By Andrew Hayes, Director, Westlawn Business Services
15 March 2016
Our first business tax roundup for 2016 includes FBT updates relating to employee entertainment and work-related electronic devices, measures to simplify GST reporting, information on claiming website development costs and details of more ATO data matching programs.
Work-related car expenses, third party reporting & other measures now law
In our November business tax roundup, we noted that changes would occur in the following areas:
- Work-related car expenses
- Zone Tax Offset
- FBT concessions on salary packaged entertainment benefits; and
- Third party reporting.
These changes have now become law.
FBT and the festive season
The ATO reminded employers over the festive season that if they provide entertainment to employees at Christmas (or at any other time of the year) they should consider the following:
- When providing food, drink or recreation may be considered ‘entertainment’
- Whether the entertainment is subject to fringe benefits tax (FBT), and
- The methods available for valuing entertainment fringe benefits.
Depending on the sort of entertainment provided to employees, there may be different FBT implications.
For more information, read our November 2015 article: Kicking up your heels with a staff Christmas party? Don’t forget the FBT.
FBT exemptions for work-related electronic devices
As announced in last May’s Federal Budget, from 1 April 2016, small business employers (with turnover of less than $2 million) will be able to provide employees with multiple electronic devices to use for work without incurring a fringe benefits tax (FBT) liability.
- Mobile phones
- Calculators, and
- GPS navigation receivers.
If you’re looking to provide multiple devices to your employees, you can purchase these at any time, but you can’t give them to your employees until 1 April 2016, or they will be subject to FBT.
Note that providing these devices may be a benefit in addition to, or part of, your employee’s salary or wages package.
If you’re planning on providing multiple devices to your employees, talk to your Westlawn Business Services Accountant first to ensure you comply with the FBT rules.
Making GST reporting easier for small business
The ATO is consulting with small business owners and tax professionals on how to reduce the costs of GST reporting for small business with a turnover of less than $2 million.
This includes simplifying account set up, record keeping and business activity statement (BAS) preparation by removing unnecessary GST labels on BAS.
They have begun testing proposed solutions with a number of stakeholders including agents, small business industry associations and software developers.
Simplified GST accounting methods for food retailers
If you’re a small food retailer, you probably buy and sell products that are both subject to GST and GST-free. Others buy products that are subject to GST and are GST-free and sell only products that are subject to GST. As such, it can become quite complicated to accurately record your sales that are subject to GST and others that are not, making accounting for GST complicated.
The ATO introduced the simplified accounting method for GST purposes (SAM) to make it easier to account for GST. These methods help business owners work out the amount of GST they are liable for in each tax period.
There are 5 methods to choose from, so you need to decide which one is best for your business.
The ATO has a guide to assist food retailers with accounting for GST. However, to ensure you get it right, speak to your Westlawn Business Services Accountant to ensure you have the right systems in place for tracking, and meeting, your GST obligations.
Accessing business profits through an interposed partnership with a private company partner
On 12 November 2015, the ATO issued a Taxpayer Alert about arrangements where a purported partnership with a private company partner is used to enable individuals to access business profits without paying top-up income tax at their marginal rates of tax: TA 2015/4.
The ATO is currently reviewing arrangements where profits are claimed to be directed through a purported partnership that has a private company as a partner. Most of the profits are taxed to the private company at the corporate tax rate, but are accessed by one or more individuals without paying additional tax reflecting their higher marginal tax rate.
The ATO is currently undertaking a pilot compliance program reviewing a number of cases involving arrangements of this type and will be engaging with additional taxpayers over the coming months.
Should you be involved in arrangements of this kind, talk to your accountant to see if your arrangement could come under review by the ATO.
Reviewing taxable payments annual reports
The ATO is contacting businesses in the building and construction industry about information that businesses have provided on their Taxable Payments Annual Report. The ATO will be contacting businesses that have:
- Provided a report with missing or invalid ABNs
- Included amounts paid for GST when the contractor isn’t registered for GST
- Not lodged a report, when ATO records indicate they should
- Advised the ATO they are not required to report, but the ATO’s records indicate the business should have reported.
The ATO will advise businesses that are reviewed what the review has found and will suggest ways to make it easier for the business to complete their reports more accurately in future, such as using the ABN Lookup tool or ATO app to check a contractor’s ABN or if they are registered for GST.
Claiming website development costs
If you incur expenses creating or maintaining your business website, you may be able to claim some of these costs as a deduction in your tax return.
a) Capital expenditure
You might be able to claim costs incurred before you start up your business over a 5-year period after your business starts (ie claim 20% of the cost per year).
b) Simplified depreciation rules
If you have already started your small business and have chosen to use the simplified depreciation rules, you might be able to deduct the expense immediately.
If you incur the cost between 12 May 2015 and 30 June 2017 and the cost is:
- less than $20,000 – you may claim a deduction for the full cost in the income year you incurred the expenditure;
- $20,000 or more – you may allocate the cost to a general small business pool.
If you incurred the cost between 1 January 2014 and 12 May 2015 and the cost is:
- less than $1,000 – you can claim a deduction for the full cost in the income year you incurred the expenditure;
- $1,000 or more – you can allocate the cost to a general small business pool.
Different rules apply if you have elected to allocate expenditure on in-house software to a software development pool. From 1 July 2015, in-house software expenditure incurred and allocated to a software development pool is deductible over 5 years.
c) Non-capital expenditure
You may also be able to claim a deduction for the ongoing expenses of running and maintaining your website, such as domain name registration and server-hosting in the income year that you incur this cost.
Ask your accountant about claiming website development costs.
Data matching programs
1. Data matching on real property transactions
The ATO has announced that it will acquire details of real property transactions for the period 20 September 1985 to 30 June 2017 from State and Territory revenue and land titles departments and offices and rental bond authorities in every State and Territory in Australia:Australian Government Gazette No C2015G02019 (8 December 2015).
The objectives of this data matching program are to:
- Obtain intelligence about the acquisition and disposal of real property and identify risks and trends of non-compliance across the broader compliance program
- Identify a range of compliance activities appropriate to address risks with real property transactions by taxpayers
- Work with real property intermediaries to obtain an understanding of the risks and issues, as well as trends of non-compliance
- Gain support and input into compliance strategies to minimise future risk to revenue
- Promote voluntary compliance and strengthen community confidence in the integrity of the tax system by publicising the outcomes of the data matching program; and
- Ensure compliance with registration, lodgement, correct reporting and payment of taxation and superannuation obligations.
2. Data matching on insurance asset classes
The ATO is currently working with insurance providers to identify policy owners on a wider range of asset classes. These asset classes include:
- Enthusiast motor vehicles
- Fine art; and
- Thoroughbred horses.
The purpose of the ATO obtaining this information is to gain a better understanding of certain taxpayers’ wealth and to help the ATO to provide tailored services to taxpayers to ensure they meet their tax obligations.
During January and February, the ATO will issue formal notices to insurers to provide the ATO with these policy details. The ATO anticipates it will receive 100,000 records where the different asset classes meet certain threshold amounts.
Contact Westlawn Business Services
- Call us on 02 6642 0444, or
- Email us at firstname.lastname@example.org
Copyright © 2016
Westlawn Business Services Pty Ltd provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.