What is for you in Government’s coronavirus stimulus package?

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The government has announced a range of measures to support the economy, business and employment in the face of the coronavirus health crisis. The measures include the below.

Cash Flow Boost for employers
employers with an aggregated annual turnover of under $50 million (based on prior year turnover) will receive a payment of $2000 to $25,000 from the government to help with cash flow. Eligible businesses will receive a payment equal to 50 per cent of taxes withheld from employees’ salary and wages up to $25,000.

Eligible businesses that pay salary and wages will receive a minimum payment of $2000, even if they are not required to withhold tax.

The payment will be delivered as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.

Increasing the instant asset write off
The government is proposing to increase the threshold for the instant asset write off from $30,000 to $150,000 and expand access to businesses with an aggregated annual turnover of up to $500 million (up from $50 million). The increase will only be available from 12 March to 30 June 2020 for new or second-hand assets first used or installed ready for use by 30 June 2020.

Accelerated deprecation
The government is proposing an accelerated deprecation deduction for eligible assets acquired from 12 March and first used or installed by 30 June 2021. Eligible taxpayers will receive a deduction of 50 per cent of the cost of the eligible asset on installation, with existing depreciation rules applying to the balance. Eligible businesses are those with an aggregated turnover below $500 million. Eligible assets are those that can depreciated under Division 40 of the Income Tax Assessment Act 1997 (that is plant, equipment and specified intangible assets, such as patents), but does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.

Apprentice and trainee wage subsidy
The government will offer employers a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage from 1 January to 30 September 2020, capped at $7000 each quarter per each eligible apprentice or trainee. Businesses with less than 20 full-time staff will be eligible, however employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will continue to be eligible for the subsidy.

Direct payment to individuals
The government will make a one-off payment of $750 to around 6.5 million social security, veterans and other income support recipients and eligible concession card holders residing in Australia.

Download detailed copy here> Government announces coronavirus stimulus package Continue reading “What is for you in Government’s coronavirus stimulus package?”

Single Touch Payroll(STP)

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Single Touch Payroll (STP), is a new way of reporting tax and superannuation information to Australian Taxation Office(ATO). All businesses used to report this information to the ATO once a year previously.

Now with STP you report employees’ payroll information – such as salaries and wages, pay as you go (PAYG) withholding and super each payday to ATO each time you pay them through STP-enabled software. With Single Touch Payroll, the payment summary annual report and the payment summary will go away.

When and how you report depends on what type of employer you are:

Small employers with 19 or less employees – need to report through STP before 30 September 2019.
Large employers with 20 or more employees – you should already be reporting through STP.
There are different pathways to start STP reporting, depending on your circumstances.

There are a number of concessional reporting options available to help you transition to Single Touch Payroll reporting if you are;

Micro employers
Micro employers in the agriculture, fishing and forestry industry
Micro employers who are not-for-profit clubs and associations
Closely held payees/Self employed or sole Director
Seasonal and intermittent employers
Employers of inbound assignees

Contact us for more info or to start with single touch payroll cloud based cost effective options.

Taxable payments annual report (TPAR)

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You may need to lodge a Taxable payments annual report (TPAR) by 28 August each year if you are a:

Business providing:

 

building and construction services

cleaning services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)

courier services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)

road freight services – for contractor payments from 1 July 2019 (first report due by 28 August 2020

information technology (IT) services – for contractor payments from 1 July 2019(first report due by 28 August 2020)

security, investigation or surveillance services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)

government entity.

 

The TPAR tells us about payments that are made to contractors for providing services. Some government entities also need to report the grants they have paid in a TPAR.

Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.

The details you need to report about each contractor are generally found on the invoice you should have received from them. This includes:

 

  • their Australian business number (ABN), if known
  • their name and address
  • gross amount you paid to them for the financial year (including any GST).

 

TAX TIPS FOR INVESTORS

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Many Australians invest in property, financial markets and other assets, both here and overseas. In 2016-17, almost 4 million individuals received dividend income of $23.4 billion while 2.1 million reported rental income totalling $44 billion. $20 billion in capital gains were reported by almost 700,000 individuals, while more than 900,000 reported capital losses of $27 billion.

Assessable foreign source income of almost $6 billion was reported by 730,000 individuals.

The ATO’s data matching and information exchange capabilities continue to evolve and now cover many capital transactions and investment revenue streams.

