14 MARCH 2019
Fringe Benefit Tax (FBT) and Cars
Where a car owned or leased by an employer is made available to employees, a car fringe benefit may arise. For FBT purposes a car is any of the following:
- A sedan or station wagon;
- Any other goods-carrying vehicle with a carrying capacity of less than one tonne; or
- Any other passenger-carrying vehicle designed to carry fewer than nine passengers.
If an employer supplies a vehicle to an employee which does not satisfy the above criteria and is used privately, the right to use the vehicle can be a residual fringe benefit.
An employer makes the car available for an employee’s private use when an employee or their associate:
- Use the car for private purposes; or
- Are permitted to drive the car for private purposes.
A car garaged at or near to employee’s home is treated as available for employee or employee’s associates for their private use, regardless of whether the employee or employee’s associates have a permission to use this car privately.
Usually, travel to and from work is treated as private use of the vehicle, but there are some exceptions.
For example, an employee’s private use of a taxi, panel van or utility designed to carry less than one tonne is exempt from the FBT if the private use of this vehicle is limited to:
- Travel between home and work;
- Incidental travel in the course of performing employment-related travel; and
- Non-work-related use that is minor, infrequent and irregular
Other benefits supplied by employer to employee in relation to cars, whilst not constituting a car benefit, may instead constitute a fringe benefit. For example, where the employer supplies to the employee for private purposes:
- Payment or reimbursement of expenditure on toll roads (expense payment fringe benefit);
- Use of the employer’s toll tag (residual fringe benefit); and
- Car parking (car parking fringe benefit).
FBT and Employee Declarations
Employers must ask their employees to sign a no-private-use declaration for a qualifying business-related benefit to be an exempt fringe benefit e.g. overseas business travel. Employee declarations must be in the format required by the Australian Taxation Office (ATO). Employers can receive employee declarations electronically, but the declaration must be signed by the employee using an electronic signature. Employers are obligated to obtain all employee declarations by the employer’s FBT return lodgment date, or by 21 May if the employer is not required to lodge an FBT return. Declarations should not be sent to the ATO, although employers are required to keep the declarations as a part of their business records. Different declarations may be used for different types of expenditure and for different employees in the same FBT year (ending 31 March).
Please contact your Nexia adviser for assistance with your FBT return and employee no-private-use declarations.
9 JANUARY 2019
What is a Capital Gains Taxable Asset?
The capital gains tax (CGT) law commenced on 20 September 1985 and applies to CGT assets acquired after that date. Most people understand that assets such as real estate, shares in companies or units in unit trusts are CGT assets. However, the CGT net is cast over a broad range of assets such as the goodwill of a business, contractual rights, foreign currency, collectables costing over $500 such as jewellery or artwork, and personal use assets costing over $10,000 such as a boat.
A common belief is that a person’s home is CGT exempt but this may not be the case if the home has been rented or used in a business such as a veterinary surgeon who might conduct a veterinary business from a specially allocated part of the home. A home office usually does not taint the CGT exempt nature of a home provided tax deductions have not been claimed for rates or mortgage interest.
Special rules apply to homes that are inherited from a deceased person. In some cases, the deceased person’s main residence exemption can apply to a person who inherits the home and that person uses the home as their main residence. If a deceased person occupied a home for the total period of their ownership, any capital gain made on the sale of the home will be CGT free if the home is sold within two years of the person’s death and the date of settlement (‘completion’) of the contract (not the date of exchange (‘signing’) of the contract). Remember that a person can only have one main residence at a time, so a ‘weekender’ generally cannot be CGT exempt.
Cars are exempt from CGT as are insurance payouts arising from death or injury. However, insurance proceeds paid for lost income are taxable.
A capital gain made from the sale of business goodwill or other CGT assets used in a business may be CGT exempt under the small business CGT concessions. A small business for the purpose of these concessions is generally a business with an annual turnover of less than $2 million or CGT assets of no more than $6 million.
A myriad of tests must be satisfied to qualify for the small business CGT concessions, but eligibility is not impossible. The key to satisfying the tests is to properly structure a business when the business commences. Advice should be sought from your Nexia advisor before changing the structure of a business; for example, changes to shareholdings or unit holdings can render a taxpayer ineligible for these valuable concessions.
Lastly, the term ‘capital gains tax’ is a misnomer. No special tax exists to tax capital gains. Instead, capital gains are calculated and are then included in a person’s or entity’s taxable income to which normal income tax rates apply. Note that the determination of the assessable capital gain will be subject to concessions such as the 50% discount for assets held longer 12 months or the small business 50% reduction.
14 NOVEMBER 2018
FBT and Christmas parties
With Christmas approaching, employers should be aware of the tax consequences of hosting Christmas parties for their staff.
Employers must pay fringe benefits tax (FBT) - at a rate of 47% on the grossed-up taxable value when certain non-cash benefits (called fringe benefits) are supplied to their employees or their associates (i.e. past, future and current employees and their spouses and children) instead of paying salary or wages.
However, certain non-cash benefits will not be subject to FBT. While the FBT law does not specifically deal with Christmas parties, the following types of FBT exempt benefits are particularly relevant when determining an employer’s FBT liability when hosting a Christmas party:
- Exempt minor and infrequent benefit valued at less than $300 (e.g. a catch-all exemption available for current employees and their associates for low value benefits provided on an “infrequent” or “irregular” basis);
- Exempt property benefit (e.g. all Christmas party food and drink provided by the employer that is consumed by a current employee at a party, provided the party is held at the employer’s premises on a business day); and
- Exempt transport benefits (e.g. a current employee’s employer pays for a taxi ride home if the Christmas party is held at the employer’s premises).
