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Do I need a Business Bank Account?
Do I Need to register for GST?
Tax Tips March 2014
BAS - Act Now to avoid Late Lodgment Penalties.
Getting ahead with good accounting records

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Information for Business Owners

Do I need a Business Bank Account?











If you’re operating as a sole trader or partnership you don’t have to open a business bank account, but………
it’s a much better idea to have one.

Read on for the details!

Benefits of a business bank account
While there is no legal requirement for sole traders and partnerships to have a business account, it’s still a
good idea to open one.

With a business account, you’ll find it easier to:

  • do your bookkeeping with less stress, less time and less cost
  • track and control your business expenses and income so you can manage your business
  • extract the information you need to give to your accountant to do your tax return

It also helps to present your business in a more professional manner when dealing with your customers.

BASMAN RETURNS recommends separate business bank accounts

If you operate a business (using an ABN), we recommend you open a separate business bank account for your
business income and expenses. This means you can easily keep your business transactions separate from your
personal finances.

If you operate your business as a company or trust, you must have a separate bank account for your business.

If you have a business bank account, BASMAN RETURNS recommends that you avoid paying personal expenses
from it. This will make your business accounting clearer, simpler, faster and cheaper.

Find out more Contact Alan Beck at BASMAN RETURNS- Chartered Accountants if you need any assistance with
accounting and taxation requirements for your business.

Do I Need to register for GST?











What is GST?

GST is a tax on most goods and services sold or consumed in Australia. Goods and services tax, often known as GST,
is collected by registered businesses.
If your business is registered for GST, you will have to collect some extra money (one-eleventh of the sale price) from
your customers and pay it to the Australian Taxation Office (ATO) when it is due.

Do I need to register?
You must register for GST if your business has a gross income (also known as ‘GST turnover’) of $75 000 per year or
more GST turnover is your business’ gross income, not your business’ profit.
For example, if you run an online clothing store and you sell $80 000 worth of clothes, you’d have to register for GST because your GST turnover is over the $75 000 threshold. This rule still applies, even if you only get to keep $40 000.

When do I need to register?
If you haven’t registered for GST, and you become aware that your GST turnover will exceed the $75 000 per year threshold, you will have to register for GST within 21 days.
It’s a good idea to check each month to ensure you’re not likely to go over the over the limit. Keeping an eye on your
GST turnover is important so you can register if necessary.

How do I register?
You’ll need an ABN to register for GST. Your ABN will also become your GST registration number.
If you anticipate that your GST turnover will be over $75 000, you can register for GST and apply for your ABN at
the same time.If you already have an ABN, but haven’t registered for GST, find out how to register for GST on
the ATO website.

What are GST credits?
GST credits are a potential amount of money your business might be able to claim from the ATO.
If you are registered for GST, you can ‘claim back’ the GST that has been included in the purchase price of something you’ve bought for your business.
For example, Laura runs an consultancy firm and has just bought a new computer for the office. The computer cost
Laura $1100, including GST. Because GST is one-eleventh of the sale price, Laura would have paid $100 in GST.
Laura is registered for GST because her business’ GST turnover is more than $75 000. She is able to claim GST
credits for the GST included in the sale price of her computer ($100).If her GST credits are higher than the amount
of GST she has to pay the ATO, she will be able to get a refund.

What happens if I don’t register for GST?
If your GST turnover is under $75 000 and you don’t register for GST, you won’t include GST in your fees. You also
can’t claim GST credits for your business purchases.

Want more information?
Contact Alan Beck at BASMAN RETURNS- Chartered Accountants if you need any assistance with accounting and taxation requirements for your business.

Tax Tips March 2014











Tax Tips for Business Owners
March 2014

Welcome to the March 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

Selling a property will typically see things like stamp duty, land tax and other considerations ticked off the
"to do" list, but there are some instances where GST will also have to be factored in. We run through the
scenarios where this will arise.

Work-related deductions are the most common claimed, and the most popular of these are car expense
claims. However as this is an area of tax law that is very regulated, good guidance is essential to stay on
the right side of the taxman.

We also cast an eye over the changing FBT landscape, examine the outcome of a court case that could have
far reaching implications for any business's GST position, and find that there are some instances where a
partnership can claim the interest on a loan.

And finally we run through the new penalty regime for SMSFs that's set to bite from July 1 this year.

Should you require more information regarding any topic touched upon in this newsletter, please feel free
to contact Alan on 0419 671 602 for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal
financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our
formal advice be obtained before acting on the basis of this information.

BAS - Act Now to avoid Late Lodgment Penalties.

If you lodge your activity statements quarterly, remember to lodge and pay your quarter 2 activity statement (October–December 2013) by 28 February 2014.

Even if you can’t pay on time, you still need to lodge your activity statement by the due date.
By checking your activity statement before you lodge, you can avoid future penalties and charges by making sure all the information you’ve entered is correct.

If you’re having trouble lodging or paying on time, contact Alan BEFORE the due date on 0419 671 602 to see if we can make alternative arrangements for you.


Getting ahead with good accounting records

Research shows businesses that are good at meeting their GST and activity statement obligations tend to run more successful businesses. This can be because the business systems and processes they use to manage their tax affairs help them keep track of their business performance and make sound business decisions.

By maintaining proper records of dates, fees for service, expenses, wages and other costs, you can use this information to help you:

  • manage your cash flow
  • complete your activity statements more easily
  • avoid reporting errors, such as not reporting the correct amount of GST
  • keep track of creditors and debtors
  • demonstrate your financial position to banks.

If you run a small business and would like to find out what records your business should be keeping or help evaluating how well your business is keeping records contact Alan at BASMAN RETURNS on 0419 671 602 or email alan@basman.com.au



Small Business Income Tax Concessions










Small Business Income tax concessions

There are four income valuable tax concessions available to small businesses:

You can choose whether or not to do an end-of-year stocktake and account for changes in the value of trading stock, if the value of your trading stock has not increased or decreased by more than $5,000 over the year.

You can generally pool your assets to make depreciation calculations easier. You can claim an accelerated deduction for motor vehicles and an immediate deduction for most assets costing less than $6,500 each.

You can claim an immediate deduction for prepaid expenses where the payment covers a period of 12 months or less that ends in the next income year.

You generally have a two-year time limit (from the day that the Commissioner issued your notice of assessment) for reviewing an assessment.

If you need help with your small business accounting and tax contact the BASMAN  for more information.


Last Minute Tax Tips












A few things to check to ensure you have taken all the possible steps to minimise your tax liability before 30 June:

  ·         BAD DEBTS - Review your debtors and write off the bad debts before 30 June to get the deduction.

  ·         CONSUMABLES - Buy any necessary loose tools, stationery, printer toners, paper, water etc before 30 June.

  ·         DEFER INCOME - Delay issuing this week’s bills to customers until 1 July.

  ·         EMPLOYEE/DIRECTOR BONUS - Consider committing (in writing) to employee/director bonuses before 30 June.

