of these changes may affect your business please ring HBG Tax and Accounting on 08 9594 1963.

This article was written based on information supplied from Knowledge Shop Newsletter June 2019.

The material and contents provided in this article is of informative in 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.

  Category: Tax
  Comments: None

Are You in The ATO’s Spotlight this Tax Season?

By Heaney Business Group
Man writing

ATO Is Shining the Spotlight on Work Related Deductions

ATO Taxation Statistics show that in 2016-17 there were more than 8.84 million people claiming $21.98 billion in work-related expense deductions.” ABC News reported.

To claim an expense for your business you need to have incurred that expense in your business and have records of it; the expense needs to relate DIRECTLY to how your business earns its revenue. Expenses that have a partial business and personal use will need to be split in the percentages associated with the use and only the business expense can be claimed. Common work-related expenses that also have personal components are cars, mobiles and internet service for home businesses.

Record Keeping – When You Don’t Have to Keep Records

When claiming work deductions below $300 you are not required to keep records unless it is clothing that is over $150; however beware the ATO can ask you to prove that you DID purchase the items related to the claim. If you haven’t kept records of your purchase and you can’t prove that you purchased it, your claim may be denied.

Do You Have a Home Office?

Did you know that there are different rules that apply when you are working from home?

When your home is the principal location for your business and you have a dedicated office area, you may be able to claim a variety of expenses associated with the amount of area (square meterage) in your home that is used to conduct your business.  For your dedicated work area, you may be able to claim expenses that are incurred in the running costs for that portion of your home like a percentage of your electricity bill plus depreciation on your office equipment.

If you don’t have a dedicated work area and use the dining table or the couch to work from, the work-related expense claim you can make are likely to be more limited.

Cryptocurrency is Considered as an Asset for Tax Purposes

The ATO considers cryptocurrency an asset for tax purposes and not a form of currency. Being an asset means that cryptocurrency is therefore subject to capital gains tax. You need to keep records of all of cryptocurrency your trades so that you can determine whether you have made a loss, or a gain relating to each trade and therefore are required to pay tax on any gains.

Capital gains tax can be a complicated area and the ATO will be scrutinising taxpayers that are claiming large cryptocurrency losses.

Do You Earn Income Via the Shared Economy?

If you are earning an income from the shared economy, for example AirBnB or Uber you must declare this income like any other on your tax return. You can also claim business expensed related to the service that you provide.

Are You in The ATO’s Spotlight this Tax Season?

If you are unsure if any of these apply to you or any have other questions related to your tax please contact HBG Tax and Accounting on 08 9594 1963 this week so any arrangements that are needed can be made before the end of the tax year.

This article was written based on information supplied from Knowledge Shop Newsletter June 2019.

The material and contents provided in this article is of informative in 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.

  Category: Tax
  Comments: None

Important Financial Changes You Need to Know

By Heaney Business Group
Vote
Vote

Australian’s will go to the poles on Saturday 18th May and there are some important things that you need to know which may impact on your financial affairs.

Do you know what Bill Shorten’s Labor is proposing?

If Labor win’s the upcoming federal election they have some changes in legislation that may hit you hard in the hip pocket.

  • Franking Credit Changes – Retiree’s Tax
  • Negative Gearing Changes
  • Tax Changes to Trust Distributions
  • Superannuation Changes

Franking Credit Changes

Have you heard about the proposed “Retiree’s Tax”. What it means to many of you not just retirees is that your franking credits – the tax that you have already paid as a shareholder in the company where you own shares, will be taxed again.

When an Australian shareholder receives their dividend from a shareholding and it is “franked”, they receive a tax credit for the tax already paid by the company on that income — thereby ensuring that the same income is not “taxed twice”.

Retirees are estimating they will lose 20 – 30% of their income if this policy goes through.

One man, via video, said he would lose 20 per cent of his income as a result of Labor’s plan to end cash refunds on franking credits.” According to ABC News

Negative Gearing Changes

Labour is proposing to stop negative gearing – this will probably have an adverse effect forcing up rents that are charged and the cost of buying properties.