Please note that the $300 minor and infrequent benefit exemption applies separately on a per benefit basis (i.e. minor benefit exemption can apply if one present of $250 is provided to an employee and another present of $290 is provided to the employee’s spouse).
As you can see from the above, the amount of FBT payable can be influenced by:
- When the party will be held (i.e. for the minor and infrequent benefit exemption, the cost of the benefit provided must be less than $300 per head and not provided regularly or frequently);
- Where the party will be held (i.e. for the property fringe benefit exemption to apply, the food and drink must be provided and consumed by current employees on the employer’s premises on a business day);
- For whom the party will be held (i.e. the tax consequences are different depending on whether the benefits are provided to employees, their associates or clients).
This brief overview gives a broad outline of the application of the FBT law to Christmas time activities. A variety of benefits may be supplied to employees at Christmas time with each containing their own valuation, deduction and exemption rules.
Please contact your Nexia Adviser if you would like to discuss any of the tax effective benefits that may be supplied to employees at Christmas time or in certain situations, at any time.
7 NOVEMBER 2018
10% GST withholding on the sale of new residential premises from 1 July 2018
Purchasers who buy new residential premise on or after 1 July 2018 (i.e. purchasers who sign the sale contracts on or after 1 July 2018) will have to pay the GST exclusive amount of the sale price to the property developer that sold the new premises and the GST component of the sale price directly to the ATO at settlement. [Note, prior to the introduction of this new GST withholding tax regime, a purchaser paid a GST inclusive amount to the property developer that sold the new premises (i.e. the purchaser paid the GST component of the sale price to the developer and the developer then had to remit the GST to the ATO at a later time)].
To facilitate this new GST withholding tax regime:
- The developer must provide to the purchaser before settlement date a written notice setting out the amount of GST required to be withheld;
- The purchaser must then inform the ATO of the purchase by submitting:
- A GST property settlement withholding notification form to advise the ATO that a sale of new residential premises has taken place – the form must be provided to the ATO before settlement; and
- A GST property settlement date confirmation form to advise the ATO when the settlement date is – the form must be provided to the ATO either on settlement date or when the purchaser makes the GST withholding payment. - The ATO then allocates the credit to the developer’s property credits account and once the vendor lodges the business activity statement (BAS), the developer can utilise the credit.
Please speak to your Nexia advisor so that we can help guide developers and purchasers navigate the new GST withholding regime and ensure the correct details are provided to the ATO so that credits can be effectively offset against GST liabilities when developers lodge their BAS.
7 NOVEMBER 2018
Beware of private use of company cars
A car fringe benefit occurs when a business owns or leases a car and makes this company car available for private use by an employee. For FBT purposes a car is either a sedan or station wagon, another goods-carrying vehicle with a carrying capacity of less than one tonne (e.g. a panel van or ute), or any other passenger-carrying vehicle designed to carry less than 9 passengers.
Please speak to your Nexia advisor if you have employees who use company cars to travel between home and work or if the company car is garaged at or near the employee’s home (even if the company car is not used by the employee for private purposes and only parked there for security purposes).
Our Nexia advisors can advise you whether directors will also be employees and therefore affected by these measures and whether using a panel van or ute to travel between home or work will be a car fringe benefit or a residual fringe benefit.
Nexia has extensive knowledge and experience in applying FBT rules and look forward to helping you comply with all your FBT obligations.
3 OCT 2018
Do you need help with your GST reporting?
When we review business activity statements (BAS) prepared by our clients or other accounting firms, we often pick up mistakes which we correct before we lodge the BAS to keep track of GST obligations.
Set out below are some of the most common errors we have encountered and how we have corrected the mistakes:
Mistake: Incorrect timing of GST transactions
What should have been done? Report GST transactions for the correct tax period (e.g. time of making the supply if cash basis or time of issuing the tax invoice if accruals basis)
Mistake: Wrong numbers on BAS
What should have been done? Check for accidental miscalculations or transcription errors
Mistake: Unsubstantiated claims for GST credits
What should have been done? Only claim GST credits on claims that can be substantiated (e.g. have a valid tax invoice)
Mistake: Incorrect claims of GST credits on purchases made for personal use
What should have been done? Only claim GST credits on goods purchased for a creditable purpose
Mistake: Not charging GST when exceed the $75,000 turnover threshold
What should have been done? Charge GST if the $75,000 GST threshold is passed
Please speak to your Nexia advisor if you need help in completing your business activity statements for GST purposes.
25 JULY 2018
Are you ready for the Wine equalisation tax (WET) changes?
Generally, wine equalisation tax (WET) is payable at a rate of 29% on the wholesale value of wine supplied by taxpayers registered or required to be registered for GST (e.g. wine producers, wine importers or wine sellers).
From 1 July 2018, there are 3 main changes to the way WET operates:
- The producer rebate cap is reduced to $350,000 per year (previously the rebate cap was $500,000 per year) and more conditions must be satisfied by the producer to claim this rebate;
- More strenuous conditions must be satisfied before WET credits can be claimed (in respect of wine sold from 1 January 2018 onwards); and
- More information must be supplied if wine is bought under quote (i.e. sales that are exempt from WET because the purchaser quoted their ABN).
