Cryptocurrency on ATO’s radar

Christmas 2020 Edition

ari@odonoghueking.com.au (Ari King) — Tue, 15 Dec 2020 00:38:53 GMT

We wish you a Merry Christmas....

To keep updated with the most recent changes regarding tax cuts, JobKeeper 2.0 and the new JobMaker Hiring Credit, please read our most recent blog.

JobKeeper Changes - Getting ready for 2.0

Fri, 18 Sep 2020 03:36:38 GMT

The Morrison Government has announced an extension to the JobKeeper Payment for businesses who continue to be significantly impacted by the Coronavirus. We have summarised the changes for you, and can assist you in determining whether your business is eligible for JobKeeper 2.0 and what rate you will now need to pay your employees.

Please contact our office if you have any questions.

JobKeeper Payment Edition

Wed, 01 Apr 2020 11:18:43 GMT

The third wave of the Government's Coronavirus Stimulus package was announced by the Prime Minister on Monday, March 30. We have summarised the features of this latest announcement, how this payment will affect your business and employees, and how it compares to the JobSeeker Payment previously announced. Please note: the proposed JobKeeper Payment is not yet law.

We understand this is a stressful time for many people.

As your Tax Agent, we are here to answer your questions as best we can and assist you with obtaining the necessary assistance you and your families need during this time.

If you have any questions, please do not hesitate to contact our office by either phone or email.

Government Second Stimulus Package

Wed, 25 Mar 2020 06:19:31 GMT

The Government has now passed many of the Stimulus Package elements that were announced on both the 12th and 22nd of March, 2020.

Below is a detailed analysis on how the elements of the Stimulus Packages announced will affect you and your businesses.

We understand it is a stressful time for many people.

As your Tax Agent, we are here to answer your questions as best we can and assist you with obtaining the necessary assistance you and your families need during this time.

If you have any questions, please do not hesitate to contact our office by either phone or email.

Coronavirus Stimulus Package Update

ari@odonoghueking.com.au (Ari King) — Mon, 16 Mar 2020 03:18:35 GMT

Please read our newsletter for information on how the Coronavirus Stimulus Package may affect you and your business. Also, we have provided some information on how employers could handle staff who are required to quarantine due to the virus.

March 2020 Tax Update

Thu, 05 Mar 2020 02:08:16 GMT

Please click the link below to read our most recent newsletter...

November Tax Update

Thu, 07 Nov 2019 02:46:26 GMT

P r a c t i c e U p d a t e - November 2019

Super guarantee opt-out for high income earners now law

From 1 January 2020, eligible individuals with multiple employers can apply to opt out of receiving super guarantee ('SG') from some of their employers, to help them avoid unintentionally going over the concessional contributions cap.

If appropriate for them, they should submit the relevant ATO form to apply for an SG employer shortfall exemption certificate, which releases one or more of their employers from their SG obligations for up to four quarters in one financial year.

We can assist with the lodgment of this form.

Note that this measure may not benefit everyone who is eligible, so before lodging the form, it is important to consider the individual's employment arrangements, such as how their pay and other entitlements may change (if at all), and the effect of any relevant award or workplace agreement applicable to them.

The measure only became law on 2 October 2019, so to give eligible employees time to make an application, the ATO will accept applications for the 2019/20 financial year as follows:

 third quarter commencing 1 January 2020 — lodge on or before 18 November 2019; and

 fourth quarter commencing 1 April 2020 — lodge on or before 31 January 2020.

A separate application is required for each financial year.

ATO recommends updating ABN details for disastrous reasons

The ATO has provided an important reason for businesses to update their ABN details: to help businesses to manage the coming disaster season. ABN details are used by emergency services and government agencies to help identify and contact businesses during times of emergency and potential disaster.

Therefore, to make sure they don’t miss out on receiving important information, the ATO asks that businesses update their ABN details, including authorised contacts, physical location, email and phone number.

Also, if a taxpayer is no longer in business, the ATO asks they cancel their ABN so they aren't contacted unnecessarily.

