directors and family members. knowledge important ......2019/09/24 · directors and family...

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. Please contact ATS for further information or advice.

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IMPORTANT DATES TO REMEMBER

Lodgement Due Dates

30/06/19 Lodge and pay August 2019 monthly activity statement

21/10/19 Pay annual PAYG instalment, lodge only if varying amount

Lodge and pay September 2019 monthly activity statement

28/10/19 Lodge and pay Quarter 1 activity statement if paper lodgement

Super guarantee contributions due for Quarter 1

Lodge and pay annual activity statements for TFN withholding (trusts)

21/11/19 Lodge and pay October 2019 monthly activity statement

25/11/19 Lodge and pay Quarter 1 activity statement where lodging electronically

28/11/19 Lodge and pay Quarter 1 Super guarantee statement if contributions wer not paid on time

01/12/19 Income tax payable for large / medium taxpayers, companies and super funds (lodgement 15 Jan 2020)

Income tax payable for lodgements due 31 October 2019

21/12/19 Lodge and pay November 2019 monthly activity statement

Congratulations to the 2019 Footy Tipping winners

1st Place – Paul Pocock Employee of ATS Partners

2nd Place – Richard Quinn Employee of Cavalier Homes

3rd Place – Scott Ravizza Employee of Droppoint

IN THIS ISSUE

Planning for Christmas functions &

gifts.

New catch-up provisions for

concessional contributions

Single touch payroll exemptions for

Directors and family members.

Confusion over personal income tax

changes

The ATO is getting tough on overseas

income

What rental expenses can you claim?

2 The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. Please contact ATS for further information or advice.

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IT’S BEGINNING TO LOOK A LOT LIKE CHRISTMAS

With the Festive Season just around the corner, it is worthwhile having a refresher of the Fringe Benefits Tax (FBT

implications of holding Christmas Parties and other entertainment.

CHRISTMAS GIFTS Gifts which ARE NOT considered to be entertainment

These generally include, for example:

A Christmas Hamper, a bottle of whiskey, wine, etc; and

Gift vouchers, a bottle of perfume, flowers, a pen set etc.

Cont.


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Briefly, the general FBT and income tax consequences for these gifts are as follows:

Gifts to employees and family members – FBT is payable (except where the minor benefit exemption applies) and a

tax deduction is allowed.

Gifts to clients, supplies etc. – no FBT and a tax deduction is allowed.

Gifts which ARE considered to be entertainment

These generally include, for example:

Tickets to attend a theatre, live play, sporting event, movie or the like and

A holiday airline ticket or admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

Gifts to employees and family members – FBT is payable and a tax deduction is allowed (except where the minor

benefit exemption applies); and

Gifts to clients, suppliers, etc – no FBT and no tax deduction.

THE MINOR BENEFIT EXEMPTION Generally speaking, where the value of a Christmas related benefit (eg: food and drink, and a gift) provided to an employee or

family member is <$300, it may be exempt from FBT (subject to certain other conditions – refer S.58P of the FBTAA 1986 and TR

2007/12).

Surprisingly, for the purposes of the $300 minor benefit threshold, the following tips should be considered:

The $300 threshold is applied separately to each benefit provided to an employee, and /or each benefit provided to a

family member (eg.; spouse).

All benefits provided to an employee or a family member in relation to a Christmas function are no longer grouped when

applying the <$300 threshold (ie.; <$300 threshold is applied separately to each benefit).

However, note that, if the minor benefit exemption applies to the provision of entertainment benefits to an employee, no tax

deduction can be claimed.

EXAMPLE An employer holds an external Christmas party for employees and their spouses. The cost of the food and drink per person is

$250, and no other benefits are provided.

Assuming the actual method is adopted:

For employees attending with their spouse – no FBT is generally payable(ie., the per head cost is <$300); and

For employees attending alone – no FBT is generally payable (ie., the per head cost is <$300.

In either case, no tax deduction will be allowed.

Assuming the 50/50 method is adopted:

50% of the total expenditure is subject to FBT and is tax deductible.

Gift Vouchers

What if employees with spouses are given a gift voucher (for their spouse) to the value of $150(assuming this benefit is

In frequent and irregular, etc)?

Under the actual method, for employees attending with their spouses – no FBT is payable because the cost of each separate

benefit (including the voucher) is <$300 (ie;. The benefits are not aggregated).

No deduction is allowed for the food and drink, but the voucher is deductible.

