Business Tax Tips

Business Tax Tips

Plant & Associates are a Queensland based accounting firm servicing clients predominantly in the Brisbane and Gold Coast areas. We are able to provide services no matter where our clients are located due to our technological infrastructure.

We specialize in providing accounting, business and tax services to small to medium enterprises, SMSF’s and Individuals.

Please call to discuss any of these points. We are offering an obligation free meeting to review your tax structure to identify any area of improvement.

Claim a tax deduction for $299 gift cards and alcohol

 

  • Gifts to clients for home consumption are tax deductible. Gifts to employees and directors are also tax free, provided they are provided infrequently and are less than $300 each.
  • Buy Wish gift cards, perfume or some bottles of wine and save 40% of the cost by claiming back the GST as well as a tax deduction!
  • Contrast this to taking your client or employee out to dinner, or giving them movie tickets. The ATO considers this “entertainment” and this is not tax deductible, nor is the GST claimable, regardless of who it’s for or the monetary amount.

    Pay your June Quarter Superannuation by 30 June

 

  • Superannuation isn’t payable until the 28th day after the end of the quarter. However, you also can’t claim a tax deduction until you have paid it.
  • The ATO says that a contribution isn’t made until the super fund receives the money, so make the June quarter contribution a few days before 30 June.

Always pay off non-tax deductible debt first and don’t mix Investment and Personal Debt

 

  • If you have a rental property loan, and you deposit your wage into it and draw the exact same amount out the next day, you have just decreased the tax deductible % of your loan. Don’t mix personal and tax deductible debt.
  • If you are considering renting out your home in future, consider the use of a mortgage offset account and interest only loan. This way you minimise the interest, but can still get a tax deduction for 100% of the interest on the original loan amount if you decide later to rent your current home and buy a new one.

    Are you paying too much Land Tax?

  • Each trust should own no more than one property to avoid land tax which is payable if the total unimproved value of property exceeds $350,000.
  • Assets should be held in separate trusts to maximise asset protection and minimise land tax. Ideally, each trust will have a separate corporate trustee.

    Leases, Chattel Mortgages and Hire Purchase Agreements are all different

 

  • You should ask for advice from your accountant every time you finance a new asset, as they all have different tax and GST treatments, and which one is best will depend on the particular type and use of asset you are buying.
  • Your accountant will need to see the finance documentation when preparing your tax return, without it your tax return may be incorrect.
  • Hire Purchase Agreements and Chattel Mortgages now have exactly the same tax treatment, but Hire Purchase Agreements are usually cheaper.

 

Are all your children listed on your Trust Tax Return?

 

  • Anyone under 18 can receive tax trust distributions of $416 per year tax free.
  • What about Mum and Dad who are retired? If self-funded and over 60, they are likely to be able to receive a large trust distribution at a low tax rate. If receiving the age pension, they may still be able to receive an amount tax free without affecting their pension.
  • Stay at home Mum’s and Dad’s can earn $5,475 per year without tax and without affecting their Family Tax Benefit Part B claim.

 

You may be liable for 9.5% Superannuation Guarantee, Work Cover and Payroll Tax for contractors even if they are on an ABN!

 

  • Consider changing the terms of the agreement so that contractors are remunerated for providing a “result” rather than being paid an hourly rate.
  • Alternatively, see if they would be willing to contract through a company or trust and thus absolve you of any liability for superannuation, work cover and payroll tax.

Tax Return preparation

  • Have you reviewed your asset schedule for assets you have disposed of? If not you may be missing out on claiming a tax deduction for the written down value.
  • Have you checked that no bad debts are included in your MYOB file?
  • Items less than $1000 can be claimed as an immediate tax deduction for a small business tax payer. For other businesses any individual item over $100 has to be depreciated. See your accountant for the rates for SBE, as different times have different limits.
  • Are you a business owner taking more than an $110,000 wage? You could be paying more tax than you need to.
  • Do you know what’s in your shareholder’s loan account?
  • Do you know what transactions have resulted in a GST adjustment and can you reconcile your balance sheet GST figures?

