Tag Archives: Tax

What Education Expenses Can I Claim?

Get the latest information surrounding self-education expenses (item D4 of the tax return), especially in relation to the recent changes made to deductibility rules. We’ll also cover off some key information about what can and cannot be claimed and at what stage a legitimate claim can be made.

Items that can be claimed

Typical expenses that can be claimed as a tax deduction in personal tax returns include the following: tuition fees (direct full-course fees, fees payable under FEE-HELP, fees payable under VET student loans, and costs under OS-HELP loans), meals and accommodation during temporary overnight stays to participate in a course, textbooks, stationery, union fees, amenities fees, parking fees, a proportion of the decline in value of a computer, and travel costs in either direction between home and place of education or workplace and place of education. Note that with travel costs, only one leg of the trip is tax deductible.

Items that cannot be claimed

Fees paid under the HECS-HELP, HELP, SFSS, SSL, TSL or VSL programs cannot be claimed. Additional legs of trips made between home, work and place of education cannot be claimed.

Further, any formal courses provided by professional associations, or seminars, workshops or conferences cannot be claimed as part of self-education expenses. These are, however, tax deductible but claimable at Other Work-Related Expenses (item D5 of the tax return).

Timing of claimable deductions

In order to claim self-education expenses, you must be working in that same industry and show that the course undertaken was leading to, or would likely lead to an increase in income from those current work activities. You cannot claim self-education expenses if you undertake a course to obtain a job in the future in that industry, or if you’re looking to move into a different area of specialty in your current industry. Should this be satisfied, all items that can be claimed (as listed above) will be deductible expenses.

The removal of the $250 reduction

Commencing from the 2023 financial year, the ATO have removed the requirement to reduce the first $250 of self-education expenses. This simply means that for every deductible amount claimed, the tax benefit for claiming self-education expenses commences from the first dollar of claimable costs – in line with other work-related deductions.

Conclusion

The above is a summary of the claiming of self-education expenses as a tax deduction for individual taxpayers. It outlines key items that can be claimed, at what stage they can be claimed and the key change that took place in the 2023 financial year which removed a reduction in the claimable amount by $250.

Six Member SMSFs allowed from 1 July 2021

It has been a few years since the proposal to increase the number of members in a self-managed super fund (SMSF) from four to six was put forward by then Treasurer Scott Morrison.

On 22 June 2021, the legislation for this proposal received Royal Assent.

SMSFs are permitted to have up to six members from 1 July 2021.

There is a lot to consider when adding members to a SMSF and may not suit everyone.

Key Considerations:

  • More members can pool their balances to purchase larger or higher value assets such as property.
  • It could increase the ability to make contributions which in turn could increase cashflow.
  • Allows families to include more family members. It would allow Mum & Dad to include up to four children under the same SMSF.
  • Increased complications when there are disputes, in particular family law disputes
  • Increased risk of control imbalance if voting is based on weighted balances.
  • All trustees/directors are responsible for decisions made, even if they are not directly involved. Succession planning and future control will need to be carefully considered to help manage the risk of loss of capacity and death
  • Most States and Territorities, include New South Wales only permit up to four individual trustees. Accordingly, the SMSF will need to have a corporate trustee where all members would be directors in order to have up to six SMSF members.
  • Some trust deeds specify the four member limit and would need to be varied before increasing the number of members.

ATO Tackling International Tax Evasion

Australian tax residents are taxed in Australia on their worldwide income. While most do the right thing and declare all their income, some try to avoid paying tax by exploiting secrecy provisions and the lack of information-sharing between countries. As the world becomes more interconnected and barriers are broken down, it is inevitable that there are fewer places for the unscrupulous to hide from tax.

With the rise of the global economy and easy flow of money across borders, no country is immune to international tax evasion and money laundering. A recent coordinated effort with Joint Chiefs of Global Tax Enforcement (J5) shows that member countries, including Australia, are doing all they can to protect their tax revenue. This most recent investigation yielded evidence of tax evasion by Australians using an international institution located in Central America.

Tax chiefs from the J5 countries met in Sydney on 17–21 February 2020 to share information about common mechanisms, enablers and structures that are being exploited to commit transnational tax crime. The J5 was initially formed in 2018 to fight global tax evasion and consists of the tax and revenue agencies of Australia, United Kingdom, United States, Canada and the Netherlands. The countries share intelligence on international tax crime as well as money laundering.