Assuming the 50/50 method is adopted:

50% of the total cost of food and drinks is subject to FBT and deductible and

The total cost of all gift vouchers is not subject to FBT because the costs is <$300. As the vouchers are not entertainment, the cost

is deductible.


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A REMINDER THAT YOU CAN ACCESS RESOURCES FROM OUR WEBSITE https://www.atspartners.com.au/resources/

JUST CLICK ON THE DOCUMENT REQUIRED AND IF IT’S A QUESTIONNAIRE OR CHECKLIST, COMPLETE AND

EMAIL IT BACK TO US AT; [email protected]

A WORD FROM FAYE AND ANDREW REGARDING SUPERANNUATION

NEW SUPER CATCH-UP PROVISIONS FOR CONCESSIONAL CONTRIBUTIONS

The purpose of the new provision allowing fund members to carry forward unused Concessional Contribution

(CC) cap amounts is to provide flexibility for those people with varying capacity to save, and for those with

interrupted work patterns. From the 2019 income year an individual will be allowed to carry forward five

years’ worth of unused CC cap amounts.

Naturally there are conditions

Under the ruling a fund member is able to increase their annual CC cap (which is currently $25,000) using

unused CC cap amounts from previous income years where all the following requirements are met:

a) The fund member must be eligible to make a Concessional Contribution (CC) ie must be under 65 or

if between 65 and 75 meet the ‘work-test’ before making any CC.

b) The fund member’s CC exceed their CC cap for the income year.

c) The fund member’s Total Superannuation Balance was less than $500,000 just before the start of

the income year (ie to apply in the 2020 financial year the balance must be less than $500,000 on

30 June 2019).

d) The fund member has an unused CC cap amount that accrued in the 2019 income year or a later

year.

e) The unused CC cap amount accrued in one (or more going forward from 2019) up to the previous

five years. If an unused CC cap amount is not applied within the subsequent five income years, the

unused cap will expire and is lost.

We all get heavier as we get older, because there's a lot more information in our heads.

That's my story and I'm sticking to it!!

https://www.atspartners.com.au/resources/

mailto:[email protected]


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Single touch payroll exemption for Directors and family members

The ATO has provided a concession from single touch payroll for payments by small employers to closely held payees.

Single touch payroll (STP) was extended to cover all employers on 1 July 2019. For directors of their own company or for family businesses employing family members, there are some practical problems with STP - sometimes they don't know exactly what their salary or wages are for the year until just after the end of the financial year. STP however demands that payments are reported to the ATO in real time.

A new concession allows payments made by small employers with 19 or less employees to closely held payees, such as directors and family members, to be exempt from STP until 1 July 2020. Payments to arm’s length employees will need to be reported using STP.

There is no need for entities to apply to the ATO for the concession, although the ATO will need to be notified of closely held payees. For 2019-20, employers using the concession will report as they have in the past, issuing payment summaries at year end to affected employees.

Who is a closely held employee? A closely held employee is someone who receives non-arm’s length payments, that is, they are directly related to the entity from which they receive payment. For example:

family members of a family business

directors or shareholders of a company

beneficiaries of a trust

What happens after 1 July 2020? From 1 July 2020, employers making payments to closely held employees will have the option of reporting these payments quarterly. The ATO expects the employer to make a reasonable estimate of year-to-date amounts up to and including the last pay day of the relevant quarter. Three methods could potentially be used for this purpose:

Withdrawals taken by the payee (but don’t include payments of dividends or payments which reduce liabilities owed by the business to the closely held payee).

Calculating 25% of the total salary or director fees from the previous year or the year of the last lodged tax return of the closely held payee.

Vary the previous years’ amount (to take into account trading conditions) within 15% of the total salary or directors fees for the current financial year.

If a business chooses to report closely held payees quarterly, they will have until the due date of their 2021 tax return to finalise the information that has been reported for the year and make any adjustments to the amounts that have been reported.

There are some practical problems still to be worked through, like what happens if you overestimate income and pay too much superannuation? Unlike tax payments, superannuation cannot normally be refunded if contributions exceeded the amount that was required to be paid.

Laundry expenses hung out to dry

The ATO is airing the ‘dirty laundry’ on work-related clothing and laundry expenses warning that it is closely reviewing claims

“Last year around 6 million people claimed work-related clothing and laundry expenses, with total claims adding up to nearly $1.8 billion. While many of these claims will be legitimate, we don’t think that half of all


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taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing,” Assistant Commissioner Kath Anderson said.

