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A Video Update from
Forrester Korfiatis

Focus on Work-Related Expenses

This year, the ATO is paying close attention to what people are claiming as ‘other’ work-related expense deductions. You’re reminded to keep strict records of other work-related deductions by showing: the money was spent yourself and not reimbursed; the expense was directly related to earning your income; and you have a record to prove it. Deductions that fall under this category can include home office expenses, mobile phone and internet bills, and work equipment, but the ATO is reminding taxpayers that they can only claim a deduction for the work-related portion of the expense, not for private use.

 Upcoming Key Dates

21 April
Lodge and pay quarter 3, 2017–18 PAYG instalment activity statement for head companies of consolidated groups.
Lodge and pay March 2018 monthly activity statement.
28 April
Lodge and pay quarter 3, 2017–18 activity statement if lodging by paper.
Pay quarter 3, 2017–18 instalment notice (form R, S or T). Lodge the notice only if you are varying the instalment amount.
Make super guarantee contributions for quarter 3, 2017–18 to the funds by this date.
Employers who do not pay minimum super contributions for quarter 3 by this date must pay the super guarantee charge and lodge a superannuation guarantee charge statement – quarterly (NAT 9599) by 28 May 2018.
Note: The super guarantee charge is not tax deductible.
30 April
Lodge TFN report for closely held trusts if any beneficiaries quoted their TFNs to trustees in quarter 3, 2017–18.
Lodge lost members report for the period 1 July 2017 to 31 December 2017.

Changes to Lease Accounting Standards

From 1 January 2019, there will be new lease accounting standards coming into effect that may affect lessors’ business models and offerings. The new requirements eliminate nearly all off-balance-sheet accounting for lessees and redefine many commonly used financial metrics, such as the gearing ratio and EBITDA. This will increase comparability, but may also affect covenants, credit ratings, borrowing costs and your stakeholders’ perception of you. The best way to prepare is to arrange an appointment with us so you can fully understand the changes, and prepare for any issues.

Single Touch Payroll

If you run a business, you may have heard from the ATO about using Single Touch Payroll from 1 July this year. To prepare for the new system, employers are encouraged to contact their digital service provider to see if their software will be ready; and find out where to get help and further information. If you’d like to learn more about how your reporting obligations will change; what you need to report; how to transition on 1 July or at a later date; how to finalise a report and find exemptions from providing payment summaries; and how to make corrections to a report, simply make a booking with us.

Changes to Casual and Part-Time Entitlements

Last year, the Fair Work Commission made changes to overtime rates and minimum shift entitlements for casual and part-time employees in several Awards. This means business owners needed to pay staff affected by the updated award from the first full pay period after 1 January. The changes affect a number of awards, including retail, hospitality, hair and beauty, and social and community services. If you’re unsure whether or not these changes affect your business, speak with our team.

Contractor or Employee?

The difference between a contractor and an employee is not always clear cut. The courts and tax office take a number of factors into account when determining the actual status, such as hours worked, superannuation, method of payment and leave to name a few. Any written agreement stating the nature of the relationship is certainly relevant, but it’s not conclusive, and should not be relied solely upon. Both employers and contractors need to be fully aware of their situation as serious penalties are involved with sham contracting arrangements. Find out more here.

"Holiday home" included in tax concession test

A taxpayer company has been unsuccessful before the Administrative Appeals Tribunal (AAT) in a claim to secure the capital gains tax (CGT) concessions for small businesses.

In this case, the AAT affirmed the Commissioner's decision that the taxpayer did not satisfy the "maximum net asset value" test for the purposes of qualifying for the concessions. The AAT found that the individual who controlled the company could not exclude from the test his interest in a Queensland property, which he claimed was used for "personal use and enjoyment".

TIP: The small business CGT concessions are intended to offer small business taxpayers a range of unique tax concessions. However, despite being targeted towards taxpayers who typically have less complicated affairs, the rules are riddled with complexities that may not appear obvious at first glance.

Each concession has its own particular rules. However, there are two basic conditions for the relief - either the taxpayer is a small business entity (SBE) or is a partner of a partnership that is an SBE, or the taxpayer satisfies the maximum net asset value test. If you have any questions, please contact our office.

Small business benchmarks catch out florist

The AAT has recently dismissed an appeal by a florist against the Tax Commissioner's decision to issue income tax and GST assessments following an ATO audit of her florist business.

The taxpayer had reported that the cost of goods sold in her business represented 83% of her reported business income. The ATO had selected the taxpayer for audit because this figure was outside what it considered to be the industry benchmark range of between 44% and 54%.

In this case, the taxpayer was unable, due to a lack of evidence, to prove to the AAT that the assessments were excessive.

TIP: The Tax Commissioner has warned that businesses operating outside the relevant benchmarks could be subject to ATO review and/or audit, and where the businesses do not have adequate records to substantiate their performance, the ATO will make a default assessment using the appropriate small business benchmark.

Businesses may want to consider reviewing their record-keeping practices and assess whether they are at risk of an audit. Please contact our office for further information.

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Disclaimer: This is not advice. Information provided in this bulletin may be in the form of summaries and generalisations - it may omit detail that could be significant in a particular context or to your personal circumstances. You should not act solely on the basis of material contained in this bulletin. Before you start any transactions, you should obtain appropriate professional advice relevant to your particular circumstances. Links to third-party websites are inserted for your convenience, but do not constitute endorsement of material at those sites or any associated product or service. Changes in legislation may occur quickly and we therefore recommend that our formal advice be sought before acting in any of the areas. The information in this bulletin is provided on the basis that all persons accessing the bulletin undertake responsibility for assessing the relevance and accuracy of its content.

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