EOFY Checklist

Your essential EOFY checklist – No one wants to pay more tax than they need to or face unnecessary risks. We’ve compiled a list of our top tips for you.

Donate – If you are going to donate to charity, now is the time. Any donations you make to deductible gift recipients can be deducted this year. Remember, if you received something in return for the money, like goods purchased at a charity auction, you may not be able to claim a deduction for the full payment. There are special rules dealing with this situation that need to be taken into account.

Work related deductions – you can claim a deduction for business expenses you have incurred that have not been paid by your employer. But be careful, you need to be certain that what you are claiming is a legitimate business expense and able to be claimed. For example, you cannot claim the cost of dry cleaning the clothes you wear to work unless it is protective clothing, a uniform required by the business, or occupation specific clothing (like the checked pants some chefs wear).
To be legitimate, the expense must be for something you need to do your job. Items like laptop bags have been in the news lately because some handbags can be used to carry laptops. This does not mean that your Gucci bag is suddenly deductible. It is really up to you to justify the deduction that you are claiming, keeping records of the actual usage of the item can help with this.

Home office expenses – if you work from home as part of your employment, you may be able to claim items such as phone expenses, running costs for your home, and equipment. Just bear in mind that expenses need to be in proportion to your use of the home for work purposes. If your home is a place of business and you are entitled to claim a deduction for interest expenses or rent, then this will generally impact on your ability to claim the full main residence exemption from CGT when you sell the home.

Earning extra cash from AirBNB style services – The tax treatment of what you earn by renting all or part of your house through AirBNB and similar services is the same as any other residential rental property arrangement. You must include the rental income in your income tax return, but you can also claim tax deductions for expenses associated to the rental, such as the interest on your home loan, professional cleaning, fees charged by the facilitator, council rates, and insurance. Expense claims need to be in proportion to the rental, that is, how much of the house is used and for how long. Also, beware that this type of activity can restrict your ability to claim the CGT main residence exemption when you sell the property if it is or has been your home.

Uber – If you drive for Uber or a similar service, the income you earn needs to be declared on your income tax return. Plus, you need to be registered for GST. You can claim expenses for your car that relate to transporting passengers (relative to the kilometres travelled with passengers).

Danger zones – Expense claims that are high on the Australian Taxation Office (ATO) hit list include:

·Travel expenses – Problems arise when people make claims for expenses that they did not actually incur. Typically, this happens when someone receives an allowance for travel but does not spend it (they might stay with family or friends instead). While the ATO publishes some reasonable rates each year for food and accommodation expenses, these only provide limited relief from the full record keeping rules. You cannot claim a deduction for the ATO reasonable rate amount if you spent less than this on food and accommodation.

· Self-education expenses – Any study you claim as self-education must be connected to the income you are currently earning (either to maintain or improve your specific skills or knowledge) or is likely to result in increased income from existing income earning activities. Merely doing a course while working full time does not make the course deductible. Be careful of excessive claims for travel overseas and luxury courses. You need to prove that these expenses are essential to your current work.
You can no longer claim – If you are a property investor, you can generally no longer claim the cost of travelling to and from your investment property.

Capri Financial Services

25/06/2018 by Walsh Accountants

The post EOFY Checklist appeared first on Home.

What’s Changing on 1 July 2018?

Individuals

Personal tax bracket changes – The top threshold of the 32.5% personal income tax bracket will increase from $87,000(¥9,570,000) to $90,000(¥9,900,000)*.
Introduction of the Low and Middle Income Tax Offset* – providing a tax offset for those with taxable income of up to $125,333(¥13,786,630).

GST on property developments and residential subdivisions – The way GST is collected on sales of newly constructed residential properties or new subdivisions will change from 1 July. Purchasers will be required to remit the GST directly to the ATO as part of the settlement process. If you are buying a property, it is essential that you check the details to ensure that these new requirements have been managed (see this issue in Business also).

