Unfortunately our financial institutions have not always acted as ethically as we consumers would like. Whether you’ve received bad advice or paid for advice you didn’t receive at all, our supervisory and regulatory bodies have sought not only to improve the system so it won’t happen again, but also to ensure that if you are on the receiving end of such bad behaviour, you could be entitled to receive financial restitution. If you’ve recently received a compensation payment, you might be wondering whether you need to pay tax on it. The answer is - it depends! It depends on how your investment was held and the type of compensation you received. For example, if you’ve disposed of the investment and previously reported a capital gain in your income tax return, your compensation payment increases the capital gain (you may be able to claim the 50% discount too if you held the investment for more than 12 months). You may need to amend your income tax return to include this additional capital gain. If you haven’t yet disposed of the investment, and you hold it as a capital investment 1 , then the compensation payment reduces its cost for when you do dispose of it in the future (make sure keep details of the compensation payment with your tax records to provide to us later). Where your compensation payment includes an amount that is a refund or reimbursement of adviser fees, and these fees were previously claimed a tax deduction by you, then the amount you received as a refund or reimbursement will generally be taxable to you in the income year you receive it. Similarly, any part of the payment that represents interest should also be included in your tax return in the year you receive it. If you’ve received an amount of compensation and not sure whether it is taxable, or if you need to amend a prior year tax return for a payment you received, please reach out to us.
Most people look forward to retirement as it is a chance to finally take time to relax, enjoy life and do things they never had time for when they were working. But sometimes things change and some people feel the urge to return to work. If a return to work is inevitable, it is important to understand the superannuation retirement rules when it comes to working and accessing your superannuation.
Many people gift assets to their family or friends to give them a helping hand. However care must be taken to ensure any gifting does not impact your current or future social security entitlements, such as the age pension.
What happens if your property is damaged from the results of a natural disaster, or by tenants? Such a situation can affect the types of expenses you claim and the income you need to declare for your rental property.
The ATO knows that many business owners naturally help themselves to their trading stock and use it for their own purposes. This common practice can occur in businesses such as butchers, bakers, corner stores, cafes and more.
Give yourself the ultimate gift that doesn’t cost a thing – a super to-do list which is a gift that will benefit you now and in the future.
Some employers, especially at Christmas time or for birthdays, give small gifts to their employees or the employee’s associates (i.e. spouses). These gifts typically take the form of bottles of wine, movie tickets, gift vouchers etc. The tax treatment of these gifts from an employer standpoint, depends upon a range of factors including: To whom the gifts are provided (e.g. employees or clients?) Whether the gifts constitute entertainment The dollar value of the gifts, and The frequency with which they are provided. Use the following steps as a guide: 1. Does the gift constitute entertainment? If yes, go to 2 If no, go to 3 (gifts that constitute entertainment include: tickets to the movies/plays/theatre, restaurant meals, holiday airline tickets, admission tickets to amusement parks etc.) (gifts that do not constitute entertainment include: Christmas hampers, bottles of alcohol, gift vouchers, perfume, flowers, pen sets) 2. Does it cost less than $300 (GST-inclusive) and is provided infrequently? If yes…no FBT, no deduction, no GST credit If no…FBT applies, is deductible and can claim any GST 3. Does it cost less than $300 (GST-inclusive) and is provided infrequently? If yes…no FBT, deduction can be claimed as can any GST credits If no…FBT applies, deduction can be claimed as can any GST credits All told, from a tax standpoint it’s best to buy employees and their associates non-entertainment gifts that cost less than $300. That way, no FBT is payable yet a deduction and GST credits can be claimed. Alternatively, you can put the tax burden back on the employee and pay them a cash bonus, in which case the amount will be assessable to the employee, and deductible to the employer. Touch base with us if you require further clarification.
The ATO continues to see instances in which closely held groups seek to inappropriately divert profits to a related SMSF to access concessional tax rates.
SCENARIO: I run a small business that requires me to travel quite a lot, particularly to country areas where I will often stay overnight. To save on accommodation costs, I have purchased a caravan. I have a business logo on the side of the caravan that is on display when I attend town shows and events. Will the costs of purchasing and maintaining my caravan be deductible in my individual income tax return? GUIDANCE: In these challenging and changing times, many have jumped on the modern version of the proverbial band wagon and purchased a caravan or motor home to use for work or business-related travel. It is a common misconception that there are specific rules governing whether you can claim a tax deduction for the costs of purchasing and maintaining a caravan or motor home. A caravan or motor home is no different to any other work or business asset you own, and the extent the expenses are deductible will depend upon the extent you use the caravan or motor home for income-producing purposes. The complexity does not arise because the expenses relate to a caravan or motor home, but that the expenses (in our scenario above) are essentially travel and accommodation expenses, and this is an area of tax law that can be difficult to apply in practice. Travel and accommodation expenses are deductible under the tax legislation where you incur these expenses gaining or producing assessable income, or they are necessarily incurred in carrying on your business. Travel between two unrelated work locations is also deductible where neither of the two work locations is your home (although in this case, the costs may still be deductible under the general deduction provision). Travel costs will not be deductible if they are a prerequisite to earning income, if you are living away home (rather than travelling on work) nor if they are as a result of your own personal choice or circumstances, eg, the costs are not deductible just because you decide it is more convenient to stay overnight. It would seem that if it is reasonable that you would stay overnight rather than travelling to and from a location within a day, and the reason cannot be attributed to a personal choice, then it is more likely the travel would be viewed as work-related. Keeping a diary would help support your deduction (and is necessary as a sole trader travelling for six or more consecutive nights). Generally, the depreciation and GST claim on a caravan or motorhome will not be limited by the car limit (currently $68,108). This is because, a caravan or motorhome (designed to carry a load of more than one tonne) is not a ‘car’ as defined in the tax legislation. What if my business logo is on the side of the caravan? The good news is while the cost of the business logo will ordinarily be tax deductible as advertising, the bad news is the ATO is firmly of the view that placing a business logo on the side of a caravan (or any type of motor vehicle) will not turn private travel into business travel, even if the signage is affixed permanently. This means if the travel expenses are not tax deductible without a logo, the travel expenses will not be deductible with a logo.