GST & Properties – new changes for the purchaser

If you are thinking of buying a newly established residential property, or a subdivided property, you may need to remit GST on the purchase directly to the ATO. The following article provides a quick guide to this new legislation, and what to do if you are affected.

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2018/19 Budget Updates

The Treasurer handed down the Budget 2018/2019 on 8 May 2018. While there are a lot of proposed changes that will potentially affect individuals such as a 7 year Personal income Tax Plan to lower the income tax liabilities for individuals, there is no certainty as to whether they will become law in future. Meanwhile, let’s recap on the ones that are now law, and will affect taxpayers, especially small businesses immediately. The most important of these is the extension of the less than $20,000 immediate asset write off concession to 30 June 2019 for eligible small businesses.

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Trading names will cease to exist from 1 November 2018

Do you have a trading name attached to your ABN, or your company/trust’s ABN?

From November 2018, trading names will be removed from ABN Lookup. ABN Lookup is a tool run by Australian Business Register (ABR) to collect or update trading names. They were collecting trading names up till 28 May 2012 when Australian Securities & Investments Commission (ASIC) started a new service to manage the registration of business names. To keep your trading name, you will need to register it as a business name with ASIC. This applies to cases where you trade under a name that is different from your, or your entity’s name.

What should I do now?

You can register for a business name through the ASIC website online here.

To check if your business name details are up to date or not, you can conduct a search from the Business Names Index, or log onto your ASIC Connect account. The link here provides instructions on how to conduct the search.

Proper record keeping for tax deductions

If you have ever lodged a tax return, you would know the pain in keeping records to substantiate your tax deductions. While it may be possible that some receipts are lost, perhaps it is a fuel receipt that is lost in the glovebox (or beneath the car seat!), or simply faded over time, it is important that you keep all the receipts as evidence that you have made the purchase as the receipt will include detailed line items of what was purchased.

There is a recent case where the Administrative Appeals Tribunal (AAT) knocked back a taxpayer’s claim for deductions. One of the reasons was that the claims were based on his bank statement transactions rather than on actual receipts/invoices.

PSJF and Commissioner of Taxation (Taxation) [2018] AATA 678 (20 March 2018)

In PSJF and Commissioner of Taxation (Taxation) [2018] AATA 678 (20 March 2018), the taxpayer was employed as a photographer. He claimed some travel expenses as tax deductions in his tax return. The AAT found that some of his deductions are disallowed.

During the Discussion, there were a few issues that were raised. However we would like to bring to your attention on the matters about the tax deductibility of expenses:

  • For an expense to constitute an allowable deduction in the production of salary or wages income, a two-pronged test must be satisfied: first, that expense must come within the definition of a deduction pursuant to s 81 of the ITAA97. Secondly, such claimed deduction must be substantiated with written or receipt-based evidence. There is no other way for any claimed expense to be allowed as a deduction against assessable income.
  • Put another way, element (1) above must, to quote the requirements of s 81 of the ITAA97, “be incurred in gaining or producing [the Applicant’s] assessable income” and cannot be an “outgoing of a domestic or private nature”. Element (2) above requires that the claimed expense must be substantiated by written evidence – most usually in the form of a tax invoice and accompanying receipt – from “a supplier”. That paperwork must identify the supplier and “the nature of the goods or services” provided by the supplier in order to meet the requirements of s 900-115 of the ITAA97.

To put it simply, for an expense to be tax deductible, it needs to satisfy the following:

  • have a link between the expense and the income that was earned, and
  • have sufficient evidence to prove the purchase – and the evidence they require is a tax invoice and receipt.

This means that merely having a bank statement showing the transactions is not a valid form of evidence to claim them as your tax deduction.

There are various ways to keep record of your work or business-related receipts. If you would like to hear about our options in keeping proper records of your receipt without having a shoebox, feel free to have a quick chat to us and we can work with you to find you a best solution.

If you are interested, or are unable to sleep at night, check out the full document here.

FBT Updates & Reminder – Exempt Vehicle

The following article applies to those who use motor vehicles in the course of running their businesses.

FBT Motor Vehicle Exemption – Updated Guidelines

For many years, many entities have enjoyed a FBT exemption where:

  • the vehicle is a panel van, utility (ute) or other commercial vehicle (that is, one not designed principally to carry passengers)
  • the employee’s private use of such a vehicle is limited to
    • travel between home and work
    • travel that is incidental to travel in the course of duties of employment
    • non-work related use that is minor, infrequent and irregular (eg: occasional use of the vehicle to remove domestic rubbish).

These have been a grey area and have caused confusion to business owners when attempting to work out whether their vehicles are exempt or not.

The ATO has recently released new guidelines to reduce confusion and provide more certainty for employers when applying the FBT exemptions. The guidance notes relate to the clarification on the definition of an employee’s (and/or their associate’s) private use where it is ‘minor, infrequent and irregular’ for FBT purposes.

If you believe you fall under this category and would like more clarity, contact us for more information and we can talk you through this over the phone, or via email.

2018 FBT Return Lodgement

The FBT year has ended 31 March 2018. For those who require a return lodgement, your FBT Return is due by 21 May 2018. Please contact us for instructions on the lodgement of the return.

Motor Vehicle Odometer Readings

For those who provide motor vehicle benefits to employees and/or associates, it is important that you keep records of your vehicle’s odometer reading as at 31 March 2018.