Business

Single touch payroll – Employers with 20 or more employees at 1 April 2018 must use standard business reporting-enabled software from 1 July 2018 to report payments such as salaries and wages, PAYG withholding and superannuation. Single touch payroll is expected to be compulsory for businesses with 19 or less employees from 1 July 2019.

The $20(¥2,200)k instant asset write – off for small business has been extended until 30 June 2019.

GST on low value goods – GST will apply to overseas sales of goods supplied to Australian consumers with a value under $1,000(¥110,000).

GST on property developments and residential subdivisions – The way GST is collected on sales of newly constructed residential properties or new subdivisions will change from 1 July. The vendor will no longer collect and remit GST on the purchase price of the residential premises. Instead, the vendor must notify the purchaser in writing that the GST needs to be paid to the Commissioner and advise the amount that must be paid. In most situations, the amount will be 1/11th of the contract price.

Where the margin scheme is used, it is 7% of the contract price. Where the transaction is between associates, it is 10% of the GST-exclusive market value. Notification rules will also apply to the vendor, even if the transaction does not trigger a GST liability.

R&D changes* – the way the R&D tax incentive is managed will change with caps introduced on cash rebates and for large companies, a refocussing of R&D to high intensity R&D activities.

Changes to the Wine Equalisation Tax – the rebate cap will reduce from $500,000(¥55,000,000) to $350,000(¥38,500,000) and the eligibility criteria tightened.

Significant global entity definition change* – Special reporting requirements are in place for significant global entities (SGE) – large global entities with revenues in excess of $1(¥110)bn or a member of their group. Many smaller companies that are related to or subsidiaries of these large entities are also affected. This definition will be broadened further to include members of large multinational groups headed by private companies, trusts and partnerships; and members of groups headed by investment entities.

Superannuation

Event based reporting for SMSFs – A new reporting regime commences for SMSFs. All SMSFs must report events that affect their members’ transfer balance accounts (for example, when an SMSF member first starts to receive a pension from their fund). Timeframes for reporting are determined by the total superannuation balances of the SMSF’s members. Where all members of the SMSF have a total superannuation balance of less than $1 million(¥110,000,000), the SMSF can report this information at the same time as the annual return. SMSFs that have any members with a total superannuation balance of $1 million(¥110,000,000) or more must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.

Carry forward concessional contributions – people with super balances below $500,000(¥55,000,000) will be able to rollover their unused concessional caps for up to 5 years. Unused cap amounts can be carried forward from the 2018-19 financial year; which means the first opportunity to use these new rules will be 2019-20.

Downsizer contributions – if you are over 65, have held your home for 10 years or more and are looking to sell, you might be able to contribute some of the proceeds of the sale of your home to superannuation.

First home saver scheme – First home savers are able to withdraw voluntary, after-tax superannuation contributions they have made to put towards their first home.

Changes to protect employees against inadvertent breaches of concessional caps* – Individuals whose income exceeds $263,157(¥28,947,270) and have multiple employers will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG).

*Change has been announced but has not become law at the time of writing.

Capri Financial Services

25/06/2018 by Walsh Accountants

The post The New Financial Year – Are You Ready? appeared first on Home.

Superannuation Strategies for Year End Planning

With so many changes to Superannuation, it is important you take the time to review your current strategies before the beginning of the new financial year. Making changes to your strategies may help to facilitate the new rules which took effect from 1 July 2017 and significantly benefit your superannuation savings.

Salary Sacrifice

For employees, salary sacrificing is a popular and tax effective strategy for boosting retirement savings. From July 1 2017, the general limit for concessional contributions is $25,000(¥2,750,000).
When planning your salary sacrifice strategy, you need to ensure you deduct what SG contribution amount your employer will make on your behalf because the concessional contribution limit applies to employer SGC as well as your sacrificed amount. If you exceed the contribution cap, you will pay tax at your marginal rate; plus, an ATO interest charge on the excess amount.