  ·         INVENTORY/STOCK - Review stock on hand and write off (throw out, give away) obsolete items before 30 June.

  ·         MINOR ASSETS  - Small business owners can claim up to $6,500 per item instant asset write offs.

  ·         MOTOR VEHICLES - Make a note of the odometer reading of your car(s) at 30 June.
            Start a new logbook before 30 June if you don’t already have one or if yours is more than 4 years old.

  ·         PRE-PAY EXPENSES - Consider pre-payment of expenses before 30 June to get the deduction this year
            (e.g. rent, interest, income protection insurance, subscriptions).

  ·         SALARY SACRIFICE - Consider salary sacrificing bonus payments into super (watch you don’t exceed limits).

  ·         SUPER CONTRIBUTIONS - Pay employee super contributions before 30 June to get a tax deduction this year.

  ·         TRUSTS - Trustees should ensure that they take necessary steps to create present entitlement prior to 30 June.



Of course, any tax planning must take into account the potential application of anti-avoidance provisions (tax laws). Alan can help ensure that you get the most out of your tax planning and stay within legal guidelines.

It is easier to get your tax paperwork organised now than it will be later.

As always, call Alan on 0419 671 602 if you have any questions.

BASMAN RETURNS - Chartered Accountants Tax Tip #5

BASMAN RETURNS - Chartered Accountants Tax Tip #5 - Small Business taxpayers can pre-pay expenses before 30 June and get the deduction now. For example you can prepay up to the next 12 months Interest or Rent or Subscriptions and claim the full tax deduction in the current year. 















BASMAN RETURNS - Chartered Accountants Tax Tip #4 - Motor Vehicle Log Books

BASMAN RETURNS - Chartered Accountants Tax Tip #4 - Motor Vehicle Log Books

To maximise tax deductions for motor vehicle expenses ensure you have a valid log book that covers the minimum 12 week period.

Its not too late - start your logbook before 30 June and make a a claim this year. The logbook can overlap a year end.

If you already have a log book, don't forget that you also need to take a note of your odometer reading on 30 June every year











Tax Tip # 3


Small businesses can claim an immediate tax deduction for assets costing less than $6,500. So if you need office equipment or other assets and you have a small business entity, purchase these items before 30 June to get the deduction this year.

As always, don't spend your hard-earned money on things you don't need just to get a tax deduction. Its not worth spending a dollar to save 30 cents.


Gold Coast Accountant

Changes to the super guarantee rate

To help grow Australian workers' savings for retirement, the compulsory super guarantee rate will gradually increase from 9% to 12%. When you make super payments on behalf of your employees based on the minimum 9% super guarantee rate, you will need to increase this rate on which you base your calculations to 9.25% on 1 July 2013.

The Super Guarantee rate will increase gradually from 9% to 12% from 1 July 2013 as follows: 

                        2013/14             9.25%
                        2014/15             9.5%
                        2015/16           10%
                        2016/17           10.5%
                        2017/18           11%
                        2018/19           11.5%
                        2019/20           12%

What you need to do

  • Update your payroll and accounting systems to apply the appropriate increase to the super guarantee rate.
  • From 1 July 2013, increase the rate you use to work out the super guarantee payments you make for your employees from 9% to 9.25%.
  • Continue to increase the rate you use to work out the super guarantee payments you make for your employees each year until 1 July 2019.

If you require any assistance contact BASMAN RETURNS for Superhero Service for your business.


Gold Coast Accountant




Tax Tip # 2

BASMAN RETURNS - Chartered Accountants - TAX TIP # 2 - Lodge your tax returns on time - Penalties for not lodging on time range from $110 to $4,250 depending on how long the return is overdue and the size of the entity.

Contact the BASMAN for superhero service for your business.


TAX TIP # 1

BASMAN RETURNS - Chartered Accountants - TAX TIP # 1 - Physically pay super contributions before 30 June to secure the tax deduction. 

Note that the concessional superannuation cap (Limit) for 2013 is $25,000 for persons of any age. Contributions in excess of $25,000 for the year will be taxed at 46.5%.


Your ABN is more than just a number











Hands up if you only think about your Australian Business Number (ABN) when filling out your quarterly Business Activity Statement?  

Most of us only think about our ABN in the context of fulfilling our taxation obligations but your ABN is more than just another number helping to distinguish your business from hundreds and thousands of others.   When you apply for an ABN, your business identity information becomes part of the Australian Business Register (ABR).   A whole-of-government community asset, the public rely on ABR information to confirm the identity of businesses they use to supply goods and services through the ABN Lookup website.  

ABR information is used by local, state and federal governments to support planning and decision making for economic development, infrastructure investment and disaster recovery - helping to build and support communities throughout the country.   

How is ABN information used?
Local councils across Australia use ABR information to identify emerging businesses and sectors to prepare for growth and to plan for and provide necessary services and infrastructure for their communities.

More and more, local councils are turning to ABR information to assist with disaster recovery. With the recent recurrent flooding in Queensland, local councils are geo-coding ABR information to identify businesses and industries in and around flood zones, helping to contribute to flood mitigation, response and recovery strategies.  

ABR information was also used to identify home-based businesses and primary producers impacted by the Victorian Black Saturday Bushfires to provide these businesses with information on government assistance programs available to help them rebuild including emergency grants, low-interest loan schemes, and free business advice and counselling services.  

What do I need to do?
There is one easy thing that you can do to help improve the ABR and be a good corporate citizen - check that your details are up-to-date on the ABR.   

If your details have changed, it is a legal requirement that you update your ABN listing within 28 days.

If you need any assistance or advice for your business do not hesitate to contact Alan Beck at Basman returns




We Love Xero - Online Accounting System

BASMAN RETURNS loves Xero

Doing the books and staying on top of cash flow can be a chore and headache for many small businesses. To help you stay in control without the stress, we've partnered with the world's easiest accounting system Xero.

Xero is online so you can receive automatic bank statement feeds into your XERO accounting system daily. No more data entry or downloads. You'll have much greater visibility of your cash flow and it's and quick and easy to reconcile your bank transactions.























Tax Deductions for Business





Following are details of some changes to the small business tax deduction rules that apply from the 2012-13 year:

You can now claim (write off) an outright deduction for most depreciating assets purchased that cost less than $6,500 each. This has increased from $1,000.

From 2012-13, if you buy a motor vehicle for use in your business, you can claim an immediate $5,000 deduction. The remainder of the cost is deducted through the general small business pool at 15% for the first year and 30% for later years.

From 2012-13, most depreciating assets that cost $6,500 or more (regardless of their effective life) can all be 'pooled' under the simplified depreciation rules and deducted at a single rate of 30%. The exception is newly acquired assets which are deducted at 15% for the first year.

If you had a long life pool (which no longer exists), its closing balance is rolled over to form part of the opening balance of the general pool for the 2012-13 income year (to be depreciated at a rate of 30% instead of 5%).

For more information on any of these changes contact Alan at alan@basman.com.au or on 0419 671 602

Benefit from your BAS Returns

Your business can benefit from timely and accurate BAS Return preparation and lodgement.

