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

The 120% technology and skills ‘boost’ deduction

Posted on 20 July 2023 | by Allan Hall

The legislation granting small and medium businesses (SMBs) the opportunity to claim a 120% tax deduction for technology expenses, skills training and training costs has finally passed Parliament, nearly a year after the announcement in the 2022-23 Federal Budget.

However, there are a few timing complexities involved. To benefit from the technology investment boost, you needed to have purchased and installed the technology by 30 June 2023, which was just seven days after the legislation was passed.

Key points

Under both the technology and Skills and Training Boost, eligible expenses will be available for the 120% deduction if they were incurred between 29 March 2022 and 30 June 2024
The bonus deduction for the technology boost is capped at 20% of the eligible expenditure, up to a limit of $20,000 ($100,000 of eligible expenditure)
There is no limit for the skills and training boost.

Who is eligible for the boosts?

Small business entities (including individual sole traders, partnerships, companies or trading trusts) with an aggregated annual turnover of less than $50 million can access the 120% skills and training boost, as well as the technology boost. Aggregated turnover includes the turnover of your business, affiliates and connected entities.

The technology investment Boost

Expenses that may qualify for the technology boost include:

Digital enabling items like computer hardware, telecommunications equipment, software, internet costs, computer network systems and services that facilitate their usage.
Digital media and marketing expenses including audio and visual content that can be accessed, stored or viewed on digital devices, as well as web page design.
E-commerce goods or services that support digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitisation such as guidance on digital tools for business continuity and growth.
Cybersecurity systems, backup management and monitoring services.

The technology must be primarily or substantially used for a business’s digital operations or digitisation. There must be a direct connection to how the business generates income, particularly through its digital operations.

There are several costs that the technology boost does not cover, such as expenses related to staff employment, capital raising, construction of business premises and the cost of goods and services sold by the business. The boost does not apply to:

Assets purchased and sold within the relevant period (on or before 30 June 2023)
Capital works costs, including improvements to business premises
Financing costs like interest expenses
Salary or wage costs
Training or education costs, meaning that training staff on software or technology does not qualify (refer to Skills and Training Boost below)
Trading stock or the cost of trading stock.

The Skills and Training Boost

The Skills and Training Boost is a program that provides SMBs with a 120% tax deduction for external training courses offered to their employees. The primary objective of this boost is to facilitate the growth of SMBs’ workforce by enabling them to hire and upskill less-experienced employees through external training. This initiative aims to enhance their skills and increase overall productivity.

Please note that sole traders, partners in a partnership, independent contractors and other non-employees are not eligible for the boost as it is specifically designed for employees. Similarly, associates such as spouses or partners, as well as trustees of a trust, are not qualified to participate.

To ensure compliance, there are a few rules to be aware of:

Registration for the training course must have occurred between 7:30 PM (AEST) on 29 March 2022 and 30 June 2024. If an employee is already enrolled in an eligible training course, enrolments in subsequent courses or classes after 29 March 2022 are considered eligible.
The training must be deductible to your business according to ordinary rules, meaning it should be directly related to how your business generates income.
The training needs to be provided by a registered training provider who charges your business (either directly or indirectly) for the training. (Please refer to the section on “What organisations can provide training for the boost?” below)
The training must be intended for employees of your business and should be delivered either in-person within Australia or through online platforms.
The training provider cannot be your business or an associate of your business.

Training expenditure can include costs associated with the training, such as resources or equipment necessary for the course, provided that the training provider charges your business for these expenses.

What organisations can provide training for the boost?

Please note that not all courses offered by training companies will qualify for the boost. Only courses offered by registered training providers within their registration will be eligible. Typically, these providers offer vocational training to acquire a trade or courses that contribute to a formal qualification, rather than purely professional development.