Because these new requirements can be complex and difficult to implement, the ATO will not apply penalties or interest if the new requirements are not followed between 1 July 2018 and 31 December 2018. However, this 6-month amnesty period will not be available for taxpayers who deliberately or recklessly choose not to follow these new requirements.
If you are involved in the wine industry, please contact your Nexia advisor to find out how these WET changes may affect your business. Nexia Australia has a specialised wine industry group that can help you make the necessary changes to your systems and supply chains (where necessary) to ensure your business satisfies the new WET requirements. This group has monthly meetings and targeted discussions on how Nexia can assist clients involved in the wine industry
11 JULY 2018
Roadmap for claiming GST input tax credits
GST registered businesses can claim GST input tax credits in respect of the GST component included in the price of goods or services purchased for use in the business. The businesses must have received a valid tax invoice (for purchases of more than $82.50) from the supplier.
GST input tax credits can be claimed up to 4 years from the due date of the activity statement in which these input tax credits could have been claimed for the first time.
Furthermore, remember that GST input tax credits cannot be claimed:
- when purchasing GST-free items (e.g. fresh food and medicine);
- on purchases that were used for private purposes (in such a case, apportion the GST credit between business and non-business use); nor
- in excess of the car limit when purchasing motor vehicles for the business (because the car limit is $57,581 for 2018 and 2019, a maximum of $5,234 can be claimed as input tax credits).
Please note that the ATO has a special team investigating the claiming of GST input tax credits. The ATO is alert to GST input tax claims that are unusual compared to claims in previous BASs. Further, the ATO places the onus on the business claiming the GST credits to have valid tax invoices; this may seem counter-intuitive given that one could reasonably assume that the supplier should ensure that their tax invoices comply with the law. However, the ATO has disallowed claims for GST input tax credits until the recipient has obtained a valid tax invoice from the supplier.
27 JUNE 2018
10% GST withholding on the sale of new residential premises from 1 July 2018
Property developers who sell new residential premises on or after 1 July 2018 (i.e. the date of signing the contract) will be subject to a new GST withholding tax regime where the purchaser of the property will be required to send the GST component of the sale price directly to the ATO at settlement.
Property developers will need to give written notification to purchasers that they need to withhold GST and purchasers will also need to complete two additional GST withholding forms:
- A GST property settlement withholding notification form to advise the ATO that a sale of new residential premises has taken place – form must be provided to the ATO before settlement; and
- A GST property settlement date confirmation form to advise the ATO when the settlement date is – form must be provided to the ATO either on settlement date or when payment is made.
Your Nexia adviser will be pleased to explain to buyers and sellers of new residential property their new legal obligations.
16 MAY 2018
Due date for lodgement of the FBT return is 21 May 2018
The due date for lodgement of the 2018 FBT return (i.e. for the FBT year starting 1 April 2017 and ending 31 March 2018) is 21 May 2018 – however, if Nexia lodges your tax return electronically, the due date for lodgement will be 25 June 2018.
For the 2018 FBT year, employers must pay FBT at a rate of 47% on the grossed-up taxable value of the fringe benefits on 28 May 2018 (regardless of when lodgement is).
This effectively means that an employer’s FBT return must be prepared by 28 May 18 and payment made by that date as well.
Nexia recently released a client alert (see here) providing a brief overview of how FBT operates (e.g. which records to keep and what are some examples of fringe benefits) as well as detailing some strategies to reduce an employer’s FBT liability.
Please contact your Nexia Adviser if you would like to discuss how any of these FBT issues may affect your organisation so that we can help you identify potential FBT risks and opportunities for you.
2 MAY 2018
Reminder: Pay your 2018 FBT liabilities by 28 May 2018
For the 2018 FBT year (from 1 April 2017 to 31 March 2018), employers must pay FBT at a rate of 47% on the grossed-up taxable value of fringe benefits. The 2018 FBT returns must be lodged by 21 May 2018 (if lodging by paper) or by 25 June 2018 (if lodging electronically through a tax agent e.g. Nexia) and payment is due by 28 May 2018.
Please see our recent Tax Update for more information on FBT.
18 April 2018
Common Fringe Benefits Tax errors to avoid
As mentioned in a previous Top Tax Tips, we recently published a Nexia FBT Year End Planner detailing some timely FBT year-end reminders and strategies.
For the 2018 FBT year which ended on 31 March 2018, the ATO will be on special lookout for the following most common FBT errors:
- Failing to report an employee’s private use of a company car (unless the employee uses utes or panel vans for private purposes and other conditions are also met) or incorrectly filling in logbooks;
- Claiming exempt food and accommodation components in living-away-from-home allowance (LAFHA) benefits (a common error because the exempt accommodation and food component of the LAFHA should only reduce the taxable value of the LAFHA benefit and even if a LAFHA is fully exempt from FBT, the entire amount of the allowance and the corresponding reduction in the taxable value should still be recorded on the FBT return) or claiming a reduction in the taxable value of the LAFHA benefit for exempt accommodation and food components in invalid circumstances;
- Undervaluing employee car park benefits (for example where market valuations are significantly less than the fees charged for parking within a one kilometre radius of the premises in which the car is parked); or
- Incorrectly claiming employer exemptions and rebates (for example if there are incorrect calculations of benefit values or reduction amounts or no declaration to substantiate the exemption being claimed).
Please speak to your Nexia adviser so that we can assist you to complete your FBT return correctly.