Have you considered which GST method is right for your cash flow?

  • If your clients pay you upfront, or if you’re a property developer and your clients don’t pay until the end of the job, you should be on an “Accruals” basis for GST.
  • If you always pay your debts on time, but your clients are late in paying you, you should be on a “Cash” basis for GST.

Are you managing your FBT?

  • Fringe Benefits Tax (FBT) is the most expensive tax. Roughly you pay $1 FBT tax for every $1 of expenditure. Make sure your accountant has advised you of the types of costs that are subject to FBT, and is adjusting for the ATO deemed private use of your cars as an employee contribution each year when preparing your tax return.
  • Mobile phones are 100% tax deductible if they are a majority work use.
  • Salary Sacrificed laptops are also tax deductible if the intention is to use them for a majority work use when purchased. Don’t depreciate business laptops, salary sacrifice them!
  • Going out to dinner whilst travelling overnight is tax deductible. At all other times, going out to dinner for a business meeting is not.

Free review of your Business Structure

If you would like a free no obligation meeting to review your existing structure, then please call (07) 5596 5758 or email admin@plantandassociates.com.au

www.plantandassociates.com.au  

Work related expenses

You may be able to claim deductions for work-related expenses you incurred while performing your job as an employee. You incur an expense in an income year when:

    • you receive a bill or invoice for an expense that you are liable for and must pay (even if you don’t pay it until after the end of the income year), or
    • you do not receive a bill or invoice but you are charged and you pay for the expense.

These expenses include:

    • car expenses, including fuel costs and maintenance
    • travel costs
    • clothing expenses
    • education expenses
    • union fees
    • home computer and phone expenses
    • tools and equipment expenses
    • journals and trade magazines.

You may also be able to claim some deductions which are not work related. They are:

    • interest and dividend deductions for investments
    • deductions for gifts and donations
    • a deduction for the cost of managing your tax affairs.

  • Record keeping for work-related expenses

    You must be able to substantiate your claims for deductions with written evidence if the total amount of deductions you are claiming is greater than $300. The records you keep must prove the total amount, not just the amount over $300. The $300 does not include car and meal allowance, award transport payments allowance and travel allowance expenses. There are special written evidence rules for these claims which are explained at the relevant items.

    If the total amount you are claiming is $300 or less, you need to be able to show how you worked out your claims, but you do not need written evidence.

Advance expenditure

If you have prepaid an amount for a service costing $1,000 or more, and the service extends for a period of more than 12 months or beyond 30 June 2018 (such as a subscription to a journal relating to your profession), then you can claim only the portion that relates to 2016-17. You can also claim the proportion of your pre-paid expenses from a previous year that relate to 2016-17.

Ride Sourcing is Taxi Travel

Article by National Tax & Accountants Association Ltd

In a recent case, the Federal Court has agreed with the ATO that ‘ride-sourcing’ (such as Uber) is taxi travel within the meaning of the GST law.

The ATO has advised tax practitioners that since a lot of people are taking up ride sourcing to earn more income, clients with a ride sourcing enterprise should:

  • Keep records;
  • Have an Australian Business number (ABN)
  • Register for GST, regardless of how they earn;
  • Register for GST, regardless of how much they earn;
  • Pay GST on the full fare received from passengers for each trip they provide;
  • Lodge activity statements; and
  • Include income from ride-sourcing in their income tax returns.

Drivers are also entitled to claim income tax deductions and GST credits (for GST paid) on expenses apportioned to the ride-sourcing services they have supplied.

The ATO can match people who provide ride-sourcing through data-matching and will continue to write to them to explain their tax obligations.

The ATO stated that, if the taxpayer appeals this recent decision, they will continue to administer the law according to their published advice.

Ref: Uber B.V v FCT [2017] FCA 110

No Overtime Meal allowance = No Overtime Meal Deduction

Article by National Tax & Accountants Association Ltd.

An employee construction project manager/supervisor was denied deductions for overtime meal expenses, as he was not paid an overtime meal allowance under an industrial agreement (award).

