TAX DEDUCTIONS FOR VACANT LAND TO BE DENIED FROM 1 JULY 2019

The Government recently introduced legislation to deny certain tax deductions for vacant land.

The Government will deny certain deductions for expenses associated with holding vacant land.  They are trying to address concerns that deductions are being improperly claimed for expenses relating to holding vacant land where the land is not genuinely held for the purpose of earning assessable income. 

The vacant land must be available for rent for a creditable, commercial use. 

There must be a requirement, nexus between the expenditure and income for the property. Note, deductions denied will not be carried forward for use in later years.

Investment / rental property expenses are closely scrutinised. A clear typical example refers to travel expenditure to properties are denied.  Depreciation on existing chattels are denied.

 If you need further clarification on what is claimable with vacant land, please contact our office.

RESIDENTIAL RENTAL PROPERTY DEDUCTIONS

There is some confusion over what can and cannot be claimed for residential rental property deductions. 

In a nutshell, the following expenses can be claimed:

• Advertising for tenants

• Body Corporate fees and charges

• Council rates

• Water rates

• Land tax

• Gardening & lawn mowing

• Pest control

• Insurance (Building, Contents, Public Liability)

• Interest Expenses

• Prepaid expenses

• Property agent ‘s fees & commission

• Repairs & maintenance

• Some legal expenses

Generally speaking, you can claim a deduction for your costs in repairing and maintaining your rental property in the year you pay them, if those expenses relate to repairs and maintenance for wear and tear or damage. 

'Repairs' means work to make good or remedy defects, damage or deterioration of the property.  E.g.:

• replacing part of the guttering or damaged windows

• replacing part of a damaged fence

• repairing electrical appliances or equipment.

'Maintenance' means work to prevent deterioration or fix existing deterioration.  E.g.

• painting a rental property

• oiling, brushing or cleaning something that is otherwise in good working condition

• Maintenance plumbing.

If you need further clarification on what is claimable with your rental property, please contact our office.

DIGITAL TAX - THE BAR IS RAISED!......AND IMPORTANT DATES

We have previously advised of the ATO’s increase in data matching and data analytics:

1.  The introduction of Single Touch Payroll is a key development in this area.  It not only provides the ATO with real time digital data, but works towards aligning the ATO’s records with the SRO and Workcover etc.

2. The ATO recently hired a digital tax specialist to head up its data analytics function to increase its capability in this area.  A lot of source data is now provided in digital form (i.e. Single Touch Payroll).

Employers and Business Owners need to be proactive with their compliance.  

2019 Payment Summaries:  If you haven’t yet provided your employees with their payment summaries for the year ended 30 June 2019, you need to make this a priority.  The due date for this is 14th July 2019.

 UPCOMING IMPORTANT DATES

 21 July 2019                        June 2019 Monthly BAS/IAS due for lodgement and payment

 28 July 2019                        June 2019 Quarter BAS due for lodgement and payment (if lodge by paper)

 28 July 2019                        Make payment of Superannuation Contributions for June Quarter

 14 August 2019                  Lodge PAYG Withholding Payment Summary Annual Report

 21 August 2019                  July 2019 Monthly BAS/IAS due for lodgement and payment

 25 August 2019                  June 2019 Quarter BAS due for lodgement and payment (if lodge electronically)

 21 September 2019           August 2019 Monthly BAS/IAS due for lodgement and payment

ARE YOU IN THE ATO’S FIRING LINE THIS TAX TIME?

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Its no secret that the ATO have allocated significant resources to try and catch out those taxpayers who are not doing the right thing when it comes to claiming allowable deductions or declaring all income.

The ATO are placing particular focus on the following income areas:

•  Cryptocurrency

• Sharing Economy (e.g. Airbnb & Uber)

• Deliveroo

• Rental Properties

• Holiday Homes

Additionally, they are focusing on Work Related Expense claims such as:

•  Motor Vehicle expenses

• Laundry claims

• Home Office expenses

• Telephone

Over claiming deductions and under declaring income will be detected by:

•  Data matching (Banks, Government Agencies, etc)

• Algorithms

• Data Analytics

• ATO comparing claims with others in the Industry

• ATO Reviews/Audits, etc

Deliberate attempts to over claim can attract large penalties.  It is important that you are able to substantiate your claims with valid receipts.

 Please call us if you would like to discuss this further.

30 JUNE IS NEAR!

TAKE ADVANTAGE OF SMALL BUSINESS CONCESSIONS

Prepare for the end of financial year by making use of these small business tax concessions:

Instant asset write-off

Business assets purchased before 30 June may be able to be claimed as a full deduction in your 2019 tax return. The asset must have cost less than the threshold that applied when it was first installed and ready for use.

