BITCOIN All you need to know

All you need to know about Bitcoin
Bitcoin is spreading to every corner of the world and transforming the very essence of monetary transactions.

Bitcoin is a five-year old computer-driven virtual currency traded on peer-to-peer networks. The currency is largely unregulated, nor is it managed by a central bank, instead relying upon an open source cryptographic protocol for the creation, storage and transfer of currency. It is highly volatile, having fluctuated from lows of $US2 to highs above $US1,200. At the time of writing, one Bitcoin was worth around $US590. 

The question is however, is it safe to use Bitcoin in business transactions and what are the tax implications of doing so? A few things to keep in mind are:  Read more…

BUILDERS Taxable payments reporting due 21 July

Businesses in the building and construction industry, take note
21 July 2014 deadline to report total payments made to each contractor you enlisted the services of in 2013-14.

You will need to report these payments to the Tax Office on the Taxable payments annual report.

The taxable payments reporting system was initially introduced to address longstanding compliance issues by contractors in the building and construction industry. Tax compliance issues that were identified included non-lodgement of tax returns, income being omitted from tax returns that were lodged, non-compliance with goods and services tax (GST) obligations, failure to quote an Australian business number (ABN), and use of an invalid ABN.

The pointers below will help you adequately prepare for the looming deadline.

Work out if you need to report
You need to report if all the following apply:  Read more…

HOME OFFICE Which expenses can you claim?

If you operate your business in full or in part from home, you may be able to claim a deduction for your costs.
Deductions may be claimed if you are required to use your own computer, phone or other electronic devices for work purposes.

There are however rules you need to adhere to and records you need to keep. The deductions you may be able to claim are for:
  • occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums
  • running expenses which can include:
  1. home office equipment such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more)
  2. work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you are on call, or have to phone your employer or clients regularly while you are away from your workplace
  3. heating, cooling and lighting
  4. the costs of repairs to your home office furniture and fittings, and
  5. cleaning expenses.

Being able to claim these expenses hinges on whether your home is your place of business and if you have an area set aside exclusively for business activities.  Read more…

ATO continues to audit, review and investigate individuals, businesses and self-managed super funds (SMSFs) against their industry benchmarks
Sophisticated data matching technology enables detailed cross-referencing of information from an assortment of government departments, which increases the frequency and scope of ATO's audits, reviews and investigations.

Should you face an audit, review or investigation instigated by the ATO or any other government agency (e.g. Work Cover, State Revenue Office) the professional costs incurred are often significant. As such, GJB can respond to queries to provide information to explain your position if you find yourself or your business under the ATO's scrutiny.

With audits now so commonplace, GJB continues to have in place a tax audit insurance arrangement, underwritten by AAI Limited trading as Vero Insurance[1] to cover our professional fees incurred, up to a prescribed limit, for the preparation of material and management of any response process. This provides cover for your latest lodged return and all previous years' returns.

GJB's audit insurance cover is not automatic. Read more…

DEBT TAX What flow-on for business?

The "debt tax" has flow-on effects for businesses
Announcement of three year Temporary Budget Repair Levy on high income individuals will result in top marginal tax rate increasing 47% to 49%.

However there are a number of other taxes that are based on calculations that include the top personal tax rate, and so it is expected that these will also be increased for the same period that the debt levy is in place - from July 1, 2014 until June 30, 2017 (a different two year period applies for the increase in the FBT rate; see below).

Businesses which may be affected will need to plan accordingly in order to not be caught on the back foot - for example, the increase in the Medicare levy from the 2013-14 Federal Budget (from 1.5% to 2%) caught many off guard in that there were consequential effects to other tax rates that, then as now, relied on the top marginal tax rate as a basis for calculation.

There are some income tax rates that are automatically linked to the top marginal rate. For example, trust income to which no beneficiary is made "presently entitled" would be taxed at 49% for the relevant income years to which the debt levy applies.

Based on the explanatory memorandum to the relevant Budget bills, the taxes that follow the top marginal rate are summarised in the table that appears below.  Read more…

INSTANT ASSET WRITE-OFF Still uncertain?

Guidance on how to deal with instant asset write-off uncertainty - at last
As most small businesses know, the previous government introduced a number of small business tax relief measures as part of its Mineral Resources Rent Tax (MRRT, or mining tax) legislation.

These included:
  • the ability to instantly write off asset purchases up to $6,500 in value (up from the existing $1,000 relief)
  • instant write-off of the first $5,000 spent on a motor vehicle plus 15% of the rest of the purchase price
  • ability for small companies that incur tax losses to carry those losses back against profits of a previous year, with a resulting refund of tax paid in that previous year.

As part of the repeal of the mining tax, the current government proposed to also abolish these measures, with effect from January 1, 2014. However the mining tax repeal has not passed the Senate, which means that these measures have been in limbo - meaning that small businesses have also been left in limbo as far a knowing what to do about them from a practical tax treatment point of view. Currently these concessions are in the law, but should the Senate pass the legislation after July 1, they would retrospectively disappear, effective from January 1.

