Are you thinking about buying assets?

Craig Shirley - Wednesday, May 11, 2016

Are you thinking about buying assets?

Are you thinking about buying assets to help your small business grow? Now is the time to buy! If you use the simplified depreciation rules you use the $20,000 write-off threshold.

Simplified depreciation rules can get a bit tricky, so here's how to get it right and make sure you claim everything you're entitled to.

1. If you buy assets that cost less than $20,000 claim them in full as a deduction in your tax return at the end of the year. 
  1. 2. For assets that cost $20,000 or more group them into what is called a small business pool. 
  2. In your tax returns claim 15% of the pool in the first year then 30% of the pool each year after that, as a depreciation deduction.
  3. 3. If the balance of your small business pool falls under $20,000 (before you deduct the 15% or 30%) claim this amount in full as a deduction in your tax return at the end of the year.

If you would like to discuss this further we would love to hear from you.

Employee or contractor myths - workers with ABNs

Craig Shirley - Tuesday, April 26, 2016

Employee or contractor myths – workers with ABNs

When you hire a worker, forget the common myth that they’re a contractor simply because they have an ABN.

Your worker could have an ABN for a number of legitimate reasons, but this makes no difference to whether you should treat them as an employee or contractor.

When it comes to tax and super, working out if your worker is an employee or contractor is based on the terms and conditions of their working arrangement with you. It's important to get it right because your tax and super obligations can change based on those arrangements.

There are several tests that help determine whether the arrangement you have with a worker is a genuine business relationship or an employee relationship.

1.    Does the contractor only work for you or for other firms as well.

2.    Does the contractor only supply labour time and expertise or are there materials or Intellectual property involved.

3.Is your contractor available to the general public to supply there services i.e. has a website or advertises.

Each contractor case needs to be looked at on its own merits and an employer would be well served to seek advice to make sure you are meeting your requirements and your contractor arrangements meet your needs.

SMSFs gain an advantage on tax property development

Craig Shirley - Monday, September 08, 2014

The recently released ATO taxpayer alert TA 2014/1 spells good news for SMSFs! It should serve to remind us of a special exception that differentiates SMSFs from other types of trusts … and how this can save SMSFs extra tax in addition to the usual tax concessions that SMSFs are used to.

Naturally, SMSFs are trusts. Accordingly, on its face, taxpayer alert TA 2014/1 applies to SMSFs as much as it applies to any other type of trust. However, there is a special exception that applies to SMSFs (or, more accurately, complying superannuation funds). Recall that it wasn’t so long ago that the ATO was concerned that investors were incorrectly self-assessing themselves to be running a business. (See taxpayer alert TA 2009/12.) Naturally, this arose in the context of the GFC and resulted in taxpayers claiming losses on sales of assets as being business losses and therefore deductible against assessable income. The government changed the law for SMSFs, which took effect from 10 May 2011 (ie, Budget night). The change was contained in the Tax Laws Amendment (2012 Measures No. 1) Act 2012 (Cth). The relevant explanatory memorandum stated that: … during the recent economic downturn, a number of superannuation entities sought, for the first time, to treat some of their shares as trading stock. … This practice creates potential uncertainty regarding the appropriate tax treatment of gains and losses made from the sale of shares owned by complying superannuation entities. This has created the need to amend the law to reduce the present ambiguity around the application of the trading stock provisions. Accordingly, the change introduced for SMSFs means that almost of their assets must be treated as being on capital account and therefore eligible for the CGT discount (33⅓%) if they had been acquired by the SMSF at least 12 months before the CGT event. This is the case even if the SMSFs is running a business. In short, the changes introduced by the Tax and Superannuation Laws Amendment (2012 Measures No. 1) Act 2012 (Cth) were designed to counter one perceived tax mischief, namely, taxpayers treating assets as being on revenue account in a falling market. Taxpayer alert TA 2014/1 is designed to counter the exact opposite: taxpayers treating assets as being on capital account in a rising market. Arguably, the legislative changes introduced by the Tax and Superannuation Laws Amendment (2012 Measures No. 1) Act 2012 (Cth) were therefore somewhat short-sighted. Regardless though, the key point is that taxpayer alert TA 2014/1 almost certainly does not apply to SMSFs. Rather, SMSFs are compelled to be taxed under the CGT regime, which can results in profits being taxed at 10% instead of the usual 15%. Naturally, this can be contrasted against other types of trusts where the ATO might warn real estate gains could give rise to ordinary income, even if the real estate had been acquired by the non-superannuation trust at least 12 months before the CGT event.

Taxpayer alert 2014/1 serves as a timely reminder for non-SMSF trusts that they might have to pay more tax on their real estate development activities. However, in this article, I have sought to remind that SMSFs almost certainly have to pay less!


Low income earners may need to lodge a tax return

Craig Shirley - Friday, September 05, 2014

There are a number of reasons why you may still wish to or have to lodge a return even if your income is below the tax free threshold of $18,200.

  • were entitled to the private health insurance rebate but did not claim their full entitlement as a premium reduction
  • had a reportable fringe benefits amount on their PAYG payment summary
  • had reportable employer superannuation contributions on their PAYG payment summary
  • made a loss or can claim a loss made in a previous year
  • had tax withheld from any income they received in 2013-14
  • were an Australian resident for tax purposes and had exempt foreign employment income and $1 or more of other income
  • were a liable parent or a recipient parent under a child support assessment unless they received one or more of Australian Government allowances, pensions or payments (listed in question 5 or question 6) for the whole year and their income was less than $23,523.