Prepaid expenses

Expenses such as rent, registration fees and insurance paid before 30 June that end in the next financial year can be claimed as a deduction in this year's tax return.

Simplified trading stock calculation

If the estimated difference between your opening and closing trading stock is $5,000 or less, you don't need to do a stocktake. Instead, you can include the same amount for your opening and closing stock in this year’s tax return.

Accelerated depreciation for primary producers

If you're a primary producer, you can claim a deduction in your 2019 tax return for:

• fencing

• water facilities

• assets used to store fodder that you bought (or first used or had installed ready for use) on or after 19 August 2018.

LIVE ACCOUNTING FILES

All businesses today hover around the Information Age – social media, cloud based applications and single touch payroll upon us!

Your accounting file should be online & live whether your enterprise is retail, hospitality, distribution, construction, manufacture or service.

If you haven’t upgraded to a live accounting file yet, then you should do so now. 

This is the way of business, don’t be ignorant or present that it all seems too hard?!

Ask for help and engage with CFD Advisors to support you.

TRUST DISTRIBUTIONS TO BE DETERMINED BY 30 JUNE!

Did you know that your Family Trust is required to prepare a Trust Distribution Minute for the year ended 30 June 2019 BEFORE the end of the Financial Year?  If you don’t there is a danger that you will pay a lot of extra tax!

A Trust Distribution Minute determines the allocation of the Trust’s net income to its beneficiaries for the relevant financial year and decisions on distributions must be made by 30 June.

The consequences for not doing so, is that the default beneficiary stated in the Trust Deed will be assessed on the total income of the Trust.  If no default beneficiary is listed in the Deed, the trustee is assessed at the highest marginal tax rate plus the Medicare Levy.

We have prepared Trust Distribution Minutes for the year ended 30 June 2019 for our clients.  Upon receipt from our office, you should immediately sign and date them and return them to our office.

If you have any queries, please contact our office.

WHO THE ATO ARE TARGETING THIS YEAR!

Hundreds of thousands of Aussies are expected to receive “please explain” letters this year amid a dramatic escalation in the ATO’s crackdown on the $8.7 billion “tax gap”.

Dodgy, work-related claims like dry cleaning and car expenses will once again be the most closely scrutinised, along with investment property deductions, cryptocurrency earnings and sharing economy platforms like Uber.

The ATO investigate through technology — process of data-match, benchmarks and summary of expenses.  Taxpayers with claims that are outside the norm will receive a letter from the ATO.

With regards to rental properties, the in-depth audits they conduct this year are expected to double, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others and omitted income from accommodation sharing.

The most important thing to remember is that if you can’t substantiate it, you can’t claim it!  Make sure you’ve got the receipt/invoice or bank statement that proves you incurred the expense.  The expense must also be legitimately related to your job.  

If you’re not sure whether you can make a claim, seek our advice.  We’ll be able to tell you what you can claim and what you can’t.

We also note that the ATO are targeting supposed non compliance by setting up shop in specific suburbs (i.e. Dandenong).  They are inviting businesses to attend their seminars and attending businesses to introduce themselves. 

EOFY IS FAST APPROACHING – IT’S TAX PLANNING TIME!

With the end of financial year only weeks away, now is the time to implement tax savings strategies to reduce your 2019 tax liability.  Effective tax planning is crucial for being prepared for the coming end of year!

Here is why effective tax planning is a critical financial function of any successful business:

• Being prepared for a tax bill and planning for it as part of cash flow management will save you grief because you can plan for it by budgeting for it. 

• The changing taxation landscape, while being confusing and costly from a compliance perspective, also affords opportunities to the prepared. For example, Australians under the age of 65 can now deduct personal superannuation contributions up to cap of $25,000 provided payment is made before 30 June 2019.

• It is an opportune time to get your books up to date as well – review your results year to date, your debtors and creditors (get paid or reach arrangements with creditors) as well as bill for work you have completed. 

• Reduce tax risks such as ensuring payments to employees and directors (including superannuation) are up to date as well as ensuring related party loan accounts will not cause Division 7A headaches. 

 Talk to us today about how we can assist you to maximise your opportunities with effective tax planning.

SINGLE TOUCH PAYROLL – CLOUD ACCOUNTING – ON TIME REPORTING

We are constantly online and live?!

Below are the most common questions we receive regarding the requirement for Single Touch Payroll Reporting:

• How do we handle all this reporting?

