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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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.

2017 tax return lodgement

If not now, then when?

For clients who have not lodged their 2017 tax returns – please get in touch with us as soon as possible to commence preparation of your tax return before it is too late. The general tax return due date is mid May 2018 – individual due dates may vary – we suggest clients contact us for your exact due dates.

Please be aware that late lodgements may attract fines and penalties from the ATO, so avoidance is not a wise move.

Upcoming lodgements & payments – April & May 2018

Find out what payments and lodgements are due in April and May 2018 for you and your business!

Individuals

If you are required to pay PAYG Instalments quarterly, you should either have received a paper form, or have access to the form online via your MyGov account. Your due date for payment of Instalment is 28 April 2018.

Businesses

Quarterly Business Activity Statements (BAS)

You should have received a paper form by now, or have access to the form online via the Portal.

The due date for lodging and paying BAS is 28 April 2018, unless you are lodging through an agent like ourselves, then you enjoy an extension for lodgment and payment by 26 May 2018.

Monthly Activity Statement for April

If you are required to report GST or PAYG Withholding on a monthly basis, your April Activity Statement will be due by the 21st May 2018.

Quarterly Super Guarantee Contributions

For businesses that have employees, please ensure that you make your super guarantee contributions before 28 April 2018. Previously you would lodge the contributions via the Small Business Superannuation Clearing House (SBSCH). From 26 February 2018 onwards the Clearing House is accessed via the ATO’s online services (Business Portal). If you need a hand with setting up a Business Portal, or would like us to handle this whole lodgement process on your behalf, please contact us.

Businesses that have access to Xero’s Auto Super need to ensure their payment is authorised a few business days before the due day, for the payment to be debited in time.

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.

Need more information?  Contact Us

2017 tax return lodgement reminder

Yes it is that time of year already! If you haven’t yet brought in your 2017 tax return information for us to prepare your returns – it would be a good idea to start sending documents through.  For most taxpayers, their general 2017 tax return due date will be mid-May 2018 although some tax returns may have an earlier lodgement due date.

 

If you are not sure what documents to send us – we are only an email away!

 

Do you have any family members or friends that are in need of a helping hand with their tax matters, or they simply don’t know where to start? Feel free to send them our way! We are always up for a challenge!