Using business money for private purposes

Posted on 23 October 2023 | by Allan Hall

2 steps to take

If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences.

That’s why it’s important to get it right.

Business money and assets you take or use for private purposes can include:

salary and wages
director fees
fringe benefits, such as an employee using the company car
dividends paid by the company to you as a shareholder (that is, distribution of the company’s profits)
trust distributions if your business operates under a trust and pays you as a beneficiary
loans from a trust or company
ad hoc drawings or takings
allowances or reimbursements of expenses you receive from a trust or company.

If you’ve used business money or assets from a company or trust for private purposes, follow these steps to avoid unintended tax consequences:

Keep accurate records of the transactions, and
Account for the transactions in the company or trust tax return and your individual tax return, if applicable.

Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.

You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cash flow.

Taxpayers are ultimately responsible for keeping business records and what you claim in your tax returns, however Registered Tax or BAS Agents like Allan Hall on the Northern Beaches can help and advise on your tax.

CONTACT ALLAN HALL BUSINESS ADVISORS

Business income: it’s not just cash

Posted on 16 October 2023 | by Allan Hall

Clothing, jewellery, gaming products, flights and crypto assets are just some of the things you might have to account for in your tax return as part of your business income.

If you received these or any other non-cash benefits instead of money for your goods or services, or as a tip or gift – you must record them as income at their market value.

This means you record the cash price that you would normally have to pay for those goods or services.

You may be able to reduce the assessable amount of a non-cash benefit you’ve received, by the amount you would have been able to claim as a deduction if you had purchased the item to be used in carrying on your business.

It’s important to report your regular forms of income

Such as:

cash and digital payments
vouchers or coupons
business investments
online and overseas business activities
services you provide using your personal effort and skills (personal services income)
the sharing economy, such as ride-sourcing
assessable government grants and payments
the value of trading stock you take for your own use
payments from insurance claims.

There are some payments that aren’t assessable income, so you don’t need to include them on your return, such as:

non-assessable non-exempt (NANE) government grants
bona fide gifts or inheritance
GST you’ve collected
money you’ve borrowed or contributed as the business owner.

Always keep accurate and complete records to prove the income you report and the expenses you claim as deductions.

Remember, registered tax professionals like Allan Hall in Brookvale can help and advise on your tax.

CONTACT ALLAN HALL BUSINESS ADVISORS

Support for Australian small business

Posted on 3 October 2023 | by Allan Hall

The Government has introduced the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 (the Bill) into Parliament.

The Bill delivers measures announced in the 2022‑23 Budget to ease pressure and boost resilience for small businesses.

Schedule 1 to the Bill will implement a $20,000 instant asset write‑off for one year, as announced in the 2023‑24 Budget, to improve cash flow and reduce compliance costs for small businesses.

Small businesses with aggregated annual turnover of less than $10 million will be able to immediately deduct eligible assets costing less than $20,000, from 1 July 2023 until 30 June 2024.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

This is targeted, responsible support, to help Australia’s small businesses continue to grow.

Schedule 2 to the Bill will introduce the Small Business Energy Incentive, a 2023‑24 Budget measure designed to help small and medium businesses electrify and save on their energy bills.

Up to 3.8 million small and medium businesses with aggregated annual turnover of less than $50 million will have access to a bonus 20 per cent deduction for eligible assets supporting electrification and more efficient use of energy.

The new tax incentive applies from 1 July 2023 until 30 June 2024. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000.

The new Small Business Energy Incentive builds on the Albanese Government’s measures to help small businesses become more energy efficient and ease pressure on their energy bills.

Small businesses are the engine room of Australia’s economy, which is why these new measures are so critical.

CONTACT ALLAN HALL BUSINESS ADVISORS

End of Temporary Full Expensing 30 June

Posted on 12 June 2023 | by Allan Hall

Just under a month to go before the Temporary Full Expensing Measures finish up

The temporary full expensing rules allow eligible businesses to claim a tax deduction for the full cost of eligible depreciable assets (except for motor vehicles which are subject to the current car cost limit of $64,741).