Facts

It was accepted that the taxpayer worked during the day on building sites, did additional paperwork at night and often worked weekends during the relevant income years.

As a result, additional amounts were negotiated and ‘rolled’ into his salary to cover the fact that he was expected to work additional hours, and also to cover any out-of-pocket expenses associated with such overtime.

However, the taxpayer’s salary was not paid under an award, which was imply used as a starting point in annual remuneration negotiations.

The taxpayer claimed a deduction for overtime meal allowances, contending that he had received an allowance under the relevant industry award to buy food and drink whilst working overtime.

Under audit, the ATO disallowed these overtime meal claims, and imposed  a 25% administrative penalty on the tax shortfall for lack of reasonable care.

Decision

The AAT agreed with the ATO, finding the taxpayer had received no overtime meal allowance under the relevant industrial award.

This was on the basis that the taxpayer was paid the same amount each week, regardless of any overtime he actually worked, meaning the payment was not a ‘definite predetermined amount’ to cover an estimated expense (as an allowance should be).

Additionally, the overtime amounts were ‘rolled in’ to the calculation of the taxpayers fixed weekly wage.

As a result, the calculation of the ‘allowance’ out of the taxpayer’s gross salary was merely a construction, and not representative of a separately identifiable allowance for his overtime meal expenses.

As no deduction is claimable under the income tax law for overtime meal expenses unless an appropriate award overtime meal allowance is paid, the Tribunal swiftly dismissed the taxpayer’s appeal, and also affirmed the 25% administrative penalty.

Ref: Kael v FCT [2017] AATA 38

 

Plant and associates

www.plantandassociates.com.au

07 55965758

work related deductions

Common misconceptions regarding claiming work related deductions

Car expenses

  • When claiming work related motor vehicle deductions remember that you still need to be able to substantiate how you worked out the number of business kilometres you travelled using the cents per kilometre method.
  • In order to claim under the log book method – you must have a complete and valid log book.
  • Under the log book method, a log book will last for 5 years UNLESS you change the vehicle, your useage pattern changes, your employment changes. If any of these things change you MUST complete a new log book.
  • The motor vehicle expense deduction is not available to vehicles over 1 tonne – these expenses get claimed at D2 on the tax return (Travel Expenses).

Travel expenses

  • Remember that just because you receive an allowance from an employer does not automatically entitle you to a work related deduction. Travel allowance claims are only deductive where the tax payer sleeps away from home.
  • 1 tonne vehicles are not allowed to claim 100% of expenses – private useage must be taken into account
  • Parking expenses are not allowed to be claimed where an employee is traveling to and from work and parking at or near the workplace for more than 4 hours
  • Car washing expenses are not allowed where the vehicle is provided for the employee’s exclusive use

Uniform, Clothing & Laundry Expenses

  • Everyday clothing is not tax deductible, nor can a claim for laundry be made on these items.   This includes heavy duty conventional clothing such as drill shirts and trousers.
  • Only outdoor workers can claim sun protection clothing as a work related deduction.
  • If your claim for Laundry expenses exceeds $150 you must have written evidence eg diary entries and receipts
  • Conventional footwear including non slip are non deductible

If you are unsure as to the deductibility of your clothing and shoes consider the following tax rulings TR 97/12, TD 1999/62 and TR 98/5 or ask your accountant.

Self education expenses

There must be a nexus between the self education expense and the current income producing activity (Employment) otherwise these expenses can not be claimed.

Other work related expenses

  • Sunscreen and sunglasses – outdoor workers can claim these but you must adjust for private useage.
  • Home office – running costs can not be claimed on a floor percentage basis, you must use the ATO rate of $0.36 cents per hour only
  • Home Office – Occupancy costs – (Rent, mortgage interest, rates) you can not claim theses if the home is not a place of business – (A place of business would include signage and stationery nominating the address as a place of business and the area should not be readily suitable or adaptable for use as a private or domestic purpose such as a bedroom) Having a room set aside for doing admin work at the end of the day does not constitute a place of business.
  • Bank fees – you cannot claim these
  • All other expenses including computers, mobile phones, internet etc MUST be apportioned between private and business useage.
  • Vaccinations are not deductible
  • Subscriptions to staff associations or social clubs are not deductible

What are the requirements of your Tax Accountant?