18 April 2018
New GST withholding regime on sale of new residential premises from 1 July 2018
Currently, purchasers of new residential premises pay a GST inclusive amount to the seller (i.e. GST is included in the purchase price so the purchaser pays GST to the seller and the seller must remit the GST to the ATO).
However, under a recently enacted new law, purchasers of new residential premises will have to pay the GST component of the purchase price directly to the ATO:
- For sale contracts signed on or after 1 July 2018, the purchaser will be required to withhold and pay 10% of GST to the ATO on the day the consideration is provided (i.e. at instalment dates or only at settlement if lumpsum at settlement); and
- For sale contracts signed before 1 July 2018, the 10% GST withholding rule will only apply to payments made on or after 1 July 2020 (i.e. there is a 2-year transitional period where GST withholding will not apply to consideration provided in this transitional period)
This new GST withholding regime does not apply to the sale of used (i.e. not new) residential properties or the sale of new or used (i.e. not new) commercial premises.
21 March 2018
GST and the use of “drop shipping” to sell products in Australia
From 1 July 2018, overseas vendors with a GST turnover of AUD $75,000 or more (calculation of turnover is limited to Australian sales only), will have to account for GST on sales of low value goods (i.e. imported goods costing AUD $1,000 or less) to consumers in Australia (i.e. purchasers not registered for GST or GST-registered purchasers that acquired such low value goods solely for private purposes).
However, these changes will also affect Australian GST-registered retailers who “drop-ship” supplies of low value goods to consumers in Australia directly.
For example, GST will apply if an Australian GST-registered retailer sells products costing $1,000 or less (e.g. a wedding dress of $500) to a consumer in Australia and the product is shipped directly to the consumer by sea cargo from the company’s offshore supplier.
For more information on GST on low value goods, please see our article published in one of our Nexia International publications.
14 March 2018
Get ready for the 31 March 2018 FBT year-end
Recently, we published our FBT Year End Planner detailing some timely FBT year-end reminders and strategies. Read this planner to gain some practical insight on:
- the latest developments in the FBT landscape (e.g. new simplified record keeping for fleet cars and certain utes);
- what documents to keep to satisfy FBT record-keeping obligations; and
- what strategies to consider to reduce an employer’s FBT liability.
14 February 2018
Taxpayers may not claim GST input tax credits on purchases made while carrying on a hobby
In a recent Nexia top tax tips we said that GST registered businesses can claim GST input tax credits on purchases made in relation to the making of taxable supplies (e.g. sales of goods or services) or GST-free supplies (e.g. most sales of medical and education services).
In contrast, a taxpayer who is conducting a hobby by generating relatively small amounts of income from conducting irregular activities without a business plan will not be able to claim GST input tax credits on purchases – such as a person running a small number of sheep on a small acreage. Such taxpayers can therefore cancel their GST registration and - if they have claimed GST credits for purchases associated with their hobby - they should amend their past activity statements.
6 DECEMBER 2017
Know when to claim GST input tax credits
GST registered businesses can claim GST input tax credits of the GST included in the price of goods or services purchased for use in the business if a valid tax invoice is held.The retention of a tax invoice is not required for purchases less than $75 GST exclusive.While this concession was enacted to save on the retention of tax invoices for relatively small amounts, we recommend that tax invoices be held or be scanned for computer storage.Please note that GST registered businesses must issue a tax invoice for the sale of all goods and services regardless of price.
GST input tax credits can only be claimed if purchases are made relating to the making of either:
- Taxable supplies (e.g. a property developer that sells new apartments may claim the GST charged on acquisitions relating to the sale); or
- GST-free supplies (e.g. a farmer who has carried on a farming business on the land for at least 5 years and sells the land to a buyer and the buyer intends that a farming business will be conducted on the land, may claim the GST charged on the original purchase price of the farmland).
GST input tax credits cannot be claimed on purchases relating to the making of input taxed supplies (e.g. selling financial products or second hand property).
22 November 2017
Going concern concession and GST free supplies of farmland
The sale of farmland as well as the sale of business premises as a going concern will constitute GST-free supplies (i.e. a seller will not charge GST on the sale) if:
- for the sale of farmland – a farming business has been carried on for at least 5 years before the sale and the buyer intends that a farming business will be conducted on the land; and
- for the sale of a going concern – the buyer and seller must agree in writing that the sale is of a going concern, the seller and the buyer are registered or required to be registered for GST, the supply is for consideration and the seller is supplying a going concern (i.e. an enterprise is carried on up to the date of sale).
Because no GST is charged on such a GST-free sale, a purchaser’s cash flow is improved (because there is no need to pay an extra 10% of GST) and such a sale may also lead to a reduction in stamp duty payable (because stamp duty is calculated on the GST inclusive sale price).
However, if the going concern conditions for a GST-free sale are not met, the seller will then have to pay GST on the supply. In some contracts, the seller will have a right to recover the GST from the buyer.
If you are interested in selling farmland or a business as a going concern, please speak to your Nexia adviser so that we can determine whether such a sale may qualify as a GST-free sale. We can also advise you which documents to maintain to have adequate evidence that an enterprise is in fact being carried on up to the date of sale (i.e. the settlement date).
15 November 2017
Do you know how to apply the margin scheme to a property sale?
A GST registered entity that sells property as a taxable supply will usually pay GST on 1/11th of the sale price. In contrast, if the margin scheme applies, the seller will only pay GST on 1/11th of the margin.