The current international investigation started on information obtained by the Netherlands, which led to a series of investigations in multiple countries and concerned an international financial institution located in Central America whose products and services are believed to be facilitating money laundering and tax evasion for customers across the globe.

J5 members believe that through this institution, a number of clients may be using a sophisticated system to conceal and transfer wealth anonymously to evade their tax obligations and launder the proceeds of crime. The enforcement action consisted of evidence, intelligence and information-collecting activities such as search warrants, interviews and subpoenas.

According to the ATO, several hundred Australians are suspected of participating in these arrangements. The ATO is currently proceeding with multiple investigations with support from the Australian Criminal Intelligence Commission (ACIC). In addition, it is encouraging anyone with information about the scheme or other similar arrangements to contact the ATO.

ATO Deputy Commissioner and Australia’s J5 Chief, Will Day, has said, “this multi-agency, multi-country activity should degrade the confidence of anyone who was considering an offshore location as a way to evade tax or launder the proceeds of crime”.

While the J5 is a powerful tool, it is by no means the only one in the ATO’s arsenal. The ATO also has a network of international tax treaties and information exchange agreements with over 100 jurisdictions, and uses them to identify facilitators such as banks, lawyers and financial advisers. Once a pattern has been identified, such as a practitioner with a large number of clients using the same methods to avoid or evade tax, the ATO is likely to look closely at the entire client base.

In recent years over 2,500 exchanges of information have occurred, enabling the ATO to raise additional tax liabilities of $1 billion. The message from the ATO is that anyone with offshore income or assets is better off declaring their interests voluntarily. Those who do so may have administrative penalties and interest charges reduced.

It’s important to keep in mind that holding offshore assets is not just for the wealthy. Australians with migrant backgrounds may not even know they hold offshore assets in some cases, but those assets are still subject to tax law. For example, grandparents or other relatives may start a bank account in an Australian’s name in another country to make contributions celebrating a holiday, birthday or other life event.

Click here to read more on the ATO website.

Small Business and Payroll Tax Support
The NSW government is supporting businesses who are experiencing financial distress as a result of COVID-19 with a new support measures. The table below outlines the various packages available depending on your circumstances. For the Small Business Support Grant evidence may be required to support your eligibility including BAS information and a letter from an accountant. For payroll tax the deferral arrangements are still being completed however we will advise you when the details are released. We ask that you prepare supporting document in preparation and as always or partners and managers are ready to assist.

Small Business Support Grant
The NSW small business COVID-19 support grant of up to $10,000 is available to eligible NSW small business owners.

Available Funding – Grant amount is up to $10,000

Eligible Criteria:

  • Must have between 1-19 employees and an annual turnover of more than $75,000
  • Must have total Australian wages below the NSW Government 2019-20 payroll tax threshold of $900,000
  • Must have an Australian Business Number as at 1 March 2020, are based in NSW and employ staff as at 1 March 2020
  • Are highly impacted by the Public Health (Covid-19 Restrictions on Gathering and Movement) (see list on further reading link below) by the NSW Government Shutdown Restrictions defined as a decline in turnover of 75 per cent compared to the equivalent period (of at least two weeks) in 2019; and
  • Have unavoidable business costs not otherwise the subject of other NSW and Commonwealth Government financial assistance measures. Such as utilities, overheads, legal costs and financial advice, more examples can be found in further reading link below.

Assistance Delivery Method – $10,000 Cash Grant

How funding may be used – Grant must only be spent on unavoidable business expenses for which no other government support is available.

Evidence in support of eligibility

  • Must certify to the administrating agency that business meets the Eligibility criteria
  • Must provide a Business Activity Statement (BAS) to demonstrate that the business has an annual turnover of $75,000
  • Must lodge supporting documents as may be required to demonstrate that they meet the eligibility criteria
  • For small businesses that are not on the list of highly impacted industries, a letter from an accountant confirming the decline in turnover will be required

Additional information can be found on the Service NSW website.

Payroll tax relief for businesses with grouped Australian wages of no more than $10 million
Businesses whose total grouped Australian wages for the 2019/20 financial year are no more than $10 million will have their annual tax liability reduced by 25% when they lodge their annual reconciliation, which is due on 28 July. For businesses who lodge and pay monthly and whose total Australian wages will be no more than $10 million for the current financial year, no payment for the months of March, April or May 2020 will be required. Businesses will also have the option of deferring these payments for an additional three months. When lodging your annual reconciliation, you will still need to provide wage details paid in these months and will receive the benefit of a 25% reduction in the amount of tax you would have had to pay for 2019-20.

