Tag: tax return

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ABN cancellation program

Posted on | by Allan Hall

Is your ABN current?

Inactive Australian Business Numbers (ABNs) are being cancelled

The Australian Taxation Office (ATO) has started reviewing existing ABNs, to identify any potentially inactive for cancellation.

Your ABN may be selected if you haven’t reported business activity in your tax return or there are no other signs of business activity in other lodgments or third-party information.

If your ABN is identified for cancellation, the ATO write to you. If you still require your ABN you’ll be told exactly what you need to do to stop cancellation.

Inactive ABNs are cancelled to make sure information on the Australian Business Register (ABR) is correct. Emergency services and government agencies use this information during natural disasters and to identify where financial disaster relief is needed to help businesses.

If your ABN is cancelled and you need it later:

  • you can reapply for the same ABN if your business structure is the same
  • you’ll get a different ABN if your business structure is different, for example you were a sole trader but you’re now a company.

If the ATO cancels your ABN and you disagree with the decision, contact them and they’ll try to resolve the issue.

Remember, registered tax agents and BAS agents can help you with your tax.

CONTACT ALLAN HALL

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Tax time focus on rental property income and deductions

Posted on | by Allan Hall

ATO cracks down as 90% of rental income tax statements are wrong

Income and tax deductions from rental properties is one of the four key areas the Australian Taxation Office (ATO) is focusing on this tax time.

It’s an area that’s easy to get wrong and needs extra care when lodging.

The ATO Random Enquiry Program has found that nine out of ten tax returns that reported rental income and deductions contain at least one error, even though most of those property owners were assisted by a registered tax agent.

The ATO is therefore urging rental property owners to ensure they carefully review their records before declaring income or claiming deductions this tax time, and for registered tax agents to ask a few extra questions of their clients.

Assistant Commissioner Tim Loh explained, “Registered tax agents can only work with the information they gather from their clients, and we know some clients won’t know everything they need to tell their agent. We don’t expect agents to be Sherlock Holmes, but we do expect them to ask the right questions to ensure their client’s return is right.”

Mr Loh said that rental property owners are urged to ensure they know what income they need to declare and what can be claimed as a deduction.

“We are concerned about mistakes, and in particular, leaving out income or deliberate over-claiming of rental property deductions this year.”

“Getting it right the first time, will ensure you receive the tax refund you are owed, and avoids us knocking on your front door down the track.”

Include all rental income

The ATO receives rental income data from a range of sources including sharing economy platforms, rental bond authorities, property management software providers, and state and territory revenue and land title authorities.

“The amount of data we access grows each year, making it easier and faster for us to spot any rental income that you have charged your tenants, but haven’t declared,” Mr Loh said.

When preparing tax returns, make sure all rental income is included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

“Income and deductions must be in line with a rental property owner’s ownership interest, which should generally mirror the legal documents.”

Get your expenses right

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums. Other expenses such as borrowing expenses and capital works need to be claimed over a number of years. Capital works can include replacing a roof, or a new kitchen renovation. Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Refinancing or redrawing on a rental property loan for private expenses such as holidays or a new car, means that the amount of interest relating to the loan for the private expense can’t be claimed as a deduction.

If income from a rental property in a holiday location is earnt, it needs to be included in tax returns.

“You can claim expenses for the property to the extent that they are incurred for the purpose of producing rental income, not where your family and friends stayed in the property for a mini getaway at mate’s rates, you use it yourself, say at Christmas, or you stopped renting the property out,” Mr Loh said.

“Other circumstances where deductions cannot be claimed include pretending that your property is available for rent when it really isn’t, for example you advertise significantly above a reasonable market rate compared to similar properties or you place unreasonable restrictions on potential tenants.”

“Our 2022 Tax Time Toolkit for Investors also contains a number of fact sheets for landlords, including Top 10 tips to help landlords avoid common tax mistakes. These tips will help you avoid common mistakes and save you time and money.”

Selling a rental property

When selling a rental property, capital gains tax (CGT) needs to be considered and any capital gains or capital losses need to be reported.

When calculating a capital gain or capital loss, it’s important to get the cost base calculation right. Cost base is usually the cost of the property when purchased and any costs associated with acquiring or selling it. These can be things like stamp duty, legal fees, valuations and real estate sales fees. Any capital works claimed as deductions may also need to be subtracted from the cost base.

“If you’ve sold a rental property that was once your home, you may be entitled to partially claim the main residence exemption. You will need to claim this exemption in your tax return when you lodge.” Mr Loh said.

