ALERT: Increased scrutiny of home office claims

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Last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, which includes home office expenses.

Reportedly, due to a high number of mistakes, errors and questionable claims for home office expenses, the ATO has recently advised that it will be increasing attention, scrutiny and education on these claims this tax time.

In particular, the ATO has flagged their concerns relating to taxpayers who are claiming:

-   expenses they never paid for;

-   expenses that their employer has reimbursed them for;

-   private expenses; and

-   expenses with no supporting records.

Whilst additional costs incurred as a direct result of working from home can be claimed, care must be taken not to claim private expenses as well.

The ATO has indicated that one of the biggest issues they face is people claiming the entire amount of expenses (e.g., their internet or mobile phone), rather than just the extra portion relating to work.

Provided the taxpayer is able to demonstrate that they have incurred additional costs of running expenses (e.g., electricity for heating, cooling and lighting), then these are generally deductible.

In contrast, employees are generally not able to claim any portion of occupancy-related expenses (e.g., rent, mortgage repayments, property insurance, land taxes and rates).

Taxpayers are warned that the ATO may contact their employers to verify expenses claimed for working from home.

In addition, the ATO expects to disallow a lot of claims where the taxpayer has not kept adequate records to prove that they have legitimately incurred the relevant expense and that the expense was related to their work.

As with the claiming of deductions in general, supporting records must be kept when claiming work-from-home expenses, which may include receipts, diary entries and itemised phone bills. 

Importantly, only the additional work-related portion of the relevant expense is deductible.

Advancement in technology has allowed the ATO to deploy sophisticated systems and analytics to spot claims that do not ‘add up’ and claims that are out of the ordinary compared to others in similar occupations, earning similar income.

Finally, the ATO has reminded taxpayers of the ‘three golden rules’ to follow when claiming work-from-home deductions, being:

-   the taxpayer must have spent the money themselves and have not been reimbursed;

-   it must be directly related to earning the taxpayer’s income, not a personal expense; and

-   the taxpayer must have a record to prove the expense.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

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admin@mawcons.com.au

(08) 9364 4204

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Do you run a business and live near Mundaring?

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Do you run a business and live near Mundaring?

We are running a Free Seminar called “Small Business Health Check” at The Treehouse Business Centre from 3 - 6 PM on Tue. 30 October 2018 .

Most businesses get into a rhythm doing the same thing day in, day out.

This interactive session allows business owners to take a step back from working in the business to spend some
time working on the business on reviewing and improving a range of areas.

This session includes a complimentary one hour follow up telephone call to assist in the implementation of the learnings in the session

https://www.eventbrite.com.au/e/free-seminar-small-business-health-check-mundaring-tickets-48264957788

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This workshop is brought to you by Business Local

This free workshop is brought to you by the Small Business Development Corporation’s Business Local outreach service. Business Local provides small business owners in the Perth metropolitan area with access to free enterprise skill development sessions.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Crowdfunding donations to help drought-affected farmers

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Editor:  The ATO is currently offering various support measures to individuals and businesses from drought-affected communities to help with managing their tax and super obligations or who are struggling with their mental health.

It has also recently provided a summary of the potential tax impact of making donations to, or raising funds via a crowdfunding platform for drought relief (as outlined below).

For taxpayers wishing to make a contribution to a drought relief fund, it is important to be aware of the tax implications associated with making such donations.

For example, donations of $2 or more to an organisation that is a deductible gift recipient will be tax deductible.

To check to see if a particular appeal is a registered charity, the ATO has advised that taxpayers should use the ‘ABN lookup’ function on the Australian Business Register website before donating.

For those looking to raise funds through crowdfunding platforms to assist their farming business, payments received from the crowdfunding platforms may be assessable income, depending upon how the funds are used. 

For example:

-   Where the funds are used for emergency relief (i.e., such as food and clothing), then the amounts are not assessable. 

-   Where the funds are spent on deductible expenses (i.e., such as purchasing feed for livestock), the amount is assessable income, but will be offset by the relevant deductions obtained, ensuing there is no net taxable outcome. 

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Black economy recommendations will impact day-to-day business

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Editor: Recently issued draft legislation has focused on introducing new measures to manage the growing cash economy (i.e., the ‘black economy’) in light of the Black Economy Taskforce recommendations and recent Federal Budget announcements. 

Two of these key recommendations are outlined below.

Removing tax deductions for PAYG failure

The Government is currently considering removing tax deductions where businesses fail to comply with their PAYG withholding obligations for payments to employees and contractors from 1 July 2019.

