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Focus on work-related car expenses

The Tax Office has flagged work-related car expenses as a concern this tax time.

The ATO is targeting those who make mistakes or deliberately lodge false claims. Examples include:
– Claiming things they are not entitled to, i.e., private trips such as work to home travel.
– Making claims for trips that did not occur.
– Claiming expenses that their employer has already reimbursed them for.

Advancements in data-matching technology allow the ATO to match individuals with peers in similar occupations, earning similar amounts of income. Analytics is also used to identify claim patterns, i.e., over 800,000 people claimed exactly 5,000 kilometres under the cents per kilometre method last year.

The best way to avoid making a mistake include:
– only making a car claim if you paid for the expense yourself and were not reimbursed;
– it was directly related to earning your income; and,
– you must have a record to support the claim.

An example of a legitimate car claim is travelling between work sites or between jobs as part of your job.

Before you submit a car claim, consider if your employer would agree you needed to undertake the trips as part of your job. Employers may be contacted if your claim raises a red flag.

Posted on 17 May '18 by , under tax. No Comments.

Budget 2018: creating a level-playing field

The Government will continue its commitment to strengthen the economy by focusing on improving its integrity measures to create a fairer level-playing field for all.

Funding new ATO enforcement
Additional funds will be allocated from the Budget over four years to fund a new ATO enforcement strategy to tackle the black economy. Through this measure, the ATO will implement new mobile strike teams, stricter auditing and a Black Economy Hotline for Australians to report black economy and illegal phoenix activities.

Cash payment limit
The Government will commence with a restriction on cash payments made to businesses for goods or services of up to $10,000 from 1 July 2019. Payments over $10,000 must be made via an online banking system or cheque unless payments are with financial institutions or consumer to consumer non-business transactions.

No tax-deductibility for non-compliant payments
From 1 July 2019, the Government is keeping a closer eye on those businesses that try to claim deductions for any payments made to their employees that do not comply with current regulations. Deductions for payments from a business to a contractor will also be disallowed if the contractor does not have an ABN and the business does not withhold any PAYG monies, despite the withholding requirements applying.

Reforms to combat illegal phoenixing
Corporations and tax laws will be strengthened with further measures to prevent illegal phoenix activities. Those measures will include changes to:
– introduce new phoenix offences for individuals who run or open the door to illegal phoenixing;
– stop directors incorrectly backdating resignations to avoid liability or prosecution;
– control the power of related creditors to vote on the appointment, removal or replacement of an external administrator;
– expand the Director Penalty Regime to GST, luxury car tax and wine equalisation tax (to make directors personally liable for company’s debts); and
– allow the Tax Office to restrict refunds for outstanding tax lodgements.

Personal income tax
The ATO will receive further funding from 1 July 2018 in a bid to strengthen compliance activities on individual taxpayers and their tax agents. This funding is set to provide new compliance activities, a stronger audit presence and prosecutions, improve education and guidance materials, pre-filling of income tax returns and enhance real time messaging to tax agents and individual taxpayers. This measure is set to prevent over-claiming of any entitlements, including tax deductions by higher risk taxpayers and their agents.

Black economy package
The Taxable Payments Reporting System (TPRS) will expand to include security providers and investigation services; road freight transport; and computer system design and related services. Businesses required to report payments to contractors to the Tax Office must keep information from 1 July 2019, with the first annual report due by August 2020.

Tax and superannuation debts
The Budget implements a further range of strategies to improve debt collections revenue and time taken for debts to be collected. This measure is set to deter individual taxpayers from gaining an unfair advantage over individuals paying their fair share of tax and super.

Posted on 9 May '18 by , under tax. No Comments.

Budget 2018: building resilience

The 2018 Federal Budget is built on the back of a historically strong post-mining boom Australian economy, triggering fairly conservative changes to tax policy. The Budget’s strategy is to provide sustainable tax relief to those in the workforce, stimulating spending and encouraging businesses to invest in creating jobs.

Individuals
The Government is introducing a seven-year Personal Income Tax Plan to make tax lower, fairer and simpler. The plan is affordable and consistent.

The first step is to lower taxes for low and middle-income earners, thereby increasing disposable incomes to help take the pressure off household budgets. From 1 July 2018, the Government will introduce the Low and Middle Income Tax Offset, a non-refundable tax offset of up to $530 per annum to Australian resident low and middle-income taxpayers.

The second measure in the plan will tackle bracket creep. From 1 July 2018, the Government will increase the top threshold of the 32.5 per cent personal income tax bracket from $87,000 to $90,000.