Self-employed / Tax Deductible Contributions

From July 1 2017, most individuals can claim a tax deduction on personal super contributions. This is a popular strategy for those who are self-employed or those who are making excess contributions on their own behalf as their employer does not provide for salary sacrifice arrangements. You need to take into consideration your total deductions for the year. Regardless of how much you contribute, you can only claim an amount that reduces your tax liability to zero. If you think this may be an issue for you, be sure to give your accountant a call to discuss.

Spouse Super Contributions

If your spouse earns less than $37,000(¥4,070,000) this financial year, you may be eligible to make a superannuation contribution on their behalf and claim a tax rebate up to $540(¥59,400). If you’re claiming a spouse rebate, this will make your spouse ineligible for the Government Co-contribution payment (individuals earning less than $36,813(¥4,049,430) with a contribution of at least $1000(¥110,000) into their fund are entitled to a $500(¥55,000) Government Co-contribution) so you need to work out which strategy works best for you.

Account-Based Pensions

If you’re retiring this year and commencing a pension from your super, you may be interested to know that pensions established after 1st June can have payment deferred until after 1 July. This is a useful strategy if you don’t need income until after the new financial year. If you are turning 60 during the year, the pension can be structured so that actual payments won’t commence until after age 60 when the payment will be tax free. This is all dependent on your cashflow so personal circumstances will need to be brought into consideration.

Existing Superannuation Pension

If you have an existing superannuation pension, please make sure that you meet your minimum pension obligations before 30 June otherwise the ATO may declare your pension never existed for the financial year and you will lose your tax-exempt status. If this declaration is made, any payments you have received during the income year will be treated as lump sum payments and taxed accordingly.

Transition to Retirement Pensions

If you are over preservation age and still working you can access your super as a non-commutable income stream – referred to as a “Transition to Retirement” (TRIS) pension.
Previously, TRIS pensions were treated as tax exempt but from 1 July the tax structure changed, and earnings are now taxed as if the funds were in accumulation. If you are drawing a TRIS pension, it is important you do not exceed the 10% maximum limit for pension payments.
With the recent changes, you may wish to speak to us before commencing a TRIS pension to see if the strategy is still of value to you.

Small Business CGT Concessional & Super

If you’re a small business owner and you are thinking about selling the business &/or retiring, on sale of business assets you may be eligible to use one of the small business capital gains tax concessions thereby reducing or even eliminating the CGT that may have resulted from the sale of the assets. Some or all proceeds can be contributed into super as part of your retirement plan. There are two small business tests to meet the definition to take advantage of this concession – either

1. Aggregated turnover per annum of less than $2(¥220)million
2. $6(¥660)million maximum net asset value of business and associated entities

If you are in this position and would like to ascertain if you qualify, please be sure to call your accountant to discuss.

Self Managed Superannuation Funds:

From an Administration point of view, now is the time for SMSF Trustees to start thinking about preparing for the beginning of the new financial year. You will need to ensure all your minutes of meetings are up to date, contributions are accounted for, and minimum pension payments will be paid prior to 30 June. Leaving these things to the last minute could lead to unintended issues such as the loss of tax benefits if a contribution is not counted in the right financial year.

What deductions can your SMSF generally claim?

• Many insurance premiums
• Ongoing portfolio management fees incl. professional fees for ongoing services
• Ongoing accounting/administration/audit fees
• ATO/APRA lodgement fees
• Costs to upgrade the trust deed necessitated by legislative/regulatory changes

Does your SMSF have a Limited Recourse Loan (LBRA)? Trustees should check the terms of any related party loans they have with the SMSF to ensure the arrangement is being maintained in commercial terms. As interest only payments are no longer allowed, you will need to ensure that repayments are now being made on principal and interest terms. Trustees were required to take steps to ensure arms-length dealings are being met, or unwind the arrangement, by 31st January 2017. If you have not reviewed your LBRA or have any concerns, please contact us immediately to discuss.

Capri Financial Services

25/06/2018 by Walsh Accountants

The post End of Year Planning Strategies for your Superannuation appeared first on Home.