Specifically, deductions are proposed to be denied for these types of payments where the payer has failed to either:

-   comply with their obligations in relation to withholding from these payments; or

-   notify the ATO of the withholding amount (i.e., via their BAS).

Interestingly, deductions will only be denied if no withholding took place or no notification has been made. 

That is, incorrect amounts withheld or reported to the ATO will not impact a taxpayer’s entitlement to deductions.

Further expansion of the taxable payments reporting system (‘TPRS’)

The TPRS was introduced for the first time in the 2013 income year with respect to businesses in the building and construction industry, requiring the reporting of total payments made to contractors for building and construction services each year.

The taxable payments annual report is due by 28 August each year.

Legislation is currently being considered by Parliament to extend the TPRS to the cleaning and courier industries from the 2019 income year.

Furthermore, draft legislation has now been released to further expand the TPRS to the following industries from the 2020 income year:

-   security providers and investigation services;

-   road freight transport; and

-   computer system design and related services.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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The Company Tax Rate Saga

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In the last week of the August Parliamentary sittings, the controversial corporate tax cut plan for the big end of town (i.e., companies with an aggregated turnover of over $50 million) was defeated.

In addition, long-awaited legislation impacting the company tax and franking rates for small to medium companies (i.e., introducing a new ‘base rate entity passive income test’ from the 2018 income year to qualify for the lower 27.5% tax rate) was passed.

This legislation was particularly relevant for company rates applicable to passive investment and ‘bucket’ companies, which may now need to reconsider earlier lodged 2018 company tax returns, as well as the amount of franking credits attached to dividends paid from 1 July 2017.

Additionally, consideration may also need to be given to the company tax rates (and in certain circumstances, the franking rates) previously applied with respect to the 2016 and 2017 income years. 

This is in light of the recently issued ATO compliance and administrative approaches for the 2016, 2017 and 2018 income years.

Editor: Unfortunately, the recent Government delays have created much confusion in this area, and in certain cases, a review and possible amendments may be required for previously lodged returns.

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admin@mawcons.com.au

(08) 9364 4204

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ALERT: Suburban scammers pushing illegal early access to super

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The ATO has become aware of people in some suburban areas of major cities attempting to encourage others to illegally access their super early (generally for a fee) to help them to purchase a car, to pay debts, to take a holiday, or to provide money to family overseas in need.

The ATO advises that anyone approached by someone telling them that they can access their super early, or anyone hearing about it from family, friends or work colleagues:

-   should not sign any documents nor provide them with any personal details;

-   stop any involvement with the scheme, organisation or the person who approached them; and

-   seek advice from a professional advisor.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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UPDATE: Cents per Km Deduction Rate for Car Expenses from 1 July 2018

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The Commissioner of Taxation has determined that the rate at which work-related car expense deductions may be calculated using the cents per kilometre method is 68 cents per kilometre for the income year commencing 1 July 2018 (up from 66 cents per kilometre).

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Tax and transacting with cryptocurrency

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Editor: With interest in cryptocurrencies (such as Bitcoin) increasing, the ATO has issued guidance regarding various tax consequences of transactions involving cryptocurrencies.

Any capital gains made on the disposal of a cryptocurrency (including using the cryptocurrency or converting it to Australian dollars) may be taxed, although certain capital gains or losses from disposing of a cryptocurrency that is a 'personal use asset' are disregarded.

Cryptocurrency may be a personal use asset if it is kept or used mainly to purchase items for personal use or consumption (but the longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal use asset).

Note: If the cryptocurrency is held as an investment, the taxpayer will not be entitled to the personal use asset exemption but, if they hold the cryptocurrency as an investment for 12 months or more, they may be entitled to the CGT discount.

If the disposal is part of a business the taxpayer carries on, the profits made on disposal will be assessable as ordinary income and not as a capital gain.

Editor: The ATO has also provided guidance regarding the tax consequences of the loss or theft of cryptocurrency, as well as of 'chain splits'.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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Certificate awarded from Australian Taxation Office for Lodgement Program 2017-18

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We are pleased to announce that Mawer Consulting met the ‘85% or more’ on-time lodgment performance requirement for Lodgment program 2017–18.

As a tax practitioner, the role we play is vital in supporting and influencing our clients to recognise and value the tax and superannuation system that underpins Australia’s economic and social wellbeing.

Achieving the 85% on-time lodgment performance requirement indicates we are assisting your clients in meeting their tax reporting obligations in a timely manner.

Thank you to all our clients for making this possible.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

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NEW SEMINAR : Small Business Health Check

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Mawer Consulting and Small Business Development Corporation have teamed up to help small business owners of Perth to achieve what they desire. Best of all, all of the sessions are complimentary for small business owners.