Lodging your BAS on time, every quarter, provides you with a snapshot of your business' financial position. From quarter to quarter you can use this information to track your business performance and growth.

Lodging your BAS on time means that you maintain a good lodgement history with the ATO.If you find yourself in a situation that may require a deferral of payment or if you need to organise a payment arrangement, a good lodgement history will give you an advantage.
Grow your business with a Gold Coast Accountant
To find out more about using BAS preparation work to generate useful information that will help you to Improve Your Business Performance contact Alan Beck at BASMAN RETURNS to find out more (for FREE).

Phone: 0419 671 602
email: alan@basman.com.au
Website: www.basman.com.au

Employing Staff - A Guide for new Employers

You may have tax and superannuation obligations if you employ or contract workers into your business, either full-time or part-time. This includes your family members and you, if you are a director. Your obligations may include:

  • pay as you go (PAYG) withholding
  • superannuation guarantee
  • fringe benefits tax (FBT).

You have responsibilities from the day your employee (or contractor) starts working for you to the day they stop. You also have some responsibilities if you stop being an employer altogether.

Preparing to engage workers If your business is about to engage workers (either employees or contractors) for the first time, you will need to know how to set up the necessary taxation and superannuation arrangements.

Worker's first day When a worker starts work you will need to:

  • determine whether they are an employee or contractor if you have not already done so
  • provide employees with a Tax file number declaration (NAT 3092) and, if applicable, a Withholding declaration (NAT 3093), which they must complete and return to you
  • provide a Standard choice form to employees who are eligible to choose a super fund - you can download a copy of our Standard choice form (NAT 13080)
  • accept a voluntary agreement on a voluntary declaration form if offered by your new contractor.

Worker's payday On payday you will need to determine the rate of tax that you need to withhold from payments you make.

Payments and reporting Most reporting and payment responsibilities occur when you complete and lodge your activity statement, usually monthly or quarterly. An annual report and a balancing payment (or refund) may be required. Superannuation payments are required at least quarterly.

Worker's last day When an employee or contractor stops working for you, you'll have final reporting and payment obligations. If they are eligible for an employment termination payment (ETP), you will have additional PAYG withholding obligations.

No longer an employer Once you stop engaging workers, you need to ensure you have met all your final payment and reporting obligations. You also need to cancel your PAYG withholding registration.

Keeping records Keeping employment and contractor records is an essential part of running your business and helps you to claim all your deductions. You must keep your records in an accessible form (either printed or electronic) for five years.

If you would like any further information or assistance contact Alan at BASMAN RETURNS on 0419 671 602 or send an email to alan@basman.com.au

Employee or Contractor ?

The Tax Office's new Employee or contractor homepage has information you need to work out whether your workers are employees or contractors including:

Grow your Gold Coast business
  • the basics - things your business needs to know

  • the common reasons businesses get the decision wrong

  • industry specific information

  • an Employee/contractor decision tool

  • summary of the obligations you need to meet for your employees or contractors.

If you get the decision wrong, you risk having to pay penalties.

For more information, visit Employee or contractor or contact Alan at BASMAN RETURNS

BASMAN partners with XERO

Doing the books and staying on top of cash flow can be a chore and headache for many small businesses. To help you stay in control without the stress, we've partnered with the world's easiest accounting system Xero.

Because Xero is online you can receive automatic bank statement feeds into your XERO accounting system daily. No more data entry or downloads. You'll have much greater visibility of your cash flow and it's and quick and easy to reconcile your bank transactions.
XERO Accounting SoftwareFeatures include:

  • Dashboard - A real-time view of your business at a glance, including bank balances and money coming in and going out.
  • Banking - Connects with bank accounts making reconciliations simple and accurate.
  • Online - Access to your accounts anywhere and at anytime. Your data is secure even if your computer is lost or stolen.
  • Work Together - Give BASMAN RETURNS access so they can work on your books from anywhere and offer better advice.
  • Unlimited users - All for one monthly fixed price. Invoicing - Customise, create, send and receive invoices. See at a glance who owes you money.
  • Reporting - Generate and view interactive reports with ease
 
Contact Alan Beck CA on 0419 671 602 to find out more







Personal Services Income

Personal services income (PSI) is an issue currently drawing the attention of the ATO

PSI is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour.

Examples of PSI are fees earned by a professional person on his or her own account, income payable under a contract for services or where the payment under the contract relates wholly or principally to the labour of the person concerned.

Income Tax Returns and BAS returns for small businessThe PSI rules in the tax law limit deductions available to individuals in receipt of PSI if they are not able to satisfy the required personal services business tests. The fundamental rule is that an amount is not deductible to the extent it relates to gaining or producing PSI if the income is not payable to the individual as an employee and the amount would not be deductible if the income were payable to the individual as an employee.

The rules also attribute income derived by an interposed entity, after allowing for a limited range of deductions, to the individual providing services to the interposed entity. The PSI rules do not apply to individuals or interposed entities carrying on a "personal services business".

For the average person, these rules rapidly descend into a complicated mess and the ATO is concerned that people are not applying the law correctly.

If you have any concerns about PSI in your business contact Alan at Basman Returns on 0419 671 602 to find out more.

Small Business Tax Changes

Tax changes that will apply to small businesses from the 2012-13 income year onwards include:

  • An increase in the small business instant asset write-off threshold from $1,000 to $6,500.

  • The long-life small business pool and the general small business pool, have been consolidated into a single pool to be written off, at the one rate of 30%. Newly acquired assets are to be deducted at half this pool rate, that is 15% in the year of allocation. 

  • Small businesses can claim an initial deduction of up to $5,000 for motor vehicles costing at least $6,500 acquired in the 2012-13 and subsequent income years. The remainder of the cost is depreciated through the general small business pool at 15% in the first year and 30% in the following years.

  • The entrepreneurs tax offset has been abolished from the 2012-13 income year onwards.

If you have any queries call Alan at BASMAN RETURNS on 0419 671 602


TRUST RESOLUTIONS REQUIRED BY 30 JUNE

From the 2011-12 income tax year, all trustees who make beneficiaries entitled to trust income by way of a resolution must do so by 30 June 2012.

The ATO previously provided an extension to make resolutions by 31 August however the extension was withdrawn as a result of a Federal Court decision. If you have relied on this practice previously, you will no longer  be able to do so.

What do you need to do?

You need to ensure that any resolution you make to distribute your trust's income for the 2011-2012 year is made in accordance with the terms of the trust deed and by 30 June 2012

The issue is more complex than it appears and I will be contacting clients with Trusts to provide a solution. If you are unsure if this applies to you, please contact Alan Beck on 0419 671 602 or via the website at www.basman.com.au



Tax Minimisation vs. Tax Avoidance

 
It's important to understand that there is a difference between avoiding tax and minimising tax.

It's only natural to want to minimise the amount of tax you pay and there are many legal ways to do this. At this time of year particularly, you might be considering entering into a tax-effective investment or other tax planning arrangement. However, you need to be cautious of ending up in a tax avoidance scheme. There's nothing to like about the consequences of that!