NSW Payroll Tax Relief

Available Funding – Annual tax liability reduced by 25%

Eligible Criteria

  • Total grouped Australian wages of no more than $10 million
  • Be paying NSW Payroll Tax

Assistance Delivery Method

  • Businesses who lodge and pay monthly, no payment for the months of March, April or May 2020 will be required
  • Businesses will also have the option of deferring these payments for an additional three months
  • When lodging your annual reconciliation, businesses still need to provide wage details paid in these months and will receive the benefit of a 25% reduction in the amount of tax you would have had to pay for 2019-20

How funding may be used – To reduce 2019/2020 Payroll tax liability

Evidence in support of eligibility – 2019/2020 Payroll Tax Reconciliation

Additional information can be found on the Revenue NSW website.

Payroll tax deferral arrangements for businesses with total grouped Australian wages over $10 million
Businesses whose total grouped Australian wages for the 2019/20 financial year are over $10 million, will have the option of deferring the payment of payroll tax for up to six months. These businesses will not need to make their payment for the March period, normally due on 7 April 2020.

NSW Payroll Tax Deferral

Available Funding – Option of deferring the payment of payroll tax for up to six months

Eligible Criteria

  • Total grouped Australian wages over $10 million
  • Be paying NSW Payroll Tax

Assistance Delivery Method

  • Businesses have the option of deferring the payment of payroll tax for up to six months
  • Businesses will not need to make their payment for the March period, normally due on 7 April 2020.

How funding may be used – To defer 2019/2020 Payroll tax liability

Evidence in support of eligibility – 2019/2020 Payroll Tax Reconciliation

Further information – Payroll Tax Deferral
More information regarding the deferral arrangement will be released in the upcoming days.

Please review the information provided in the Government links provided above. If you have any questions, please contact your Partner or Manager.

JobKeeper Payment: Enrolment Reminder

From 20 April 2020 you need to enrol for JobKeeper by either using the Business Portal and authenticate with myGovID or have enrolment processed by a tax professional through the online tax agent portal.

* If you require our assistance please contact the firm to request the enrolment of your business. *

As per previous email correspondence  you should have completed items numbers 1 to 4 below. If not, please do so as a matter of urgency.

  1. Check if you, as an employer, and their nominated employees meet the eligibility requirements.
  2. Notify eligible employees that you (their employer) intend to participate in the JobKeeper scheme.
  3. Send eligible employees the JobKeeper Employee Nomination Notice to complete and return to you to confirm that they agree to you being nominated as the employer to receive JobKeeper Payments.
  4. Keep the Employee Nomination Notice Form on file for five years.

IMPORTANT NOTE: If you want to undertake the Job Keeper process yourself you need to have access to the business portal via myGovID.

We will be offering our services on a do and charge basis depending on the complexity of your personal situation. More information can be obtained from your partner or manager.

The ATO have released guidance for employers to understand what they need to do to ready themselves for the JobKeeper Payment.

* Please make special note below of the requirement for a business portal with myGovId if you decide to enrol or claim JobKeeper on your own behalf. We ask that you please let us know as soon as possible if you intend to process yourself or require our assistance. The myGovId process can be time consuming and we expect large volumes of business’ trying to access the system on the 20th of April when enrolment opens *

To get ready to claim, employers are advised to:

  1. Check if they, as an employer, and their nominated employees meet the eligibility requirements.
  2. Notify eligible employees that you (their employer) intend to participate in the JobKeeper scheme.
  3. Send eligible employees the JobKeeper Employee Nomination Notice to complete and return to you to confirm that they agree to you being nominated as the employer to receive JobKeeper Payments from.
  4. Keep the Employee Nomination Form on file for five years.
  5. Pay the minimum $1,500 to each eligible employee per JobKeeper fortnight. The first fortnight starts on 30 March and ends on 12 April. Alternatively, employers can make one combined payment of $3,000 for the first two fortnights paid by end of April 2020.
  6. Enrol for JobKeeper from 20 April using the Business Portal and authenticate with myGovID or have enrolment processed by a tax professional through the online tax agent portal.
  7. Subscribe to updates on the ATO website, so the ATO can advise when new information is available.

IMPORTANT NOTE: If you want to undertake the Job Keeper process yourself you need to have access to the business portal via myGovID.