Reporting asset disposals for CGT

As the ATO's data-matching capabilities increase, they are paying close attention to capital gains made on shares, property and cryptocurrency. It is t herefore important to let us know about any asset disposals (which can include an asset's sale, loss or destruction) and to keep records relating to CGT events, including asset disposals, for at least five years after the year in which the event occurred (and maybe longer if you make a capital loss). Good records will also help to work out a capital gain or loss correctly.

Government passes other superannuation legislation

The Government has recently passed legislation requiring insurance in superannuation for new members under 25, and members with low balance accounts, to only be offered on an opt-in basis from 1 April 2020.

Importantly, low balance account holders and young members will still be able to opt in if they want to take out insurance.

Additionally, a targeted exemption will allow trustees to elect to provide insurance on an opt-out basis to members employed in emergency services, such as police, ambulance officers or firefighters, or other workers employed in the top 20% riskiest occupations.

Super Lookup 'status' will change if SMSF annual returns are late

The ATO considers the lodgment of an SMSF's annual return on time to be a fundamental part of an SMSF trustee's obligations.

Consequently, from 1 October 2019, if an SMSF is more than two weeks overdue on any annual return lodgment due date and hasn't requested a lodgment deferral, the ATO will change their status on Super Fund Lookup ('SFLU') to 'Regulation details removed' until any overdue lodgments have been brought up to date.

We can request a lodgment deferral on your behalf to ensure the SMSF's status remains ‘complying’ (unless the fund does not meet the agreed date of referral).

Having a status of ‘Regulation details removed’ means APRA funds won't roll over any member benefits to the SMSF and employers won't make any super guarantee ('SG') contribution payments for members to the SMSF. The ATO says it is taking this approach because "non-lodgment combined with disengagement indicates that retirement savings may be at risk". While the fund's status is 'Regulation details removed', members should alert their employer to make any SG payments into the employer's default super fund or a fund of the member's choice until the SFLU status of the SMSF has been updated to 'complying'.

Taxpayer liable for excess transfer balance tax despite commutations

A taxpayer has unsuccessfully tried to challenge an excess transfer balance tax liability, despite following the ATO's instructions.

The taxpayer was receiving three pensions in 2017, including two capped defined benefit income streams and one account based pension.

Based on information reported by the super funds, the ATO became aware that the taxpayer had exceeded his $1.6 million transfer balance cap, and so it issued the taxpayer with an excess transfer balance determination of $376,646.72 on 3 January 2018.

The taxpayer then commuted $376,646.00 from his account based pension on 31 January 2018, but additional earnings continued to accrue due to the commutation being 72 cents short, so the ATO had to issue another excess transfer balance determination of $3,841.96 on 1 July 2018 (which the taxpayer acted on by making another commutation in August 2018).

Finally, in September 2018, the ATO issued an excess transfer balance tax notice of assessment, assessing the taxpayer for excess transfer balance tax of $2,867.85.

The taxpayer challenged this before the AAT, contending that, despite doing what was required of him by the 3 January 2018 letter, he was still liable for the excess transfer balance tax, to which the AAT replied:

“That is true but the problem for the applicant is that the determination period on which the tax liability is based is not determined by reference to when the taxpayer is first informed of his excess transfer balance. Further, the applicant does not avoid a tax liability by complying with the request to commute funds out of his superannuation income streams.

That is made clear by the letter from the Commissioner dated 3 January 2018 which requests the applicant to commute the necessary funds but goes on to say “when you are no longer in excess of your cap we will send you a separate ‘Excess transfer balance tax notice of assessment’ detailing the tax amount payable”.”

The AAT agreed with the ATO’s contention that the taxpayer was liable for the excess transfer   balance tax, that it had been calculated in accordance with the tax legislation, and that there was no discretion for the tax to be waived.

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.

Tax Office priorities for 2019 Tax Returns

Fri, 12 Jul 2019 00:39:16 GMT

As Australians prepare to lodge their tax returns for the financial year ending 30 June 2019, we are focussing on what the ATO have under the magnifying glass.