If you've been investing for a while, or you're quite financially savvy, you might think it couldn't happen to you. Apart from the fact that, on face value, many tax avoidance schemes appear legitimate, often people promoting these arrangements also use pressure tactics or offers of exclusivity to influence you to 'sign on the dotted line' before you have a chance to really investigate what you're getting into or seek any external advice.

It's always worth taking the time to check things out where your money is concerned. A little time and effort now might save you a lot of trouble later. And a lot of money. 

For more information call Alan Beck at BASMAN RETURNS on 0419 671 602 or email alan@basman.com.au



Increases to the 9% Super Guarantee

The Superannuation Guarantee (Administration) Amendment Act 2012 received royal assent on 29 March 2012.

In the legislation:

  • the superannuation guarantee (SG) rate will gradually increase from 9% to 12% between 1 July 2013 and 1 July 2019

  • the SG age limit of 70 will be removed from 1 July 2013, and employers will be required to contribute to complying super funds of eligible mature age employees aged 70 and older.

If you require any assistance contact Alan Beck CA on 0419 671 602 or visit the website at www.basman.com.au


Reporting Payments to Contractors to the ATO

From 1 July 2012, businesses in the building and construction industry will need to report to the ATO each year, the total payments they make to each contractor for building and construction services.

Business operators in the industry are encouraged to check how they keep their records to make sure they have the details that will be required for the new Taxable payments annual report.

The first annual report is due 21 July 2013 for payments made in the 2012-13 financial year. In the first year businesses that lodge their business activity statements quarterly, may lodge by 28 July 2013.

For more information, refer to:

Get your business ready for the FBT year-end

If you own a business that employs staff, and provide remuneration to your employees in a form other than straight salary, you may be liable for fringe benefits tax (FBT). The upside for your workers is that they do not then have to pay income tax on the value of the benefits that attract FBT.

FBT is separate to income tax, is based on a 'taxable value' of the benefits provided, and is payable at the current FBT rate of 46.5%. The Tax Office has even given FBT its own tax year, from April 1 to March 31 (with the FBT return lodgement deadline May 21, but possibly later if you use the services of your tax agent).

Under the tax law, a fringe benefit is deemed to arise when one of the categories of benefits (see below) is provided by an employer, an associate of the employer, or a third party under an arrangement with either of the former. The benefit might be provided to the employee or an associate (widely defined).

Fringe benefit categories

The law contains several different categories of fringe benefits, which include:
·         car fringe benefit
·         debt waiver
·         loan fringe benefit
·         expense payment
·         housing fringe benefit
·         living away from home allowance
·         airline transport
·         board (accommodation)
·         entertainment
·         tax-exempt body entertainment
·         car parking
·         property fringe benefit
·         residual benefits (that is, any that are not covered by the preceding).

The rules for calculating the taxable value of a fringe benefit are subject to two separate 'gross-up' rates – a higher and a lower gross-up rate. Grossing-up means increasing the taxable value of benefits you provide to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

The higher gross-up rate is used where the employer is entitled to a GST credit for GST paid on benefits provided to an employee, known as GST-creditable benefits. The lower gross-up rate is used where there is no entitlement to a GST credit.

Exemptions from FBT

Minor benefits (that is benefits that have a GST-inclusive value of $300 or less) are generally exempt from FBT. However a condition to maintain this exemption is that such minor benefits must be offered with ‘infrequency and irregularity’. There can also be other conditions (check with us). Examples of minor benefits can include the occasional lunch, birthday gifts, flowers on special occasions, the Christmas party, or a one-off interest free loan. Note also that there can be multiple minor benefits (that is, each can have a value of less than $300) – for example Christmas lunch on one hand plus a Christmas gift on the other.

Providing certain work-related items to staff will not make you liable for FBT. These include protective clothing, a briefcase, a mobile phone, calculator or tools of trade, portable computer (limited to one per year for each employee) and other items. There are other benefits that escape the FBT net, however a condition of exemption is that the benefit or item is primarily used to enable your employee to do their job.

Salary of course is not a fringe benefit, and a super contribution is exempt. Entitlements under employee share acquisition schemes are not deemed to be a fringe benefit, nor are termination payments.

Not exempt

You are providing a fringe benefit if, for example, you allow a staff member (or their associates) to use a work vehicle for private purposes, provide a loan or reimburse a worker for a private expense, such as school fees.

Also a car provided to an employee by the popular 'novated lease' arrangement is considered a fringe benefit, and typically gives rise to an FBT liability for the employer (see more on novated leases for cars in our last newsletter, or ask us for a copy).

The FBT rules pertaining to cars changed recently for situations where a vehicle is available for private use and the ‘statutory formula’ method is used to determine the taxable value. The value of the car benefit (on which the amount of FBT is based) is taken on the actual purchase price of the car. Under the statutory formula method the number of kilometres travelled determines the statutory fraction applied to determine the taxable value.

The position up to 7.30pm on 10 May 2011 was:

Kilometres travelled during the FBT year
Statutory percentage
 
 
Less than 15,000km
26%
15,000 - 24,999km
20%
25,000 - 39,999km
11%
Over 40,000km
7%
 
For example, an employee using a car valued at $34,000 would get a tax liability of $6,528 if they drove 24,000km, but that liability would drop to only $3,591 if they drove more than 25,000km.

But starting on 10 May 2011, the government introduced a flat 20% to be applied across all bands, but to be introduced over four years, as per the following table.

New contracts entered into after that date will operate under the new rates, but contracts existing before then will still run out under the old rules, unless a significant change occurs to the arrangement after 10 May 2011 (such as extending the term of a car lease).

The impact of the changes will generally be dependent on the number of kilometres travelled annually by the employee. For example: an employee travelling less than 15,000km annually would benefit from a reduction in the fraction from 26% to 20% once the new rules become applicable.

Record keeping and registration

The FBT record keeping regime for small businesses contains a threshold under which full records need not be kept (although you will still need to show the value of benefits on employee payment summaries). The threshold for 2011-12 is $7,391, but it increases each year. As long as benefits paid do not exceed 20% more than the previous year, the exemption can still apply.

For businesses, it makes no difference whether you are a sole trader, partnership, trustee, corporation, unincorporated association or government body, or whether you pay other taxes such as income tax – as an employer providing taxable benefits in connection with employment, you will be liable to the FBT provisions. All that is required is that the employee receives the benefit in their capacity as an employee of the business. Also an employee is deemed to have received a fringe benefit if that benefit is directly received by the employee's 'associates' – in the main, these would be family members and relatives. So this catches the school fees paid for an employee’s children or the interest-free loan made out in the wife's name.

While an item’s ‘primary use’ is important to determine if a taxable benefit has been provided, the Tax Office bases its decisions on the employee's 'intended use' at the time the benefit is provided.

