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Common Tax time Mistakes

Posted Date : 22-10-16

There are a number of easy traps you can fall into when filing your tax return. Avoid these common mistakes and get the most out of your individual tax return this year. The ATO has become extra vigilant in the last few years and has been imposing penalties for not taking proper care in lodging the tax returns. Please review the following section to check for anything you might miss:

Not declaring all of your income

It is not just the obvious income from your current job the Tax Office needs – everything from the interest earned on bank account to the dividends from the shares you may own all need to be declared. You will need to track down group certificates from all your jobs and declare that too, along with any investments in your name.

Not having evidence to back up your claims

Without receipts for your expenses, you can only claim a maximum of $300 worth of work related expenses.Chances are good that you can claim more than $300 and you can boost your tax refund – if you keep the receipts or evidence to support your claims. Without receipts, ATO can ask you to repay the difference plus interest charges and possible penalties added on top.

Deductions that relate to motor vehicles, or rental property expenses

We get plenty of questions around claiming costs for your car or motor vehicles as well as rental property expenses. In addition, rightly so – there are some complex rules around them, including what records you need to keep. If you get it wrong and the ATO finds out, you could be facing an audit and a hit to the hip pocket. We can help explain the rules and make sure you have the right documents.

Wrongly claiming work-related expenses

Office workers can claim travel costs to meetings, but not to their main office. Point is, the Tax Office is very specific about what can be claimed and what cannot. Your accountant can explain these, and find some deductions you might not even know you are eligible for deduction.

A tax guide for Uber drivers

Posted Date : 22-09-16

Uber is a unique, flexible opportunity to earn a side income for almost anyone with a good car. However, there is a multitude of factors to consider about how you manage your taxes. If you start to drive for Uber without some good tax planning, you could soon have an ATO tax debt in the thousands, even tens of thousands of dollars.

When you drive Uber, you would be termed as a sole trader and you would be required to have an ABN and be registered for GST. According to the latest regulations, you are required to be registered for GST from at least 1st August 2015. Uber drivers should register for GST then start to lodge quarterly a BAS statement and pay GST obligations.

The ATO’s Uber tax implications are straightforward at a basic level:

  • Any money you make driving for Uber counts as income, meaning you must declare it on your Tax return.
  • Even if you earn less than the $75,000 GST income threshold, as an Uber driver you need to register for GST.

If you are an Uber driver, you’ll need to declare the income you’ve generated in the financial year on your tax return. If you drive Uber in addition to another job, it is important to save a significant portion of the earnings to conform to the tax liability. The best way to estimate is use your marginal tax rate and add 2% for Medicare.

This is becauseUber driving boosts your income, your tax bill is boosted as well. If you do not save for that, it can be a nasty surprise at tax time. During your first year driving for Uber, you should put aside at least 30, even 40 per cent of what you earn from Uber.

Uber drivers are also required to keep another 10% aside for GST, as Uber does not explicitly charge GST. Please contact us for further information.

Benefits

However, it is not all bad for Uber drivers. As you are using your car for earning income, you can claim a range of expenses to net against your income, like :

  • Registration
  • Insurance
  • Repairs
  • Tyres
  • Car maintenance
  • Car cleaning costs

Small business entity turnover threshold to be increased to $10 million

Posted Date : 22-09-16

As part of the Government’s Ten Year Enterprise Tax Plan, the small business entity turnover threshold will be increased from $2 million to $10 million from 1 July 2016.

Under the current law, businesses with an aggregated annual turnover of less than $2 million are entitled to access a number of small business tax concessions, including simplified depreciation rules, trading stock rules and a reduced corporate tax rate of 28.5%

From 1 July 2016, we expect that small business tax concessions, such as the following, will be available to businesses with an aggregated annual turnover of less than $10 million:

  • Tax rate of 27.5%, which is a further reduction from the already lower 28.5%
  • Simplified depreciation rules, including the immediate write-off of depreciating assets costing less than the threshold amount ($20,000 until 30 June 2017), and pooling of most other depreciating assets in the general small business pool (30% diminishing value rate and 15% for additions)
  • Simplified trading stock rules which allow taxpayers to estimate the value of their trading stock on hand at year end, rather than conducting a stocktake where a reasonable estimation indicates that the stock movement is less than $5,000
  • Immediate deduction for prepaid expenses, where the prepayment covers a period of 12 months or less, that ends in the next income year
  • Accounting for GST on a cash basis and paying GST instalments as calculated by the Australian Taxation Office
  • Exemption from fringe benefits tax where work-related devices such as mobile phones, laptops and tablets are provided to employees.

However, the Government has indicated that the current $2 million turnover threshold will be retained for the purposes of accessing the small business capital gains tax concessions, and access to the unincorporated small business tax discount will be limited to entities with a turnover of less than $5 million. However, it is unclear whether the new threshold will be applied when determining if businesses can access the new Small Business Restructure rollover relief, which was introduced earlier this year, allowing small businesses to change their legal structure without triggering any income tax liability when business assets are transferred.

While it was widely expected that there would be some form of company tax relief, much of the speculation centred on a long-term path to corporate tax cuts.

The Government has elected to give small and medium-sized businesses a pre-election tax cut, with their company tax rate falling to 27.5 per cent from July 1 this year.It is a 2.5 per cent tax reduction for up to 60,000 firms with annual turnover between $2 million and $10 million.

The threshold for reduced tax rate is proposed to progressively increase in the next few years to cover all companies by 2023-2024. The tax rate would then reduce to 25% by 2026-2027 income year.

LATEST BLOG

Common Tax time Mistakes

posted 22 October 2016

A tax guide for Uber drivers

posted 22 September 2016

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