If you’re in business, you need to know about the PPSR

22 January 2020

There is a simple step that many businesses can take to better manage the risk that can attach to certain assets.

Not so many years ago, a new scheme was introduced, which also established a national register, that could affect anyone who answers “yes” to any of the following scenarios — are you in business, and do you:

  • sell goods on retention of title terms?
  • hire, rent or lease out goods?
  • buy or sell valuable second-hand goods or assets?
  • want to raise finance using stock or other assets as collateral?
  • work as an adviser to clients who conduct these activities?

As you will gather from the very wide-ranging scenarios listed above, the scheme (the Personal Property Security Register, or PPSR) can potentially cover a significant proportion of Australian business.

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CGT when spouses have different main residences

7 January 2020

It can sometimes be the case that spouses can have different main residences at the same time. When this occurs, special CGT rules apply to in effect provide only one CGT main residence exemption over this period. However, important decisions and choices may need to be made to optimise the tax outcome in this case (or avoid an adverse outcome).

While in most cases spouses will have a single main residence in which they live together, there may be times when they are separated, for example due to work commitments, where they have two different main residences over the same period.

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Three wise FBT tips for Christmas

10 December 2019

Employers know that popping a champagne cork or two to celebrate the festive season lets staff know their efforts are appreciated, but the well-prepared business owner will also know that a little tax planning can help ensure that it’s not the business that ends up with the FBT hangover.

Three benefits generally provided for the festive season, rather than gold, frankincense and myrrh, typically include:

  • entertainment (that is, a Christmas party)
  • gifts to employees, (and even their family), and
  • cash bonuses.

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CGT exemption on inherited homes

9 December 2019

Inheriting a home or a legal interest in one could be the largest windfall gain that many Australians ever experience. From a tax law perspective, when someone dies a capital gain or loss does not apply when a property passes:

  •  to the deceased person’s beneficiary
  • to the deceased person’s executor or other legal personal representative (LPR), or
  • from the deceased’s LPR to a beneficiary.

While generally no CGT applies when assets are distributed to beneficiaries, there may be CGT implications when the executor or beneficiary sells the inherited asset to a third party.

Selling an inherited property
There are different factors that influence whether CGT will apply, including whether the asset was a pre-CGT asset or not. Assets acquired before 20 September 1985 (when CGT was introduced) are considered pre-CGT assets.

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Fictions (and facts) about work expense deductions

12 November 2019

There can be varied sources for some of the myths about tax deductions —pub-talk, BBQ-banter, hairdresser-homilies, what-your-taxi-driver-just-heard and many others. We sort out fact from fiction.

This year’s tax time saw media reports about various outlandish tax claims — for example the ATO being faced with claims for dental expenses, gambling losses, Lego sets, sunscreen (and an umbrella) for cigarette breaks, and even the cost of a wedding reception (all rejected, by the way).

How certain myths are started about what can or can’t be claimed on tax is anyone’s guess, but it is these snippets of misinformation about allowable tax deductions that can lead unaware taxpayers to make incorrect claims — and get the taxman’s attention.

Here are some of the most common:

Fiction: Everyone can automatically claim $150 for clothing and laundry, 5,000km under the cents per kilometre method for car expenses, or $300 for work-related expenses, even if they didn’t spend the money.

Fact: There is no such thing as an “automatic” or “standard deduction”. Substantiation exceptions provide relief from the need to keep receipts in certain circumstances. While you don’t need receipts for claims under $300 for work-related expenses, $150 for laundry expenses (note: this is for laundry expenses only and does not include clothing expenses) or if you are claiming 5,000km or less for car expenses under the cents per kilometre method, you still must have spent the money, it must be related to earning your income, and you must be able to explain how you calculated your claim.

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Tax and the kids’ savings

28 October 2019

If a child is under the age of 18, and they earn income on their savings account, remember that the ATO considers that the person who “owns” the interest depends on who uses the funds of that account (no matter what type of account it is or the name of the account holder).

You need to consider:

  • who provides the money, such as the initial and ongoing deposits into the account, and
  • who decides how the money is spent, regardless of who it is spent on.

In other words, if you provide the money and spend it as you like, you must include the interest in your own tax return.

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Tax when you’re headed overseas

15 October 2019

Most people’s “to-do” list when they are planning a trip overseas will likely include items such as travel insurance, phone chargers or taking photos of their passport — but probably the last thing on anyone’s minds will be their likely tax situation before, during or after that trip-of-a-lifetime.

However a few simple considerations, taken in the context of your personal circumstances, may end up making quite a difference to your final fiscal outcome.

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Business trading structures: What’s best for your business?

11 September 2019

When you have plans for starting a new business, one of the central decisions is which business trading structure will work best for your venture.

The general problem however can be that there are both pros and cons with the main options available, so considerations need to be given with regard to the overall situation as well as the specific conditions presented with any business venture. To explain the options, we can look at one example that has typical conditions found in many businesses.

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Keeping busy — but is it just a hobby, or are you in business?

28 August 2019

It is important to understand the differences between a hobby and a business for tax, insurance and legal purposes among other things. For one thing, there will be certain tax and other obligations that start once you are in business.

However it’s a myth that there is a dollar threshold to be in a business (some people can have very expensive hobbies). What matters is whether, as a whole, your activity is “commercial”, with an aim to make a profit. Once you are in business, there are dollar thresholds that can affect what you can claim for tax purposes.

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