How to manage business day-to-day transactions
The ATO has the following tips for small business owners "that can make your tax life easier:
- They should keep an eye on upcoming expenses and regularly update their books and reconcile their accounts.
- They should set aside the GST they
collect (e.g., by transferring it into another bank account within the business
to keep it separate from their cash flow).
- They can also set their PAYG
withholding and super aside, so they will have the funds available when
payments are due.
- They should plan ahead and
schedule time in their calendar to prepare their business activity statement
('BAS'), and lodge and pay their BAS on time.
Editor: If you need assistance with any of these issues, please contact our office.
Minimum pension drawdown reminder
An SMSF must
pay a minimum amount each year to a member who is receiving an account-based
pension.
This minimum amount is calculated by
applying the relevant percentage factor based on the member's age by the
member's pension account balance calculated as of 1 July 2024, or on a pro-rata
basis if the pension commenced part way through the 2025 financial year.
If the minimum payment is not made by 30
June, this could result in adverse taxation consequences for the member.
How
to avoid common CGT errors
The ATO wants
taxpayers to know that having a foreign resident capital gains withholding
('FRCGW') clearance certificate does not mean they do not have any
further CGT obligations.
If taxpayers have sold property, they
still need to include capital gains, losses or an exemption or rollover code in
their tax return.
Editor: If an amount of FRCGW was withheld from the property sale, you should let us now and provide the 'FRCGW payment confirmation' from the purchaser.
Where you have lived in a property for any period during your ownership period you should provide us with the full details so we can determine the correct application of the main residence exemption.
Keeping not-for-profit
records up to date
Taxpayers
should remember that they are legally required to keep certain records for
their not-for-profit ('NFP').
All
organisations including NFPs are required to keep accurate and complete records
of all transactions relating to their tax and superannuation affairs.
Generally,
for tax purposes, taxpayers must keep their records in an accessible form
(either printed or electronic) for five years.
Records that
NFP taxpayers are required to keep include:
- governing
documents;
- financial
reports;
- documentation
relating to grants; and
- registrations
and certificates.
A good record
keeping system will help taxpayers run their NFP successfully and manage their
tax and super obligations.
If a
taxpayer's NFP is endorsed as a deductible gift recipient ('DGR'), they must
keep records that explain all
transactions and other acts relevant to their organisation's status as a
DGR.
This
requirement applies to both endorsed DGRs and listed by name DGRs.
Increase to rate for working from home running expenses
PCG 2023/1 outlines the ATO's new method ('the fixed-rate method') for
calculating additional running expenses while working from home, which has
applied from 1 July 2022.
Editor: This guideline was recently updated to increase the work from home fixed rate from 67 cents to 70 cents per hour from 1 July 2024.
The fixed-rate method allows taxpayers to claim at a rate of 70 cents per hour for the following additional running expenses for working from home:
- energy
expenses (electricity and gas) for lighting, heating, cooling, and electronic
items used while working from home;
- internet
expenses;
- mobile
and home phone expenses; and
- stationery
and computer consumables.
However, PCG
2023/1 does not cover occupancy expenses relating to a home, such as rent,
mortgage interest, property insurance and land tax.
Taxpayers
are not required to use the above fixed-rate method - as from 1 July 2022, they
can instead continue to claim the actual expenses they incurred as a result of
working from home and keep all records necessary to substantiate their claim.
Truck driver entitled to claim meal expenses
In a recent decision, the Administrative
Review Tribunal ('ART') upheld a truck driver's claim for meal expenses,
notwithstanding that those expenses had not been fully substantiated.
The taxpayer was employed as a long-haul
truck driver in Western Australia. He
was away from home for considerable periods each year.
The taxpayer sought a deduction for meal
expenses of $32,782 in the 2021 income year, apparently calculated by
multiplying the number of days he was away from home (310) by the maximum
reasonable daily allowance under Taxation Determination TD 2020/5.
The ATO only allowed the taxpayer a
deduction for meal expenses of $5,890 based on a review of his logbook, fatigue
diary and bank statements. This was an
average of $19 per day multiplied by 310.
The ART
found on the balance of probabilities that the taxpayer incurred the claimed
expenditure, and it found that the taxpayer had met his burden of proof.
In this
regard, the ART determined that the taxpayer incurred the disputed expenses in
gaining or producing his assessable income, and it did not agree with the ATO
that there was an insufficient linkage between the expenditure on bank
statements and the taxpayer's work.
The ART held
that the exception to the substantiation provisions applied to the taxpayer,
as:
- a travel allowance was paid by the
taxpayer's employer which covered the expenses;
- the taxpayer incurred the
expenditure in gaining or producing his assessable income; and
- the expenditure fell within the
ATO's reasonable travel amounts set out in TD 2020/5.
The ART
accordingly allowed the taxpayer's claim for travel expenses in full.
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.