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Maximising your tax return as a home-based business

Posted on July 15, 2019 by admin

Small business owners may be able to claim deductions for the costs of using your home as a principal place of business when filing your 2019 income tax return. Tax deductions may be claimed for the business portion of expenses that include electricity, cleaning, rent payments or mortgage repayments. However, it can be difficult to ensure you are claiming expenses you are entitled to. How you operate the business out of your home will determine the types of expenses that may be claimed. Your business structure will also affect your entitlements and obligations when claiming deductions on home-based business expenses. Individuals that operate a business as a sole trader or partnership are entitled to claim a deduction for the costs of running their business from home. There are two types of expenses that can be claimed, running expenses or occupancy expenses. Running expenses refer to the increased costs of using your home’s facilities for the running of your business. Occupancy expenses are those that you pay to own or rent your home. Typically, those that are eligible to claim occupancy expenses can also claim running expenses. Records that need to be kept include written evidence, tax invoices and receipts, which […]

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Tax bracket changes passed

Posted on July 8, 2019 by admin

In the 2019-20 Federal Budget, the Government announced their plans to change and build on the Personal Income Tax Plan. These changes affect the low and middle-income tax brackets and were passed on 5 July 2019. The Budget proposed that from the 2018-19 income year: There will be an increase to the low and middle-income tax offset from a maximum amount of $530 to $1,080 per annum and an increase in the base amount from $200 to $255 per annum. Taxpayers with a taxable income which does not exceed $37,000 will receive a low and middle-income tax offset of up to $255. Taxpayers with a taxable income which exceeds $37,000 but is not more than $48,000 will receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080. Taxpayers with a taxable income which exceeds $48,000 but is not more than $90,000 will be eligible for the maximum low and middle-income tax offset of $1,080. Taxpayers with a taxable income which exceeds $90,000 but is not more than $126,000 will be eligible for a low and middle-income tax offset of $1,080, less an amount equal to 3% of the excess. Assessments for returns that have already been […]

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End-of-year Single Touch Payroll changes for employers

Posted on June 27, 2019 by admin

Single Touch Payroll (STP) will change how employers report their employee’s end-of-year information to both employees and the ATO. The first year of STP for employers with 20 or more employees will soon come to an end at the completion of this financial year. Employers that are reporting through STP will no longer need to: Provide payment summaries to their employees for amounts reported and finalised through STP, as an income statement will get sent to employees’ through their ATO online services account (accessed through myGov) instead. Lodge a PAYG payment summary annual report to the ATO for information that is reported and finalised through STP, as long as the finalisation declaration is completed by the due date. Employers who started reporting through STP in the 2018-19 financial year will have until 31 July 2019 to make the finalisation declaration through their STP-enabled solution. The declaration states that you have completed your reporting for the financial year. Employers should ensure that all STP information is true and correct before making their finalisation declaration. Employee payment summaries and PAYG payment summary annual reports are still required for all payments that are not reported and finalised through STP, due 14 July 2019 […]

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Penalty interest deductibles

Posted on June 24, 2019 by admin

The ATO has recently replaced the Taxation Ruling (TR) 93/7W on whether penalty interest is deductible to the new TR 2019/2. This new ruling highlights the circumstances in which penalty interest is deductible and the situations where it is not. “Penalty interest” refers to an amount charged by a lender to a borrower under a loan agreement if instalments are not paid. The payable amount is then calculated by reference to a number of months of interest that would have been received. TR 2019/2 says that penalty interest is generally deductible under section 8-1 where: The borrowings are incurred when gaining or producing your assessable income; or It is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Penalty interest that is incurred to discharge a mortgage is also deductible under section 25-30, to the extent that borrowed funds were used to produce assessable income. The ATO makes a note that unlike the general deduction provisions, there’s no influence from the expense being capital or revenue in nature. You cannot deduct a loss or outgoing under section 8-1(2) to the extent that: It is of capital or capital in nature. It is […]

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Tax planning tips for businesses

Posted on June 18, 2019 by admin

Although the 2018-19 financial year is coming to an end, there are still a number of tactics you may be able to employ to ensure that you get the most out of your tax return. Bring forward expenses:It is a common recommendation at tax time for small business owners to claim all of the appropriate deductions that are available. These can include rent, utilities, repairs for the business, or work-related travel. You may also consider bringing forward as many expenses as possible to before 1 July, such as pre-paying rent or repair expenses. This can allow you to claim the necessary deductions in your 2018-19 tax return. Take advantage of the instant-asset write off:More business owners can take advantage of the instant-asset write off this financial year, as it has now been extended to include businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for assets purchased or installed and ready for use from 2 April 2019 until 30 June 2020. This could be particularly helpful for individuals who rely on tools, cars or other assets. Keep strong records:As a good recommendation to keep in mind for […]