It is therefore more important than ever to report investment income including from overseas, maintain accurate records, correctly calculate capital gains or losses on disposal, and to ensure you comply with the various rules and concessions available to investors.

RENTAL PROPERTIES

The ATO has received a large boost in funding to close the $8.7 billion individuals tax gap. Part of its focus is to ensure taxpayers are returning all rental income as well as claiming only the rental property expenses to which they are entitled. Some of this additional funding will go to improving the checking of claims in real time, additional audits and prosecutions.

The ATO receives details from Airbnb and other providers which will be data matched against tax returns. From this year, the ATO will receive details of your deductions data from your tax agent or myTax, and a multi-property rental schedule for individuals may be available this year and will be mandatory in 2020.

The ATO’s most recent random checks of rental claims found 90 per cent contained an error and it plans to double the number of audits on rental deductions.

Owners of rental properties that are being rented out or are ready and available for rent can claim immediate deductions for a range of expenses, such as:

  • interest on investment loans
  • land tax
  • council and water rates
  • body corporate charges
  • insurance
  • repairs and maintenance
  • agent’s commission
  • gardening
  • pest control
  • leases (preparation, registration and stamp duty)
  • advertising for tenants.

Landlords may be entitled to claim annual deductions for the declining value of depreciable assets (such as stoves, carpets and hot-water systems), and capital works deductions spread over a number of years (for structural improvements, like re-modelling a bathroom).

Remember that landlords are no longer allowed travel deductions relating to inspecting, maintaining or collecting rent for a rental property.

Further, deductions for the depreciation of plant and equipment for residential real estate properties are limited to outlays actually incurred on new items by investors in residential real estate properties. For example, for properties acquired from 9 May 2017, landlords can no longer depreciate assets that were in the property at the time of purchase. However, should they purchase a new (not used or refurbished) asset, they can depreciate that asset.

Plant and equipment forming part of residential investment properties as of 9 May 2017 will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

Ensure that interest expense claims are correctly calculated, rental income is correctly apportioned between owners, claims for costs to repair damage and defects at time of purchase are depreciated and that holiday homes are genuinely available for rent.

You can contact us to clarify if your expenditure is repairs and maintenance and can be claimed immediately or improvements, which can be claimed over time.

RESIDENTIAL PROPERTY AND NON-RESIDENTS

The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018proposed that the Australian home of a non-resident for tax purposes, including Australian expatriates, will no longer have access to the capital gains tax main residence exemption on disposal.

The Bill lapsed when the election was called and it is unclear whether it will be re-introduced.

HAVE YOU MADE ANY GAINS OR LOSSES FROM CRYPTOCURRENCIES?

The ATO is now matching transaction data obtained from digital exchanges, so it is more important than ever that you ensure cryptocurrency gains and losses are correctly reported.

If you either currently are or have been involved in acquiring or disposing of cryptocurrencies in the past, you need to be aware of the income tax consequences. These vary depending on the nature of your circumstances.

One example of cryptocurrency is Bitcoin. The ATO’s view is that Bitcoin is neither money nor Australian or foreign currency. Rather, it is property and is an asset for capital gains tax (CGT) purposes.

Other cryptocurrencies that have the same characteristics as Bitcoin will also be assets for CGT purposes and will be treated similarly for tax purposes. However, if you are considered to be trading cryptocurrency, the income will be ordinary income.

A person involved in cryptocurrency transactions needs to keep appropriate records for income tax purposes. If you have dealt with a foreign exchange or cryptocurrency, there may also be taxation consequences for your transactions in the foreign country.

CAPITAL GAINS TAX PLANNING

Careful planning should be undertaken in planning the timing of the disposal of appreciating assets which may trigger a capital gain. In this context, it is important to recognise that CGT is triggered when you enter into a contract for the sale of a CGT asset rather than on its settlement.

This is particularly important where the entry and settlement of the contract straddle year-end. In these circumstances, it may be preferable from a cash flow perspective to defer the sale of the CGT asset to the subsequent year where other relief may be available, such as a capital loss sold on another asset.

Care should also be taken to ensure that an eligible asset is retained for the 12-month holding period required under the CGT discount, and to recognise that the CGT discount is not available to the extent that any capital gain accrued after 8 May 2012 and you were a foreign resident or temporary resident at any time after that date.

Keep proper records for all of your investments and ensure that you keep them for at least five years after a capital gains tax event occurred.

