9 Oct 2017

Straight Numbers & Tax Talk for Business – October 2017

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In this Issue:

With only three months into the new financial year, it’s a great time to do some tax planning for next year and looking at your overall business potential. Are you making enough profits or are you haemorrhaging in areas you don’t know about?

Increasing profits is not always achieved by an increase in the number of customers. Your business numbers tell the story, and if you look at them closely, you might find that you’ve got several opportunities to increase your bottom line, eg increase your profit margin or reduce your overheads etc.

And then there is the efficiency factor. You might think your business is running smoothly, but do you really know how efficient it is handling the three main areas of your business, ie Sales & Marketing, Production and Finance?

Efficiencies can be had in all three of these areas, but unless you review your operations, you won’t know where the weak spots are. To help you get started, we’ve included article “Are you Racing Against Time?” in this newsletter, which we’ve posted as a guest blogger in the Aussie Painters Network Online Magazine. Visit their website to find more articles and useful information for business.

If you have any questions about the items published in this newsletter, please don’t hesitate to give us a call on 07 3399 8844… or stop by at our office for a coffee. We’re never too busy to sit down and talk to you.

Best regards from the Team

ATO warning regarding work-related expense claims for 2017

The ATO is increasing attention, scrutiny and education on work-related expenses (WREs) this tax time.

Assistant Commissioner Kath Anderson said: “We have seen claims for clothing and laundry expenses increase around 20% over the last five years. While this increase isn’t a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention.”

Ms Anderson said common mistakes the ATO has seen include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.

“I heard a story recently about a taxpayer purchasing everyday clothes who was told by the sales assistant that they could claim a deduction for the clothing if they also wore them to work,” Ms Anderson said.

“This is not the case. You can’t claim a deduction for everyday clothing you bought to wear to work, even if your employer tells you to wear a certain colour or you have a dress code.”

Ms Anderson said it is a myth that taxpayers can claim a standard deduction of $150 without spending money on appropriate clothing or laundry. While record keeping requirements for laundry expenses are “relaxed” for claims up to this threshold, taxpayers do need to be able to show how they calculated their deduction.

The main message from the ATO was for taxpayers to remember to:

  • Declare all income;
  • Do not claim a deduction unless the money has actually been spent;
  • Do not claim a deduction for private expenses; and
  • Make sure that the appropriate records are kept to prove any claims.

GST applies to services or digital products bought from overseas

From 1 July 2017, GST applies to imported services and digital products from overseas, including:

digital products such as streaming or downloading of movies, music, apps, games and e-books; and
services such as architectural, educational and legal.

Australian GST registered businesses will not be charged GST on their purchases from a non-resident supplier if they:

  • provide their ABN to the non-resident supplier; and
  • state they are registered for GST.

However, if Australians purchase imported services and digital products only for personal use, they should not provide their ABN.

Imposition of GST on ‘low-value’ foreign supplies

Parliament has passed legislation which applies GST to goods costing $1,000 or less supplied from offshore to Australian consumers from 1 July 2018.
Using a ‘vendor collection model’, the law will require overseas suppliers and online marketplaces (such as Amazon and eBay) with an Australian GST turnover of $75,000 or more to account for GST on sales of low value goods to consumers in Australia.

The deferred start date gives industry participants additional time to make system changes to implement the measure.

Editor: It should be noted that this is a separate measure to that which applies GST to digital goods and services purchased from offshore websites, as outlined above.

 

FREE Tax Blaster Session

There are a number of ways that individuals and small business operators can legally slash their tax. We find that many of our clients only begin to realise after a chat with one of our professional tax agents how much tax they could have saved if they had taken action earlier.

Don’t delay it any longer and book in for your FREE 20-minute Tax Blaster session. We’ve got limited spaces available for people who want to increase their earnings, save on taxes and put more money into their retirement fund.

Find out NOW how you could be making more money for your retirement and facing less financial stress now and in future.

Call our Team on 07 3399 8844 to book your FREE meeting NOW.

Memorable Quotes…

“Laughter is the sun that drives winter from the human face”

—Victor Hugo, French Poet, 1802—1885

New threshold for capital gains withholding

From 1 July 2017, where a foreign resident disposes of Australian real property with a market value of $750,000 or above, the purchaser will be required to withhold 12.5% of the purchase price and pay it to the ATO unless the seller provides a variation (this is referred to as ‘foreign resident capital gains withholding’).

However, Australian resident vendors who dispose of Australian real property with a market value of $750,000 or above will need to apply for a clearance certificate from the ATO to ensure amounts are not withheld from their sale proceeds.

Therefore, all transactions involving real property with a market value of $750,000 or above will need the vendor and purchaser to consider if a clearance certificate is required.

Action to address super guarantee non-compliance

 

The Government will seek to legislate to close a loophole that could be used by unscrupulous employers to short‑change employees who choose to make salary sacrificed contributions into their superannuation accounts.