Qualifying training providers will be registered by:

Tertiary Education Quality and Standards Agency (search the register – includes States and Territories)
Australian Skills Quality Authority (ASQA)
Victorian Registration and Qualifications Authority (search the register)
Training Accreditation Council of Western Australia

While some desired training may not be delivered by registered training organisations, there is still a wide range of options available. Short courses offered by universities or flexible courses designed for upskilling, rather than obtaining a degree qualification, can still be explored, especially if they align with the development pathway identified through recent performance reviews for your staff.

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WFH changes and what the ATO is looking for

Posted on 13 March 2023 | by Allan Hall

Calculation and record-keeping requirements of your working from home (WFH) deductions may have changed for the 2022-23 income year.

The 80c per hour temporary shortcut method ended on 30 June 2022.

For the 2022-23 income year you may be able to use either the revised fixed rate method or the actual cost method to determine your working from home deductions.

Whilst the actual cost method remains unchanged, the fixed rate method has increased from 52c per hour to 67c per hour. The revised fixed rate method incorporates the following usage expenses:

electricity
gas
stationery
computer consumables, such as printer ink
internet
phone.

It is not possible to claim an additional deduction for expenses that are already covered by the revised fixed rate method. However, you may be eligible to claim a separate deduction for the depreciation of assets, including items like laptops, mobile phones, and office furniture.

To claim your working from home deductions using the revised fixed rate method, you must be able to provide both:

A representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.
A record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023.

If you choose not to use the fixed rate method, you may be able to use the actual cost method. Please contact your Allan Hall Accountant to assist you in getting the best tax deduction for your personal circumstances.

Regardless of the method you choose, it is important to maintain accurate and complete records for at least 5 years to support your claims for home-based business expenses.

CONTACT ALLAN HALL BUSINESS ADVISORS

Electric car FBT exemption now law

Posted on 13 February 2023 | by Allan Hall

From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses

Eligibility

Fringe benefits tax (FBT) is not applied if you provide private use of an electric car that meets all these conditions:

the car is a zero or low-emissions vehicle
the first time the car is both held and used is on or after 1 July 2022
the car is used by a current employee or their associates (such as family members)
luxury car tax (LCT) has never been payable on the importation or sale of the car (the current LCT threshold is $79,659).

Benefits provided under a salary packaging arrangement are included in the exemption.

Please note: Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.

Zero or low emissions vehicle

A vehicle is a zero or low-emissions vehicle if it satisfies both conditions:

A battery electric vehicle, hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle
A car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).

Plug-in hybrid electric vehicles – 1 April 2025 onwards

From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low-emissions vehicle under FBT law. However, you can continue to apply the exemption if both requirements are met:

Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025
You have a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025. For this purpose, any optional extension of the agreement is not considered binding.

‘Held and used’ electric car requirement

The practical effect of this requirement is that the electric car must be used for the first time on or after 1 July 2022 – even if it is held before this date.

An electric car is ‘held’ when it is:

owned (includes cars acquired under hire-purchase arrangements)
leased (or let on hire), or
otherwise made available by another entity.

An electric car is considered ‘used’ when it is used or available for use by any entity or person.

Luxury Car Tax (LCT) treatment

To be eligible for the exemption, the value of the electric car must be below the LCT threshold for fuel-efficient vehicles (currently $79,659) at the time it is first sold in a retail sale, and in any subsequent sale. If you purchase an electric car second-hand, you need to determine if it was subject to LCT at any time in the past.

Associated car expenses

The following expenses are exempt from FBT if they are provided for an eligible electric car:

registration
insurance
repairs or maintenance
fuel (including electricity to charge and run electric cars).

The FBT may be reduced on any items that aren’t exempt car expenses, if the expenditure would have been deductible to the employee had they incurred it themselves. This is called the otherwise deductible rule.

Please note: A home charging station is not a car expense associated with providing a car fringe benefit for electric cars. However, it may be a property fringe benefit or an expense payment fringe benefit.