Clothing claims are up nearly 20% over the last five years and the ATO believes taxpayers are making common mistakes and errors like claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated. In some cases, the ATO will ask employers if they require their employees to wear a uniform to check the validity of claims made.

In one case highlighted, a car detailer claimed work related laundry expenses of over $20,000 per year over two years. It seems that the taxpayer worked out how many hours he spent doing his laundry then multiplied that by what he thought was a reasonable hourly rate ($227 per hour because his personal time was valuable). Needless to say, the taxpayer’s claim was reduced to $0.

It’s not just large claims that the ATO is reviewing but claims up to the $150 substantiation threshold. Claims over $150 have to be substantiated with receipts for expenses. Below this level taxpayers are not required to keep normal records. The ATO believes that a lot of taxpayers are simply ticking the box thinking that the claim is a ‘standard deduction’ but it’s not an automatic entitlement.

“Just to be clear, the $150 limit is there to reduce the record-keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation-specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim,” Ms Anderson said.

Confusion over personal income tax changes for the low and middle income tax offset (LMITO) – what are you really entitled to?

The recent income tax cuts that passed through Parliament do not mean everyone automatically gets $1,080 back from the Government as soon as they lodge their income tax return. The Australian Taxation Office (ATO) has been inundated with calls from taxpayers wanting to know where their money is and how they can access the $1,080 they now believe is owing to them.

The thing to know is that this is a tax offset. Therefore you need to owe tax to be able to get the benefit of the tax offset. It is not an automatic cash refund of $1,080. If you earned a taxable income in 2018-19 of:

Less than $21,885, while you have an entitlement to LMITO of $255, you do not pay personal income tax and therefore cannot utilise the offset.

Up to $37,000 you will receive a tax reduction of $255.

Between $37,001 and $45,000, you will receive a tax reduction of $255 plus 7.5% on every dollar between $37,001 and $45,000.

Over $45,000, you will receive a tax reduction of $1,080.

A Facebook story … no, really

My wife asked me why I was always whispering.

I told her that Google, Facebook and Microsoft were always listening.

She laughed. I laughed. The toaster laughed.


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Tax treatment of compensation from financial institutions

By 30 June 2019, five major financial institutions paid $119.7 million in compensation for poor financial advice to 6,318 customers. The question is, how are these payments treated for tax purposes

The tax treatment varies according to why the compensation was paid and who the payment was made to. Compensation payments are made for a number of reasons including fee for no service, deficient advice, or overcharging for insurance premiums for death or disability insurance cover. Each one has different tax consequences.

In some cases, the compensation will be assessable income and in others will impact the cost base of any underlying investment. If an investment has already been sold, the compensation may trigger a capital gains tax liability and in some cases it will be necessary to amend prior year tax returns.

There may also be GST consequences. In general, the GST treatment will mirror the GST consequences for the financial institution that made the payment. If you or your superannuation fund claimed GST credits, these may need to be repaid where a compensation amount includes a GST component.

Managing the tax treatment of compensation payments can be tricky. If you or your superannuation fund has received a compensation payment, please let us know as soon as possible so we can assist you get the tax treatment right.

AUSTRALIAN TAXATION OFFICE TAKE “GLOVES OFF’ ON OVERSEAS INCOME

How you are taxed and what you are taxed on depends on your residency status for tax purposes. As tax residency can be different to your general residency status it’s important to seek clarification. The residency tests don’t necessarily work on ‘common sense.’ For tax purposes:

Australian resident - taxed on worldwide income including money earned overseas (such as employment income, directors fees, consulting fees, income from investments, rental income, and gains from the sale of assets).

Foreign resident - taxed on their Australian sourced income and some capital gains. Unlike Australian resident taxpayers, non-resident taxpayers pay tax on every dollar of taxable income earned in Australia starting at 32.5% although lower rates can apply to some investment income like interest and dividends. There is no tax-free threshold. Australian sourced income might include Australian rental income and income for work performed in Australia.

Temporary resident – Generally, those who have come to work in Australia on a temporary visa and whose spouse is not a permanent resident or citizen of Australia. Temporary residents are taxed on Australian sourced income but not on foreign sourced income. In addition, gains from non-Australian property are excluded from capital gains tax.

Just because you work outside of Australia for a period of time does not mean you are not a resident for tax purposes during that period. And, for those with international investments, it’s important to understand the tax status of earnings from those assets. Just because the asset might be located overseas does not mean they are safe from Australian tax law, even if the cash stays outside Australia. Don’t assume that just because your foreign income has already been taxed overseas or qualifies for an exemption overseas that it is not taxable in Australia.