According to the Labor Party

“Australia currently has the most generous property tax concessions in the world.

Current arrangements for negative gearing and capital gains tax concessions predominantly benefit high-income earners. 70 per cent of the benefits of the CGT discount and 50 per cent of the benefits of negative gearing go to the top 10 per cent of income earners

The negative gearing changes not only apply to property, but shares and business purchases and you will no longer be able to deduct excess interest when purchasing these assets either if this change is implemented.

Tax Changes to Trust Distributions

If elected Labor proposes to change the tax rate on discretionary trust distributions to a standard minimum of 30%. If you are currently using your trust to reduce the amount of tax pay to protect your asset or for a business succession strategy this will no longer be available and you will have to pay a minimum of 30% tax. These tax changes could also affect any adult children who are in tertiary education and receiving an income from the trust.

Superannuation Changes

Labor has also said that they will increase compulsory super contributions from 9.5% to 12% which will impact all small businesses. Other changes include reduction of concessional contributions into superannuation and taxing of pensions over $75,000.

Please read Labor’s policy document for full details.

Do your homework and make an informed choice when you vote in the upcoming election.

If you are unsure how any of these changes may affect you please ring HBG Tax and Accounting on 08 9594 1963.

  Category: Tax
  Comments: None

3 Things to Do to Get Ready to Submit Your Tax Return

By Heaney Business Group
tax time

tax timeTax time is fast approaching and you don’t want to get caught short. Start by getting support and advice from a Business Accountant. HBG Tax & Accounting offer advice when it comes to your personal tax return as well as your business deductions and has the expertise to help you on matters relating to your Individual Tax Returns.

To claim deductions against the tax you have paid, you need to have made the deductions in the relevant year and in some cases that can before the deduction is actually due. There are main areas where an accountant can advise you on the best timing to pay invoices to maximise the benefit that you will receive, this advice needs to be tailored to your specific circumstances.

Here are 3 broad areas to consider before the end of the tax year.

Keeping Your Documents in Order Using Simple Steps

  • Tax Deductions
  • Log Books
  • Claiming GST

Tax Deductions

When running a business or working as a sole trader you need to know what deductions you can claim so you can reduce your assessable income which in turn will reduce the amount of tax you have to pay. To support your deductions, you must keep the relevant tax receipts with a transaction record showing the expenditure items.

Log Books

Using a vehicle for work purposes or if your business is supplying vehicles record keeping may be required. Travel that exceeds 5,000 km each year must be documented, keeping a log book in your vehicle for yourself or staff with the odometer readings noted can be used as vehicle expenses, running costs and depreciation. Don’t forget to mark any personal use separately in your log book. Logbook records need to be kept for a continuous 12 week period and redone every 5 years. See the ATO’s Logbook method for more details or speak to your accountant.

Claiming GST

Certain items in business can be claimed for the whole amount of GST that you pay however you can only claim a portion of GST on items that are also used for personal use. For instance, if you purchase a car and you use the vehicle half the time in the business and then half time for personal use, you can only claim for 50% of the cars GST.

Needing to Know More About How to Get Your Tax Matters in Order?

The team at HBG Tax & Accounting are your local accountants in Rockingham who have all your tax needs covered; not just business, for individual tax returns and accounting matters too.

Call the team at HBG Tax & Accounting to make an appointment on 08 9594 1963 to discuss all your tax needs.

  Category: Tax
  Comments: None

Warning on tax for overseas incomes

By Heaney Business Group
Tax

Tax payment on overseas income have been highlighted in recent cases as to why people are paying more tax than they thought they would be when income was made outside Australia.

As an Australian resident earning an income in another country which could include money from overseas investments, the sale of overseas property or dividends from foreign shares / trusts; you will need to declare this income on your Australian Tax Return.

Claiming Foreign Income Tax Offset

Often this foreign income will be taxed at the appropriate rate in the country of origin. You may be able to use the tax that you have paid to claim a foreign income tax offset that can then be used to reduce your Australian Tax bill.

Problems arise when there is a difference in rates of tax or how the tax is applied to the gain; this can mean that you may not have paid enough tax on the gain to claim the offset as ruled by the ATO.