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Tax time changes

Posted on June 11, 2019 by admin

The ATO will start processing 2018-19 tax returns on 5 July 2019 and are expected to start paying refunds from 16 July 2019, with the majority of electronically-lodged current year tax returns completed within 12 business days of receipt. There a few changes to tax returns that individuals should take note of going into this end of financial year. Private health insurance statements:From 1 July 2019, health insurers are no longer required to send private health insurance statements, it is now optional to send this information. Private health insurance information will be available in the pre-fill report, expected by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer. Low and middle-income tax offset:Taxpayers may be eligible for an income tax offset if they are an Australian resident for income tax purposes or their taxable income is in the appropriate income range. It is not compulsory to claim this offset, the ATO will work it out when their tax return is lodged. Income statement:Employers reporting through Single Touch Payroll are not required to provide a payment summary to their employees as income statements will replace them. Employees can access their income […]

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Changes to the ABN application process

Posted on June 3, 2019 by admin

The ATO has made recent changes to the application process for an Australian Business Number (ABN). The changes have been made as a measure to protect the process’ integrity and identify those who are attempting to misuse it. An ABN is a unique 11 digit number that identifies your business to the government and the wider community. The recent changes focus on: Ensuring that those who are entitled to an ABN are the only ones who will receive one. Identifying people going through the application process multiple times. Confirming entitlement and helping people to understand their obligations. You are only entitled to an ABN when carrying on or starting an enterprise in Australia. An enterprise includes activities done in the form of a business, including operating a charity, renting or leasing property, or acting as the trustee of a superannuation fund. It is compulsory for businesses with a GST turnover of $75,000 or more to have an ABN and be registered for GST. There is no single test to determine cases where you are carrying on a business. However, features of a functioning business include: An intention to make a profit from the activity that is demonstrated by a business […]

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Reducing errors when claiming business expenses

Posted on May 27, 2019 by admin

The ATO has identified particular areas relating to business expenses that are commonly entered incorrectly in tax returns. Owners should take the time to carefully review tax returns to ensure all information is correct. Individuals who use a motor vehicle entirely for their business can claim a deduction for the whole amount. However, if they use the vehicle for a mix of business and private use, they will need to divide the expense amount and only claim the business portion. Business expenses must be kept separate from an individual’s private expenses, such as personal rent, fines, travel, food and renovations of a private residence. Those who operate their small business as a company or trust need to be aware that paying private expenses from these accounts may have other tax implications such as fringe benefits tax and shareholder loans. In the event a business is upgrading its accounting software, remember to check that business and private expense codes are correct. The business expenses must be claimed at the GST exclusive rate if they are registered for GST, not the GST inclusive rate. Small businesses should note that falsely or incorrectly claiming expenses is not something the ATO takes lightly. Penalties […]

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Tax incentives for start-up investors

Posted on May 24, 2019 by admin

Tax incentives may be available to investors that are considering putting their money into qualifying start-up businesses. Eligible businesses are defined by the ATO as early-stage innovation companies (ESICs). The two key tax incentives for eligible early-stage investors, also known as ‘angel investors’, who purchase new shares in an ESIC are: Non-refundable carry forward tax offset that is equal to 20% of the amount paid for their qualifying investments. This offset is capped at a maximum amount of $200,000 for the investor and their affiliates combined in each income year. Modified capital gains tax (CGT) treatment, where capital gains on qualifying shares that have been continuously held for at least one year may be disregarded. Capital losses on shares that have been held for less than ten years must be disregarded. Note that the maximum tax offset of $200,000 does not limit the shares that qualify for the modified CGT treatment. The early-stage investor tax incentives are available to both Australian resident and non-resident investors. To qualify for the tax incentives, investors must have purchased the shares in a company that meets the requirements of an ESIC immediately after the shares are issued. They must be issued on or after […]

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Tax incentives for start-up investors

Posted on May 20, 2019 by admin

Tax incentives may be available to investors that are considering putting their money into qualifying start-up businesses. Eligible businesses are defined by the ATO as early-stage innovation companies (ESICs). The two key tax incentives for eligible early-stage investors, also known as ‘angel investors’, who purchase new shares in an ESIC are: Non-refundable carry forward tax offset that is equal to 20% of the amount paid for their qualifying investments. This offset is capped at a maximum amount of $200,000 for the investor and their affiliates combined in each income year. Modified capital gains tax (CGT) treatment, where capital gains on qualifying shares that have been continuously held for at least one year may be disregarded. Capital losses on shares that have been held for less than ten years must be disregarded. Note that the maximum tax offset of $200,000 does not limit the shares that qualify for the modified CGT treatment. The early-stage investor tax incentives are available to both Australian resident and non-resident investors. To qualify for the tax incentives, investors must have purchased the shares in a company that meets the requirements of an ESIC immediately after the shares are issued. They must be issued on or after […]

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