ATO Doubles Rental Deduction Audits

ATO Doubles Rental Deduction Audits

In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and the Australian Taxation Office (ATO) thinks that is too much – one in ten is estimated to contain errors.

4,500 audits of rental property deductions will be undertaken this year with the focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing. Deliberate cases of over-claiming are treated harshly with penalties of up to 75% of the claim.  In one case exposed by the ATO, a taxpayer had to pay back $12,000 in claims for deductions against a holiday home that was not genuinely available for rent and was blocked out during the holiday season. In another, a taxpayer paid back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.

Please contact us you have any concerns about an ATO audit or wish to discuss your deductions.

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Important Budget 2019-20 Pre-Election Announcements That Are Now Law

Important Budget 2019-20 Pre-Election Announcements That Are Now Law

The Federal Budget announced a series of measures, some of which were legislated before the election was called.

Extension and increase to the instant asset write-off

The popular instant asset write-off for small business has been extended and increased. The new laws:

  • increase the threshold below which small business entities can access an immediate deduction for depreciating assets and certain related expenditure (instant asset write-off) from $25,000 to $30,000; and
  • enables businesses with aggregated turnover of $10 million or more but less than $50 million to access instant asset write-off for depreciating assets and certain related expenditure costing less than $30,000.

Assets will need to be used or installed ready for use from Budget night until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for the $20,000 or $25,000 threshold. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

The instant asset write-off only applies to certain depreciable assets.  There are some assets, like horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc., that don’t qualify.

For assets costing $30,000 or more

For small businesses (aggregated turnover under $10m), assets costing $30,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool, adjusted for current year depreciation deductions (i.e., these are added back), is less than $30,000 at the end of the income year, then the remaining pool balance can be written off as well.

The ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out) will continue to be suspended until 30 June 2020.

Pooling is not available for medium sized businesses which means that the normal depreciation rules based on the effective life of the asset will apply to assets that don’t qualify for an immediate deduction.

The amendments apply from 7.30 pm legal time in the Australian Capital Territory on 2 April 2019 until 30 June 2020

One-off energy assistance payments

A one-off energy assistance payment of $75 for singles and $62.50 for each eligible member of a couple, will be made to predominantly pension and social welfare recipients who were residing in Australia on 2 April 2019.  The payments are expected to be completed by 30 June 2019.

Medicare levy and surcharge income threshold increase

The Medicare levy low income thresholds for singles, families, and seniors and pensioners will increase from the 2018-19 income year, meaning more people will be excluded from paying the levy.

Please contact us if you have any questions about these changes to legislation and how they may affect you.

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The Major Parties’ Superannuation and Tax Policies

The Major Parties’ Superannuation and Tax Policies

The federal election has been called for May 18 and both major parties have outlined their superannuation and tax policies. With the federal election only weeks away many of our clients have been asking what the major political parties’ policies are that may impact their SMSF, individual taxation circumstances or personal investments.

If you would like more information on a particular policy announcement, please do not hesitate to contact our office to set up a time to discuss any requirements you may have.

Liberal-National Coalition

  • Australians aged 65 and 66 will be able to make voluntary superannuation contributions without needing to work a minimum amount. Previously, this was only available to individuals below 65.
  • Extending access to the bring-forward arrangements (the ability to make three years of post-tax contributions in a single year) to individuals aged 65 and 66.
  • Increasing the age limit for individuals to receive spouse contributions from 69 to 74.
  • Reducing red-tape for how SMSFs claim tax deductions for earnings on assets supporting superannuation pensions.
  • Delaying the implementation of SuperStream (electronic rollovers for SMSFs and superannuation funds) until March 2021 to allow for greater usability.
  • From 2018-19 taxpayers earning between $48,000 and $90,000 will receive $1,080 as a low and middle income tax offset. Individuals earning below $37,000 will receive a base amount of $255 with the offset increasing at a rate of 7.5 cents per dollar for those earning $37,000-$48,000 to a maximum offset of $1,080.
  • Stage 1 tax cuts: From July 1 2018, increasing the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000.
  • Stage 2 tax cuts: From 1 July 2022, increasing the top threshold of the 19 per cent personal income tax bracket from $41,000, to $45,000.
  • Stage 3 tax cuts: From 1 July 2024, reducing the 32.5 per cent marginal tax rate to 30 per cent which applies from $120,000 to $200,000. The 37 per cent tax bracket will be abolished.

