A recent important legislative change that received Royal Assent and takes effect from 1 July 2019. This change relates to insurance held through superannuation (other than an SMSF or small APRA fund), where the member is deemed to be “inactive”. Whilst the changes don’t take effect until 1 July 2019, it is possible you may have received letters from your superannuation funds notifying you (by 1 May 2019) of the impending changes.
Under the changes, superfunds are not able to offer insurance coverage (on an opt-out basis) to many members if the member has an inactive account, irrespective of the size of the account balance.
An inactive account is defined as one that has not received a contribution or rollover in respect of that member for a continuous period of 16 months. If you have insurance that was put in place many years ago and has continued to be held, but where you are no longer making contributions to that account, it is likely you will be impacted by this change.
It is important to consider your situation and consult your financial adviser to discuss the appropriate action to take, to ensure that your insurance policies remain in force.
The Federal government has been phasing out the Medical Expenses tax offset, which entitles individuals to a tax reduction of either 10% or 20% (depending on the individual’s income level) of the amount paid for medical expenses above a certain threshold. Since 1st July 2015 the offset has only been available to individuals in respect of costs of disability aids, attendant care or aged care, but 30th June 2019 will see this concession come to an end.
It is a timely reminder to ensure that, where applicable, eligible costs are paid prior to 30th June 2019 to bring them within the scope of the offset.
Recent audit activity by the ATO has led the regulator to conclude that there are significant errors in claims being made by taxpayers against rental income. The ATO’s audit work on over 300 taxpayers found that there were errors in 9 out of 10 cases, with incorrect interest claims for refinanced loans, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent, being the main areas where taxpayers have transgressed.
The ATO’s previous blitz on work related expenses dropped the average claim by just $130, resulting in an extra $600 million in government revenue. With this in mind, the focus on rental property claims is set to continue, in the hope that it too will result in a windfall to government coffers. Taxpayers have been put on notice.
The ATO has announced a helpful concession on the Single Touch Payroll (STP) obligations for payments made to “closely held payees” (essentially owners and family members).
In recognition of the fact that business owners and their families often classify what they take from the business as Drawings, and then at a later time determine the amount that constitutes a salary, the ATO will not require reporting on such amounts until after 1st July 2020 – an extra 12 months on the current commencement date for other employees.
For smaller employers (eg independent contractors) who only make payments to owners and family members, this announcement will in effect defer the commencement of the STP system for another 12 months.
The ATO is considering a system whereby reporting for such employees will only be required with the BAS on a quarterly basis, rather than each time there is a pay run. We can expect further announcements from the ATO on this topic in due course.
The recent spate of fire and flood that has hit Australian states has caused devastating loss to many people. If your business assists employees during such an emergency, fringe benefits tax is unlikely to apply to the assistance you provide. While we doubt anyone would be thinking about FBT during a crisis, it’s good to know that the tax system does not disadvantage your generosity.
The exemption applies in a range of scenarios including natural disasters, accidents, serious illness, armed conflict, or civil disturbances.
As an employer you might provide benefits such as meals, temporary accommodation, clothing, transport, or even cash support. Self-employed business owners who are employees of their own company or Trust, can also benefit from these concessions.
The federal government yesterday announced proposed enhancements to the instant asset write-off, extending the period of application by a further 12 months to 30th June 2020, and the level at which it cuts out from $20,000 to $25,000.
This scheme allows businesses with less than $10 million in turnover to write-off 100% of a purchased asset worth less than the set level (proposed at $25,000) in their tax return, in the year the asset is purchased.
The government plans to legislate the change when Parliament resumes on 12 February, so best to wait until it is law before relying on the announcement.
The ATO has recently issued information to help property developers claim GST remitted on their behalf to the ATO by purchasers.
Since 1st July 2018 all purchasers of new residential property have been required to retain the GST portion of the purchase price and remit it to the ATO, for the ATO to hold as a credit for the developer. This allows the ATO to collect the GST early, and helps guard against rogue developers who do not pay their tax.
Unfortunately, the process involves a series of forms; a complicated process that has resulted in the credit for GST paid not linking back to the developer’s ABN. This has left developers with a GST bill and no credit.
The ATO has reminded developers and conveyancing parties to ensure that all information is provided so that the process can operate effectively, but with such a convoluted series of forms, developers might do well to also keep their fingers crossed!!
Legislation to apply the Single Touch Payroll (STP) system to small employers (those with 19 or fewer employees) has finally been passed by the Senate. This has created a passage for the STP system to come into operation for such employers from 1st July 2019.
In line with previous releases, the ATO has issued an initial list of low cost software providers for taxpayers in the micro business sector (i.e. those with 4 employees or less), who will supply affordable solutions, costing less than $10 per month, take only minutes to complete each pay period, and do not require the employer to maintain the software. The ATO has also raised the possibility of allowing micro employers to report quarterly via their accountant or BAS agent.
The present list of low cost software providers is available here.
The variety of scams designed to take money from the unwary is never-ending. The age old phone call claiming to be from the Australian Taxation Office and threatening jail for an unpaid debt is as popular as ever, with one client recently being asked to call back on 02 6100 4093. If you receive any such call, hang up. If you are concerned and want to check the status of a potential ATO debt we can do that for you on the spot.
The extra income earned by people taking part in car sharing services such as Car Next Door or DriveMyCar has come to the attention of the ATO. These car sharing services work by making private cars publicly available in a similar way to other car hire services – it’s like AirBNB for cars.
Combined, DriveMyCar and Car Next Door state that over $13 million has been paid out to car owners renting through the service.
The community or peer to peer rental can be confusing as many people taking part see it as private. The ATO has taken an interest as some people utilising these services are counting the extra income as a hobby – income from a hobby is not assessable and does not need to be included on your income tax return. But, the ATO is keen to point out that income from sharing services is not a hobby and needs to be declared. The upside is that if you earn income from these activities you might be entitled to claim deductions for things like platform membership fees, availability fees, cleaning fees and car running expenses.
We can help you get your tax position right. Just give us a call.