We will be offering our services on a do and charge basis depending on the complexity of your personal situation. More information can be obtained from your partner or manager.

Last week the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 and the Rules were passed by parliament.

This Act and the accompanying rules with explanatory memorandum encapsulates the rules for receiving the JobKeeper payment.

Light reading can be found here: https://www.legislation.gov.au/Details/F2020L00419

The JobKeeper payment requires an application to the ATO. The ATO application is almost ready.

The ATO have provided a link to register your interest in the JobKeeper payment (LINK BELOW), so the ATO can contact you when applications are ready.
The ATO have furthermore updated their website to include the most recent developments.

The Link is here: https://www.ato.gov.au/general/JobKeeper-Payment/

What to do next….

If you would like Economos to handle to JobKeeper matter for you:

  • Please let us know ASAP that you want us to assist you with the matter
  • There will be an administrative fee for any applications and ongoing reporting made on your behalf

If you would like to look after the JobKeeper matter yourself:

Due to the matter above being time critical, you may receive numerous, similar emails from our office.

Underneath some quick discussion points from an initial reading of the legislation and explanatory memorandum:

  1. Businesses need to understand Jobkeeper in fortnights. Each of the following is a “JobKeeper fortnight”:
    i) the fortnight beginning on 30 March 2020; and
    ii) each subsequent fortnight, ending with the fortnight ending on 27 September 2020.

Admin process

  1. Businesses need to nominate to participate (with the ATO)
  2. Employees need to respond in writing to employers that they agree to be nominated to participate (this response does not need to be sent to ATO)
  3. Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all of these eligible employees are covered by their participation in the scheme. The employer cannot select which eligible employees will participate in the scheme. This ‘one in, all in’ rule is a key feature of the scheme
  4. qualifying employers that decide to participate in the JobKeeper scheme must, as a condition of entitlement, notify all employees in writing that they have elected to participate in the scheme and that their eligible employees will all be covered by the scheme (if the employee so agrees).
  5. The nomination requirements in subsection 9(3) of the Rules require an employee to provide a notice in the approved form to their employer agreeing to be nominated by the employer for the purposes of the JobKeeper scheme:  The employee:
    • Agrees to be nominated by the employer as an eligible employee under the JobKeeper scheme as the employer with which the employee will participate in the JobKeeper scheme;
    • that they confirm they have not agreed to be nominated by another employer; and
    • that they do not have permanent employment with another employer if they are employed as a casual employee with this employer.

The required wording and forms are available on ATO.gov.au

Turnover Test

  1. Once an entity satisfies the Turnover test in March or April it does not need to retest its turnover in later months.
  2. The Test periods for the turnover test being compared by can be periods of one month or three months (if three months, then those Quarters reporting periods begin 1 April 2020, and 1 July 2020)
  3. An alternative decline in turnover test applies if there is not an appropriate relevant comparison period in 2019. This might be the case for a new business, started for example in January 2020 or a business that made a major business acquisition in 2020.

Components of the $1500

  1. The component amounts that together must equal or exceed $1,500 are
    i) salary and wages
    ii) PAYG WHT
    iii) super contributions
    iv) Salary sacrifice
  2. The requirement that the component amounts be at least $1,500 applies regardless of whether the employee ordinarily receives more or less than that amount.
  3. If an employer’s ordinary arrangement is to pay its employees less frequently than fortnightly, then the payment can be allocated between fortnights in a reasonable manner.
  4. There are timing rules.  Where the employer wishes to participate in the scheme and receive the first or second JobKeeper payment (relating to the JobKeeper fortnights commencing on 30 March 2020 and 13 April 2020 respectively the employer has until the end of the second JobKeeper fortnight, that is, 26 April 2020, to provide the Commissioner with its election to participate;

Eligibility

  1. A business owner is entitled to participate even if they are not an “employee”
    i) Sole trader
    ii) Beneficiary of a trust
    iii) Director or shareholder of company
    iv) Partner in a partnership
    The individual must be actively engaged in the business
  2. Under s.16 of the ACT participation in the JK scheme requires monthly reporting
  3. The Jobkeeper scheme effectively ceases after the last Jobkeeper fortnight – after 27 September 2020.

But importantly please register your interest and please explicitly advise if you wish us to register for you and maintain reporting (fees will apply).

Amidst the growing fears around the spread of COVID-19 (coronavirus), we would like to take this opportunity to reassure our clients that Economos are committed to ensuring that the disruptions are kept to a minimum.