  • Reasonable and direct questions need to be asked, we have also provided various checklists for you to use. (Available on our website)
  • It is not necessary for you to provide to us or have us view/sight all your receipts, we only need you to advise that you have adequate substantiation. REMEMBER, in the event of an audit you will be required to provide that substantiation to the ATO.
  • If we have suspicion that a client is making fraudulent claims we have the right to request to see the substantiating evidence, if the client refuses to provide the substantiation we can refuse to input the deduction and also terminate our services to the client.

What is written evidence?

The following can be used to substantiate your claims:

  • A document in English
  • Document from the supplier of the goods and services showing the name of the supplier, amount of the expense, nature of the goods and services, date incurred
  • Bank statements
  • credit card statements
  • BPAY reference numbers
  • email receipts
  • Invoices
  • Delivery notes
  • PAYG payment summary
  • Paper or electronic copies of documents
  • Warranty documents

www.plantandassociates.com.au

PROBATIONARY EMPLOYEES AND REASONS FOR DISMISSAL

Probationary Employees and Reasons for Dismissal

If an employee is dismissed within their probationary period, do I have to give them a reason?

Short answer = no. Long answer = no, but we generally recommend you do.

Note:  Hereafter the term “probationary period” is replaced by “minimum employment period”.

The ‘short answer’ option

An employee dismissed within their minimum employment period does not have to be given reasons for the dismissal because they will not have achieved the required period of service to pursue unfair dismissal, which means they do not have a right of reply to the employer’s decision.

As the employer is not obligated to engage the employee in a warnings process or be drawn into a debate as to the merits of their decision, the employee can simply be given written notice of termination and dismissed with minimal process.

The ‘long answer’ option

Whilst an employee dismissed within their minimum employment period cannot pursue unfair dismissal, every employee can trigger the general protections provisions of the Fair Work Act 2009 (the Act) from day one of employment.

An employee could pursue a general protections dismissal claim if they believe they were terminated for a discriminatory reason (e.g. pregnancy, age, sex, carer’s responsibilities, etc) or for taking personal/carer’s leave; sought to lodge a WorkCover claim; suggested they were being bullied or queried their wage rate or award entitlements, for example. If an employer made the mistake of dismissing an employee for any of these reasons, it would be a breach of the general protections provisions of the Act.

 

An employer terminating an employee for performance reasons within their minimum employment period will be acting within their rights so when you have bona fide reasons for concluding employment, even if only minor issues, why not identify them? Failing to explain, even broadly, the performance issues that have led to termination within the minimum employment period may encourage an employee to fabricate their own reasoning as to what led to dismissal.

When a general protections dismissal claim is lodged by an employee, the onus is on the employer to PROVE that the employee was not terminated for the reasons they allege.

Identifying the performance reasons that led to dismissal within the minimum employment period at the time the employee is terminated – and including a summary of those issues in the termination letter – may not prevent a general protections dismissal claim being filed by an antagonistic ex-employee, but it will provide the employer with an evidence base to draw from in the hope of successfully defending against a fabricated or inaccurate claim.

Concluding thought – if you feel you can’t identify to an employee why they’re being terminated, maybe there isn’t a valid (i.e. lawful) reason for the dismissal.

Information provided by Employer Services Pty Ltd.

To find out more about how Employer Services can assist your business contact them on (07) 3220 3500

Chris Muir

DIRECTOR

Ph 07 3220 3500 l F 07 3220 3511

M 0432 711 885  l W www.employerservices.com.au

Level 7, 490 Upper Edward Street, SPRING HILL, QLD, 4000

 

Assisting your kids with their superannuation savings

Assisting your kids with their superannuation savings

  • The government has placed annual contribution caps on superannuation. These caps limit contributions in later years, when people are generally more able to direct surplus income to savings, which can leave those who haven’t planned ahead with a significantly reduced after-tax income in retirement.
  • Unfortunately, planning ahead tends to be lower down the priority list for people in their peak spending years where the focus is, understandably, on repaying debt and funding children’s education.
  • An effective way of helping your children is to fund additional superannuation contributions on their behalf. This allows them to focus on their current needs safe in the knowledge that their longer-term financial planning is under control.
  • It is important to remember that annual restrictions still apply — and it is vital that you work with your children to ensure you operate within those restrictions. You should also seek financial advice to ensure that this option is for you.