The ATO have invested more money than ever into audits. For every $1 the ATO spends on investigating a lodged tax return, they expect $3 in return for refunds clawed back. This amount is staggering, and it’s why the ATO are focusing on this area.

It is important that all income and deductions are declared correctly and can be substantiated. Gone are the days where ‘we put $300 last year, let’s do that again’, as the ATO is using data-matching technology more than ever to verify figures declared in tax returns.

The ATO also use benchmarking. They look at the occupation codes on tax returns, and use averaging of income and deductions of other lodged tax returns with the same occupation to determine whether deductions declared are on par. If not, there will more than likely be a flag for an audit.

So what are the ATO currently focussing on?

Scrutiny of rental deductions

In 2017, the ATO examined a random sample of rental property deductions and found that nine out of 10 contained an error. The ATO will be looking very closely at these deductions this year and that its detection methods are becoming more advanced.

Work-related expenses still on the radar

When it comes to work-related expense claims, the ATO is looking more closely into deductions claimed where employees have not spent the money [for example, standard deductions such as laundry, cents per kilometre car claims], not apportioning expenses where there is private use, and not keeping records to support claims. Even where record-keeping exceptions apply, taxpayers must still be able to show how they calculated the claim.

Different instant asset write-off rules

While the instant asset write-off threshold for small businesses has been increased to $30,000 and extended to 30 June 2020, the rules for this deduction differed for small business entities and medium-sized business entities for the year ended 30 June 2019. There has also been a common mistake detected by the ATO that some taxpayers are using this deduction for rental properties, and this is not correct.

Businesses with a turnover of up to $10 million can claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

$30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020

$25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019

$20,000, before 29 January 2019

Businesses with a turnover from $10 million to less than $50 million are also now eligible for the instant asset write-off for purchases up to $30,000 each. They can claim a deduction for assets purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.

Extending payment reporting obligations to new industries

The Taxable Payments Reporting System (TPRS) has now been extended to cleaning, courier, road freight, information technology (IT), security, investigation and surveillance services. These sectors are considered high risk for black economy activity and those operating in these industries need to report information annually to the ATO about the payments they make to contractors for services.

If you require help completing or lodging your 2019 tax return, or are a small business and have questions surrounding the instant asset write-off incentive, the changes in the Taxable Payments Reporting System or need help with the new Single Touch Payroll (STP) requirements, please contact our office on (02) 4325 0314 or click below to email us.

Cryptocurrency on ATO’s radar

Wed, 22 May 2019 06:42:16 GMT

The rise in the popularity of cryptocurrency and other crypto-assets in recent years has forced the Australian Taxation Office (ATO) to develop ways to track and monitor transactions in this area of investment. It is commonly assumed by taxpayers that crypto gains and losses are like betting wins and losses, and therefore not declarable in their income tax returns. However, the ATO views bitcoin and other cryptocurrencies as property, not currency, and therefore liable for capital gains tax (CGT) when sold for a profit.

The ATO has recognised that there has been significant growth in participation of crypto-assets in recent years. It estimates that there are between 500,000 to one million Australians that have invested in crypto-assets.

The ATO will now broaden its use of third party data matching into the area of crypto-assets. The use of the ATO’s data matching program is a key element of the ATO’s compliance program. It helps the ATO identifying taxpayers who fail to disclose their income details correctly. The ATO has recently announced it has begun collecting bulk records from Australian cryptocurrency designated service providers (DSPs) as part of a data matching program to ensure people trading in cryptocurrency are paying the right amount of tax. Data to be provided to the ATO will include cryptocurrency purchase and sale information, and the ATO is targeting individuals or entities engaged in buying, selling or transferring cryptocurrency during the 2014–15 to 2019–20 financial years.

The ATO will be working with other regulators, in particular the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities and Investment Commission (ASIC) to investigate cryptocurrency-related tax evasion and money laundering. The ATO will also likely have access to information from foreign-based cryptocurrency exchanges and the like via automatic exchange of information rules such as the Common Reporting Standard, which requires organisations to collect information about the identity of users and to share that information with the relevant tax revenue authority.