The margin is usually the difference between the sale price and the purchase price of the property (if the property was acquired on or after 1 July 2000) or the sale price and the property’s value at 1 July 2000 (if the property was acquired before 1 July 2000).
The seller will only be able to apply the margin scheme if the property was originally bought from someone:
- who sold the property as a taxable supply subject to the margin scheme;
- who sold the property as a GST-free going concern (i.e. GST-free supply);
- who sold the property as existing residential premises (i.e. input taxed supply); or
- who was not registered or required to be registered for GST.
Please contact your Nexia Advisor so that we can determine whether the margin scheme applies to your property sale transaction.
11 November 2017
Uber drivers need to be registered for GST but can’t currently qualify for FBT benefits
A recent Federal Court case confirmed that Uber drivers are carrying on a business of supplying taxi travel because an Uber driver is transporting passengers by a vehicle for a fare – even though no taximeter is installed in an Uber vehicle.
Therefore, all Uber drivers - even those with turnover of less than $75,000 – must register for GST and charge GST on the taxi fare they charge.
Uber drivers can claim tax deductions and GST credits for business expenses (e.g. car, fuel, servicing, smartphone and data usage) – and apportion such claims for items purchased for both personal and business use.
The ATO is currently using data matching – by comparing all payments made through a ride sourcing provider (e.g. Uber) to ride sourcing drivers (e.g. Uber drivers) – to check whether such drivers have declared payments as assessable income on their tax returns.
Please note that the current taxi travel FBT exemption that exempts employers from having to pay FBT on travel undertaken by their employees in a taxi to or from work or due to illness of the employee, does not apply to Uber travel. There is currently consultation on this discrepancy and we will keep you updated on any relevant developments.
If you are deriving income from the ride-sourcing economy, please contact us so that we can help you comply with your GST registration, reporting, lodgement and payment obligations.
4 OCTOBER 2017
Directors may be personally liable for unpaid GST
The ATO’s Phoenix Taskforce has been conducting raids on pre-insolvency advisors, investigating whether they are providing advice to struggling companies on how to “phoenix a company” - i.e. where directors of a debt-laden company transfer that company’s assets to a new company (with the same directors) and then liquidate the old company to avoid paying employee entitlements, creditors or outstanding tax liabilities (GST and income tax).
One of the proposals to curb this type of “Phoenixing” behaviour is to extend the director penalty notice (DPN) regime to make directors of companies personally liable to pay a penalty equivalent to the amount of unpaid GST [i.e. similar to the current treatment of outstanding pay as you go (PAYG) obligations and superannuation guarantee (SG) charges].
If this proposal does become law, directors of companies will no longer be able to deliberately avoid the payment of income tax and GST nor exploit the time lag between collecting and paying tax to the ATO. We will keep you updated on any developments in this area.
The ATO recognises that people who participate in phoenix companies harm the economy and attempt to create an un-level playing field with companies that pay their taxes (i.e. phoenix companies can quote less for goods and services in the belief that they won’t pay tax). In this respect, Nexia supports the ATO’s work.
27 SEPTEMBER 2017
No GST on imported services for Australian businesses
From 1 October 2016, Australian businesses importing intangible goods (e.g. professional services or digital products such as downloaded movies, music, apps, games or e-books) from overseas businesses will no longer have to pay GST on such imports – and thereby effectively pay 10% less on such imports (compared to such imports prior to 1 October 2016).
To ensure such Australian businesses are not charged GST, those businesses will need to supply their ABN and a statement that they are registered for GST to the overseas supplier at the time of purchase.
Please come and talk to us if you are an Australian GST registered business that has mistakenly been charged GST on such a transaction. We can assist you to claim a refund of the GST charged.
Note: From 1 July 2017, Australian consumers importing such intangible goods from foreign businesses will have to pay GST on such imports – thereby effectively paying 10% more on such imports.
2 AUGUST 2017
When can a taxpayer request an activity statement early?
Generally, the ATO issues activity statements at the end of the reporting period and the due date for completing and lodging such activity statements is either 21 days (for monthly activity statements) or 28 days (for quarterly activity statements) later
However, the ATO can issue activity statements earlier to allow taxpayers more time to ensure that they meet their lodgement obligations by the due date (e.g. for businesses under administration or if a taxpayer is away because of travel commitments and therefore may not be able to meet the lodgement and payment due date).
However, these options are not available for quarterly taxpayers who have elected to report and pay monthly.
Please let us know if we can assist you to request your activity statements to be issued earlier.
16 AUGUST 2017
Easier way to claim GST input tax credits for small restaurants, cafes or caterers
A restaurant, cafe or caterer with a GST turnover of $2 million or less (GST exclusive) can use a simplified accounting method (e.g. business norms method, stock purchases method or snapshot method) to calculate their net GST liability.
For example, pursuant to the snapshot method, the split between taxable and GST-free trading stock purchases gained from a sample period will be extrapolated over the whole income tax year – thereby obviating the need to keep tax invoices to determine the split.
Such a deemed split will determine the entitlement to GST input tax credits on the acquisition of trading stock – a useful concession if such a business does not have adequate point-of-sale equipment to calculate the breakdown of taxable and GST-free supplies.
Please contact us if you are in the food industry and would like to know more about how using the simplified accounting method can reduce your GST record keeping obligations.
2 AUGUST 2017
When can a taxpayer request an activity statement early?