Australian Labor Party

  • Disallowing refunds of excess franking credits from 1 July 2019 – this would mean SMSF members in pension phase no longer receive refunds for the franking credits they receive for their Australian share investments.
  • Banning new limited recourse borrowing arrangements.
  • Reducing the post-tax contributions cap to $75,000 per year down from $100,000.
  • Ending the ability to make catch-up concessional contributions for unused cap amounts in the previous five years.
  • Ending the ability for individuals to make personal superannuation tax deductible contributions unless less than 10 per cent of their income is from salaries.
  • Lowering the higher income 30per cent super contribution tax threshold from $250,000 to $200,000.
  • Labor supports the stage 1 tax cuts and will match the $1,080 low and middle income tax offset. From 1 July 2018, individuals earning below $37,000, will get a $350 a year tax offset, with this amount increasing for those earning between $37,000- $48,000 to the maximum $1,080 offset.
  • Introduce a 30 per cent tax rate for discretionary trust distributions to people over the age of 18.
  • Will limit negative gearing to newly built housing from January 1 2020. (Existing investments are grandfathered under the current law)
  • Reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. (Existing investments are grandfathered under the current law)
  • Limit the deductions for the cost of managing tax affairs to $3,000.

How can we help?

If you have any questions or would like further clarification in regards to how the above policies may affect you and your fund, please contact us.

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ATO gets tough on business reporting PAYG withholding tax for employees and contractors

ATO gets tough on business reporting PAYG withholding tax for employees and contractors

Effective from the 1st July 2019 the ATO has announced a proposed change of rules for businesses claiming a tax deduction for PAYG Withholding payments for employees and/or contractors.

In short, you could be denied your ability to claim a tax deduction if you do not meet your obligations when it comes to Pay-As-You-Go withholding.

As a business owner you need to ensure you are;

  • Withholding tax from employee wages and salaries, contractors’ payments, this also applies to commissions, bonuses, allowances and director’s fees.
  • Deducting PAYG Withholding tax at the top marginal tax rate for suppliers who do not quote an ABN
  • Reporting and lodging your PAYG withholding tax in the appropriate Business Activity Statement or Instalment Activity Statement by the due date

What happens if you don’t meet the PAYG withholding tax obligations?

  • You may permanently lose your tax deduction for wages paid

What happens if you make a mistake?

  • If you make a mistake, and proactively notify the ATO before they ask you an exemption is available. And note that the ATO’s data collection systems are very good at picking up non-compliance and then making an enquiry.

What you can do to prepare:

To make sure you comply with the withholding requirements PrimeAdvisory strongly recommends that you take this opportunity to;

  • Review your systems for PAYG withholding tax and reporting
  • Ensure you have a valid ABN from all suppliers

With any questions or concerns about your PAYG withholding tax obligations please Contact us.

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PrimeAdvisory Rocked!

PrimeAdvisory Rocked!

For the last 12 months PrimeAdvisory have hosted a series of client events with the theme centred around “Interesting Places and Interesting People”.   Last month was no exception, together with our team and around 80 guests and clients meeting at the iconic music venue “Selinas” at The Coogee Bay Hotel.   This place with its  40 plus years of history is known as one of Sydney’s best music venues.   SELINA’S is an iconic, multipurpose live music venue with the capacity to hold up to 5,000 people with a big stage and a mezzanine level hosting sold out acts, such as Nirvana, INXS, Foo Fighters, Midnight Oil and many other famous rock bands.

PrimeAdvisory Directors, Guy, Christian and Mark adding to the “Wall of Fame”

To start the night off Christian Borkowski our CEO was up front and centre stage welcoming everyone and taking us on a journey down memory lane back to the 80’s and 90’s.  He also gave us an insight into his first experience at Selina’s many years ago as an 18-year-old (or maybe a little younger) the raw energy and the electric atmosphere created by over 2,500 people rocking out to their favourite live band.   This place helped cement Christian’s love for live music and to this day he can be seen out and about enjoying the Sydney music scene.

This was followed by one of our guest speakers Nathan Richman the producer of the “Turn It Up” Documentary.  Nathan is passionate about the live music scene and his documentary explores how the music industry is changing as a result of the shrinking number of venues, thanks to lock-out laws and other legislation.

We then heard from Chris Cheung, the current owner of The Coogee Bay Hotel who spoke about the history of the venue and growing up in the pub scene.  He spoke about Selinas “hey day” were it was not unusual for the venue to be packed to the rafters with 5,000 patrons there to enjoy a live performance and loving every minute of it.   This making Selina’s part of Australia’s Rock renaissance in the 80’s and 90’s hosting some of Australia’s most successful acts.

Our next guest speaker was John Senakis the managing director from Platinum One Entertainment who has been in the music industry for over two decades.  John spoke about his experiences at Selinas as a booking agent, the bands and a few tales of international artists like James Brown, who have performed at Selinas.

The night was wrapped up with a live performance from The Big Music Bandits who are a band of young very talented artists that are students of the Big Music School of Rock in Crows Nest.  These kids certainly know how to rock and entertained us with some of the most iconic Australian rock classics from the Hoodoo Gurus, Screaming Jets, Divinyls, Midnight Oil and for their finale song ……. Summertime by Thirsty Merc.  We might also add that one of the very talented lead singers of the night was Jenna Wall, daughter to our director Guy Wall.

We ended our night with a lasting quote……..

Music is like food for the soul

If you did not get to enjoy this night, watch out for our next forthcoming event………

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