The continuing uncertainty for small businesses has not been helpful, and while the Federal Budget would have been an ideal opportunity to provide clarity, no such guidance was forthcoming.

The government's failure to address these concerns for small businesses has led to the Tax Office having to step up to the plate and, sure enough, in the week after the Budget it provided guidance on how businesses should deal with these measures pending either the passing of the mining tax repeal law or a revision of the proposals. 

The Tax Office advises that should the mining tax (and so the concessions) be repealed, taxpayers will have to amend any tax returns already lodged that have claimed the higher rate of instant asset write off, accelerated vehicle depreciation and loss carry-backs, but - crucially - has advised that businesses that have made such claims based on existing law will not have imposed on them tax shortfall penalties or shortfall interest upon amendment.

This means that small businesses which have bought qualifying assets or will make a tax loss in the current year can now take advantage of the existing measures confident that the worst that can happen is they will have to recalculate their tax based on the new law but that they won't be hit with interest and penalties. 

Speak with GJB on 02 9686 3130 to find out more.

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EOFY PLANNING 8 tactical business deductions

Tactical business deductions for your end-of-year tax planning
Various legitimate ways minimise #yourbusiness tax liability, with various straightforward tax deductions that most can utilise.

The general rule is that you can claim deductions for expenses your business incurs in its task of generating income. Many of these deductions are obvious - rent, materials, supplies and so on.

But for all the obvious possible deductions, there are also some very often overlooked and not so obvious tax deduction tactics that you may be able to take advantage of in the run-up to the end of this financial year. These may not suit every business, so check with us to ensure they are applicable to your situation.  Read more…

Draft legislation tied to repeal of Minerals Resource Rent Tax (MRRT) cleared by lower house of Parliament
If fully legislated, the present instant tax write-off for "individual" assets costing less than $6,500 (GST excl) will be reduced to $1,000.

This measure is proposed to apply retrospectively from January 1, 2014 once made law.

Plant & equipment
From July 1, 2012 small businesses (with a turnover of less than $2 million a year) that use a small business depreciation pool have been entitled to claim an immediate deduction for plant and equipment costing less than $6,500. The draft legislation that has cleared Parliament means that this immediate deduction is to reduce to $1,000 for all assets acquired after December 31, 2013.

To have been eligible for the higher $6,500 immediate deduction for the 2012-13 financial year, the asset must have been first used or installed ready for use, on or before the last day of 2013. This means you could not write off the asset if you had simply placed an order, or even if you had pre-paid expenditure to acquire the asset by the end of the year. The actual physical installation or taxable use of the asset determined whether you could write it off.

The $6,500 immediate deduction also applied to improvements that have been made to existing items of plant and equipment, but again provided that the cost of these improvements was incurred on or before the relevant year's end.  Read more…

INCREASED DEDUCTIONS for simply doing your tax?

Most business owners know they can claim a deduction for paying a registered tax agent to prepare and lodge their tax return
However many may not know that the regulations that provide for this deduction operate in a different way compared with other tax rules that allow expenses.

Why should taxpayers care which particular rule allows them to get a deduction for paying their accountant? Because in this case the specific regulations operating here create unique opportunities for business owners, especially where their affairs involve multiple taxpayers.

What are the basics?
Before discussing how to use this rule to your advantage, let's look at the basics. If your tax agent issues you an invoice for a) managing a taxpayer's tax affairs, or b) complying with an obligation imposed on another taxpayer by a Commonwealth law (insofar as that obligation relates to the tax affairs of that entity), then, as long as the accountant is a registered tax or BAS agent (or legal practitioner) a deduction can generally be claimed by the person on the invoice. This rule is subject to a number of conditions (most of which are common sense, and more specific details on these conditions can be obtained from this office).

Don't I need to earn assessable income?
No. Unlike most expenses that require a taxpayer to earn assessable income before they are able to make a claim, this type of expense can be claimed even where a taxpayer earns absolutely no assessable income. In other words, this type of expense can create a carried forward tax loss for an entity that can be offset against income from future financial years.  Read more…

ATO AUDITS In danger of triggering one?

Ten ways to trigger an ATO audit
As the financial year-end nears, the Australian Taxation Office (ATO) expects to data-match over 640 million transactions to tax returns this year.

With increased ATO scrutiny, private businesses are in danger of triggering an ATO audit, regardless of whether or not they have done anything wrong.

While ATO audits are now a well-recognised part of our tax system, they are still expensive and disruptive, and there are a number of ways in which a private business may trigger one:

1. Financial performance out of kilter with your industry
With the ATO statistically analysing tax returns, if your performance is inconsistent with your industry peers, this can be an indicator of tax issues such as unreported (cash) income, transfer pricing and other issues.

2. Hiccups in paying employee super
Employees who complain to the ATO that their employer has not paid them the correct amount of super, or not paid it on time, certainly trigger ATO's interest. Often what starts as a review of superannuation guarantee obligations often escalates into an audit of income tax, GST and fringe benefits tax (FBT) if the process isn't properly managed.  Read more…