The Government will introduce a Bill into Parliament this year that will ensure an individual’s salary sacrificed contributions do not reduce their employer’s superannuation guarantee obligation.

Smiling ElvisHeard this one before?

  • Clever husbands always think twice before saying nothing.
  • I’m leaving everything to my kids. I just hope they can keep up the repayments.
  • Note on door: Out to lunch—if not back by five, out to dinner as well.

Change to travel expenses for truck drivers

Editor: The ATO has released its latest taxation determination on reasonable travel expenses, and it includes a big change for employee truck drivers.

For the 2017/18 income year, the reasonable amount for travel expenses (excluding accommodation expenses, which must be substantiated with written evidence) of employee truck drivers who have received a travel allowance and who are required to sleep away from home is $55.30 per day (formerly a total of $97.40 per day for the 2016/17 year).

If an employee truck driver wants to claim more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the amount in excess of the reasonable amount.

Editor: The determination includes an example of a truck driver who receives a travel allowance of $40 per day in 2017/18 ($8,000 over the full year for 100 2-day trips), but who spent $14,000 on meals on these trips.

In terms of claiming deductions for these expenses, he can either claim $14,000 as a travel expense (if he kept all of his receipts for the food and drink he purchased and consumed when travelling), or just rely on the reasonable amount and claim $11,060 ($55.30 x 200 days) as a travel expense (in which case he will need to be able to show (amongst other things) that he typically spent $55 or more a day on food and drink when making a trip (for example, by reference to diary entries, bank records and receipts that he kept for some of the trips)).

Protecting Yourself from Financial Fraud

Financial fraud is an all too common occurrence in this day and age, be it from the computer networks of businesses being infiltrated by hackers or other methods of identity theft. It is easy for consumers to become overwhelmed with the amount of information out there, but the good news is there are a number of simple proactive steps that can be taken to help protect you from financial fraud.

One good tip is using chip-enabled credit cards whenever possible, as this gives credit cards an additional level of protection, generating unique codes for individual purchases that prevent the information from being used by others.

Customers also need to be wary about sending sensitive information out over public email or Wi-Fi and to be aware of scam emails purporting to be from their financial institutions; such institutions would never use an email to ask for sensitive pieces of information such as ATM pin numbers or passwords.

Car depreciation limit for 2017/18

The car limit for the 2017/18 income year is $57,581 (the same as the previous year). This amount limits depreciation deductions and GST input tax credits.

Example
In July 2017, Laura buys a car to which the car limit applies for $60,000 to use in carrying on her business.

As Laura started to hold the car in the 2017/18 financial year, in working out the car’s depreciation for the 2017/18 income year, the cost of the car is reduced to $57,581.

Div.7A benchmark interest rate

The benchmark interest rate for 2017/18, for the purposes of the deemed dividend provisions of Div.7A, is 5.30% (down from 5.40% for 2016/17).

Beware the Brainstorming Myth

Brainstorming sessions can produce results if they’re focused on a specific issue. If it’s just a free-form session of throwing ideas around, chances are you won’t generate practical solutions. Keep the discussion centered on the problem you’re trying to solve.

No small business tax rate for passive investment companies

The Government has released draft tax legislation to clarify that passive investment companies cannot access the lower company tax rate for small businesses of 27.5%, but will still pay tax at 30%.

The amendment to the tax law will ensure that a company will not qualify for the lower company tax rate if 80% or more of its income is of a passive nature (such as dividends and interest).

The Minister for Revenue and Financial Services said the policy decision made by the Government to cut the tax rate for small companies was meant to lower taxes on business, and was not meant to apply to passive investment companies.

Get it in writing and get a receipt

The ATO also notes that requesting a written contract or tax invoice and getting a receipt for payment may protect a consumer’s rights and obligations relating to insurance, warranties, consumer rights and government regulations.

Consumers who support the cash economy, by paying cash and not getting a receipt, risk having no evidence to claim a refund if the goods or services purchased are faulty, or prove who was responsible in case of poor work quality.

FREE Copy of Our Book

We hope that you’ve enjoyed this edition of the Straight Numbers & Tax Talk.

As a Thank You to our readers we’ll give away a FREE copy of our highly sought-after book titled ‘Straight Money Talk – A Straightforward Plan for Financial Independence” (worth $17.95), PLUS the accompanying workbook “5 Steps to Financial Independence”.

In this book, Robert Bauman lays out 10 steps anybody can follow to become truly wealthy, and reveals ‘money myths’ and ‘inside secrets’.

Just contact us on 07 3399 8844 to claim your gift and we will send it out to you.

About Straight Money Talk—A Straightforward Plan for Financial Independence

Amazon screen shot 8.15 am 23 may

 

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BONUS ARTICLE:

 

Are you racing against time?

 

Work on business

 

 

 

 

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.