Taxpayers should be mindful of these developments, and seek tax advice from their accountant if they believe they have omitted any gains or losses incurred from trading in crypto-assets in previous years income tax returns. Taxpayers should also be aware that they are required to declare any capital gains or losses from trading in crypto-assets in future tax returns.

As with other assets, if the cryptocurrency is held by an Australian resident taxpayer for more than 12 months before being sold or used, he or she may be eligible for the 50 per cent CGT discount.

According to the ATO, if taxpayers are flagged following the data matching exercise, they may be contacted by the ATO and given the opportunity to verify the information collected before any compliance action is undertaken. People will be given at least 28 days to clarify any information that has been obtained from the data provider. Where people find that they have made an error or omission in their tax return they should contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where the ATO is contacted prior to an audit. People can correct a mistake by requesting a self-amendment or making a voluntary disclosure, and can also contact the ATO if they need help paying their tax.

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

SMSF's and Cryptocurrencies

Wed, 04 Apr 2018 00:00:00 GMT

An increasingly popular investment

Bitcoin and other cryptocurrencies have recently become increasingly popular as an investment, and many SMSF trustees are now considering whether to invest in Bitcoin. However, as this is a relatively new asset class, there is still some uncertainty as to whether it is prudent (or even possible) for an SMSF to invest in Bitcoin. There is also some uncertainty amongst investors as to what Bitcoin actually is.

Bitcoin is a type of currency that can be used for direct payment, although unlike normal currency it operates independently of any government or bank, it can only be stored in digital format and it is substantially unregulated.

The ATO’s view is that Bitcoin, at least for income tax purposes, is neither money nor a form of currency, and it is an asset for CGT purposes.

While we cannot advise as to whether it is prudent for an SMSF to invest in Bitcoin, we note that it is possible for an SMSF to do so without breaching the superannuation legislation, subject to our comments below.

First of all, the SMSF’s trust deed should allow for the SMSF to invest in Bitcoin and/or crypto-currency or digital currency. If the SMSF deed does not allow for these investments, we recommend that it be upgraded in this regard.

Secondly, as for any SMSF investment, Bitcoin and crypto-currency should be included in the SMSF’s written investment strategy.

Also, the ATO’s view that Bitcoin is an asset rather than money (and is not a listed security) means that an SMSF cannot acquire Bitcoin from a related party such as a member, as to do so would constitute a breach of the general prohibition against SMSFs acquiring assets from related parties.

It is also necessary for any investment by an SMSF in Bitcoin to satisfy the various other ‘tests’ set out in the superannuation legislation, such as the “sole purpose test”, the ‘prudent person test’, and the ‘arm’s-length test’.

There may also be other administrative requirements to be considered (for one thing, the ATO has stated that various records are to be kept in relation to bitcoin transactions).

We recommend that any SMSF trustee that is considering investing in Bitcoin first obtain detailed advice in relation to incidental superannuation compliance and administrative issues.

Single Touch Payroll

Fri, 16 Feb 2018 00:00:00 GMT

Is your business ready?

Single Touch Payroll is a reporting change that will be introduced from 1 July, 2018. It means that employers will be required to report payments, such as salaries and wages, pay as you go (PAYG) withholding and super information, directly to the ATO at the same time that they pay their employees.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018. If you have 20 or more employees on the 1st of April, 2018, then you will be considered a ‘substantial employer’ and you will need to report through Single Touch Payroll as of 1 July, 2018. This is now law. If you have 19 or less employees, Single Touch Payroll reporting will be optional until 1 July, 2019. It will be mandatory from that date, subject to legislation being passed in parliament.

Businesses that do not implement this new legislative requirement have been warned that they will incur penalties for non-compliance. The first 12 months after 1 July, 2018 will be considered a transition period and businesses will be exempt from an administrative penalty for failing to report on time, unless the ATO have already issued your business with a written notice advising that a failure to report on time in the future may attract a penalty.

If a business meets certain criteria, they may be able to obtain an exemption from Single Touch Payroll reporting or be able to defer the required start date of Single Touch Payroll reporting.

