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Applying for small business income tax concessions

Posted on August 7, 2020 by admin

Businesses looking to save on tax for the financial year may consider applying for income tax concessions. Businesses classified as a small business entity are eligible for income tax concessions. Since 1 July 2016, businesses are considered small business entities in the case that they: are a sole trader, partnership or trust, operate as a business for all or part of the income year, and have an aggregated turnover of less than $10 million. In the event that you meet the above requirements as a small business entity, here are the income tax concessions available to you. Small business structure rolloverSmall business entities can change the legal structure of their business and transfer active assets from one entity to another without incurring any income tax liability. Assets such as capital gains tax assets, trading stock, revenue assets and depreciating assets are eligible in this rollover. The rollover is also only available in the case that it is part of a genuine restructure and there is no change to ultimate economic ownership. Simplified trading stock rulesUnder the simplified trading stock rules concession, you can estimate the value of your trading stock at the end of the financial year when reporting in […]

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What types of income do you need to include in your business’ tax return?

Posted on July 30, 2020 by admin

Due to changing economic circumstances, businesses may be receiving income from sources they have never received from, and may be unaware of their tax implications. In the event that they are listed below, you will need to include them in your business’ tax return. Government paymentsDue to COVID-19, many government grants and payments have been made to businesses this year. Businesses receiving the following grants will need to report them as part of their assessable income in this year’s tax return: JobKeeper payments, Supporting Apprentices and Trainees wage subsidy, Grants under the Australian Apprenticeships Incentives Program, Subsidies for carrying on a business. Keep in mind that COVID-19 cash-flow boost payments are non-assessable and non-exempt income, meaning they do not have to be included as part of your assessable income. Crowdfunding incomeCrowdfunding refers to the usage of the internet or social media platforms, mail-order subscriptions, benefit events or other methods to find supporters and raise funds for your business’ projects and ventures. Profits made through crowdfunding are considered part of your business’ assessable income in the case that you have: used crowdfunding in the course of your employment, entered into a transaction with the intention of making a profit received money […]

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Common tax mistakes that businesses make

Posted on July 23, 2020 by admin

Meeting tax obligations as a business owner can be stressful and potentially expensive if done wrong. Certain mistakes warrant severe action, so you can expect the ATO to take a closer look at them if you’ve failed to identify these errors before lodging tax returns for your business. Most mistakes made with regards to tax filing often revolve around poor administrative knowledge of tax laws. Ensure that you are aware of potential mistakes you could be making that might cost you your business. Inconsistent declarations The ATO gathers data from numerous businesses across a particular industry to create a benchmark showing a band of percentages within which businesses in that industry should typically fall under. Businesses that fall outside this band can expect delays and a closer look from the ATO inspecting reasons for inconsistencies within your business’ declarations. However, these can also be sources of mistakes from the ATO’s part as some inconsistencies can be very real – such as demographics or personal situations – that can cause variations in data. Ensure that you are declaring all your sales, and that any inconsistency can be justified to the ATO. Poor bookkeeping A majority of tax mistakes committed by small […]

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Common tax mistakes that businesses make

Posted on by admin

Meeting tax obligations as a business owner can be stressful and potentially expensive if done wrong. Certain mistakes warrant severe action, so you can expect the ATO to take a closer look at them if you’ve failed to identify these errors before lodging tax returns for your business. Most mistakes made with regards to tax filing often revolve around poor administrative knowledge of tax laws. Ensure that you are aware of potential mistakes you could be making that might cost you your business. Inconsistent declarations The ATO gathers data from numerous businesses across a particular industry to create a benchmark showing a band of percentages within which businesses in that industry should typically fall under. Businesses that fall outside this band can expect delays and a closer look from the ATO inspecting reasons for inconsistencies within your business’ declarations. However, these can also be sources of mistakes from the ATO’s part as some inconsistencies can be very real – such as demographics or personal situations – that can cause variations in data. Ensure that you are declaring all your sales, and that any inconsistency can be justified to the ATO. Poor bookkeeping A majority of tax mistakes committed by small […]

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Amending fringe benefits tax return and updated exemptions

Posted on July 16, 2020 by admin

The Government has updated fringe benefits tax (FBT) exemptions to include travel in ride-sourcing vehicles under the existing taxi travel exemption. In the case that your business has been providing employees with such travel options and would like to amend your FBT returns to include the new exemption, the ATO has also updated 2020 FBT return amendment instructions. New FBT exemptionRide-sourcing vehicles are now included in the FBT taxi travel exemption. Business owners will be eligible for the exemption for travel provided to their employees in a single trip to or from the workplace: On or after 1 April 2020, and In a licenced taxi or other vehicle involving the transport of passengers for a fare, such as a ride-sourcing vehicle (excluding limousines). Ride-sourcing FBT exemptions also apply to travel in relation to the sickness or injury of an employee. Amending your FBT returnIn the event that you have already lodged your FBT return but are eligible to be exempt from FBT due to the addition of ride-sourcing vehicles, there are a number of ways you can amend your FBT return. An amendment to your FBT return can only be made if it is requested within three years from the […]

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Are you eligible for the small business income tax offset?