Key changes

The temporary full expensing measures that have allowed small and medium businesses to write off the full cost of new assets, with no limit, (other than the cost limit on motor vehicles) is scheduled to end on 1 July 2023
Any business considering purchasing assets and utilising these measures prior to this date should plan now — it is important to note that to receive the deduction, an asset must be installed and ready for use.

To claim the deduction in full, in the year the asset is acquired, the asset must be installed and ready for use and must be used for a taxable purpose.

Temporary full expensing supports businesses and encourages investment, as eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose.

From 1/7/2023 to 30/6/2024, businesses with turnover up to $10M will be entitled to claim an immediate tax deduction for assets costing $20,000 or less. Assets purchased above this amount will not get an immediate deduction.

CONTACT ALLAN HALL BUSINESS ADVISORS

2023-24 Federal Budget

Posted on 10 May 2023 | by Allan Hall

Tax and Superannuation Overview

2023-24 Federal Budget Highlights

The Federal Treasurer, Dr Jim Chalmers, handed down the 2023–24 Federal Budget at 7:30 pm (AEST) on 9 May 2023.

The Budget forecasts the underlying cash balance to be in surplus by $4.2 billion in 2022–23, the first surplus since 2007–08, followed by a forecast deficit of $13.9 billion in 2023–24.

The Treasurer has described the tax measures as “modest but meaningful” including changes to the Petroleum Resources Rent Tax and confirmation of a 1 January 2024 implementation of the BEPS Pillar Two global minimum tax rules.

A range of measures provide cost-of-living relief to individuals such as increased and expanded JobSeeker payments and better access to affordable housing. No changes were announced to the Stage 3 personal income tax cuts legislated to commence in 2023–24.

As part of the measures introduced for small business, a temporary $20,000 threshold for the small business instant asset write-off will apply for one year, following the end of the temporary full expensing rules.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The business tax and superannuation highlights are set out below.

READ FULL BUDGET REPORT

Business highlights

The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.
An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
Employers will be required to pay their employees’ superannuation guarantee (SG) entitlements at the same time as they pay their salary and wages from 1 July 2026.

Small business depreciation — instant asset write-off threshold of $20,000 for 2023–24

The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.

Small businesses (aggregated annual turnover less than $10 million) may choose to calculate capital allowances on depreciating assets under a simplified regime. Under these simplified depreciation rules, an immediate write-off applies for low cost depreciating assets. The measure will apply a $20,000 threshold for the immediate write-off, applicable to eligible assets costing less than $20,000 first used or installed between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write-off multiple low-cost assets. The threshold had been suspended during the operation of temporary full expensing from 6 October 2020 to 30 June 2023.

Assets costing $20,000 or more will continue to be placed into a small business depreciation pool under the existing rules.

The provisions that prevent a small business entity from choosing to apply the simplified depreciation rules for 5 years after opting out will continue to be suspended until 30 June 2024.

Increased deductions for small and medium business expenditure on electrification and energy efficiency

An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.

The additional deduction will be available to businesses with aggregated annual turnover of less than $50 million. Eligible expenditure may include the cost of eligible depreciating assets, as well as upgrades to existing assets, that support electrification and more efficient use of energy. Certain exclusions will apply, including for electric vehicles, renewable electricity generation assets, capital works, and assets not connected to the electricity grid that use fossil fuels.

Examples of expenditure the measure will apply to include:

assets that upgrade to more efficient electrical goods (eg energy-efficient fridges)
assets that support electrification (eg heat pumps and electric heating or cooling systems), and
demand management assets (eg batteries or thermal energy storage).

Total eligible expenditure for the measure will be capped at $100,000, with a maximum additional deduction available of $20,000 per business.

When enacted, the measure will apply to eligible assets or upgrades first used or installed ready for use between 1 July 2023 and 30 June 2024. Full details of eligibility criteria will be finalised in consultation with stakeholders.

FBT exemption for eligible plug-in hybrid electric cars to end

The FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.

Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the exemption.

Employers to be required to pay SG on payday

Employers will be required to pay their employees’ superannuation guarantee (SG) entitlements at the same time as they pay their salary and wages from 1 July 2026.

Employers are currently required to make SG contributions for an employee on a quarterly basis to avoid incurring a superannuation guarantee charge.

The proposed commencement date of 1 July 2026 is intended to provide employers, superannuation funds, payroll providers and other stakeholders sufficient time to prepare for the change.

Changes to the design of the superannuation guarantee charge will also be required to align with the increased payment frequency. The government will consult with relevant stakeholders on the design of these changes, with the final framework to be considered as part of the 2024–25 Budget.

In addition, funding will be provided to the ATO to, among other things, improve data matching capabilities to identify and act on cases of SG underpayment.

Superannuation measures

Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.

Reducing tax concessions for super balances exceeding $3M

Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million.

From 1 July 2025, earnings on balances exceeding $3 million will incur a higher concessional tax rate of 30% (up from 15%) for earnings corresponding to the proportion of an individual’s total superannuation balance that is greater than $3 million. The change does not impose a limit on the size of superannuation account balances in the accumulation phase and it applies to future earnings, ie it is not retrospective.

Earnings relating to assets below the $3 million threshold will continue to be taxed at 15%, or zero if held in a retirement pension account.

Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests.

Need help?

If you would like assistance to interpret these changes and how they may affect your individual or business circumstances, please contact your Allan Hall Advisor on 02 9981 2300.

CONTACT ALLAN HALL BUSINESS ADVISORS

End of temporary full expensing

Posted on 25 January 2023 | by Allan Hall

Temporary full expensing measures finish 1 July 2023

The temporary full expensing rules allow eligible businesses to claim a tax deduction for the full cost of eligible depreciable assets (except for motor vehicles which are subject to the current car cost limit of $64,741).

To claim the deduction in full, in the year the asset is acquired, the asset must be installed and ready for use and must be used for a taxable purpose.

Key changes

The temporary full expensing measures that have allowed small and medium businesses to write off the full cost of new assets, with no limit, (other than the cost limit on motor vehicles) is scheduled to end on 1 July 2023
Any business considering purchasing assets and utilising these measures prior to this date should plan now — it is important to note that to receive the deduction, an asset must be installed and ready for use.

From 1/7/2023 to 30/6/2024, businesses with turnover up to $10M will be entitled to claim an immediate tax deduction for assets costing $20,000 or less. Assets purchased above this amount will not get an immediate deduction.

CONTACT ALLAN HALL

Rental properties and second-hand depreciating assets

Posted on 10 October 2022 | by Allan Hall

Find out if you can claim second-hand depreciating assets for your residential rental property

Second-hand depreciating assets for residential rental properties are depreciable items previously used or installed ready for use by you or another entity.

In most cases, they are things that were existing in:

a property when you purchased it
your private residence that was later rented out.

Items can include things like:

flooring, window coverings
air conditioners, washing machines, alarm systems, spas, pool pumps
items used for both the rental property and your own home.

Since 1 July 2017, you can’t claim the decline in value of second-hand depreciating assets, unless the property is used for carrying on a business (for example a hotel) or they are an excluded entity. The change doesn’t apply to properties rented out prior to this date, or where the property is either:

newly built
substantially renovated (where all or most of a building is removed or replaced), and
- no-one else has claimed a deduction for the assets
- no-one resided in the property before your clients acquired it, or
- you acquired the property within six months of the build or substantial renovation.

To help get it right, here are a few questions to ask yourself:

When did you purchase the property?
Was it a new or existing build?
Did you live in the property before renting it out?
When did you start renting out the property?
Was the asset already in the rental property when you bought it?
Is the property used for business purposes?

CONTACT ALLAN HALL

ATO priorities this tax time

Posted on 30 May 2022 | by Allan Hall

Four priorities for the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

record-keeping
work-related expenses
rental property income and deductions, and
capital gains from crypto assets, property and shares.