How your money is being tracked A lot of Australians have international dealings in one form or another. The ATO’s analysis shows China, the United Kingdom, Switzerland, Singapore and the United States are popular countries for Australians.


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The ATO shares the data of foreign tax residents with over 65 foreign tax jurisdictions. This includes information on account holders, balances, interest and dividend payments, proceeds from the sale of assets, and other income. There is also data obtained from information exchange agreements with foreign jurisdictions.

In addition, the Australian Transaction Reporting and Analysis Centre (AUSTRAC) provides data to the ATO (and the Department of Human Services) on flows of money to identify individuals that are not declaring income or paying their tax.

It’s not uncommon for taxpayers to forget to declare income from a foreign investment like a rental property or a business because they have had it for a long time and deal with it in the local jurisdiction with income earned ‘parked’ in that country. However, problems occur when the taxpayer wants to bring that income to Australia, AUSTRAC or the ATO’s data matching picks up on the transaction and then the taxpayer is contacted about the nature of the income. If the income is identifiable as taxable income (for example, from a property sale or income from a business), you can expect the ATO to look very closely at the details with an assessment and potentially penalties and interest charges following not long after. There is no point telling the ATO the money is a gift if it wasn’t, they can generally find the source of the transaction and will know it’s not from a very generous grandmother - misdirection is only going to annoy them and ensure that there is no leniency.

What you need to declare in your tax return If you are an Australian resident, you need to declare all worldwide income in your tax return unless a specific exemption applies, although in some cases even exempt income needs to be reported. Income is anything you earn from:

Employment (including consulting fees)

Pensions, annuities and Government payments

Business, partnership or trust income

Crowdfunding

The sharing economy (AirBnB, Uber, AirTasker etc).

Foreign income (pensions and annuities, business income, employment income and consulting fees, assets and investment income including offshore bank accounts, and capital gains on overseas assets)

Some prizes and awards (including any gains you made if you won a prize and then sold it for a gain), and

Some insurance or workers compensation payments (generally for loss of income).

You do not need to declare prizes such as lotto or game show prizes, or ad-hoc gifts.

Do I need to declare money from family overseas? A gift of money is generally not taxable but there are limits to what is considered a gift and what is income. If the ‘gift’ is from an entity (such as a distribution from a company or trust), if it is regular and supports your lifestyle, or is in exchange for your services, then the ATO may not consider this money to be a genuine gift.

I have overseas assets that I have not declared Your only two choices are to do nothing (and be prepared to face the full weight of the law) or work with the ATO to make a voluntary disclosure. Disclosing undeclared assets and income will often significantly reduce penalties and interest charges, particularly where the oversight is a genuine mistake.


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How to repatriate income or assets

Before moving funds out of an overseas account company or trust , important to ensure that you seek advice on the implications in Australia and the other country involved. This is a complex area and the interaction between the tax laws of different countries requires careful consideration to avoid unexpected consequences.

The $11.1bn small business tax shortfall Last month, the ATO released statistics showing small business is responsible for 12.5% ($11.1 billion) of the

total estimated ‘tax gap’.

These new figures give visibility to tax compliance issues within the small business sector and indicate where we can expect ATO resources to be focussed now and in the future.

The tax gap estimates the difference between the tax collected and the amount that would have been collected if everyone was fully compliant with the law.

Australia’s small business community is doing comparatively well with international figures showing gaps in this same sector of between 9% and 30%.

ATO Deputy Commissioner Deborah Jenkins says that some small businesses are making mistakes with their tax, but these are often unintentional errors which are easily fixed.

To combat these errors, the ATO have ramped up their ‘visits’ to small businesses to monitor compliance, and educate business operators on compliance expectations with the goal of reducing the black economy (estimated to be 64% of the total small business tax gap). The ATO plans to visit almost 10,000 businesses this financial year.

If the ATO turn up at your business, they may spot check how you are recording your sales and the records for the past day or so. They may also check payroll records to ensure that staff are ‘on the books’ and superannuation entitlements are being met. If something does not look right in an initial assessment, it’s likely the ATO will expand their enquiries to other elements of the business.

The ATO states that the three main drivers of the small business income tax gap are:

Not declaring all income

Failing to account for the private use of business assets or funds, and

Not sufficiently understanding tax obligations.

The small business tax gap estimate is based on a sample of 1,398 randomly selected businesses for the 2015-16 income year (around 0.03% of the small business population). The ATO are looking to expand that sample to 2,000 businesses. However, one of the criticisms of the tax gap analysis has been the size of the sample group, particularly given that ATO resources are allocated on a return on investment basis.