Posted on July 9, 2020 by admin

The small business income tax offset can be used to reduce the tax you pay by up to $1,000 a year. Also known as the unincorporated small business tax discount, the offset is worked out on the proportion of tax payable on your business income. The rate of offset is 13% for the 2020-21 financial year and 16% for the 2021-22 financial year and onwards. The offset is only available to entities with an aggregated turnover of less than $5 million (from 2016-17 financial year onwards) and is capped at $1,000. The ATO will work out your offset based on your income tax return and uses your: Net small business income you earned as a sole trader, or Share of net small business income from a partnership or trust. Conditions for sole traders The offset is calculated based on net small business income for sole traders (which is the sum of your assessable income from carrying on your business, minus any deductions). Sole traders are not entitled to the offset in the event that their net small business income is a loss. Income and deductions that you need to include in your net small business income include: farm management deposits […]

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COVID-19 factors to remember when filing your tax return

Posted on July 2, 2020 by admin

The end of the financial year has rolled around again, but this time, COVID-19 may affect the way you fill out your tax return. The ATO has released a range of methods to make tax time easier for businesses and individuals experiencing unprecedented circumstances. How JobKeeper will affect tax returns Sole traders receiving JobKeeper payments on behalf of their business are required to include these payments as assessable income for the business. Employees receiving JobKeeper will see that those payments have been automatically filled out in their tax return. Individuals who have had their wages increase due to JobKeeper should identify whether they have been bumped into a higher tax bracket as a result. If an individual is working multiple jobs and receiving JobKeeper at one of these positions pushes them into a new tax bracket, they may be faced with a higher tax bill on their return if their other employers had continued deducting tax at their original lower rate. How JobSeeker will affect tax returns JobSeeker payments are considered taxable income. The ATO will automatically upload JobSeeker details in the ‘Government Payments and Allowances’ section of recipients’ tax returns. However, recipients are advised that there may be a […]

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Cars and taxes for 2020-21 financial year

Posted on June 25, 2020 by admin

New car threshold amounts will be implemented from 1 July 2020. Understanding the new thresholds and how they may affect your small business operations and vehicle usage will be important in preparing you for the financial year ahead. Income tax: There is an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). The maximum value you can use for calculating your depreciation claim is the car limit (irrespective of any amount you were paid for a trade-in) in the year in which you first used or leased the car. For the 2020-21 financial year, the upper cost limit is $59,136 including GST. Goods and services tax (GST): Businesses registered for GST with motor vehicles used solely for business purposes are entitled to claim a credit for the GST included in the price of the vehicle, provided they have a tax invoice. In the event that you purchase a car and the price is more than the car threshold, the maximum amount of GST credit you can claim is one-eleventh of your car limit amount. Keep in mind that you cannot claim a GST credit […]

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Landlord tax obligations under COVID-19 circumstances

Posted on June 18, 2020 by admin

Property investors may have a number of tenants that have temporarily paused their rent payments or are not paying the full amount of rent owed due to being impacted by COVID-19. Regardless of rental income changes, landlords are still entitled to claim deductions on rental property expenses if they are still incurring regular rental property expenses. Landlords who receive a back-payment of rent, or an amount of insurance as a result of a decrease in rental income, will still need to include these amounts in their assessable income for the tax year that they receive the payment. Additionally, landlords may be faced with deferred loan repayments as a result of COVID-19. In this case, if your loan accumulates interest it will be considered as an incurred expense, meaning that you will still be able to continue claiming a deduction on your loan interest. It is likely that landlords of short-term rental properties have had their situation compromised by COVID-19 due to cancelled bookings and low demand. If your property is used both privately and for renting out short-term accommodation, you will be able to continue deducting property expenses in the same proportion as you were entitled to prior to COVID-19. […]

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Claiming self-education expense deductions

Posted on June 11, 2020 by admin

Individuals upskilling and educating themselves during these down times may be eligible to claim a deduction for their self-education expenses. The deductions apply to self-education activities that are directly related to an individual’s work as an employee. In the case that individuals are looking to claim self-education expenses based on a course’s relation to their work, the relation must mean: maintaining or improving the specific skills or knowledge the individual requires in their current work activities; resulting in, or likely to result in, an increase in the individual’s income from their current work activities. There are many types of expenses you can claim as part of your self-education deduction, including: General course expenses (e.g. tuition fees, stationary, textbook, student union fees) Depreciating assets (e.g. computer, desk) Repair costs to assets used for self-education purposes Car assets (claimed using the cents per kilometre method) Work-related self-education expenses cannot be claimed as part of a deduction. These expenses include travel expenses, child care costs related to attendance of courses and capital costs of items (e.g. computers, desk) acquired for self-education purposes. Keep in mind that self-education courses which enable individuals to get new employment are not eligible for deduction claims. Some expenses […]

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