DO YOU HAVE FOREIGN INVESTMENTS?

If you are an Australian resident with overseas assets, you need to include any capital gains or capital losses you make on those assets in your tax return and may have to include income you receive from overseas interests in your tax return. You can ‘receive income’ even if it is held overseas for you.

If you receive foreign income that is taxable in Australia and you paid foreign tax on that income, you may be entitled to an Australian foreign income tax offset.

Please be aware that the ATO has information exchange agreements with revenue authorities in many foreign jurisdictions, and therefore is likely to receive data on any of your overseas investments and income.

INVESTMENT PRODUCTS PROMOTED AS TAX EFFECTIVE

The end of the financial year often sees the promotion of investment products that may claim to be tax effective. If you are considering such an investment, seek independent advice before making a decision.

TAX TIPS FOR STUDENTS

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If you’re a student, lodging an income tax return may seem a bit daunting. Parents who may be helping to navigate these uncertain waters can also find it challenging.

GETTING YOUR REFUND

If your total taxable income for the year ended 30 June 2019 is below the tax-free threshold of $18,200 you may not need to lodge an income tax return.

However, if you have had tax withheld from your income during the year and are under the threshold, you must lodge a tax return to have these withholding amounts refunded to you.

Typical examples of situations where tax may have been withheld are pay as you go (PAYG) withholding amounts from your salary, withholding from bank interest income during the year where you have not provided your tax file number (TFN) to your bank, or distributions from a family trust where you have not previously provided your TFN to the trustee.

IDENTIFY ALL YOUR SOURCES OF ASSESSABLE INCOME

To determine whether or not you need to lodge a tax return, identify all sources of income derived during the year that is assessable for income tax purposes.

Such amounts include:

  • income from work as an employee or a contractor, including any tips or gratuities received
  • investment income, such as any bank interest or dividends on shares received
  • certain government payments received such as Youth Allowance, ABSTUDY, living allowance and Austudy
  • some non-government scholarships, grants and awards
  • distributions from a family trust or partnership

If you get paid cash in hand, you still need to declare the cash as income on your tax return. Check that your pay slip or income statement shows all your earnings and the amount of tax taken out, as well as super payments if you’re entitled.

REPORT INCOME AND EXPENSES FROM THE GIG ECONOMY AND ANY SIDE HUSTLES

If you drive people around, do odd jobs, give private tuition, rent out your possessions, run social media accounts or sell products, your income from such activity may be assessable and your expenses deductible. This can include barter and cryptocurrency payments as well.

The ATO is receiving data from a range of websites including Airtasker, Uber, Airbnb and eBay which is matched against tax returns. Make sure you keep records and report correctly.

For some activities such as online selling, you’ll need to first determine whether you are in business.

HAVE YOU MADE ANY GAINS OR LOSSES FROM CRYPTOCURRENCIES?

The ATO is now matching transaction data obtained from digital currency exchanges so it is more important than ever that you ensure cryptocurrency gains and losses are correctly reported.

If you either currently are or have been involved in acquiring or disposing of cryptocurrencies in the past, you need to be aware of the income tax consequences. These vary depending on the nature of your circumstances.

A person involved in cryptocurrency transactions needs to keep appropriate records for income tax purposes. If you have dealt with a foreign exchange or cryptocurrency, there may also be taxation consequences for your transactions in the foreign country.

If you are involved in cryptocurrencies, you should contact us for advice.

CHECK YOUR SUPER

If you’re an employee and are paid more than $450 before tax in a calendar month or are under 18 and work more than 30 hours per week, your employer should be making contributions into your nominated superannuation fund.

You might also have a number of small-balance super accounts from working different jobs. Be aware that from 1 July 2019, inactive low-balance accounts will start to be consolidated, exit fees will be removed and insurance will be provided on an opt-in basis for members under 25 or with balances below $6000.

You can check with us if you’re entitled to super payments.

KNOW YOUR DEDUCTIONS

You are entitled to claim tax deductions for certain expenses that are directly related to the income you have received. For example, you can claim work-related deductions if you have the necessary receipts or credit card statements, they directly relate to the work you do, and you paid for the expense and were not reimbursed.

Typical work-related expenses that may be allowable include:

  • uniforms and protective clothing
  • employment-related mobile phone and internet costs
  • subscriptions and union fees
  • travel expenses between worksites or client locations, but not the commute to and from home.

If you use us, we can access your uploaded data.