Tips to make your business ATO proof:

Tax reporting is up to date

Systems are in place to manage your business, those systems are set up correctly, and you can explain how those

system work

Payroll records are up to date and accurate

You can explain and provide evidence that your invoicing or receipts system works correctly and is well

maintained.


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Rental property expenses – what can you claim? It’s not uncommon for landlords to be confused about what they can and can’t claim for their rental properties. What often seems to make perfect sense in the real world does not always make sense for the Australian Tax Office (ATO).

In general, deductions can only be claimed if they were incurred in the period that you rented the property or during the period the property was genuinely available for rent. This means a tenant needs to be in the property or you are actively looking for a tenant. If, for example, you keep the property vacant while you are renovating it, then you might not be able to claim the expenses during the renovation period if it was not rented or available for rent during this time (there are some exceptions to this general rule). There needs to be a relationship between the money you make and the deductions you claim. Here are a few common problem areas:

Interest on bank loans Only the interest on repayments for investment property loans, and bank charges, are deductible - not the actual loan itself. Also, if a loan facility is used for multiple purposes then only some of the interest expenses might be deductible. For example, if some of the loan is used to acquire or renovate a rental property but further funds are drawn down to pay for a holiday then this is a mixed purpose loan and an apportionment needs to be undertaken.

Repairs or maintenance? Deductions claimed for repairs and maintenance is an area that the ATO is looking very closely at so it’s important to understand the rules. An area of major confusion is the difference between repairs and maintenance, and capital works. While repairs and maintenance can often be claimed immediately, the deduction for capital works is generally spread over a number of years.

Repairs must relate directly to the wear and tear resulting from the property being rented out. This

generally involves restoring a worn out or broken part – for example, replacing damaged palings of a fence or

fixing a broken toilet. The following expenses will not qualify as deductible repairs, but are capital:

Replacement of an entire asset (for example, a complete fence, a new hot water system, oven, etc.)

Improvements and extensions where you are going beyond the work that is required to restore the property back to

its former state

The sharing economy The deductions you can claim for ‘sharing’ a room or an entire house are similar to rental properties. You can claim tax deductions for expenses such as the interest on your home loan, professional cleaning, fees charged by the facilitator, council rates, insurance, etc. But, these deductions need to be in proportion to how much and how long you rent your home out. For example, if you rent your home for two months of the financial year, then you can only claim up to 1/6th of expenses such as interest on your home loan as a deduction. This would need to be further reduced if you only rented out a specific portion of the home.

Friends, family and holiday homes If you have a rental property in a known holiday location, the ATO is likely to be looking closely at what you are claiming. If you rent out your holiday home, you can only claim expenses for the property based on the time the property was rented out or genuinely available for rent and only if the property was not actually being used for private purposes at that time.

If you, friends or relatives use the property for free or at a reduced rent, it is unlikely to be genuinely available for rent and as a result, this may reduce the deductions available. It’s a tricky balance particularly


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when you are only allowing friends or relatives to use the property in the down time when renting it out is unlikely.

A property is more likely to be considered unavailable if it is not advertised widely, is located somewhere unappealing or difficult to access, and the rental conditions - price, no children clause, references for short terms stays, etc., - make it unappealing and uncompetitive.

WE’VE BEEN TO THE HENTY FIELD DAYS, A LOT OF GOOD PEOPLE THERE

INCLUDING ANISSA AND MERILYN

MAKING PAYING YOUR INVOICES EASIER!

ATS Partners is excited to announce that we now have a

secure payment gateway set up on our website to make

paying by credit card easier!

To pay your account by credit card either click on the

following link or type it into your internet browser.

https://www.atspartners.com.au/payments/

You can also find the link on our website

www.atspartners.com.au/contact

https://www.atspartners.com.au/payments/

http://www.atspartners.com.au/contact


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GIVE ME 5 FOR KIDS

As part of Business Women Albury Wodonga Anissa was chosen to take part in this year’s Triple M the

Border “Give me 5 for Kids Hospital Bed Challenge”.

At 9am on Wednesday the 12th of June Anissa was in her PJs and dressing gown, sitting on a bed in Myer

Centrepoint while Triple M broadcast live and she was not allowed out of bed until she raised her goal

amount for the kid’s ward at Albury Wodonga Health. She was finally allowed out by about 11am.

A big thank you to all those who supported her.

Well done Anissa!!

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