Other documentation and declaration requirements can seem very particular. For travel, for example, a diary of the trip will need to be kept only if the employee is away for six continuous nights or more, but documentary evidence of travel expenses need to be kept no matter the duration of travel. If the trip is within Australia and not entirely for business purposes, receipts must be kept for food, drink, accommodation and incidentals. But if the trip is deemed to be entirely for business, these are not needed. And if overseas and solely for business, only accommodation receipts are required.
Once a business registers for FBT with the Tax Office it will be allocated an FBT number (which is actually the same as the tax file number)

Can you pay less FBT?

There may be strategies available to reduce the amount of FBT you are required to pay. The most obvious of course is to replace fringe benefits with straight salary, or simply focus on providing only those fringe benefits that are deemed exempt under the FBT law. Or share some of the cost and use employee contributions to reduce the taxable value of the benefit. With a car, for example, an employee could agree to contribute to some of the operating costs, such as fuel, that you do not then reimburse. This then reduces the taxable value of the fringe benefit provided.

You can also provide a benefit that your employee would normally be able to claim as an income tax deduction, had they paid for it themselves. Operating under the 'otherwise deductible' rule, you can reduce the taxable value of the fringe benefit by the amount your employee would have been able to claim. Assume a staff member incurs a work expense that would have been a one-off wholly deductible amount for the employee in their own tax return, such as a subscription to a professional accounting body for an employee of an accounting practice. If you reimburse the employee for this expense (as a fringe benefit for them) the taxable value would be zero (but the employee won't get the deduction).

Please contact Alan Beck at BASMAN RETURNS if you require any assistance.

DISCLAIMER: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional adviser. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication (including Taxpayers Australia Incorporated, each of its directors, councillors, employees and contractors and the editors or authors of the information) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information. The copyright is owned exclusively by Taxpayers Australia Inc (ABN 96 075 950 284). This content has been researched, authored, reviewed and produced by Taxpayers Australia staff. This paper takes into account the law and related matters of which the author is aware at 1 March 2012.


FREE Webinars for Business Owners

The Queensland Government is running a series of 1 hour webinars (web-based seminars) in 2012 to help small business owners improve their skills and their business.

The free webinars cover a variety of topics, including:
  • cloud computing
  • using Facebook, Twitter & LinkedIn for business success
  • local search marketing and search engine optimisation
  • pay per click online advertising.

All webinars are interactive and allow you to give, receive and discuss the topic in more depth.
To find out more, including how to register, visit the QLD Business and Industry  website

Cheers

Personal Tax Cuts from 1 July 2012

From 1 July 2012, the tax-free threshold will rise from $6,000 to $18,200, and the maximum value of the Low-income tax offset (LITO) will be reduced from $1,500 to $445.

The first marginal tax rate will be increased from 15 per cent to 19 per cent, and will apply to that part of taxable income that exceeds $18,200 but does not exceed $37,000.

The second marginal tax rate will be increased from 30 per cent to 32.5 per cent, and will apply to that part of taxable income that exceeds $37,000 but does not exceed $80,000.

For more information contact BASMAN RETURNS

Tax & Super obligations for Employers

You may have tax and superannuation obligations if you employ or contract workers into your business, either full-time or part-time and including family members or yourself as director. 

If your business is about to engage workers (either employees or contractors) for the first time, you will need to know how to set up the necessary taxation and superannuation arrangements.

When a worker starts work you will need to:
  • determine whether they are an employee or contractor if you have not already done so
  • provide employees with a Tax file number declaration (NAT 3092) and, if applicable, a Withholding declaration (NAT 3093), which they must complete and return to you
  • provide a Standard choice form to employees who are eligible to choose a super fund - you can download a copy of our Standard choice form (NAT 13080)
  • accept a voluntary agreement on a voluntary declaration form if offered by your new contractor.

On payday you will need to determine the rate of tax that you need to withhold from payments you make.

Prepare ahead for super and FBT
While your super guarantee and fringe benefits tax payments are not linked to your workers' payday, you need to understand these payments, record keeping and reporting obligations and plan to meet them.

Most reporting and payment responsibilities occur when you complete and lodge your activity statement, usually monthly or quarterly. An annual report and a balancing payment (or refund) may be required. Superannuation payments are required at least quarterly.

When an employee or contractor stops working for you, you'll have final reporting and payment obligations. If they are eligible for an employment termination payment (ETP), you will have additional PAYG withholding obligations.

Once you stop engaging workers, you need to ensure you have met all your final payment and reporting obligations. You also need to cancel your PAYG withholding registration.

Keeping employment and contractor records is an essential part of running your business and helps you to claim all your deductions. You must keep your records in an accessible form (either printed or electronic) for five years.

National Business Name System

The current state based business names system is to be replaced by a National system after 28 May 2012

The registration process will be online and will be linked to the ABN application process.

Costs will be around $30 for one year and $70 for three years - A cost reduction in most states and territories.

Existing businesses do not need to do anything, their existing business
names will transfer automatically to the national register.

If you have an queries contact the BASMAN on 0419 671 602 or by email at alan@basman.com.au

Cheers & Best wishes for a safe and happy Christmas & New Year

Alan

Property and Tax - An Overview

Your home
In most cases there are no tax implications for the home that you live in, and no tax implications when you sell it. This situation may change if you rent out part of your home or use it for work, or it's on more than 2 hectares of land. If you're saving for your first home, you may be eligible for government contributions to help you build your savings quickly.

There are usually no capital gains tax implications at the time you inherit a dwelling. Capital gains tax may apply when you subsequently sell or otherwise dispose of the dwelling.

If you rent out property to others, you must declare the income in your tax return, and you can claim tax deductions for many of the related expenses. You may have to pay capital gains tax when you sell the property.

Vacant land is generally a capital asset that is subject to capital gains tax. However, if you purchase the land for resale to earn a profit, or use the land in a business-like way, it is considered trading stock. In this case you treat proceeds from the land as ordinary income, and you may need to register for GST.

If you subdivide land - including if you subdivide land adjacent to your home - the subdivided land will generally be subject to capital gains tax. However, if you purchase land to subdivide and resell for a profit, or use the subdivided land in a business-like way, the proceeds may be treated as ordinary income and you may need to register for GST.

If you build new residential premises for sale, you'll be liable for GST on the sale and entitled to claim GST credits for related purchases. If you renovate a property and sell it for a profit, there could be implications for income tax, capital gains tax and GST.

If your property is used to run a business - whether it's commercial premises like a shop or office, or even your own home - there will be income tax implications while you own it and capital gains tax implications when you sell. You may also be liable for GST, and entitled to claim GST credits, when you buy, sell, lease or rent commercial premises.

Source: www.ato.gov.au

$5,000 Immediate Deduction for Motor Vehicles

As part of the 2011-12 Federal Budget, the government announced it would allow small businesses to claim up to $5,000 as an immediate deduction for motor vehicles, with effect for vehicles acquired from the 2012-13 income year.
Maximum Tax Refund
The remainder of the motor vehicle value will be pooled in the general small business pool (depreciated at 15% in the first year and then 30%).

