In this Issue:
- What the super housing measures mean for SMSFs
- ATO scrutinising car claims this tax time
- FREE Tax Blaster Session
- Memorable Quotes…
- 2018 Budget Update
- Individual Tax Return Checklist 2018
- Laughter is the best medicine…
- ATO relief for SMSFs reporting ‘transfer balance account’ events
- Continued ATO focus on holiday home rentals
- FREE Copy of Our Book
Tax time is rolling around quickly and we’re all ready to roll up our sleeves and help you get more tax savings this year. To help our readers get ready for their 2017/18 tax return, we have compiled a Check List as a guide to eligible tax deductions for Individuals.
To obtain a copy of the 2017/18 Year-end Checklist for Business just contact us via email or give us a call.
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 Robert & the Team at
What the super housing measures mean for SMSFs
The ATO has reminded members of SMSFs that they will be able to use their voluntary super contributions to assist with buying their first home, or to make a contribution into their super from the proceeds of the sale of their main residence (under changes passed by Parliament in December 2017).
The First Home Super Saver Scheme
The First Home Super Saver (FHSS) Scheme allows SMSF members to save faster for a first home by using the concessional tax treatment available within super.
From 1 July 2018, SMSF members can apply to release certain voluntary concessional and non-concessional contributions made from 1 July 2017, along with associated earnings to help buy their first home.
Editor: There are various conditions that need to be met in order to take advantage of this measure – contact our office if you would like to know more.
The downsizing measure
SMSF members who are 65 or over and exchange a contract for sale of their main residence on or after 1 July 2018 may be eligible to make a downsizer contribution of up to $300,000 into their super.
This downsizer contribution won’t count towards their contributions caps or total super balance test in the year it’s made.
However, it will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension.
SMSFs must ensure the member’s contribution has satisfied all relevant conditions and completed the downsizer contribution form before accepting a downsizing contribution.
ATO scrutinising car claims this tax time
The ATO has announced that it will be closely examining claims for work-related car expenses this tax time as part of a broader focus on work related expenses.
Assistant Commissioner Kath Anderson said:
“We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed.”
This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-per-kilometre method.
Ms Anderson said that the ATO’s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: “Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job . . . simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace.”
Ms Anderson said there are three golden rules for taxpayers to remember to get it right.
“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”
A traffic supervisor claimed over $11,000 for work related car expenses, and provided a logbook to substantiate his claim.
However, upon investigation the ATO discovered that the logbook wasn’t printed until the following year – the taxpayer admitted the logbook was fraudulent and it was ruled invalid.
Even though the logbook was invalid, the taxpayer was able to provide other evidence to show that he had travelled at least 5,000 kilometres for work-related purposes, so the ATO used the cents per kilometre method to calculate the taxpayer’s deduction (but his claim was reduced from over $11,000 to under $4,000).
Claiming for home to work travel
A Laboratory Technician claimed $3,300 for work-related car expenses, using the cents per kilometre method for 5,000 kilometres.
However, he advised that his employer did not require him to use his car for work; this claim was based on him needing to get to work.
The ATO advised the taxpayer that home to work travel is a private expense and is not an allowable deduction – his claim was reduced to nil and the ATO applied a penalty for failure to take reasonable care.
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.
“Without leaps of imagination,
or dreaming, we lose the excitement
of possibilities. Dreaming, after all,
is a form of planning.”
2018 Budget Update
The Government handed down the 2018/19 Federal Budget on Tuesday 8th May 2018. Some of the important proposals include:
- The introduction of the ‘Low and Middle Income Tax Offset’, a temporary non-refundable tax offset of up to $530 p.a. to Australian resident low and middle income taxpayers for the 2019 to 2022 income years. This offset will apply in addition to the Low Income Tax Offset.
- Providing tax relief for individual taxpayers by progressively increasing some of the tax brackets (including an increase in the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000 from 1 July 2018), and eventually removing the 37% tax bracket entirely.
- The $20,000 immediate write-off for small business will be extended by a further 12 months to 30 June 2019 (i.e., for businesses with aggregated annual turnover less than $10 million).
- From 1 July 2019:
- Increasing the maximum number of allowable members in an SMSF from four to six members;
- Ensuring that unpaid present entitlements (or ‘UPEs’) come within the scope of Division 7A; and
- Denying deductions for expenses associated with holding vacant residential or commercial land.
Individual Tax Return Checklist 2018
When tax time comes around it’s important to know what you can claim and what you can’t claim. To make it easier for our readers, we have created a Check List detailing all items that you could be eligible to claim this year.
Please call us on 07 3399 8844 or email us at firstname.lastname@example.org to request the full check list, so you can make sure you get all the deductions in 2018 that you’re entitled to.
Judge: “Why did you steal the car?”
Man: “I had to get to work.”
Judge: “Why didn’t you take the bus?”
Man: “I don’t have a driver’s license for the bus.”
ATO relief for SMSFs reporting ‘transfer balance account’ events
The ATO has announced that, from 1 July 2018, SMSF event-based reporting regarding events impacting a member’s transfer balance account (i.e., via a Transfer Balance Account Report) will be limited to SMSFs with members with total superannuation balances of $1 million or more.
Editor: This new reporting is only required if an event that impacts a member’s transfer balance account actually occurs (e.g., such as starting an account based pension, or commuting such a pension).
This effectively means that up to 85% of the SMSF population will not be required to undertake any additional reporting with respect to a member’s transfer balance cap, outside of current time frames (as SMSFs with members with account balances below $1 million can choose to simply report events which impact their members’ transfer balances when the fund lodges its SMSF annual return).
However, from 1 July 2018, SMSFs that have members with total superannuation account balances of $1 million or more will be required to report any events impacting members’ transfer balance accounts within 28 days after the end of the quarter in which the event occurs.
Editor: Whilst SMSFs are not required to report anything to the ATO until 1 July 2018, SMSF trustees should be mindful that, where the $1.6 million transfer balance cap has been breached in respect of a member from 1 July 2017, any resulting tax liability will continue to accrue until the excess amount is commuted (i.e., irrespective of when reporting that breach is required).
Continued ATO focus on holiday home rentals
The ATO has recently advised that they are “setting their sights on the large number of mistakes, errors and false claims made by rental property owners who use their own property for personal holidays”.
While it confirms that the private use of holiday homes by friends and family is entirely legitimate, the ATO states that such use reduces a taxpayer’s ability to earn income from the property, and therefore impacts on (i.e., reduces) the amount of claimable deductions.
As a result, the ATO has reminded holiday home owners that:
- They can only claim deductions for a holiday home with respect to periods it is genuinely available for rent.
- They cannot place unreasonable conditions on prospective tenants/renters, set rental rates above market value, or fail to advertise a holiday home in a manner that targets people who would be interested in it and still claim that the property was genuinely available for rent.
- Where a property is rented to friends or relatives at ‘mates rates’, they can only claim deductions for expenses up to the amount of the income received.
Property owners whose claims are disproportionate to the income received can expect greater scrutiny from the ATO.
FREE Copy of Our Book
We hope that you’ve enjoyed this edition of the Straight Numbers & Tax Talk.
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About Straight Money Talk—A Straightforward Plan for Financial Independence
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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.