Our latest seminar is titled 'Small Business Health Check'

Most businesses get into a rhythm doing the same thing day in, day out.

This interactive session allows business owners to take a step back from working in the business to spend some time working on the business on reviewing and improving a range of areas.

This session includes a complimentary one hour follow up telephone call to assist in the implementation of the learnings in the session.

Find a list of all available seminar dates on our Eventbrite page below:

https://www.eventbrite.com.au/o/mawer-consulting-17425341484

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

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NEW SEMINAR : Hatching your new business idea

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Mawer Consulting and Small Business Development Corporation have teamed up to help small business owners of Perth to achieve what they desire. Best of all, all of the sessions are complimentary for small business owners.

Our latest seminar is titled 'Hatching your new business idea'

This workshop will cover a range of relevant topics for potential start-ups and new business owners including the following:

Converting your business idea into a well-defined business concept.

Defining your target market and explaining market differentiation concepts.

Pricing methods and budgeting techniques

Breakeven analysis and business viability concepts

Business cash flow concepts and planning strategies

Business analysis techniques to assist in evaluating your business or business idea

Bookkeeping basics and how quality record keeping will help you make informed decisions

Business growth strategies to help grow your business

Find a list of all available seminar dates on our Eventbrite page below:

https://www.eventbrite.com.au/o/mawer-consulting-17425341484

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

Liability limited by a scheme approved under Professional Standards Legislation

NEW SEMINAR DATES: Small Business Cash Flow Essentials

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Mawer Consulting and Small Business Development Corporation have teamed up to help small business owners of Perth to achieve what they desire. Best of all, all of the sessions are complimentary for small business owners.

We now have three dates and locations available for our Small Business Cash Flow Essentials seminar.

They say cash is king, and if you run a business you will understand this saying.

This interactive session discusses why cash flow is vital to proactively manage, how cash flow planning works in a practical sense, different methods/softwares available to manage cash flow, discuss three way models and a range of other vital issues.

This session includes a complimentary one hour follow up meeting or telephone call to assist in the implementation of the learnings in the session.

Find a list of all available seminar dates on our Eventbrite page below:

https://www.eventbrite.com.au/o/mawer-consulting-17425341484

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

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NEWS: ATO scrutinising car claims this tax time

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The ATO has announced that it will be closely examining claims for work-related car expenses this tax time as part of a broader focus on work related expenses.

Assistant Commissioner Kath Anderson said: 

“We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed.”

This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-per-kilometre method.

Ms Anderson said that the ATO’s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: “Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job . . . simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace.”

Ms Anderson said there are three golden rules for taxpayers to remember to get it right.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Superannuation guarantee amnesty introduced

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The Government has introduced legislation to complement the superannuation guarantee ('SG') integrity package already before Parliament by introducing a one‑off, twelve month amnesty for historical underpayment of SG.

The Bill incentivises employers to come forward and "do the right thing by their employees" by paying any unpaid superannuation in full, as well as the high rate of nominal interest (but without the penalties for late payment that are normally paid to the Government by such employers).

Employers that do not take advantage of the amnesty will face higher penalties when they are subsequently caught – in general, a minimum 50% on top of the SG Charge they owe. 

In addition, throughout the amnesty period the ATO will still continue its usual enforcement activity against employers for those historical obligations they don't own up to voluntarily.

The amnesty will run for twelve months from 24 May 2018.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: 2018 Budget Update

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The Government handed down the 2018/19 Federal Budget on Tuesday 8th May 2018.  Some of the important proposals include:

-    The introduction of the 'Low and Middle Income Tax Offset', a temporary non-refundable tax offset of up to $530 p.a. to Australian resident low and middle income taxpayers for the 2019 to 2022 income years.  This offset will apply in addition to the Low Income Tax Offset. 

-    Providing tax relief for individual taxpayers by progressively increasing some of the tax brackets (including an increase in the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000 from 1 July 2018), and eventually removing the 37% tax bracket entirely.

-    The $20,000 immediate write-off for small business will be extended by a further 12 months to 30 June 2019 (i.e., for businesses with aggregated annual turnover less than $10 million).

-    From 1 July 2019:

–      Increasing the maximum number of allowable members in an SMSF from four to six members;

–      Ensuring that unpaid present entitlements (or ‘UPEs’) come within the scope of Division 7A; and

–      Denying deductions for expenses associated with holding vacant residential or commercial land.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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MUST READ FOR OVER 65's: No need to actually 'downsize' for ‘downsizer contributions’

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From 1 July 2018, individuals aged 65 or over may use the proceeds from the sale of an eligible dwelling that was their main residence to make superannuation contributions (referred to as ‘downsizer contributions’), up to a maximum of $300,000 per person (i.e., up to $600,000 per couple), without having to satisfy the age or gainful employment tests that usually apply.  