This reform is closely related to another previously announced measure that allows small businesses to immediately write-off any new business asset worth less than $6,500 from the 2012-13 income year onwards.

Contact Alan at BASMAN RETURNS for all your small business accounting and taxation needs
M: 0419 671 602 E: alan@basman.com.au


Tax Deductions for Individuals

When completing your tax return, you are entitled to claim deductions for some expenses that are directly related to earning your income.You may be able to claim deductions for expenses that directly relate to your work as an employee (work-related expenses) or your investment income.

The most basic rules when you claim a deduction are:

  • Claim the deduction in the same income year that you made the purchase.
  • Don't claim an expense that you have been, or will be, reimbursed for.
  • Claim for expenses in earning your assessable (taxable) income - but not private, domestic or capital expenses.
  • Keep written records.

If you have expenses from using your car to earn income you can claim deductions for costs such as petrol and car parking. However, you cannot claim the cost of normal domestic and private travel, such as holidays or trips between your home and your workplace.

If you have expenses from travelling, including using someone else's car, to earn income, you can claim deductions for costs such as petrol, car parking, airfares, train fares and accommodation. However, you cannot claim the cost of normal domestic and private travel, such as holidays or trips between your home and your workplace. Work-related travel includes expenses for vehicles with a carrying capacity of one tonne or more, or nine or more passengers (for example, utility trucks and panel vans) and for motorcycles. Claim work-related car expenses
for work-related expenses for using your car.

You can claim a deduction for the expense of buying and cleaning:

  • clothing that is specific to your occupation, is not everyday in nature and would allow the public to easily recognise your occupation (such as the checked pants a chef wears)
  • special work clothing and footwear that you wear to protect yourself from the risk of illness or injury
  • your work uniform, if it
    • has been designed and made only for your employer
    • has your employer's logo permanently attached, and
    • is not available to the public.

You cannot claim for everyday clothes, even if your employer tells you to wear them.

Many individuals also claim other work-related expenses. You must have incurred the expense in the course of earning your assessable income and it must not be private, domestic or capital in nature. If something is used for personal and work-related uses, keep a diary of your use for four weeks and use that to estimate the proportion that was work-related. Common expenses people claim are:

  • buying a computer to use for your work
  • work-related phone calls and the work-related proportion of your Internet access charges
  • the work-related proportion of your expenses for repairing your computer
  • reference books, technical journals and trade magazines
  • union fees and subscriptions to trade, business or professional associations.

Self-education expenses
You can claim a deduction for self-education expenses when your course of study is directly connected to your current employment by either:

  • maintaining or improving the specific skills or knowledge you require
  • resulting in, or being likely to result in, an increase in your income.

You can also claim a deduction for self-education expenses if, in undertaking the course, you are satisfying study requirements to receive Youth Allowance to study full-time. You can claim a deduction for expenses such as travel, computers and some course fees.

If you earn income from interest or dividends, you can claim deductions for expenses, such as:

  • account-keeping fees if you held the account for investment purposes
  • management fees and fees for investment advice relating to changes in the mix of your investments.

If you were not the sole holder of an account, you can only claim your share of fees, charges or taxes on the account. For example, if you held an equal share in an account with your spouse, you can only claim half of any allowable account-keeping fees paid on that account.

You can claim a tax deduction for a gift if it:

  • is made to a deductible gift recipient (DGR)
  • is truly a gift
  • is a gift of money or property that is covered by one of the gift types, and
  • complies with any relevant gift conditions.

Only gifts made to DGRs are tax deductible.

You cannot claim a deduction if you get a benefit, such as raffle tickets and fundraising chocolates.

You are entitled to deductions for the expenses of managing your tax affairs, including payments to recognised tax advisers and the cost of tax reference material and travel to obtain tax advice.

Other deductions you may be able to claim include:

  • the deductible amount of undeducted purchase price (UPP) of a foreign pension or annuity - if you have income from a foreign pension or annuity
  • personal superannuation contributions - if you are not an employee or less than 10% of your income is from employment
  • a deduction for a project pool - if you incur capital expenditure that is directly connected with a project you carry on (or propose to carry on)
  • other deductions, such as
    • election expenses for local, territory, state or federal candidates
    • income protection, sickness and accident insurance premiums
    • foreign exchange losses
    • business expenses you incurred after you finished carrying on a business.

In some circumstances, you may be able to claim a deduction for tax losses from earlier income years.

The above information has been sourced from the Australian Tax Office however it is not specific advice and may not apply to your specific circumstances. If you require specific advice contact BASMAN RETURNS.

Capital Gains Tax - Selling an inherited dwelling

If you inherit a dwelling and subsequently sell or otherwise dispose of it, capital gains tax may apply to the subsequent disposal. This depends on a number of things, such as when the former owner died, when they (and you) acquired the dwelling, and what they (and you) did with it.

If the deceased acquired the dwelling before 20 September 1985

You disregard a capital gain or capital loss you make when you dispose of the dwelling if either of the following conditions applies:

  • Condition 1 (disposal within two years)
    You disposed of the dwelling within two years of the person's death.
  • Condition 2 (main residence)
    From the deceased's death until you disposed of the dwelling, it was not used to produce income and was the main residence of one or more of:
    • a person who was the spouse of the deceased immediately before the deceased's death (but not a spouse who was permanently separated from the deceased)
    • an individual who had a right to occupy the home under the deceased's will
    • you, as a beneficiary, if you disposed of the dwelling as a beneficiary.

If the deceased acquired the dwelling after 20 September 1985

If the dwelling passed to you on or before 20 August 1996, you disregard any capital gain or capital loss when you dispose of it if:

  • condition 2 (main residence) above is met, and
  • the deceased used the dwelling as their main residence from the date they acquired it until their death, and did not use it to produce income.

If the dwelling passed to you after 20 August 1996, you disregard any capital gain or capital loss when you dispose of it if:

  • either condition 1 (disposal within two years) or condition 2 (main residence) above is met, and
  • just before the deceased died it was their main residence and was not being used to produce income.
 
Even if not all of the above conditions apply to you, your circumstances may still allow for a partial exemption.
 
The legislation is complex and this information is provided as a general guide only and does not cover all possible circumstances.
 
If you require specific advice contact the BASMAN by email at alan@basman.com.au or call Alan on 0419 671 602






Superannuation - Record Keeping for Employers

Employers must keep adequate records showing the amount of super paid for all eligible employees.

Super records should include:
  • how you calculate any reportable employer super contributions
  • how you calculate each of your employee's salary or wages and ordinary time earnings
  • copies of relevant salary sacrifice agreements you entered into with your employees
  • copies of relevant industrial agreements with your employees
  • evidence that you offered your eligible employees a choice of super fund.

You must keep super records:
  • for five years
  • in English, or in a form that can be easily accessed and converted into English.

For more help contact the BASMAN at alan@basman.com.au
or call him directly on 0419 671 602.

Private Companies & Trusts - What is Division 7A ?