Reportable fringe benefits

Although the private use of an eligible electric car is exempt from FBT, you include the value of the benefit when working out if an employee has a reportable fringe benefits amount (RFBA). You will need to work out the notional taxable value of the benefits associated with the private use of the exempt electric car.

An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year. The RFBA must be reported through Single Touch Payroll or on the employee’s payment summary.

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Cost pressure continues to impact business

Posted on 13 June 2022 | by Allan Hall

Australian Bureau of Statistics survey findings

Over one-third of all businesses expect to increase the price of their goods or services over the next three months by more than usual, a similar result to March 2022, according to data released by the Australian Bureau of Statistics (ABS).

ABS Head of Industry Statistics, John Shepherd, said: “Most of these businesses were finding that increases in the cost of products and services and fuel and / or energy costs were leading factors for planned price increases.”

The survey results also showed nearly half of all businesses have no plans to increase their prices over the next three months.

Of these businesses, nearly half said it was to retain customers and 46% said they had fixed-price contracts in place.

The results also provided information about planned capital expenditure over the next three months. Almost one in five businesses have planned capital expenditure in May 2022, consistent with findings in May 2021.

Nearly half of businesses planning capital expenditure indicated it would be higher than what is usual for this time of year, fewer than a year ago when 59% planned for higher expenditure.

The biggest Influencing factors on whether businesses were planning for capital expenditure were uncertainty about the future state of the economy and supply chain disruptions.

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

Employee COVID-19 tests now tax deductible

Posted on 26 April 2022 | by Allan Hall

COVID-19 test expenses

From 1 July 2021, if you’re an employee, sole trader or contractor and you pay for a COVID-19 test for a work-related purpose, you can claim a deduction.

When you can claim COVID-19 testing

From 1 July 2021, to claim a deduction for the cost you incur to pay for a COVID-19 test, you must:

use the test for a work-related purpose, such as to determine if you can attend or remain at work
get a qualifying COVID-19 test, such as a
- polymerase chain reaction (PCR) test through a private clinic
- other tests in the Australian Register of Therapeutic Goods, including rapid antigen test (RAT) kits
pay for the test yourself (that is, your employer doesn’t give you a test or reimburse you for the cost)
keep a record to prove that you incurred the cost (usually a receipt) and were required to take the test for work purposes.

You can only claim the work-related portion of your expense on COVID-19 tests. For example, if you buy a multipack of COVID-19 tests and use some for private purposes (such as by other family members or for leisure activities), you must only claim for the portion of the expense you use for a work-related purpose.

When you can’t claim COVID-19 testing

You can’t claim the cost of a COVID-19 test where any of the following apply:

you use the test for private purposes – for example, to test your children before they return to school or daycare
you receive a reimbursement for the expense from your employer or another person
you work from home and don’t intend to attend your workplace.

You also can’t claim a deduction for the travel or parking expenses you incur to get your COVID-19 test because these expenses don’t have a sufficient connection to you using a COVID-19 test.

Keeping records for COVID-19 tests

You need to keep records of COVID-19 tests to demonstrate that you paid for the test and the test was required for work-related purposes. This may include a receipt or invoice, and correspondence from your employer stipulating the requirement to test.

If you don’t have a record of your expenses before the law changed on 31 March 2022, the ATO will accept reasonable evidence of your expenses. Reasonable evidence is documentation that shows the cost of the test and the requirement to take it for work purposes. This may include:

bank and credit card statements
a diary or other documents, including receipts, that show a pattern of buying COVID-19 tests after the law change that could reasonably have applied from 1 July 2021.

CONTACT ALLAN HALL

Working From Home Temporary Shortcut Method Extended

Posted on 27 October 2021 | by Allan Hall

Working from home shortcut method

This method is temporary and can only be used to work out your deduction for work from home expenses:

between 1 March to 30 June 2020 in the 2019–20 income year
for the 2020–21 and 2021–22 income years.