Generally, the ATO issues activity statements at the end of the reporting period and the due date for completing and lodging such activity statements is either 21 days (for monthly activity statements) or 28 days (for quarterly activity statements) later
However, the ATO can issue activity statements earlier to allow taxpayers more time to ensure that they meet their lodgement obligations by the due date (e.g. for businesses under administration or if a taxpayer is away because of travel commitments and therefore may not be able to meet the lodgement and payment due date).
However, these options are not available for quarterly taxpayers who have elected to report and pay monthly.
Please let us know if we can assist you to request your activity statements to be issued earlier.
26 JULY 2017
When do small businesses qualify for the FBT car parking exemption?
With the small business entity threshold having increased to $10 million aggregated turnover for the 2017 income tax year (up from $2 million aggregated turnover the year before), small businesses can now provide exempt car parking fringe benefits to employees in the 2018 FBT year (i.e. from 1 April 2017 to 31 March 2018) if:
- Either the aggregated turnover or the gross income of the business is less than $10 million in the 2017 income tax year;
- The parking is not provided in a commercial car park; and
- The small business is not a government body, a listed public company (or a subsidiary of a listed public company).
The change in the small business threshold (i.e. from $2 million to $10 million turnover) means that more businesses should now be able to access the various concessions available for small businesses (but note the turnover threshold for businesses accessing the small business CGT concessions remain at $2 million).
5 JULY 2017
GST on imported services and digital products
As mentioned in our earlier top tax tips, from 1 July 2017, overseas businesses with an annual turnover of $75,000 or more that supply services (e.g. architectural or legal services) or digital products (e.g. streaming or downloading of movies, music, apps, games and e-books) to Australian consumers (e.g. individuals not registered for GST) must register for Australian GST.
An Australian GST registered business that purchases such services/products form an overseas business will not be charged GST on such purchases provided the Australian business declares its registration for GST and provides its Australian business number (ABN) to the overseas vendor business.
7 JUNE 2017
Simpler business activity statements (BAS) from 1 July 2017
From 1 July 2017, all small businesses with a GST turnover of less than $10 million will be able to report less GST information on their business activity statement (BAS) to reduce time and costs of GST record-keeping and reporting. Such small businesses registered for GST after 19 January 2017 may start using the simpler BAS reporting method immediately.
Such small businesses will only have to inform the ATO about GST on purchases and total sales (instead of filling in a number of other labels that may not be relevant to the business).
24 MAY 2017
GST registration for non-residents (digital products)
From 1 July 2017, overseas businesses with an annual turnover of $75,000 that supply services (e.g. architectural or legal services) or digital products (e.g. streaming or downloading of movies, music, apps, games and e-books) to Australian consumers (e.g. individuals not registered for GST) will have to register for Australian GST.
Overseas businesses can choose to register for GST by using a simplified method (i.e. where there are no proof of identity requirements but such businesses cannot claim input tax credits) as opposed to the full registration method (i.e. where there are strict proof of identity requirements but such businesses can claim input tax credits).
If you are acting as an Australian agent for such an overseas business making digital sales in Australia, we can assist the foreign business to register for Australian GST.
11 MAY 2017
Due date for lodgement of 2017 FBT return is 22 May 2017
The due date for lodgement and payment of any 2017 FBT liabilities is 22 May 2017 – however, if we lodge your tax return electronically, the due date for lodgement will be 26 June 2017.
Nexia recently released a news update (read here) providing a brief overview of how FBT operates (e.g. which records to keep and what are some examples of fringe benefits) as well as detailing some strategies to reduce an employer’s FBT liability.
Please contact your Nexia Adviser if you would like to discuss how any of these FBT issues may affect your organisation so that we can help you identify potential FBT risks and opportunities.
26 APR 2017
GST on low value goods
Currently an Australian tax resident purchasing goods costing $1,000 or less (i.e. low-value goods) from overseas (e.g. through an online transaction), would not have to pay GST on such a transaction. However, a Bill is before Parliament that proposes to charge GST on such a sale from 1 July 2017 – which will mean that purchases of such low-value goods from overseas will potentially cost 10% more than is currently the case.
The GST impost on low value goods is proposed to only apply to supplies made to Australian consumers (e.g. purchasers not registered for GST or GST registered purchasers that acquired such low value goods solely for private purposes) – importations by Australian businesses will not be subject to the proposed GST impost.
However uncertainty exists on the best means to collect and remit the GST on such transactions. Under the proposed vendor registration model, the overseas seller or overseas operator of an electronic distribution platform system (e.g. Amazon or eBay), will have to register for GST – a potentially unworkable solution from an enforcement perspective.
5 APR 2017
FBT: Out with the old, in with the new
As mentioned in a previous Top Tax Tips, the 2017 FBT year ended 31 March 2017.
Some important FBT thresholds for the new 2018 FBT year (e.g. for the FBT year starting 1 April 2017) include:
- a $8,393 FBT record-keeping exemption threshold (was $8,286 last year); and
- a 5.25% benchmark interest rate to calculate taxable value of car and loan fringe benefits (was 5.65% last year)
The ATO has also set out certain weekly amounts the ATO believes to be reasonable for food and drink expenses incurred by employees receiving a LAFHA (i.e. living-away-from-home-allowances).
Please contact your Nexia Adviser if you would like to discuss your FBT situation (whether the last FBT year or the current year).