 

While saving or gifting money for children via bank accounts and managed funds is common, the tax efficiency and compounding effect of superannuation can often be overlooked.

ATO TARGETING RIDE-SHARING WORKERS FOR 2017 & 2018 – UBER

Do you provide ride-sharing services (e.g. Uber)?

If so, then it is essential that you are correctly accounting for your income and GST obligations. The ATO has recently advised that it will be obtaining information from third parties (including banks and other financial institutions) in order to ensure that people providing these services are meeting their tax obligations for the 2017 and 2018 years. If you provide these services, you must have an ABN, be registered for GST and complete a Business Activity Statement (BAS). You must also declare all income from these services on your tax return, however you can claim any expenses that are directly related to producing this income.

 

If you are currently providing these services but do not have an ABN or are not registered for GST, we can assist in ensuring that you get up to date with the requirements. Failing to comply with the tax laws could result in you facing penalties and interest or even prosecution. It is essential that you act now before the tax office start enforcement action.

DO YOU EMPLOY WORKERS ON 417 OR 462 VISAS (ALSO KNOWN AS WORKING HOLIDAY MAKERS)?

From 1 January 2017 the tax rates relating to working holiday makers (including backpackers) on 417 and 462 visas have changed. From that date, the first $37,000 of income for these workers is taxed at 15% and any income over this amount is taxed at ordinary non-resident tax rates.

 

If you employ any workers with these visa categories you must:

 

  • Register with the tax office to withhold at the working holiday maker (this is in addition to your ordinary PAYG withholding registration for other employees).
  • Ensure that your employees have provided you with a Tax File Number declaration
  • Withhold tax at 15% on the first $37,000 paid to each working holiday maker employee
  • Withhold tax at the  normal non-resident tax rates for any income over $37,000

 

The working holiday maker rates only apply from 1 January 2017. If you were employing these workers prior to that date you will need to issue them with two payment summaries for the 2017 year, one covering the period from 1 July to 31 December 2016 and one covering the period from 1 January to 30 June 2017.

 

If you currently employee these types of workers, you must register by no later than 31 January 2017. Penalties will apply if you ail to register by this date.

 

You can check your worker has a subclass 417 or 462 visa by using the Visa Entitlement Verification Online at border.gov.au/vevo

Business Structure

Are you in the right business structure?

When you start a business in Australia, there a number of structures that it can be set up under. Setting up your business structure requires careful consideration as there will be a number of factors that come into play with taxation, employing people and the amount of paperwork you will need to do.

There are four types of business structures that are commonly used in Australia:

Sole trader

This is an individual operating as the sole person legally responsible for all aspects of the business.

 

Partnership

A partnership is an association of people or entities running a business together, but not as a company.

 

Company

A company is a legal entity separate from its shareholders.

 

Trust

A trust is an entity that holds property or income for the benefit of others.

 

The type of business structure you start your business under will determine factors such as how much tax you may need to pay, any licenses that may be required, whether you’re considered an employee or the owner of the business and the amount of control you have over the business.

To be sure you are operating under the right business structure, you need to speak with our expert accountants at Plant & Associates 07 5596 5758. Our offices are conveniently located at Beenleigh and on the Gold Coast.

Our team is experienced in dealing with all facets of business structures, business tax and we stay up to date with all tax changes that can impact you so we can minimise your tax obligations and take advantage of any new benefits for you and your business.

At Plant & Associates, we can also prepare and lodge tax returns for all types of entities; sole traders, partnerships, trusts and companies.

www.plantandassociates.com.au