These ATO’s priority areas ensure that there is an appropriate level of scrutiny on the correct reporting of deductions and income.

Taxpayers can take steps to lodge right the first time

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where they see people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules,” Mr Loh said.

You must have spent the money yourself and weren’t reimbursed
If the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income
You must have a record to prove it.

Record-keeping

With some weeks left until 30 June, start organising the income and deductions records you’ve kept throughout the year. This will guarantee a smoother tax time and ensure you claim the deductions you are entitled to.

For anyone who deliberately tries to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Lodge right, no worries

We often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income.

Available pre-fill information and readiness to lodge can be easily checked in the ATO app this tax time.

NB: While the ATO receives and matches a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, they don’t pre-fill all of that information for you.

Work-related expenses

Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year.

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” said Mr Loh.

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring mum and dad.

You can easily keep track of your expenses with myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” Mr Loh said.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Mr Loh said.

CONTACT ALLAN HALL

Is it time to get your Will up to date?

Posted on 7 October 2021 | by Allan Hall

We have a few months left before the busy Christmas and school holiday period is upon us.

As such, now is the time to think about if your financial plan needs to be reviewed in light of any changes to your circumstances this year, and if your Will is up to date and estate planning is in order.

One of the key aspects of estate planning is the preparation of a Will. A Will is a legal document that implements your wishes for the distribution of estate assets upon your death. A Will determines who will be in charge of the administration of your estate (the executor(s)) and provides instructions as to how the assets of your estate are to be distributed to your beneficiaries.

Wills can vary greatly in their degree of complexity and can be used to achieve a wide range of family and tax objectives. There is no set format for a Will but there are preferred ways for a drafter to write clauses into a Will to achieve a clients’ specific objectives.

It’s usually more appropriate for a solicitor to draft a Will, rather than using a Will kit. A solicitor can consider both your legal requirements and your wishes are met when drafting the Will. A solicitor can also better understand your instructions and comprehensively provide for the future, taking into account your personal circumstances.

Whilst a Will is personal to the individual, most Wills include some common elements, these include:

statement that the document is the last Will and testament of the individual
revocation of previous Wills, codicils and other testamentary dispositions
appointment of executor and trustee. An alternative executor and trustee may be nominated in the event the preferred person is unable to fulfil their obligations eg they predecease the person or do not have the mental capacity to administer the estate
gifts
payment of estate debts and expenses from protected (eg life insurance, superannuation and compensation) and non-protected sources
instructions for the division of estate assets when a beneficiary has died. One common method is to pay the deceased beneficiary’s share to other beneficiaries
general and specific powers of the executors and trustees
instructions for the management of the estate, such as selling and/or investing of estate assets.

A Will should be reviewed on a regular basis, particularly if there is a change in your circumstances or any of your intended beneficiaries.

The following list of events may require a review of your Will:

divorce or separation (the impact of this differs according to the State or jurisdiction)
marriage (in most jurisdictions a Will is revoked when a person marries, unless the Will was made in contemplation of marriage and states this)
birth of a child
death of an executor (where only one was chosen)
death of a beneficiary
disposal of specific assets which were intended for certain beneficiaries
financial planning recommendations are implemented, which may then have estate planning implications such as:
- superannuation death benefit nomination
- ownership of life insurance policies
- business succession planning
- disposal or acquisition of assets
changes in the beneficiary’s situation eg beneficiary becomes insolvent or wishes to retain social security income support or has a change in their taxation status.

A well-drafted Will helps to safeguard the assets you have acquired and takes care of the people you want considered, once you have passed away. It gives you the peace of mind that there is a legal document in place that outlines your wishes which can be carried out with regard to cost, tax effectiveness and personal needs of family members. Wills which are inappropriately worded can lead to disputes among beneficiaries or even intestacy, which is not the legacy you want to leave behind!

If you would like to discuss Wills, or any other aspects of your financial plan, we would love to hear from you, so please give us a call in Brookvale on 02 9981 2300.

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.