The top threshold of the 32.5 per cent personal income tax bracket will increase from $90,000 to $120,000 from 1 July 2022.

The third phase of the Government’s Personal Income Tax Plan will simplify and flatten the personal tax system by eliminating the 37 per cent tax bracket entirely. From 2024-25, the 37 per cent tax bracket will be abolished to protect middle-income Australians from bracket creep over their working life. This will also allow working Australians to take on additional work and seek advancement without increased tax consequences. This strategy suggests the Government’s confidence in a buoyant economy and increased future wages growth.

The increase in Medicare levy from 2 to 2.5 per cent indicated in last year’s Budget will no longer proceed. In addition, the Medicare levy low-income thresholds will be increased for singles, families, seniors and pensioners from the 2017/18 income year.

Businesses
The $20,000 instant asset write-off has been extended for small businesses to 30 June 2019, providing more opportunity for them to reinvest in their business and replace or upgrade their assets. While the extension is a welcomed measure for small businesses; it may prove to be a standard feature with the Government facing difficulty trying to eliminate it in the future.

Posted on 9 May '18 by , under tax. No Comments.

ATO clarifies claims made in recent media coverage

The Australian Tax Office is standing by its actions undertaken that were presented on a recent current affairs program.

The ATO says where taxpayers fail to lodge tax returns and BAS returns over a number of years despite repeated requests, the ATO will raise a default assessment based on evidence that can be obtained, i.e., cash deposits in their bank account and bank statements.

In circumstances where a taxpayer refuses to cooperate with the ATO such as refusing to provide basic information, the ATO can only work off their bank account.

Firmer action is undertaken where taxpayers fail to respond to a position paper put to them based on this evidence and where there are attempts to engage with such taxpayers for an extended period, i.e., giving them a chance to rectify their tax situation.

One such penalty is a mandatory 75% penalty where a taxpayer has failed to send the ATO GST or tax they have withheld from their employees’ pay.

The next step is to issue a garnishee notice for taxpayers who repeatedly fail to engage with the ATO, despite the Tax Office’s attempts to contact them and collect tax owed. If there is no response from them, the ATO will then issue a garnishee notice.

The Tax Office generally will not proceed with garnishee action if there is a current dispute.

Posted on 3 May '18 by , under tax. No Comments.

Employing holiday makers on a visa

Employers can employ holiday makers on either a Working Visa (subclass 417) or a Working and Holiday Visa (subclass 462).

Employees on either visa are taxed at 15 per cent from the first dollar earned, regardless of their residency. Working holiday makers cannot claim the tax free threshold and must provide their employer with their tax file number (TFN).

Those who do not supply their employer with their TFN will be taxed at top marginal tax rate.

If a working holiday maker meets eligibility criteria, employers are required to pay superannuation.

Before employing someone on a Visa, you should check they have the correct visa using the ATO’s Visa Entitlement Verification Online service and register with the ATO before making your first payment to them.

Posted on 27 April '18 by , under tax. No Comments.

Changes to GST payments at settlement

Buyers of new residential premises or subdivisions of potential residential land will need to pay the GST component of the purchase price to the Australian Tax Office (ATO) as of 1 July 2018.

The amount of GST will not change. This change does not affect the sales of existing residential properties or the sales of new or existing commercial properties.

Buyers will need to split the amount of GST from the total purchase price, pay the GST component directly to the ATO by a disbursement at settlement and pay the GST exclusive purchase price to the vendor.

It is important to note settlements will not be conditional on the payment of GST to the Tax Office.

It is the property developer’s responsibility to provide written notice to the buyers when they need to withhold.

The liability for GST remains with the property developer.

Posted on 18 April '18 by , under tax. No Comments.

Fuel tax credit mistakes

Fuel tax credits are provided to businesses who acquire, manufacture, import or use fuel in part of running a business.

These credits can greatly benefit business owners but it is important to get the claim right. The ATO sees common mistakes made when calculating and claiming fuel tax credits, including:

Wrong calculations
A common error is to calculate fuel tax credits using the cost of the fuel rather than the quantity of fuel multiplied by the relevant rate. The correct formula is: quantity of eligible fuel x correct fuel tax credit rate = fuel tax credits.

Inaccurate records
You must keep accurate records of your fuel purchases and how the fuel is used in your business. If you claim less than $10,000 a year in fuel tax credits, you can use a range of documents to support your claims.