Accountant and Tax Agent for your business









Division 7A of the Income Tax Assessment Act was introduced to prevent private companies distributing profits to shareholders and their associates tax free, in the form of loans, property distributions, debt forgiveness transactions or other advances.

Broadly, Division 7A treats:

  • All loans, payments and debts forgiven by private companies to shareholders (or their associates) as assessable dividends to the extent that there are realised or unrealised profits in the company 

  • All loans, payments and debts forgiven by a trustee of a trust to shareholders (or their associates) as dividends where that trustee has made a private company beneficiary presently entitled to trust income without paying the cash to the company

The legislation is complex and imposes particularly harsh penalties where it is breached.

If you require any assistance or additional information please call Alan at BASMAN RETURNS Chartered Accountants on 0419 671 602.


Small business tax law amendments proposed


BASMAN RETURNS - Accountant and Tax Agent








From the 2012-13 income year proposed amendments to legislation will allow small businesses to:

  • Immediately write-off assets valued at under $6,500 (up from $1,000 presently)

  • Immediately write-off up to $5,000 for motor vehicles acquired from the 2012-13 income year, with the remainder to be written-off at a rate of 15 per cent in the first year and 30 per cent in following years

  • Write-off of other assets in a single depreciation pool at a rate of 30 per cent (15 per cent in the first year).


For more information contact BASMAN RETURNS

1,698 Prosecuted for Tax Offences - Who's next ?

Tax Commissioner Michael D'Ascenzo today said that over 450 individuals and over 140 companies were convicted between 1 April and 30 June for tax and superannuation offences

This brings the total number of convictions for tax and superannuation offences for the financial year 2010-11 to 1,380 individuals and 318 companies; including 8 Project Wickenby related convictions.*

"The most serious offences this quarter resulted in custodial sentences ranging from six months to over nine years," said Mr D'Ascenzo.

"Offences this quarter ranged from a $3,000 fine for failure to lodge tax returns to 21 years combined jail time for three men for their role in an illegal investment scheme that would have allowed participants to claim over $46 million in fraudulent deductions.

If you have any concerns about your tax obligations contact Alan Beck at BASMAN RETURNS on 0419 671 602 for an obligation free discussion at no cost to you.

Click Here to email BASMAN RETURNS now.

*Total includes multiple convictions for the same entities

Are you eligible for the Education Tax Refund?

The education tax refund (ETR) helps eligible families and independent students meet the cost of primary and secondary school education.
You can claim the ETR for education expenses you incur while your child attends primary or secondary school.
 
Families and approved care organisations can claim 50% of their eligible educational expenses if either of the following apply:
 
  • they were entitled to receive family tax benefit (FTB) Part A for the child
 
  • a payment was made for the child that stopped them from receiving family tax benefit (FTB) Part A for that child.
 
Independent students may also be eligible to claim the ETR.
 
For the period 1 July 2010 to 30 June 2011, you can claim up to:
 
  • $794 for each eligible child in primary school - that is, a refund of $397
 
  • $1,588 for each eligible child in secondary school - that is, a refund of $794.
 
If your expenses exceed your refund limit for the year, any excess can go towards your following year's refund claim, as long as you are still eligible.

Tax Time for Small Business

With tax time here, now is the time to get your business tax affairs in order. 
 
There are some important details you need to know when running a business, like what registrations you need, how much tax and superannuation you need to pay and when, and what records to keep and for how long.
 
Registrations
 
The most common tax registrations businesses need include:
  • a tax file number (TFN)
  • an Australian business number (ABN)
  • goods and services tax (GST), and
  • pay as you go (PAYG) withholding.
 
Record keeping
 
Good record keeping practices are the basis for running a successful business and will help you stay on top of your tax obligations. You need records of all money coming into and going out of your business.
 
Lodging your 2011 return
 
The deadline for lodging tax returns you prepare yourself is 31 October 2011.
 
If you are lodging through a registered tax agent, they have their own deadlines. However, if you are using a registered tax agent for the first time or a different tax agent to last year, you need to contact them by 31 October 2011.
 
Only registered tax agents are allowed to charge a fee to prepare and lodge your tax return.
 
If you need assistance contact the BASMAN - alan@basman.com.au

Can you claim the Education Tax Refund ?

You may be eligible for a refund of 50 per cent of certain primary and secondary school costs.
 
How do I know if I am eligible?
 
You are eligible for the refund if you had a child who attended primary or secondary school and:
 
  • you were eligible for a family tax benefit part A payment. This means you must have applied for Family Tax Benefit Part A and had it approved by the Family Assistance Office.
    or
  • a payment such as Austudy or ABSTUDY prevented you from being paid Family Tax Benefit Part A.
 
If you were sharing care of your child, the amount of education tax refund you can claim will have to be apportioned.
If you are an independent student you may also be able to claim the 50 per cent refund.
 
What can I claim?
 
You can claim for items such as laptops, home computers, printers, paper, textbooks, study guides, stationery, software and internet expenses.
 
What cannot be claimed?
 
You cannot claim the cost of school fees, school uniforms, excursions, school photos, library fees, musical instruments, sporting equipment, computer games and consoles.
 
What is the maximum amount I can claim?
 
If your costs were incurred in the 2010-11 income year you can claim up to:
  • $794 for each primary school child which is a maximum refund of $397 for each primary school child you have, and
  • $1,588 for each secondary school child which is a maximum refund of $794 for each secondary school child.
 
There are some rules that allow you to claim expenses over the threshold in a following year. If you have some costs that exceeded the threshold last year you may be able claim them this year.
 
If you need assistance contact the BASMAN at alan@basman.com.au

Last Minute Taxation Considerations for Small Business Owners

 
1. Pay your staff Super contributions before 30 June - They are not deductible until after they are actually paid.
 
 
2. Bite the bullet and actually write-off bad debts hiding in your receivables to get the deduction
 
 
3. Physically throw out and write off obsolete stock that is taking up space and collecting dust
 
 
4. If you are going to need stationery etc in the next few weeks - why not buy it before 30 June 
 
 
5. Buy any necessary new business assets before 30 June and (if you are a small business taxpayer) and claim 15% depreciation for pooled assets or 100% for minor (<$1,000) assets
 
 
6. Beware tax driven investment schemes - Don't spend a dollar to save 30 cents
 
 
7. Sort out (repay) your loan account with your private company to avoid nasty Div 7A problems
 
 
8. Consider not issuing sales invoices until 1 July
 
 
9. Consider pre-paying expenses for up to 12 months e.g. rent, insurance
 
 
10. Maximise salary sacrificed super within the statutory limits (Note: it may be too late if you don't have an effective arrangement in place).
 
 
11. Are you eligible for the super co-contribution ???
 
 
12. Have you implemented appropriate Capital Gains Tax strategies??
 
 
13. Can you personally benefit from the Education Tax Refund??
 
 
14. Do you have deductible income protection insurance premiums??
 
 
15. Have you maximised income splitting opportunities?
 
 
16. How much more benefit would you and your business obtain by consulting with your accountant during the course of the year and keeping up to date and accurate financial records?
 