29 MAR 2017
The 2017 FBT year is almost at an end
As mentioned in an earlier Top Tax Tips, the 2017 FBT year is about to end on 31 March 2017.
Nexia recently released a client alert providing a brief overview of how FBT operates (e.g. which records to keep and what are some examples of fringe benefits) as well as detailing some strategies to reduce an employer’s FBT liability.
The due date for lodgement and payment of any 2017 FBT liabilities is 22 May 2017 – however, if we lodge your tax return electronically, the due date for lodgement will only be 26 June 2017.
Please contact your Nexia Adviser if you are uncertain whether a fringe benefit exists and how fringe benefits are taxed especially whether any concessions are available. By doing so, we can help you identify potential FBT risks and opportunities for you.
Easier way to claim GST input tax credits if you are a small restaurant, cafe or caterer
A restaurant, cafe or caterer with a GST turnover of $2 million or less (GST exclusive) can use a simplified method to determine their entitlement to GST input tax credits on their acquisition of trading stock (i.e. by basically taking a snapshot of trading stock purchased during a sample period, determining the split between taxable and GST-free trading stock purchases, and extrapolating this split over the whole income tax year – obviating the need to keep all tax invoices to determine the split).
Although this particular simplified method can only be used by small food retailers to calculate the amount of input tax credits on trading stock purchases, other GST simplified accounting methods may be available if you are a small business.
8 MAR 2017
Are you FBT ready?
Employers must pay fringe benefits tax (FBT) when certain non-cash benefits (called fringe benefits) are supplied to their employees (or associates of the employees) in lieu of paying salary or wages. The 2017 FBT year is from 1 April 2016 to 31 March 2017.
Nexia will soon be releasing a client alert providing a brief overview of how FBT operates (e.g. what records must be kept and what are some examples of fringe benefits) as well as detailing some strategies to reduce an employer’s FBT liability. Please keep an eye on our website.
Please contact your Nexia Adviser to ensure that all fringe benefits are identified and whether FBT can be reduced by using legitimate alternatives in the FBT law.
Proposal to charge GST on low value imports from 1 July 2017
Currently an Australian tax resident purchasing goods costing $1,000 or less (i.e. low-value goods) from overseas (e.g. through an online transaction), does not have to pay GST on such a transaction. However, there is currently a Bill before Parliament that proposes to charge GST on such a sale from 1 July 2017 – which will mean that purchases of such low-value goods from overseas will potentially cost 10% more than what is currently the case.
The GST impost on low value goods is proposed to only apply to supplies made to Australian consumers (e.g. consumers not registered for GST or GST registered consumers that acquired such low value goods solely for private purposes). Importations by Australian businesses will not be subject to the proposed GST impost.
Nexia Australia will keep you updated on the progress of this legislation.
22 FEB 2017
Uber drivers need to be registered for GST
A recent Federal Court case confirmed that Uber drivers are carrying on a business of supplying taxi travel because an Uber is transporting passengers by taxi for a fare – even though there is no taximeter installed in an Uber. This decision means that Uber drivers must declare the income they earn and that tax deductions will be allowed to the extent that expenses have been incurred to derive that income.
Therefore, all Uber drivers will need to obtain an ABN and all drivers - even those with gross annual income of less than $75,000 - will have to register for GST and have to charge GST on the taxi services they provide.
FBT & family assistance changes from 1 January 2017
From 1 January 2017, the entire grossed-up value of fringe benefits that is reported on an employee’s PAYG payment summary will be used to calculate an employee’s adjusted taxable income for purposes of determining an individual’s eligibility for family assistance payments.
These changes will not apply to employees of certain NFP institutions who are eligible for FBT exemptions (e.g. registered health promotion charities, registered public benevolent institutions, some hospitals and public ambulance services) because their reportable fringe benefits will still continue to be adjusted downwards.
Note that from 1 July 2017, these changes in calculation of the adjusted taxable income will also apply for the purposes of determining an individual’s eligibility for the net medical expenses offset, dependant tax offsets and seniors and pensioners tax offset.
8 FEB 2017
GST tips for exporters & importers
Exporters need to carefully manage their international distribution process lead times to ensure that they don’t lose out on the concessional GST treatment afforded to exports (i.e. many exports are GST-free which means that no GST is payable on the sale price of exports but the exporter can claim GST credits on the purchase price) if more than 60 days pass before exporting goods (measured from the earlier of the date the supplier either receives payment for the goods or issues an invoice for the goods).
In contrast, businesses that import goods into Australia will usually have to pay GST to the Department of Immigration and Border Protection before the goods are released (unless is the goods are subject to a deferred GST scheme where the payment of GST is deferred).
14 DEC 2017
Transitional rules for GST on supply of digital products to consumers
As mentioned in an earlier Top Tax Tips, from 1 July 2017, Australian consumers importing intangible products and services (e.g. movies, music, apps, games, e-books, architectural or legal services or more) will have to pay GST on such imports (i.e. effectively such consumers will have to pay 10% more on such imports).
If a consumer were therefore to subscribe to a 12 month Netflix subscription on 1 December 2016, the 5 months of July, August, September, October and November 2017 will effectively cost 10% more than the previous 6 months (because of the imposition of GST from 1 July 2017 on such digital supplies).
16 NOV 2016
Are your capital gains tax (CGT) affairs in order?
The disposal of a capital asset (e.g. real estate or shares if you are not a property developer or share trader) acquired after 20 September 1985 will result in either a capital gain or loss (equal to the difference between the asset’s cost and the disposal proceeds).