Using an incorrect rate
Fuel tax credit rates change every February. Check the rates before you lodge your BAS. The current rates for fuel acquired from 5 February 2018 to 30 June 2018 are as follows:

Eligible fuel type Unit Used in heavy vehicles for travelling on public roads All other business uses (including to power auxiliary equipment of a heavy vehicle)1
Liquid fuels, for example diesel or petrol cents per litre 15.1 40.9
Blended fuels: B5, B20, E10 cents per litre 15.1 40.9
Liquefied petroleum gas (LPG) (duty paid) cents per litre 0.0 13.3
Liquefied natural gas (LNG) or compressed natural gas (CNG) (duty paid) cents per kilogram 0.0 28.0
Blended fuel: E85 cents per litre 0.0 10.725
B100 cents per litre 0.0 2.7

Not checking the activity
A common mistake is to claim fuel tax credits using the ‘other business uses’ rate for heavy vehicles travelling on public roads. Rates differ depending on the activity they are used for.

Ineligible fuels
Claiming fuel used for private purposes, or for travelling on a public road in vehicles with a gross vehicle mass (GVM) of 4.5 tonne or less is a common error. If you are unsure if about the eligibility of your fuel type and usage, contact one of our accountants today.

Posted on 16 April '18 by , under tax. No Comments.

ATO targeting holiday homes

The Tax Office has rental property owners in its sights this tax season with a large number of mistakes, errors and false claims made by some using their own property for personal holidays.

The ATO is reminding owners they cannot claim deductions for holiday homes that are not actually available for rent or only available to friends and family.

Private use is entirely legitimate although it does reduce an owner’s ability to earn income from the property.

Properties must be genuinely available for rent to claim deductions. This means you cannot use the property for your personal use or let friends and family stay rent-free and claim a deduction.

For those who rent the property to friends or family at “mates rates,” they must only claim deductions for expenses up to the amount of the income received.

In addition to rental properties, the ATO is investigating cases where taxpayers claim their property is available for rent but there is no intention of renting it out. Rental rates well above market rates and unreasonable conditions for prospective renters are just a couple of ways owners can be doing this.

The ATO will also be scrutinising incorrect rental property claims. Data matching technology allows the Tax Office to pick up attempts at over-claiming regardless of whether the mistake was deliberate or an accident.

Property owners are advised to double-check their claims before lodging their tax return. They must remember to declare all rental income and only claim deductions for periods that the property is rented or genuinely available for rent at market rates.

Posted on 6 April '18 by , under tax. No Comments.

Bitcoin tax scammers

The Australian Tax Office (ATO) is warning taxpayers to be aware of scammers impersonating the Tax Office and demanding cryptocurrency such as Bitcoin as payment for fake tax debts.

The ATO became aware of these fraudsters late last year with over $50,000 paid in Bitcoin to scammers claiming fake ATO debts.

Once scammers receive payment, it is virtually impossible to recover it as cryptocurrency operates in a digital world.

The ATO is also warning taxpayers to be wary of other tax scams such as those demanding direct deposits into third-party bank accounts, demanding payment via iTunes cards or with a prepaid Visa gift card.

Over 80,000 scams were reported to the ATO in 2017, accounting for almost $2.4 million lost to scammers impersonating the ATO.

Almost one-third of victims were targeted with iTunes gift card scams, resulting in over $900,000 lost to scammers. More than half of all losses (roughly $1.2 million) were from deposits or transfers made directly into third-party bank accounts.

Scammers are also targeting taxpayers’ personal information with many reports of scammers asking for an individual’s Tax File Number.

Posted on 28 March '18 by , under tax. No Comments.

Employers urged to act now for Single Touch Payroll

The Australian Tax Office (ATO) is urging employers with 20 or more employees to prepare for the introduction of Single Touch Payroll.

Single Touch Payroll will be introduced from 1 July 2018, requiring employers to report their employee’s tax and super information to the ATO through Single Touch Payroll approved software.

Employers will report each time they pay their employees, i.e., weekly, fortnightly or monthly. The information that will be reported includes withholding amounts, superannuation liability information or ordinary times earnings (OTE) and salary, wages, allowances and deductions.

Single Touch Payroll will provide greater transparency and connect businesses to the ATO through their existing software.

Employers must prepare by organising the following:

  • A headcount of employees on 1 April 2018 to determine if there is 20 or more. If your numbers drop down to 19 or less, you will still continue to report through Single Touch Payroll unless you apply for and are granted an exemption.
  • Talk to your software provider about how and when your product will be ready.
  • Those without a software provider will need to find a provider that offers Single Touch Payroll.
  • Update your payroll software when it’s ready.
  • Start using Single Touch Payroll.

Employers with 19 or less employees have until 1 July 2019 to prepare, however they can start reporting as soon as their software is updated.

Posted on 23 March '18 by , under tax. No Comments.