What do you need to do now?
For now, just be aware that this change is coming. More information about the requirements of Single Touch Payroll will be made available from the ATO as we get closer to July 2018.

Employers may need to update their software to enable them to report through Single Touch Payroll. It is important you are aware of what your payroll software or service providers are doing to make this transition smooth for your business. If you do not currently have a payroll software solution, please contact our office to discuss your options.

Employers who are unsure of how many people they have that are considered employees should contact us for information on how to do a headcount of employees you have on payroll as of April 1, 2018.

How your reporting will change?
Your payroll software will need to be updated for Single Touch Payroll reporting. When you pay your employees through your Single Touch Payroll-enabled software, you will be reporting payments such as their salaries and wages, allowances, deductions (for example, workplace giving) and other payments, pay as you go (PAYG) withholding and super information to the ATO at the same time as making payments to your employees.

Your payroll cycle does not need to change. You can continue to pay your employees weekly, fortnightly or monthly. You may have different pay cycles for different employees.

If you report your employee’s wage, tax and super information to the ATO using Single Touch Payroll, you will no longer have to provide your employees with payment summary. This information will be available through their myGov account. If you do not report employee’s wage and super information through Single Touch Payroll, you will still be required to provide them with a payment summary.

If you have any questions about the above, please do not hesitate to contact our office on (02) 43250314 or email Ari King at: ari@odonoghueking.com.au

Contractors vs Employees

Wed, 27 Sep 2017 00:00:00 GMT

Here is what you need to know...

Do you sometimes need help in your business and pay people for their services to assist you? Independent contractors run their own business and charge you a price for their services to your business. There can be confusion as to who is a contractor and who could actually be considered an employee of your business. There are also reporting requirements for using contractors in your business.

What is in independent contractor?

An independent contractor:

has established his or her own business
is usually paid to achieve an agreed result
Provides most or all of the equipment and tools required to perform the work
usually bears the risk and cost of fixing their faulty work
may be free to subcontract the work to others
is free to refuse additional work
usually has no right to employee entitlements such as paid leave.

Having an Australian Business Number (ABN) doesn't automatically make someone an independent contractor. Using someone for short-term jobs or during busy periods also makes no difference when determining if someone is a contractor or an employee or it may be easy to confuse a contractor for an employee, especially in the building and construction industry.

How is an employee different to a contractor?

An employee:

cannot delegate the work agreed upon, they must complete the work
is paid for the time worked, on a commission basis or paid a price per piece or activity
is not required to supply tools or material, this is supplied by you
has no commercial risk, this falls upon you as the employee

Common myths about contractors:

Myth: A worker cannot work more than 80% of their time for one business if they want to be considered a contractor.

Fact: The 80% rule, or 80/20 rule as it is sometimes called, relates to personal services income (PSI) and can change how a contractor reports their income in their own tax return and claims some business-like deductions. It's not a factor a business considers when they work out whether a worker is an employee or contractor.

Myth: My business has always used contractors, so we don't need to check whether new workers are employees or contractors.

Fact: Before hiring a new worker, you should always check whether the worker is an employee or contractor by examining the working arrangement. Unless a working arrangement (including the specific terms and conditions under which the work is done) is identical to a previous arrangement you've already checked, the outcome could be different. Hiring workers without checking the working arrangement could mean the business is incorrectly treating all future workers as contractors when they are employees.

Myth: If a worker is a contractor for one job, they will be a contractor for all jobs.

Fact: The working arrangement and specific terms and conditions will determine whether a worker is an employee or contractor for each job. A worker could be an employee for one job and a contractor for the next job.

Reporting requirements for businesses using contractors:

If you are in the building and construction industry and your business seeks the services of a contractor in any given financial year, you are required to report the total payments you make to contractors to the ATO. You are required to report the contractors ABN, name, address, total gross payments made and the GST paid to the contractor if applicable.

Please feel free to contact our office if you need help determining if you are paying a contractor or an employee, or if you need more information about your reporting requirements to the ATO.