Records of all income and expenses relating to rental properties, including purchase and sale records, must be kept. This ensures all eligible deductions are captured when preparing tax returns and capital gains tax can be calculated correctly when the property is sold.

“It’s also important to note that when selling any property for more than $750,000, vendors / sellers must have a clearance certificate otherwise 12.5% will be withheld.” Mr Loh said.

Clearance certificate applications can take up to 28 days to process so to avoid delays, sellers should apply as early as practical using the online form. Having tax affairs up to date, including all lodgments, helps speed up the assessment of an application and a certificate being issued. The certificates last for 12 months and if selling more than one property in the year, it can be used for multiple sales. Foreign residents are generally not eligible for a clearance certificate but may apply to vary the withholding amount.

Apply for a certificate and find out more at ato.gov.au/FRCGWcertificate

Keep good records to prove it all

Records of rental income and expenses should be kept for five years from the date of tax return lodgments or five years after the disposal of an asset, whichever is longer.

“Get your books in order and start keeping records as soon as you make the decision to earn rental income. It makes tax time so much easier for you and your registered tax agent” Mr Loh said.

Adequate records should demonstrate how the expense was incurred for the rental property and the extent they relate to producing rental income. They must include the name of the supplier, the amount of the expense, the nature of the goods or services, the date the expense was incurred, and the date of the document.

“We can ask for proof of any claim that you make, so good record keeping is the only way to ensure you can claim everything you are entitled to.”

“Remember, when your return is lodged, you are on the hook for the claims you are making, not the registered tax agent.”

For more information, visit ato.gov.au/rental

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covid test

Tax rules and exemptions for COVID-19 testing

Posted on | by Allan Hall

FBT, COVID-19 tests and the otherwise deductible rule

Be aware of the rules and exemptions regarding COVID-19 testing

Whilst FBT obligations do exist, there are exemptions and deductions that can be granted when providing COVID-19 tests to employees

You may have to pay Fringe benefits tax (FBT) if you:

  • provide your employees or their family members with COVID-19 tests such as a rapid antigen test, or
  • pay for a polymerase chain reaction test.

However, the otherwise deductible rule (or a different concession or exemption) may apply to eliminate or reduce any FBT payable.

Types of benefits that may arise from providing COVID-19 tests

Different types of benefits may arise for FBT purposes when you provide, or pay for, your employees’ or their family members’ COVID-19 tests.

The types of benefit that may arise under the FBT law are:

  • an expense payment benefit – where you pay for, or reimburse, an employee’s or their family member’s, COVID-19 test.
  • a property benefit – where you purchase the COVID-19 tests and give them to your employees or their family members for free or at a discount.
  • a residual benefit – where you provide your employees or their family members with a COVID-19 test that isn’t an expense payment or property benefit.

Exemptions from FBT

Some benefits are exempt from FBT. If an exemption applies, you won’t need to:

  • pay FBT for providing the COVID-19 tests to your employees, or reimbursing them for their cost
  • consider whether the otherwise deductible rule applies.
Work-related medical screening

Work-related medical screening tests are exempt from FBT if both of the following apply:

  • testing is carried out by, or on behalf of, a legally qualified medical practitioner or nurse, and
  • testing is available to all employees.

If only some of your employees get COVID-19 tests, the tests are still exempt if they are offered to all employees.

If the tests you provide or reimburse do not meet these requirements, you may need to pay FBT unless the minor benefits exemption or ‘otherwise deductible rule’ apply.

Minor benefits exemption

This exemption will only apply if:

  • the tests are provided infrequently and irregularly
  • the cumulative value of the tests provided to an employee during the FBT year is less than $300.

The otherwise deductible rule

You can reduce the taxable value of an expense payment, property or residual fringe benefit by what’s known as the otherwise deductible rule.

This is the amount your employee would have been entitled to claim as a once-only income tax deduction if they had provided or paid for the COVID-19 test themselves.

There are special records that must be kept for the otherwise deductible rule to apply.

When the otherwise deductible rule applies to COVID-19 testing

From 1 July 2021, if an employee paid for a COVID-19 test for a work-related purpose they could have claimed a deduction if certain conditions were met.

To have claimed a deduction for the cost incurred to buy or pay for a COVID-19 test, your employee must have:

  • used the test for a work-related purpose, such as to determine if they can attend or remain at work
  • received 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

The otherwise deductible rule only applies to the extent that your employee could have claimed the work-related portion of the expenditure on COVID-19 tests as an income tax deduction. For example, if you buy a multipack of COVID-19 tests and allow your employee to use some for private purposes (such as by other family members or for leisure activities), the otherwise deductible rule only applies to the portion of the expense, property or residual benefit used for a work-related purpose.