 
Important information: This content has been prepared without taking account of the objectives, financial situation, taxation position or needs of any particular individual or business entity. It does not constitute advice. For this reason you should consider the appropriateness of the information, having regard to the your objectives, financial situation, taxation position and needs and seek appropriate professional advice before acting.
 

Reduction in Tax Free Distributions to Children

In the 2011-12 Budget, the Australian Government announced changes that will remove the ability of minors (children under 18 years of age) to access the low income tax offset to reduce tax payable on their unearned income (for example, distributions from discretionary trusts, dividends, interest, rent, royalties and other income from property).
 
This measure will not affect those minors who are, for example, disabled, an orphan, or were engaged in a full time occupation at the end of the income year.In addition, income earned by minors from the investment of any property transferred to them as a result of compensation payments, inheritances or marriage breakdown will also not be affected by this measure.
 
Minors will still be able to use the low income tax offset to reduce tax payable on their earned income such as salary and wages.

Rental Property Tax Deductions 2011

This year the ATO plans to contact over 100,000 rental property owners about their claims.
 
Here are some tips to avoid a follow-up from the ATO:
 
What can I claim straight away?
 
  • Interest on a loan to:
    • purchase a rental property or purchase land to build a rental property
    • purchase a depreciating asset for the property, such as an air conditioner
    • finance renovations like a deck
    • make maintenance repairs or repair damage to the property
  • repairs to part of the guttering or windows damaged in a storm
  • maintaining plumbing, repairing electrical appliances or machinery
  • the cost of preparing a lease agreement with your tenant, and
  • costs associated with evicting a tenant.
 
What can I claim over a number of years?
 
You can claim other expenses over a number of years, including the cost of depreciating assets, structural improvements and most borrowing costs. Assets that are part of the property such as stoves, air conditioning and hot water systems can be claimed over a number of years as a 'decline in value' deduction.You can also claim a capital works deduction (normally over 25 years) for the building construction plus any subsequent improvements made by you or a previous owner.
 
Some other examples of expenses that need to be claimed over a number of years include:
 
  • the total cost of 'improvements' to your rental property
  • replacing something such as a complete fence or building, a stove, kitchen cupboards or a refrigerator, and
  • borrowing costs such as stamp duty charged on a mortgage, loan establishment fees and title search fees charged by your lender.
 
If these amounts are less than $100 in total they can be deducted immediately, otherwise they are generally deductible over five years or over the term of the loan, whichever is less.
 
What cannot be claimed:
 
  • deductions for rental properties not genuinely available for rent
  • interest on a loan you use to buy a home that you do not use to produce income or from the time you start using the property for private purposes
  • borrowing expenses or interest on the portion of the loan you use for private purposes like buying a new car
  • travel expenses when the main purpose of the trip is a personal holiday.
  • stamp duty charged by your state/territory government on the transfer of the property title or leasehold interest
  • insurance premiums where under the policy your loan will be paid out in the event that you die, become disabled or unemployed, and
  • solicitor fees for the purchase of the property and the preparation of loan documents.
 
If you need any assistance contact Alan Beck CA on 0419 671 602
or
 

Budget Announcement - FBT & Cars

FBT and cars - flat 20% valuation rate to apply
 
The Government announced that the current statutory formula 4 -percentage rate scale method for valuing car fringe benefits be replaced with a single statutory rate of 20%, regardless of the number of kilometres travelled.
 
The changes will apply to new vehicle contracts entered into after 7:30pm (AEST) on 10 May 2011, and will be phased in over 4 years
 
The flat 20% rate will particularly benefit those who drive less than 15,000 kilometres, resulting in an FBT saving. For those who drive between 15,000 and 25,000kms pa, there will be no change - the rate stays at 20%. For those who drive between 25,000 and 40,000kms pa, the rate will rise from 11% to 20% over 3 years. For those who drive more than 40,000kms pa, the rate will rise from 7% to 20% over 4 years
 
People who use their vehicle for a significant amount of work-related travel will still be able to use the "operating cost" (or "log book") method to ensure their car fringe benefit excludes any business use of the vehicle.
 
Those driving more than 25,000 kilometres a year might find that using the alternative operating cost method will be more beneficial.
 
 

Budget Announcement - Vehicle Tax Write Off

Small business motor vehicle tax write-off to replace Entrepreneur's Tax Offset
 
The Government will provide Australian small businesses with an instant tax write-off of the first $5,000 of any motor vehicle purchased from 2012-13.
 
The Treasurer said that, for example, a tradesman on a 30% marginal tax rate, buying a new $33,960 ute would receive an extra tax benefit of $1,275 in the year they purchased the vehicle.
 
The remainder of the purchase value can be transferred into the general small business depreciation pool, which is depreciated at 15% in the first year and 30% in later years
 
While the $5,000 deduction will be welcome for many small businesses, those with cash flow issues may find it difficult to outlay the initial funds to secure the deduction.

Business Tax Deductions - Step 5

Capital allowances - Plant and Equipment Depreciation
 
There are two sets of rules you can use to work out how much you can claim for depreciating assets, such as plant and equipment - the simpler capital allowances rules concession and the uniform capital allowances rules.
 
Small businesses with aggregated turnover of less than $2 million can select the set of rules you prefer. Larger businesses must use the uniform capital allowance rules.
 
Simpler capital allowances (depreciation) rules concession
 
These rules provide a simplified approach to claiming depreciation on your assets. They are particularly suited to small businesses.
 
Uniform capital allowances rules
 
These rules allow you to choose from two methods to calculate how to depreciate your business assets - the prime cost method and the diminishing value method.
 
BASMAN RETURNS can help you:
 
  • calculate the total deduction for decline in value of depreciating assets in the current income tax year
 
  • work out disposal calculations, including balancing adjustments and capital gains
 
  • make comparisons between the alternative decline in value methods - diminishing value and prime cost.
 
For more information on depreciating your business assets contact the BASMAN 
 
 

Deductions for Non Commercial Losses ?

If you're in business as an individual, either alone or in a partnership, and your business makes a loss you must check the non-commercial loss rules to see if you can offset the loss against your income from other sources, such as wages.
 
If you are not able to offset your loss in the current year, you must defer the loss and may be able to offset it in a future year, either by passing one of the tests or making a profit in the business.
 
For more information contact the BASMAN

Holiday Travel Tax Deductions

The ATO has released a Taxpayer Alert  TA2011/3 in respect of arrangements involving holiday travel claimed as a tax deduction.
 
The Taxpayer Alert describes arrangements where a taxpayer claims a deduction for expenses incurred in relation to various educational courses and seminars where the expenses have insufficient connection with the taxpayer's current income-earning activities and are private or domestic in nature. These expenses include the costs for domestic or overseas travel on a holiday activity or to a holiday destination.
 
Where an activity is undertaken both for income-earning purposes and for private purposes, it is necessary to apportion the expenses between the purposes.
 
Be aware that the ATO is currently reviewing these arrangements.
 
If you have any queries contact BASMAN RETURNS for more information.