• What does this all mean with reference to reporting requirements?

• What does this mean for cashflow?

• We have so many entities with different reporting requirements

• Do you have an online accounting application?

• Are you registered for Single Touch Payroll?

• Where to from here?

• The time required and the cost associated for such application is a burden for SME Business. 

We can answer all of your questions and arrange support so that your business can adhere to the STP requirements and champion the functions!

Please contact our office for support and to further discuss.

SINGLE TOUCH PAYROLL – ARE YOU READY!

Single Touch Payroll (STP) is compulsory for all Employers from 1 July 2019.

If you already use payroll software, check to see if it offers STP reporting by talking to your software provider.

If you don’t use payroll software, you can choose an STP ready solution or talk to our office for advice for the best solution for your business.

If you have only 1 – 4 employees you can choose a low cost STP solution.  MYOB offer a payroll only solution for up to 4 employees for $10 per month.

You must ensure you are ready and compliant. 

If you would like to discuss this further, please contact our office.

ACCOUNTANT = BUSINESS MENTOR

Do you consider your External Accountant as your Business Mentor?

Most businesses have an External Accountant and often assume that their Accountant is there to just complete Tax Returns and calculate their taxes!

As Accountants, we are more than just a once a year processing service.  We are also Business Mentors.

We are here to provide you (the business owner) with advice, support you to set goals and guide you to achieve them.  We are an independent mindset and are exposed to a myriad of business experience and industries. 

Remind yourself that your Accountant is there to support you and help you grow.  We not only get to know your business, but your entire family situation, so that we have the complete picture and can advise accordingly.

Business owners need to be proactive with their approach on growing their business and minimising taxes, not reactive!

If you need advice, be sure to contact us and we will meet with you to discuss our engagement and negotiate a plan to support you.

2018 TAX RETURNS ARE DUE FOR LODGEMENT

15th May 2019 is the due date for lodgement of all Tax Returns that are not yet lodged for the year ended 30th June 2018.

If you haven’t yet provided your tax information to our office, please forward it immediately to ensure processing can occur by the due date.

Please note that where Tax Returns are not lodged by the due date, the ATO may impose penalties.

Kindly contact our office if you have any queries.

CFD WISHES YOU A HAPPY EASTER

Nick and the CFD Team wish you a very happy and safe Easter.

May your Easter long weekend be filled with spending time with loved ones and enjoying a chocolate egg or two!!

UPCOMING IMPORTANT DATES

• 21 April 2019                      March 2019 Monthly BAS/IAS due for lodgement and payment

• 28 April 2019                     March 2019 Quarter BAS due for lodgement and payment

• 28 April 2019                     Make payment of Superannuation Contributions for March Quarter

• 15 May 2019                       Lodge 2018 Tax Returns for all entities (excluding some Individuals)

• 15 May 2019                       Make payment of 2018 Tax for Companies and Super Funds

• 21 May 2019                       April 2019 Monthly BAS/IAS due for lodgement and payment

• 28 May 2019                      Make payment of 2019 Fringe Benefits Tax

• 21 June 2019                      May 2019 Monthly BAS/IAS due for lodgement and payment

• 25 June 2019                     Lodge 2019 Fringe Benefits Tax Return

• 30 June 2019                     Super Guarantee Contributions must be paid to qualify for a deduction in the 2018/19 Financial Year

SUPERANNUATION REPORTING REQUIREMENTS

The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 received Royal Assent on 1 March 2019 which has amended the superannuation reporting time frame.

In simple terms, the new Law has eliminated the three month from due date rule for unpaid superannuation guarantee and instead superannuation amounts must be reported at the end of each quarter.

If the unpaid amount was reported by the due date, the penalty may be remitted by one of the following:

o    paying the debt

o    appointing an administrator under section 436A, 436B or 436C of the Corporations Act 2001

o    beginning to wind the company up (within the meaning of the Corporations Act 2001).

If the unpaid amount is reported after the due date (at the end of each quarter), the only way to remit the penalty is to pay the debt.

Obviously, the aim of new treasury law is to put more pressure on employers to comply with SGC reporting requirements.

We also note that as of 1 April 2019, the ATO is allowed to disclose an employer’s non compliance to affected employees, even if employees have not lodged an enquiry with the ATO.

If you would like to discuss this further, please contact our office.