As you know this is an unprecedented and constantly evolving situation. The health and safety of our clients and employees are our number one priority and managing the risk of transmission of coronavirus is critically important.

Tax Obligations

The Australian Taxation Office (ATO) together with the Government’s economic response will be assisting taxpayers who experience financial difficulties due to COVID-19.

For more information on the ATO support: https://www.ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/

At this stage there have been no announcements with regards to any extensions to lodgement due dates. We will monitor and advise you of any developments.

Contact with our team and visiting our office

Based on the information provided by the Australian Government – Department of Health, we will be exercising social distancing. Accordingly, all face-to-face meetings will be held electronically via telephone or web meeting.

Our team have the technology and devices to be able to continue to support you regardless of work location.

For the latest information about coronavirus in Australia, visit the Australian Government’s Department of Health website https://www.health.gov.au or contact the coronavirus health information line: 1800 020 080.

We encourage our clients and the community to remain calm, if we work together to follow protocols within our community, we can help to reduce the risks associated to coronavirus.

We will get through this together.

ATO Risk Profiling

The ATO has developed work-related expenses risk profiles to help it identify how work-related expense deduction amounts compare for similar taxpayers. The ATO said improvements in data analytics and modelling have allowed it to create a risk profile for tax agents’ practices based on comparing their clients’ work-related expenses claims with those made by similar taxpayers.

 The ATO has said it will share these risk profiles with some tax professionals where their clients’ claims appear higher than expected.

 

OUR TIP:

The ATO’s increasing capacity to monitor the often difficult issue of work-related expenses claims means taxpayers and tax professionals need to take care when preparing returns. Contact us if you would like to discuss which of your work-related expenses may be tax deductible.

The Real cost of adding to your Owners Corporation

When I first started in strata 25 years ago there weren’t many urban renewal projects going on. In fact newly registered strata plan numbers were only in the 50,000’s.

With the recent NSW changes to the rules for collective sale, many Owners Corporations – who may not want to leave their homes entirely – have been sparked into thinking about adding to, or changing the existing buildings for the benefit of all owners.

They may be:

  • seeking to create more of a community than merely a vertical housing structure, or
  • they may be looking for monetary benefit without selling up and moving from their current home.

It would seem a building upgrade, or addition to create modern facilities, reducing the carbon footprint or generation of income for the lot owners is a reasonable option to consider.

It’s important to remember that there may be costs you haven’t considered when undertaking such projects

dice

An Example

Let’s say the Owners Corporation is looking to add to the existing structure in order to make some money whilst the property market is booming. The owners have been throwing around the idea of converting an existing top floor plant room into an additional lot which can be sold and the proceeds returned to the owners. They don’t have the funds now, but they are looking at raising a special levy to fund the project.

The physical building works will include:

  • extending the lift shaft,
  • relocating the existing plant and equipment room; and
  • creating the new lot in the plan.

This newly formed lot could then be sold with the proceeds of the sale being returned to the owners.

So the owners create a sub committee to investigate the costs to complete the project. They have a fair idea of what the lot will sell for, but what is the cost?

Working out the Cost

A detailed project is created and they start breaking down all the expenses which will be incurred in the project. Quotes are requested, and estimates are collated for the cost of consultancy and application fees, project management and building costs.

Tax implications

The subcommittee must remember to consider the tax implications for both the Owners Corporation, and the lot owners individually. Tax is complex; there could be an unexpected tax liability or some deductions which were not considered when budgeting for the project. The subcommittee should take into account things such as:

  • Capital Gains Tax: construction and sale of the new lot for the Owners’ Corporation;
  •  GST: What are the implications for the Owners Corporation of undertaking the project?
  • Personal tax: What are the implications on the Lot Owners’ personal tax if a special levy is raised to fund the works? Would there be a difference to the Lot Owners if the funds were raised to the Administrative or Capital Works Fund for the project? What are the tax implications for Lot Owners once the proceeds are returned after the sale of the lot?

A Private Ruling

The subcommittee may want to recommend the owner’s corporation apply for a private ruling which is binding advice provided by the ATO that sets out how a tax law applies in relation to a specific scheme or circumstance. Of course there are professional costs associated with lodging the ruling.

What should you do?

There can often be significant financial benefit to individuals when undertaking these types of works, but remember to consider all tax implications.

At the Economos Group we are experienced tax advisors for all individuals, and businesses including Owners Corporations. We’ve done this before and we can do it for you. We get it done.