If a capital gain is made (i.e. the disposal price exceeds the acquisition price), that gain will form part of your income but may be discounted under the concessional CGT regime. But the discounts are not always available (e.g. companies are not entitled to the 50% general CGT discount, nor may entities claim the small business CGT 50% active asset concession on the disposal of assets if they are not used in the business or the $2 million turnover/ $6 million net asset value tests are not satisfied).
If a capital loss is made (i.e. the acquisition price exceeds the disposal price), that loss can only be deducted against capital gains (not against ordinary income such as salary, business or investment income). The ATO’s attention is alerted when capital losses have been artificially created to deduct against capital gains or where capital losses have been reclassified as revenue losses.
Because CGT assets are usually of significant value, the tax costs can also be significant. We are pleased to give certainty on the CGT consequences of disposing of capital assets.
9 NOV 2017
Are you affected by recent changes to GST?
From 1 October 2016, Australian businesses importing intangible goods (e.g. professional services or digital products such as downloaded movies, music, apps, games or e-books) from overseas businesses will no longer have to pay GST on such imports – and thereby effectively pay 10% less on such imports (as compared to such imports prior to 1 October 2016).
However, from 1 July 2017, Australian consumers importing such intangible goods from foreign businesses will have to pay GST on such imports – and thereby effectively paying 10% more on such imports.
Furthermore, currently an Australian tax resident purchasing goods costing $1,000 or less (i.e. low-value goods) from overseas (e.g. through an online transaction), does not have to pay GST on such a transaction. However, from 1 July 2017, the Government proposes that GST will be charged on such a sale – which means that purchases of such low-value goods will potentially cost 10% more than what is currently the case.
2 NOV 2016
The ATO’s extensive use of technology to check if taxpayers are tax compliant
The ATO is using data matching to ensure taxpayers are meeting their taxation obligations by examining data from:
- Share transactions (e.g. 61 million transactions scrutinised to ensure taxpayers meet their lodgement, reporting of capital gains/trading income and payment of tax obligations);
- Credit and debit card payments to merchants (e.g. to identify liquidated or de-registered businesses that continue to trade as well as businesses operating in the “cash economy”); and
- Online selling data of taxpayers who sold goods and services online totalling $12,000 or more in a year (e.g. to identify individuals carrying on a business but not meeting their registration or lodgement requirements).
- The ATO will retain this data for a period of 5 years from receipt of the verified data files from the different sources.
With the rapid advance of digital technology, the ATO’s data matching has become very sophisticated. We cannot emphasise enough the importance of advising us of all transactions during the year to ensure their correct tax treatment. We recommend seeking our advice before embarking on a significant transaction to ensure unexpected income tax, capital gains tax, GST or fringe benefits tax outcomes.
26 OCT 2016
New simplified method to calculate FBT on fleet cars
From the 2017 FBT year (i.e. from 1 April 2016 to 31 March 2017 and onwards), employers with a fleet of 20 or more cars can use a simplified method to calculate the business use percentage of their vehicles thereby simplifying their fringe benefits calculations..
Under this simplified method, the employer can apply an average business use percentage – extrapolated from log book figures from at least 75% of their fleet - to calculate the taxable value of the car fringe benefit.
Please contact us if you have a car fleet to ascertain ways of reducing FBT and related administrative burdens.
7 SEP 2016
FBT concessions for the not-for-profit sector
Not-for-profit organisations providing benefits to employees during an FBT year (i.e. 1 April to 31 March) are reminded to register for fringe benefit tax (FBT) since they may potentially be entitled to either:
- a rebate (e.g. certain non-government organisations may be able to reduce their FBT liability by 49% of the gross FBT payable, subject to a $31,777 capping threshold - for the 2016 and 2017 FBT years); or
- an exemption (e.g. certain organisations providing benefits to its employees are exempt from FBT if the total grossed-up value of certain benefits for each employee is equal to or less than either $31,177 or $17,667 – for the 2016 and 2017 FBT years).
These are only some of the many issues affecting the not-for-profit sector in Australia - please read our Not-for-Profit capability statement to discover more ways we can help you if you are operating in the not-for-profit sector.
24 AUG 2016
GST may apply if you are receiving Government grants
Taxpayers carrying on an enterprise are reminded that any grants (that were received for making a taxable supply) should be included in calculating their GST annual turnover to ascertain whether they must register for GST. The GST annual turnover threshold is $75,000 (for a business or enterprise) or $150,000 (for a non-profit organisation).
If the threshold is exceeded, the entity must register for GST in the month they receive the grant (and must generally stay registered for at least 12 months).
Please contact us if the receipt of a grant may have resulted in the threshold being exceeded or if you need assistance in applying for government grants, or are interested in finding out what grants are available for your business.
10 AUG 2016
Easier way to claim GST input tax credits if you are a small restaurant, cafe or caterer
A restaurant, cafe or caterer with a GST turnover of $2 million or less (GST exclusive) can use a simplified method to determine their entitlement to input tax credits on their acquisition of trading stock (i.e. by basically taking a snapshot of trading stock purchased during a sample period, determining the split between taxable and GST-free trading stock purchases, and extrapolating this split over the whole income tax year – obviating the need to keep tax invoices to work out the split).
Although this particular simplified method can only be used by small food retailers to work out the amount of input tax credits on trading stock purchases, other GST simplified accounting methods may be applicable to your situation if you are a small business.