This measure was announced in the 2017/18 Federal Budget, and aims to provide an incentive for older Australians to ‘downsize’ their home.  

This, in turn, is expected to reduce pressure on housing affordability by freeing up stocks of larger homes for growing families.  

Importantly, it should be noted that there is no requirement for an individual to actually ‘downsize’ by acquiring a smaller property, or to even acquire another property at all.  

In this regard, all that is required is that the individual (or their spouse) ‘downsizes’ by selling their 'main residence'. 

The individual can then move into any living situation that suits them, such as aged care, a retirement village, a bigger or smaller dwelling than the one sold, a rental property, or living with family.

Also, the property sold does not need to have been the individual’s (or their spouse’s) main residence during their entire ownership of it, provided the property was owned for at least 10 years and was their main residence at some time during the ownership period.  Therefore, the sale of an investment property that at one stage was their main residence may enable an individual (or their spouse) to make downsizer contributions. 

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Employee denied deductions for work-related expenses

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An employee photographer has been denied deductions for travel expenses (when travelling with his family), and other purported work related expenses.

The AAT held that the travel expenses were primarily incurred for the purposes of a family trip or holiday and were therefore non-deductible, as they were private and domestic in nature.

Also, in relation to the taxpayer's reliance on bank statements in the absence of invoices and receipts, the AAT observed that “evidence of the mere transfer of funds, be it by way of bank transfer or by any other means, is not sufficiently informative of the actual character of an expense", so the other disputed expenses could not be claimed as allowable deductions.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

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ALERT: Get ready for Single Touch Payroll

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Single Touch Payroll (or 'STP') is mandatory for 'substantial employers' (being those with 20 or more employees) from 1 July 2018.

All employers are required to count the number of employees on their payroll on 1 April 2018 to find out if they are a substantial employer (note that this can be done after 1 April, but they need to count the employees who were on their payroll on 1 April). 

They must count each employee (not the full time equivalent), including full-time, part-time and casual employees, as well as those employees based overseas or absent or on leave (paid or unpaid).

Employers that are part of a company group must include the total number of employees employed by all member companies of the wholly-owned group.

However, employers don't have to include the following in the headcount:

-    any employees who ceased work before 1 April;

-    casual employees who did not work in March;

-    independent contractors;

-    staff provided by a third-party labour hire organisation;

-    company directors or office holders; or

-    religious practitioners.

Note that, although directors, office holders and religious practitioners are not included in the headcount, if the employer starts reporting through STP, the payment information of these individuals will need to be reported (because the payments are subject to withholding and are currently reported in the Individual non-business payment summary).

Employers don't need to send the ATO the headcount information, but they may want to keep a copy for their own records.

Once an employer becomes a substantial employer, they will need to continue reporting through STP even if their employee numbers drop to 19 or less (unless they apply for and are granted an exemption).

Editor: Please contact our office if you need any assistance regarding the new STP regime.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Continued ATO focus on holiday home rentals

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The ATO has recently advised that they are “setting their sights on the large number of mistakes, errors and false claims made by rental property owners who use their own property for personal holidays”

While it confirms that the private use of holiday homes by friends and family is entirely legitimate, the ATO states that such use reduces a taxpayer’s ability to earn income from the property, and therefore impacts on (i.e., reduces) the amount of claimable deductions.

As a result, the ATO has reminded holiday home owners that: 

-    They can only claim deductions for a holiday home with respect to periods it is genuinely available for rent.

-    They cannot place unreasonable conditions on prospective tenants/renters, set rental rates above market value, or fail to advertise a holiday home in a manner that targets people who would be interested in it and still claim that the property was genuinely available for rent. 

-    Where a property is rented to friends or relatives at ‘mates rates’, they can only claim deductions for expenses up to the amount of the income received. 

       -   Property owners whose claims are disproportionate to the income received can expect greater scrutiny from the ATO.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: GST withholding measures now law

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Legislation has been passed to “clamp down” on GST evasion in the property development sector.

From 1 July 2018, purchasers of new residential premises and new residential subdivisions will generally be required to withhold the GST on the purchase price at settlement and pay it directly to the ATO. 

Property developers will also need to give written notification to purchasers regarding whether or not they need to withhold. 

The new obligations are primarily aimed at ending the practice of some developers collecting GST on new properties before dissolving their business prior to remitting such tax to the ATO. 

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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