The shortcut method ends on 30 June 2022. To continue to claim deductions for working from home expenses after 30 June 2022 you will need to use either the:

You will need to meet the eligibility and record-keeping requirements for the method you choose to use.

Eligibility

You can use this method if you:

worked from home and incurred some additional running expenses as a result
have a record of the number of hours you worked from home.

How it works

The temporary shortcut method simplifies how you calculate your deduction for working from home expenses.

Using this method, you:

can claim 80 cents per hour for each hour you work from home
can’t claim any other expenses for working from home, even if you bought new equipment.

The shortcut method covers all your working from home expenses, such as:

phone expenses
internet expenses
the decline in value of equipment and furniture
electricity and gas for heating, cooling and lighting.

The shortcut method includes decline in value of all items. If you choose to use this method there is no requirement to separately calculate the decline in value of equipment or depreciating assets or any other working from home expense.

However, as you may need to use a different method to work out your working from home deduction in later years it’s important to keep the:

receipts for depreciating assets or equipment you use when working from home
records of how you calculated your work-related use of the asset
your decline in value calculations.

Record keeping for the shortcut method

You must have a record of the hours you worked from home, for example, a timesheet, roster or diary.

Calculate your work from home deduction

Use the ATO’s Home office expenses calculator to help work out your deduction.

Completing your tax return

Once you calculate your deduction, enter the amount at ‘Other work-related expenses‘ in your tax return. Include in the description ‘COVID-19 hourly rate’.

infographic_five-tips-for-looking-after-household-finances

Managing Household Finances

Posted on 25 October 2021 | by Allan Hall

Five tips for looking after your household’s finances

Take the pain out of managing your family’s finances with some simple tips every family can use.

Taking care of household finances can be time consuming and boring – and often people don’t know where to start. Your local library may have some good resources if you want to do your own research, but these simple tips are ones every family can use. If you want to get more serious about your household budget, financial goals and planning your family’s financial future, a qualified Financial Adviser can work with you on something much more detailed, tailored and appropriate.

1 | Look at your current income and expenditure

Sitting down as a family and figuring out how much money is coming in and going out may help you gauge the state of your family’s finances. A clear picture of your household income and expenses could set you up to manage your cashflow better going forward.

You can make this fun by setting up a spreadsheet or large piece of paper with income and expenses categories you will use to track all expenses and income. You can even highlight different categories in different colours to make it easier to read.

2 | Consider any unnecessary expenses

Keeping expenses under control can be tough, especially if you are not used to sticking to a budget. But if you’re spending is as much, or more, than you’re earning, you might want to consider limiting your family’s discretionary costs by buying only what you can afford. If you are tracking expenses on a spreadsheet, it is much easier to see where you may have any unnecessary expenses and cut them out.

3 | Set financial goals as a family

Setting financial goals as a family may help you work towards shared aspirations instead of simply meeting current expenses. Whether it’s buying a bigger house, upgrading your car or going on a dream holiday, having a financial goal may help your family set priorities and stay on track financially.

4 | Look at what’s important to your family

There are things that will be important to your family, that you should definitely factor into your budget. But there will be other things you can do without. Protecting your family for the long term, through health and illness, is important, so talk to a professional financial adviser about factoring in personal insurance cover that will keep the family protected from unexpected accidents or illness.

5 | Build up emergency and retirement funds

Unplanned expenses such as unforeseen medical bills can put a dent in family finances. By growing your emergency fund to cover three to six months’ worth of expenses, you may be better positioned to handle unexpected events.

While it’s easy to neglect your own financial future when providing for your family, saving for retirement should not take second place. Keep in mind that the earlier you start saving, the better chance you have to grow a sufficient nest egg.

Working with a financial adviser

Managing finances need not be a painful exercise. By working alongside a financial adviser and setting financial goals as a family, handling household finances is a task you can achieve. If you are ready to take your budget to the next level with some professional help, we would love to hear from you.

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.