Hi from me!
I can't believe it's March already!
Did you know I have a new logo? Paula from Red Panda Graphics helped me with this little project. I thank her for being so patient, especially for putting up with the number of changes I made :).
How's everyone's New Year resolutions going? Mine is still a work in progress, I would like to be more disciplined with keeping in touch with you all on a regular basis, at least every 4 months through a newsletter/blog like this one. I'm sure you'll be happy to hear that they won't be as big as this one :).
The Federal Budget is happening a little earlier this year, 2nd of April. It'll be interesting what comes out of that as usual. I shouldn't admit to getting excited about something that's so boring should I ;)
Claims for home office expenses increased
The ATO has updated the hourly rate taxpayers can use to determine deductions for home office expenses from 45 cents to 52 cents per hour for individual taxpayers, effective 1 July 2018 (i.e., from the 2019 income year).
According to the ATO’s recently updated PS LA 2001/6, individual taxpayers who claim deductions for either work or business-re
lated home office running expenses may either:
claim a deduction for the actual expenses incurred; or
calculate the running expenses at the rate of 52 cents per hour.
Taxpayers who use the rate per hour method to claim a deduction for home office running expenses only need to keep a record to show how many hours they work from home.
This reduced substantiation requirement can be recorded either:
during the course of the income year; or alternatively
they can keep a representative four-week diary (where their work from home hours are regular and constant).
The Mid-Year Economic and Fiscal Outlook (‘MYEFO’) report was recently released.
It indicates that the underlying Budget deficit is expected to be $5.2 billion in 2019 (down from the $14.5 billion deficit estimated in the 2018/19 Federal Budget).
The substantial deficit reduction is reportedly a result of increased tax collections, with individual tax collections up $4.1 billion and company tax collections up $3.4 billion.
Additionally, the MYEFO report also provides a useful snap shot of what the Government is thinking when it comes to tax policy – particularly where previously announced reforms are still pending.
A few tax-related policy updates confirmed in the MYEFO worth mentioning include the following:
$10,000 cash payment limit – The Government will delay the introduction of an economy-wide cash payment limit of $10,000 from the originally proposed 1 July 2019 start date, until 1 July 2020.
GST compliance program – The Government is looking to provide $467 million of ATO funding from 2020 to 2024 to fund additional GST-related audits and the development of analytical tools to combat emerging risks to the GST system.
Abandonment of the proposed changes to intangible asset depreciation – The Government has announced it will not be proceeding with the current proposal to allow taxpayers to self-assess the effective lives of certain intangible depreciating assets.
Super access for victims of crimes – The Government proposes to introduce legislation to allow victims of certain crimes (i.e., serious violent crimes) access to their perpetrator’s superannuation to pay any outstanding compensation.
Increasing the integrity of limited recourse borrowing arrangements (‘LRBAs’) – The Government is making an adjustment to the previously announced reforms requiring outstanding balances of LRBAs to be included in a member's total superannuation balance by extending the start date and limiting impacted taxpayers.
Superannuation guarantee (‘SG’) penalty increase – Where employers fail to come forward during the 12-month SG amnesty, the Government is proposing to increase the minimum penalty from 50% to 100% of the Superannuation Guarantee Charge.
NOTE: The required legislative amendments needed to implement the tax concessions promoted by the ATO under the SG amnesty (at the time of writing) is yet to be passed by Parliament.
This is despite the fact that the Government's proposed SG Amnesty is meant to run from 24 May 2018 to 23 May 2019.
Changes to the small business instant asset write-off
On 29 January 2019, the Prime Minister announced that legislation will be introduced to:
extend the small business instant asset write-off by 12 months to 30 June 2020; and
increase the write-off threshold from less than $20,000 to less than $25,000 (effective immediately).
The current threshold of $20,000 has applied since 7.30pm AEST on 12 May 2015 and was due to revert to $1,000 on 1 July 2019.
Under the proposed changes, from 29 January 2019 until 30 June 2020, small businesses with an aggregated annual turnover of less than $10 million may claim an immediate deduction for the business-use portion of each depreciating asset costing less than $25,000.
To illustrate, assume an individual acquires a van for $22,000 (excluding GST entitlements) on 1 February 2019.
The individual is a small business entity and estimates the van will be used 90% for the business and 10% for private purposes.
Under the current rules, while the business-use portion of the cost of the van is less than $20,000 (i.e., $22,000 x 90% = $19,800), an immediate deduction is not available because the entire cost is $20,000 or more.
However, the van may be depreciated as part of the taxpayer’s SBE small business pool.
In contrast, an immediate deduction of $19,800 may now be claimed under the proposed changes, as the entire cost of the van is below the new threshold of $25,000.
This measure is expected to benefit more than 3 million eligible small businesses.
NOTE: On 13 February 2019, the Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 was introduced in the House of Representatives.
Once this Bill becomes law, it will open up opportunities for small businesses to claim an immediate deduction for depreciating assets (where they cost less than $25,000) up until 30 June 2020
What’s new for Australian business
The ATO has recently reminded small businesses of the expanded tax concessions potentially available to them, as outlined below:
The pending increase in the small business instant depreciating asset write-off to less than $25,000 (as discussed in further detail above).
Accelerated depreciation deductions for primary producers for eligible fodder storage assets, as well as for fencing and water facilities.
Assistance for primary producers impacted by drought at Drought Help, or by contacting the ATO on 1800 806 218.
A lower company tax rate of 27.5% for companies qualifying as a Base Rate Entity ('BRE').
Increased Small Business Income Tax Offset (‘SBITO’) for eligible sole traders and individual partners and beneficiaries.
Finally, the ATO has reminded taxpayers that more businesses are now eligible for most small business tax concessions.
Specifically, from 1 July 2016, a range of small business tax concessions became available to all businesses with an aggregated turnover of less than $10 million (i.e., the turnover threshold).
Previously the turnover threshold was less than $2 million. The $10 million turnover threshold applies to most concessions, except for:
the SBITO – which has a $5 million turnover threshold from 1 July 2016; and
the small business CGT concessions – which continue to have a $2 million turnover threshold.
NOTE: The relevant turnover threshold for accessing the lower company tax rate is $50 million from the 2019 income year (increased from $25 million in the 2018 income year).
PLEASE NOTE: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should call my office for advice regarding your particular situation and applicability to your particular circumstances.