Christmas and the Taxman

28 November 2021

When do employee gifts and celebrations attract fringe benefits tax (FBT)? And when are they exempt?

Christmas is traditionally a time of giving – including employers showing gratitude towards staff for a job well done. However, Christmas parties and gifts can attract the attention of the Taxman.

In certain circumstances, an employer can hold a Christmas party for staff and the cost of the party be exempt from Fringe Benefits Tax (FBT).

Take, for example, an employer who holds a Christmas party at a restaurant for employees and their partners and, apart from perhaps the Melbourne Cup, it is the only social function they provide for employees each year.  Where this is the case, the party is very likely to be exempt from FBT provided the per-head cost (dinner and drinks) is kept to less than $300 per person. To enjoy this exemption, the employer must use the “actual method” for valuing FBT meal entertainment.

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Avoid common mistakes in your business return, and include appropriate income

26 October 2021

We know you want to get your tax right, so it may help you this tax time to know how to avoid making what the ATO has found are the most common tax mistakes.

To do this make sure you have:

  • declared all income, including cash and online sales, dividends, interest, capital gains or one-off transactions such as selling equipment
  • accurately recorded the value of goods taken for private use and directors’ fees or other money drawn out of your business
  • correctly apportioned expenses that are used both privately and in your business, including adjusting your rent expenses if you store personal assets at your business premises
  • only claimed expenses you’re entitled to claim (for example capital improvements can’t be written off as a repair)
  • correctly claimed any business losses.

It’s important to have good records that are up to date. It can help to have a dedicated business bank account to help keep business transactions separate from your other finances.

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On the road: How to treat work-related travel and living away from home costs

6 October 2021

The ATO has released new guidance to help clarify the tax treatment of costs and allowances incurred when an employee travels – or spends time living away from home – for work.

Certain conditions need to be met to ensure an allowance can be considered a travel allowance:

  • None of the individual absences from the employee’s usual place of residence exceed 21 days.
  • The employee is not present in the same work location for 90 or more days in an FBT year.
  • The employee returns to their usual residence once their period away ends.

See the table below for a breakdown of the characteristics of travel allowances versus living away from home allowances.

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When it comes to real estate and CGT, timing is important

16 June 2021

When you sell or otherwise dispose of real estate, the time of the event (when you make a capital gain or loss) is usually when one of the following occurs:

  • You enter into the contract (the date on the contract), not when you settle. The fact that a contract is subject to a condition, such as finance approval, generally doesn’t affect this date.
  • The change of ownership occurs if there is no contract – such as when a property passes to a beneficiary.
  • The real estate is compulsorily acquired – the time of the event is earliest of
    • when you receive compensation from the acquiring entity
    • when the entity became the property’s owner
    • when the entity enters the property under a power of compulsory acquisition or takes possession under that power.

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Both tax and SMSF audits on still on ATO’s radar, but some leniency given

13 March 2021

While the ATO has lately been focusing on the rollout of stimulus measures, it has also flagged that audit work is not off the table completely.

In late July, when the ATO fronted a parliamentary Senate Select Committee on COVID-19, its representative said plans were to start tax audits sometime between September and October 2020. Time and efforts however were diverted to the rollout of the JobKeeper scheme and other stimulus measures, with the ATO sourcing staff for this work by redeploying people from initiating audits, saying it had been a “conscious choice” not to initiate new audits during the peak of the pandemic.

But that, as they say in the classics, was then — and this is now. The takeaway for everyone is that audits will not go away, and will come at some point, so taxpayers and SMSF trustees need to have their affairs in order.

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New data matching programs initiated by Federal Government

11 December 2020

Over the first quarter of this financial year, the government has initiated two new data matching programs, using data that the ATO holds.

Data matching involves bringing together data from different sources and comparing it. For example, records from different agencies or businesses are compared, with the results possibly identifying people who are being paid benefits to which they may not be entitled, or people who may not be paying the right amount of tax.

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What the “full expensing” write-off deduction means for business

11 December 2020

The Federal Budget measure of allowing businesses to fully write-off eligible assets is a boon to Australian businesses, even though the measure is temporary. Just to recap, businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022.

“Full expensing” in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small- and medium-sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

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Tax return tips

11 July 2020

Despite the current COVID-19 world in which we live, the procedures for completing and lodging tax returns remains pretty much the same.

So, before we sit down with you to go over your tax return, certain information will be needed. Of course these days pre-filling takes care of a lot of the “paperwork”, and if you wait until late-July or mid-August the ATO’s systems will most likely be able to provide most of the information from employers, banks, government agencies and other third parties.

We will then be able to double-check the information is correct and enter any deductions you want to claim. However to be thorough, before coming in for your tax appointment here are the sorts of information needed to enable us to complete your tax return.

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