For the otherwise deductible rule to apply, you must have the appropriate records, including the relevant declaration(s).

When the otherwise deductible rule doesn’t apply

The otherwise deductible rule doesn’t apply:

  • to COVID-19 tests you provide if
    • your employee uses the test for private purposes – for example, to test their children before they return to school or daycare
    • your employee works from home and doesn’t intend to attend the workplace, or
    • you haven’t received the declarations that are required under the FBT law
  • to any travel or parking expenses you pay or reimburse your employees to get their COVID-19 test. This is because these expenses do not have a sufficient connection to your employee obtaining or undergoing a COVID-19 test to be regarded as being incurred in respect of testing them for COVID-19.

Keeping records for COVID-19 tests

To apply the otherwise deductible rule, you must keep records, including:

  • a record of the costs of COVID-19 tests you pay for your employees (including those you reimburse them for) and the dates you paid for them. This may include a receipt or invoice.
  • a completed appropriate employer declaration or employee declaration.

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Superannuation contributions

Changes to work test requirements for non-concessional contributions

Posted on | by Allan Hall

Changes to the work test requirements for superannuation contributions

Soon older Australians will no longer have to meet the work test to make non-concessional contributions.

From 1 July 2022, members under 75 years of age will be able to make or receive non-concessional contributions without meeting the work test, subject to existing contribution cap limits. They may also be able use the bring forward rule.

Fund Trustees will no longer have to administer the work test at the time they accept the contribution.

Removing the requirement to meet the work test when making non-concessional contributions will simplify the rules governing superannuation contributions and increase flexibility for older Australians to save for their retirement through superannuation.

However, those aged 67 to 74 will need to meet the work test if they wish to make a personal concessional contribution for which they intend to claim a personal superannuation deduction.

For those individuals there is no change to the way they lodge their notice of intent to claim or vary a personal super contribution deduction.

The only change is that now the ATO will be checking to see if they meet the work test at the time they lodge their income tax return. The work test must be met during the financial year in which the contribution is claimed.

CONTACT ALLAN HALL

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Claiming Family Tax Benefit and Child Care Subsidy

Posted on | by Allan Hall

REMINDER: Claim Family Tax Benefit and Child Care Subsidy by 30 June

Confirm your income now for the 2020/21 year to receive the Family Tax Benefit (FBT) or Child Care Subsidy (CCS).

You need to confirm your income by lodging your tax return for the 2020/21 year, or advising that you do not need to lodge a tax return, no later than 30 June 2022, if you wish to:

If you DON’T do this:

  • You will not receive your FTB supplements and top ups for the 2020/21 year
  • Your CCS will reduce to zero – Services Australia will balance CCS once they receive:
    • all attendance information from your child care service
    • confirmation of your family’s income
  • You may also be required to repay all the FTB and CCS you got for the 2020/21 financial year.

If you are eligible the Child Care Subsidy (CCS) is paid directly to your child care provider to reduce the fees you pay. CCS claims can only be backdated by 28 days. CCS replaced Child Care Benefit and Child Care Rebate when they stopped on 1 July 2018.

Act now!

To ensure both you and your partner’s Tax Returns are lodged on time, please contact your Allan Hall Business Advisor or simply click below.

We are anticipating a high demand off the back of this article. To enable us to lodge your returns by the 30 June deadline, we would encourage you to send in your information as soon as possible and no later than 31 May 2022.

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ABN intent to cancel program

Posted on | by Allan Hall

The ATO is reviewing Australian business numbers (ABNs) to identify potentially inactive ABNs for cancellation.

We’ve made improvements to the ABN cancellation program by introducing a new automated process that allows you to confirm if an ABN is still required via a secure voice response system.

An ABN may be selected if it has not reported business activity in a tax return, or there are no signs of business activity in other lodgments or third-party information.

Any income earned under an ABN needs to be reported in your tax return, regardless of the amount. By keeping your tax obligations up to date the ATO can see you are actively undertaking a business, therefore the ABN should not be cancelled.

If the ATO believes you are no longer carrying on an enterprise, they may contact you or your accountant to advise of their intention to cancel the ABN.

  • If your ABN is identified for cancellation you may be contacted and advised what actions you need to take to prevent your ABN from being cancelled
  • If you are no longer in business, no action is required to be taken
  • If your ABN has been cancelled and you are still entitled to one, you will need to re-apply to reactivate it.

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