Here is a recent example of where a taxpayer had to pay more tax than expected.

 “The taxpayer in this case, was a resident of Australia but was taxed in the US on gains they made on interests in US real estate. Most of the gains they made were taxed at a concessional rate of 15% (rather than the normal rate of 35%) because the interests had been held for more than one year. Some of the gains were ultimately taxed at 35% in the US.

The capital gains were also taxed in Australia and qualified for the general CGT discount of 50%.

As the taxpayer was a resident of Australia and had paid tax on the US gains, the taxpayer claimed a foreign income tax offset for all of the US tax they paid. However, the ATO amended the tax assessment and only allowed a tax offset for slightly less than 50% of the tax they paid in the US.

The problem for the taxpayer was that while the US and Australia both have tax concessions for longer term capital gains, they operate quite differently. The US applies a lower rate to the whole gain while Australia applies a normal tax rate to half of the gain. Unfortunately for the taxpayer, the Federal Court held that the Commissioner’s approach was correct. If foreign tax has been paid on an amount that is not included in your assessable income, then you cannot claim a foreign tax offset on it. In this case, the portion of the capital gain that was exempt from Australian tax because of the CGT discount was not included in assessable income.”

Different tax concessions

Although the United States and Australia both allow for tax concessions on longer term capital gains, their systems operate quite differently. When it comes to capital gains the US considers the whole gain and applies the lower rate to all of it however in Australia half the gain will be taxed at your normal rate and the other half will attract the reduced rate of tax. Therefore, capital gains exemption will only be applied to a portion of the foreign tax that was paid and can be used to reduce your Australian tax liability.

Other countries have different rules as well if the foreign tax has been paid on an amount of income earnt overseas you may not be able to claim the full amount as a foreign tax offset.

When it comes to foreign assets it is not always as clear cut as it may seem when it comes to offsetting taxes that have been paid overseas. Please consult an accountant to see what is available for your exact situation.  

Call the team at HBG Tax & Accounting to make an appointment on 08 9594 1963 to discuss all your tax needs.

This article was written based on information supplied from Knowledge Shop Newsletter February 2019.

The material and contents provided in this article is of informative in 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.

  Category: Tax
  Comments: None

Did you know if you don’t meet your tax obligations your tax deductions will be denied?

By Heaney Business Group
Tax deduction

Tax deductions denied

If taxpayers don’t meet their PAYG withholding tax obligations from 1st July 2019, they won’t be able to claim a tax deduction for the following payments:

  • of salary, wages, commissions, bonuses or allowances to an employee;
  • of directors’ fees;
  • to a religious practitioner;
  • under a labour hire arrangement; or
  • made for services where the supplier does not provide their ABN.

For instance, if payments are made as a “contractor” but it should have been done under an “employee” and no PAYG has been withheld, a deduction can still be available if the correct information has been rectified voluntarily, although keeping in mind failure to withhold the right amount of tax could incur a penalty.

Important to know if you are in the road freight, IT or security, investigation or surveillance business

The Government has been keeping a close eye on the taxable payments reporting systems for the building and construction industry and the cleaning and courier services and now are branching out to the bigger scope in more industries about how flow of cash payments to contractors are made. If your business has an ABN, in road freight, IT, security, investigation or surveillance all payments to be made to contractor needs to be reported to the Australian Tax Office (ATO)

Know your industry

Know the definition of your industry and the subtitle of service it covers for instance “Investigation or Surveillance” includes Locksmiths as the definition is “protection from, or measures taken against, injury, damage, espionage, theft, infiltration, sabotage or the like.” If you are unsure ask your accountant.

Another example is IT services, “Specialising in computer hardware and software for the services of the client, covering areas of software installation, web development and design, computer management, software simulation and testing but that doesn’t apply to the selling of computer software or hardware leases.

Road freight has been expanded to cover the transportation of good by large vehicles such as log haulage, removal of furniture, taxi trucks, towing trucks etc this has been added to the existing delivery and logistic areas like courier deliveries services which were already required to disclose payments to contractors.

