Tax Tips for 30 June 2019

5 tax tips for 30 June 2019.
Tip number one is on how businesses can get the most out of paying Superannuation.

The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.

Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:
• $30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
• $25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019
• $20,000, before 29 January 2019.

Your business clients can’t immediately claim a deduction for individual assets that cost $30,000 or more. They can continue to deduct these over time using the small business pool or the general depreciation rules, depending on their turnover.

* * * Disclaimer: Anyone intending to apply the information to a practical situation should seek professional advice to independently verify their interpretation and the information’s applicability to their circumstances.

The Government established the Black Economy Taskforce (‘Taskforce’) in December 2016 to develop a strategy to combat the black economy. Based on the Taskforce’s recommendations, a number of different measures have since been introduced, which include the expansion of the Taxable Payments Reporting System (‘TPRS’) to various industries.
By way of background, the TPRS is a transparency measure that requires businesses operating within prescribed ‘high-risk’ industries to report payments made to certain contractors to the ATO. The purpose of these requirements is to target the cash economy and general low compliance within a particular industry.
Since 1 July 2012, businesses in the building and construction industry have been required to report total payments made to each contractor for building and construction services each year. It has been reported that $2.7 billion has been protected from being ‘lost’ to the black economy in the building and construction industry in the 2015-16 financial year. The ATO is attributing this to the TPRS and believes that this demonstrates the effectiveness of the TPRS in improving tax compliance in an industry.
Due to the success of the TPRS, it has been expanded to the cleaning and the courier industries from 1 July 2018 (i.e., from the 2019 income year). In the 2018-19 Federal Budget, the Government further expanded the TPRS to industries including road freight, information technology (‘IT’), security, investigation, and surveillance services.

* * * Disclaimer: Anyone intending to apply the information to a practical situation should seek professional advice to independently verify their interpretation and the information’s applicability to their circumstances.

Division 7A of the ITAA 1936 was introduced to prevent private company profits being accessed tax-free. Prior to these rules, it was common for private companies to lend funds to shareholders or their ‘associates’ (as defined in S.318 of the ITAA 1936), or pay their expenses, and then debit these amounts to a loan account in the company’s books. In some cases, these loans were not repaid or were forgiven by the company, and generally did not result in any tax liability arising.

Division 7A overcomes this issue by ensuring that if a private company (directly or indirectly) pays or lends an amount, or forgives a debt owed by, a shareholder (or their associate) on or after 4 December 1997, the amount may be treated as a deemed dividend.

Take steps to avoid loans from becoming deemed dividends.

Where Division 7A applies to a loan (including a payment that is converted into a loan), certain actions can be taken to avoid a deemed dividend arising. This includes:

• the shareholder or associate (i.e., the loan recipient) repaying the loan in full; or

• the parties entering into a written loan agreement that complies with S.109N (e.g., a specified maximum term, minimum interest rate, and minimum yearly repayments), before ‘lodgment day’ of the company’s tax return for the income year the loan was made (i.e., before the earlier of when the return is due for lodgment and when it is actually lodged).

 

Complying Loans:

Under current law, the term of a complying loan under S.109N must not exceed the maximum term set out in S.109N(3), being:

• 25 years for a ‘secured loan’ (i.e., where 100% of the value of the loan is secured by a registered mortgage over real property and, when the loan is made, the market value of the property, less the amounts of any other liabilities secured over the property in priority to the loan, is at least 110% of the amount of the loan); or

• 7 years. In other words, the current law provides taxpayers with the option of avoiding Division 7A in respect of a loan by entering into either a 25-year secured loan or a 7-year loan.

Under the proposed changes, there is a single complying loan model, where the maximum term is 10 years (i.e., there is no opportunity for the loan term to be increased by securing the loan).

https://www.ato.gov.au/Business/Private-company-benefits—Division-7A-dividends/In-detail/Division-7A—Loans

* * * Disclaimer: Anyone intending to apply the information to a practical situation should seek professional advice to independently verify their interpretation and the information’s applicability to their circumstances.

If you use your own car in performing your work-related duties (including a car you lease or hire), you may be able to claim a deduction for car expenses. If the travel was partly private, you can claim only the work-related portion.

This information relates to car expenses only. A car is defined as a motor vehicle (excluding motorcycles and similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. Many four-wheel drive vehicles are included in this definition.

When working out your claim, you need to use the actual costs of your motor vehicle expenses. You need to keep receipts for the actual costs you incur such as petrol and oil. You can use a logbook or diary to separate private use from work-related trips.

https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/vehicle-and-travel-expenses/car-expenses/

* * * Disclaimer: Anyone intending to apply the information to a practical situation should seek professional advice to independently verify their interpretation and the information’s applicability to their circumstances.

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