You should consult your accountant to identify all eligible deductions.

CLAIM DONATIONS

If you made one or more donations of $2 or more to bucket collections conducted by an approved organisation for natural disaster victims, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt.

CLAIM THE RIGHT TAX OFFSETS

If you receive Austudy, ABSTUDY living allowance, Newstart Allowance, youth allowance or other taxable Commonwealth government education or training payments, you are eligible for the beneficiary offset.

This offset ensures you do not have to pay tax on those payments. You may, however, have to pay tax on other income, such as wages or investment income.

In certain circumstances, the low-income tax offset will be available to reduce tax payable on such income provided your taxable income exceeds the tax-free threshold for the particular year.

Students should therefore consult their accountants  if any other tax offsets are available.

IDENTIFY ELIGIBLE SELF-EDUCATION EXPENSES

If your study is directly related to maintaining or improving your skills in your current occupation, or could increase your income from your current employment, you can claim self-education expenses.

Typical self-education expenses include:

  • course fees
  • textbooks
  • stationery
  • student union fees
  • the depreciation of assets such as computers, tablets and printers.

By contrast, if you are embarking on study for the first time or if the study is unrelated to your work then the expenses incurred are not deductible.

UNDERSTAND HELP DEBTS

Higher Education Loan Program (HELP) debt repayments are not tax deductible.

If you have a HELP debt, repayments commence once your salary exceeds $51,957 (this figure is for year ending 30 June 2019). The specific amount required to be repaid will depend on a range of factors, including your taxable income.

If you are working and you have filled out a tax file number declaration form indicating you have a HELP debt, your employer will withhold additional tax from your salary to assist you to cover your HELP debt. The ATO will automatically calculate what your HELP repayment is for the year once you lodge your tax return.

If you don’t notify your employer that you have a HELP debt through the TFN declaration, your employer will not withhold the additional tax and you may therefore find yourself facing an unexpectedly hefty tax bill.

If your income varies significantly over a year and you do not expect to exceed the threshold, you can ask your employer to stop withholding the additional tax for HELP purposes and that additional tax withheld may be refunded to you after you lodge your tax return.

People who are overseas with a HELP debt are required to make repayments based on their worldwide income.

ARE YOU A RESIDENT FOR TAX PURPOSES?

The tests used to work out residency status for tax purposes are not the same as residency tests used for other purposes, such as immigration.

If you’re an international student studying at an Australian education institution in Australia for a period of six months or more, you may be regarded as an Australian resident for tax purposes.

You will also be assessable on your worldwide income, not just the income from within Australia.

There are a number of rules to determine tax residency so you should always speak assistance about your specific circumstances.

CONSIDER THE SPECIAL RULES FOR THOSE UNDER 18

Certain types of income derived by minors under the age of 18 may be taxed at a higher rate than would apply to that same income if the taxpayer was aged 18 or over. The types of income that may be taxed differently include:

  • income received as a beneficiary from a trust
  • interest, dividends, rent and royalties.

Such income will be taxed at a rate of 66 per cent plus 2 per cent Medicare Levy for income that is greater than $416 and less than $1307, and at a rate of 45 per cent plus 2 per cent Medicare Levy on income that exceeds $1307.

Minors will not be able to typically claim the low-income tax offset to reduce their tax liability on such income.

Ordinary marginal tax rates will apply to other income derived by a minor aged under 18, such as:

  • employment or business income
  • taxable government payments such as Youth Allowance
  • income from a deceased estate
  • income from property transferred to a minor as a result of a person’s death or a family breakdown
  • net capital gains on a disposal of investments.

FIND A GOOD TAX AGENT

Student life can be financially challenging and those promises of large refunds can sound attractive. But be careful – the tax rules can be complicated, and those deductions need to be legitimate if you want to avoid paying extra tax, penalties and interest.

You should watch out for agents who offer a very low fixed fee, promise large refunds, spend very little time with you or don’t ask for receipts. A good tax agent will ask you about your employment and any investments, and check that you’ve got the right records to back up your claims.

Finding a good tax agent is a great way to begin to understand your tax obligations. Some agents offer special rates for students, so don’t forget to ask.

DAWOOD LATIF CPA,

Principal/Managing Director- Leopard Accounting Pty Ltd

Member Of CPA Australia

Registered Tax Agent

Registered Australian Securities & Investment Commission(ASIC) Agent