Australian Tax Update – June 2019
In this month’s tax update we look into key issues for you, your business and your SMSF as we enter tax time and as the ATO is getting more sophisticated in its data matching approaches. It is expected that taxpayers will face greater scrutiny where claims for tax deductions are more than what is expected. The full version of this month’s tax update also covers tips on how to prepare for a Tax Office visit.
To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business. In most cases you need a record proving you incurred the expense and the expense has to be directly related to how you earn your income – that is, the expense is directly (not sort of) related to your work.
Working from home
If your home is your principal place of business you might be able to claim a range of expenses related to the portion of your home set aside for your business.
In general, you cannot claim the cost of your work clothes or dry cleaning expenses unless the clothes are occupation-specific, such as chefs’ whites or a uniform with a logo, or protective gear because your workplace has hazards (jeans don’t count as protective wear).
You will need to keep records of all of your trades in order to work out whether you’ve made a taxable gain or loss each time you dispose of an asset.
Rental property deductions
From 1 July 2017, you can only claim deductions for new assets you purchase and install in the property.
When you own a share in a property
If you hold a 25% legal interest in a property then you should recognise 25% of the rental income and rental expenses in your tax return, even if you pay most or all of the rental property expenses (the ATO would treat this as a private arrangement between the owners).
Earning money from the sharing economy
Income earned from the sharing economy, such as Airbnb, Uber, AirTasker, etc., must be declared in your tax return. You may also be able to claim proportional expenses associated to providing the service.
No tax deductions if you don’t meet your tax obligations
From 1 July 2019, if taxpayers do not meet their PAYG withholding and reporting obligations, they will not be able to claim a tax deduction for payments:
- of salary, wages, commissions, bonuses or allowances to an employee;
of directors’ fees;
- to a religious practitioner;
- under a labour hire arrangement; or
- made for services where the supplier does not provide their ABN.
Recording payments to contractors
Businesses within the building and construction industry, cleaning, and courier services need to report payments to contractors in the year ending 30 June 2019 by 28 August 2019.
Timing of resolutions
Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest (the trust deed may actually require this to be done earlier).
The ATO is currently reviewing trustees to ensure their compliance with these obligations, particularly the requirement to lodge TFN reports for beneficiaries. Where beneficiaries have quoted their TFN to the trustee, trustees are required to lodge a TFN report for each beneficiary. The TFN report must be lodged by the end of the month following the end of the quarter in which a beneficiary quoted their TFN.
Not making your full superannuation contribution? Now you can catch up
If you have:
- A total superannuation balance below $500,000 as at 30 June; and
- Not utilised your entire concessional contributions cap ($25,000) for the year
then you can ‘carry forward’ the unused amount on a rolling 5-year basis.
If this article has raised questions regarding your personal situation, please contact one of our team of experts on +61 8 6555 9500. We are able to help you and your business with all aspects of tax time, and we can offer strategic advice to help you and your business.
This article contains information that is general in nature. It is not intended to be advice and you should consider your personal situation and needs before making any decision based on this information.