If you think your business will be impacted by these changes, speak to your accountant. As of the 1 July 2019,

you need get the following information for all your contractors

  • the ABN
  • name and address
  • gross amount paid

Having these records from the start will have reporting your first Taxable Payments Annual Report (TPAR), by 28 August 2020 easily and more accurate. Planning ahead will save you time and money in the long run.

Do you need to report?

Contractor payments obligation to report to the ATO are comprehensive and now include areas such as investigation, road freight, surveillance services, security and IT.

The following services are required to report contractor payments:

Service Reporting of contractor payments
Building and construction services From 1 July 2012
Cleaning services From 1 July 2018
Courier services From 1 July 2018
Road freight, IT or security, or investigation or surveillance services From 1 July 2019

For businesses providing mixed services, if 10% or more of your GST turnover is made up of affected services, then you will need to report the contractor payments to the ATO.

The material and contents provided in this publication are informative in 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.  

This article was written based on information supplied from Knowledge Shop Newsletter December 2018.

  Category: Tax
  Comments: None

Are You Paying Tax on Your Shares?

By Heaney Business Group
Are You Paying Tax on Your Shares?

The ATO is retrieving records dating back to 2014 and comparing over 500 million records. The records that are being compared include price, time, quantity and full details of the individual share trades from information that they already have gained from share registries, brokers and exchanges.

By cross referencing this information the ATO is able to check if the correct tax obligations such as capital gains from the sale of shares has been added or losses claimed if applicable.

5 Million Australians Own Shares

With over 5 million Australians owning shares this information will help the ATO ensure that errors are kept to a minimum.

“Almost one third of all Australian adults own shares, and there is evidence that some taxpayers are getting it wrong when it comes to reporting their capital gains or losses from the sale of shares. In particular, we tend to see higher rates of error among those who don’t regularly trade in shares and who are not aware of the tax implications,” Assistant Commissioner Kath Anderson said.

Incorrect reporting of your tax obligations can result in penalties up to 75% of the value of the original tax. Keeping accurate documentation of your share transfers and trades including:

  • records of share purchase
  • sale prices
  • costs like brokerage fees.

If you are selling part of your share parcel you need to also document the amount of shares you are still holding.

Need Help With Your Tax On Your Shares?

The team at HBG Tax & Accounting are your local accountants in Rockingham. Please feel free to give our office a call on 08 9594 1963 to make an appointment to discuss your exact situation and requirements.

The material and contents provided in this publication are informative in 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.  

This article was written based on information supplied from Knowledge Shop Newsletter December 2018.

  Category: Tax
  Comments: None

Not your typical accountant

By Heaney Business Group

It seems this is a very common perception of an accountant, but it couldn’t be further from the truth! Tax and accounting inspires us at HBG – shocking we know. Helping people through a transitional phase of their finances, or finding a solution to a more complex case is certainly inspiring for us. Even the straight forward tax and accounting jobs encourage us to utilise our skills to get the best solution for our clients.

What we really do as accountants is take on an ever-growing business advisory role, which essentially caters to the full business needs of our diverse clients. We partner with our clients help solve their business problems and offer advice on how to create more wealth and opportunity in their business.

So how can an accountant, or HBG, help you? Well, we can provide that sigh of relief and assurance of a job well done. You know that feeling of relief when something is completely taken off your plate? This feeling is strengthened with long-term relationships that we look to build with each of our valued clients.

At HBG, we are here to make our clients’ lives easier and we really enjoy the relationships we have with our clients, staff and local community. We work with our clients to solve any problem they may have, from dealing with the ATO to managing cash flow to marketing and human resource management issues. We pride ourselves on being able to meet our clients’ needs and to be seen as a true and trusted advisor.

If you are thinking about seeking advice, don’t hesitate to contact us. We aren’t your average backroom accountants and we would love the opportunity to get to know you and your business.

Should you have any questions about the how we might be able to help you, please don’t hesitate to contact our trusted tax accountants and business advisors.

 

P: 08 9594 1963

E: admin@hbgtax.com.au