BUDGET 2019 - HIGHLIGHTS

The Federal Budget was handed down this week with some of the Governments proposed changes as follows:

· Lower individual tax rates

· Increasing the low and middle income tax offset

· Instant asset write-off increased to $30k for eligible assets that are first used or installed ready for use between 2 April 2019 and 30 June 2020 to businesses with annual turnover of $10 million or more but less than $50 million

· Medicare levy low income thresholds for singles, families, seniors and pensioners will increase from the 2018-19 income year

· ABN holders will be required to lodge their tax return and confirm accuracy of their details on the ABR annually to retain their ABN status.

· Start date for amendments to Div 7A will be delayed by 12 months to 1 July 2020

Please contact our office if you would like to further discuss the proposed changes.

31 MARCH 2019 FBT YEAR END - ODOMETER READINGS REQUIRED!

31 March 2019 sees the end of the Fringe Benefits Tax (FBT) year.

If you are a business owner that supplies work motor vehicles to employees (or yourself or family members), you are required to take odometer readings of all motor vehicles owned by your business on Sunday 31 March 2019 (or first thing Monday morning).

Please set yourself a reminder to do this as we will require this information to prepare your FBT Return.

If you would have any queries, please contact our office.

PAY YOUR SUPERANNUATION OBLIGATIONS!

There has been a lot of speculation in regard to superannuation amnesty in the last 12 months.

I know as Accountants we sound like a broken record, but the reality is that the ATO is working closely with the Federal Government to crack down on employer non-compliance.

Employers should be aware that making late superannuation payments could have far-ranging consequences and is not limited to late payment as a non-deductible expense for the business.

The Charge on late payment is as follows:

• Interest on unpaid Super currently 10%

• An administration fee of $20 per employee

The ATO is authorised to hold Directors liable for any unpaid super guarantee charges or issue a garnishee notice.

There are instances where the ATO target the Director who has a DEEP POCKET.

Please note:- Superannuation payment dates for each quarter are as follows:

   Quarter 1 (1 July to 30 September) due on 28 October

   Quarter 2 (1 October to 31 December) due on 28 January

   Quarter 3 (1 January to 31 March) due on 28 April

   Quarter 4 (1 April to 30 June) due 28 July  

Look out for our post next week which will be about ATO data matching of super.

FRINGE BENEFITS TAX – WHAT YOU NEED TO KNOW AND DO!

The FBT year ends on 31 March 2019.

FBT is a tax employer’s pay on certain benefits they provide to their employees – including their employees family or other associates.

For example:

• Allowing your employee to use a work car for private purposes

• Giving your employee a discounted loan

• Paying an employee’s gym membership

• Providing entertainment by way of free tickets to concerts, etc

Some exemptions include:

• Work Tools

• Portable Electronic Devices such as mobile phones, laptops, tablets, etc

• Protective Clothing

• Minor benefits (costs less than $300 in value)

What you need to do if you’re an Employer and FBT applies to you:

1. Take odometer readings of work vehicles on 31 March 2019

2. Supply all relevant information to our office for preparation of your FBT Return by 30 April 2019 to enable it to be lodged by the due date

3. Pay any FBT owing by the due date of 28 May 2019

If you would like to discuss your FBT obligations further, please contact our office.

CFD Advisors Accountants - Tax Updates

CFD Advisors Accountants - Tax Updates  

Here is a small list of tax updates & concepts on the go!

Extension of instant asset write off

The Small business entity (SBE) instant asset write off will be extended to 30 June 2020; and,

The instant asset write off threshold will be increased from $20,000 to $25,000 (exc GST).

This is effective from 29 January 2019.

Home office expenses claim

The special rules for home office running expenses - rate increase from 45 cents to 52 cents per hour, effective from 1 July 2018. 

Tackling the Black economy

The Government has released a consultation paper seeking submissions for a reporting regime on the sharing economy. The sharing economy refers to providers such as, uber and airtasker to name a few.  Such operators and financial institutions will assist to provide information to the ATO for data matching and prefilling reports.

Enjoy the long weekend and be safe on the roads.

NET ASSET VALUE TEST

A crucial aspect of Small Business CGT concessions is the requirement to meet the basic conditions.

In particular the Maximum net asset value test.  That is, the total net value of the CGT assets owned by you and certain entities does not exceed $6 million just before the CGT event.  The limit is not indexed for inflation.

Have you prepared an Assets & Liabilities statement?  Are you aware of the Small Business CGT concessions and are you eligible?

Assess and review your Assets & Liabilities statement.  Speak to the relevant agent / authority and seek appraisals on the value of your assets.

We can assist and provide some light on whether the Small Business CGT Concessions apply to your family group portfolio and whether there is a restructure opportunity.