Throughout June we will be sharing some tax tips for businesses this coming tax time.
These will be short and sweet and we hope you will learn something for this upcoming tax season.
1. Working from home
If you don’t have a dedicated work area but you do some work on the couch or at the dining room table, you can claim some of your expenses like the work-related portion of your phone and internet expenses and the decline in value of your computer. If you have a dedicated work area, there are a few more expenses you can claim including some of the running costs of your home such as a portion of your electricity expenses and the decline in value of office equipment.
If your home is your principal place of business, you might be able to claim a range of expenses related to the portion of your home set aside for your business. What the ATO is looking for is an identifiable area of the home used for business.
Ensure any claims are in proportion to the work related use. You can’t, for example, claim all of your internet expenses because you do a bit of work from home in the evenings and need the internet.
2. Cryptocurrency
Cryptocurrency was very hot this year, and a lot of people bought some. Some made money, some lost.
In short, if you’ve dealt with crypto at all this financial year you need records of everything.
The ATO has a special taskforce dealing specifically with cryptocurrency this financial year.
It is considered an asset for tax purposes, rather than a form of currency.
This means that gains or losses made on disposal or exchange of cryptocurrency will often be captured under the tax system – regardless of whether you’re switching between currencies or ‘cashing out’ your asset into AUD.
You will need to keep records of all of your trades in order to work out whether you’ve made a taxable gain or loss.
3. Recording payments to contractors
Businesses within the building and construction industry, this one is for you.
You will need to report payments you made to contractors in the year ending 30 June 2019 by 28 August 2019. This also applies to the cleaning and courier services.
This is all tied in with the ATO trying to stamp out contractors who really should be employees.
4. ATO are focusing on cash-only businesses such as those who:
- operate and advertise as ‘cash only’ or mainly deal in cash
- ATO data matching suggest don’t take electronic payments
- are part of an industry where cash payments are common
- indicate unrealistic income relative to the assets and lifestyle of the business and its owner
- fail to register for GST or lodge activity statements or tax returns
- under-report transactions and income according to third-party data
- fail to meet super or employer obligations
- operate outside the normal small business benchmarks for their industry
- are reported to the ATO by the community for potential tax evasion – the number of reports received by the ATO shows that the community is less tolerant of unfair practices in these industries.
5. Timing of resolutions
Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest (the trust deed may actually require this to be done earlier). Decisions made by the trustees should be documented in writing, preferably by 30 June 2019.
If valid resolutions are not in place by 30 June 2019, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).
6. Not making your full superannuation contribution? Now you can catch up
This year is the first year of new measures that enable people who have been out of the work force, like new Mums, to top up their superannuation.
If you have:
- A total superannuation balance below $500,000 as at 30 June; and
- Not utilised your entire concessional contributions cap ($25,000) for the year, then you can ‘carry forward’ the unused amount on a rolling 5 year basis.
For example, if your total concessional contributions in the 2018-19 financial year were $10,000 and you meet the eligibility criteria, then you can carry forward the unused $15,000 over the next 5 years. You may then be able to make a higher deductible personal contribution in a later financial year. If you are selling an asset and likely to make a taxable capital gain, a higher deductible personal contribution may assist in reducing your tax liability in the year of sale.
Remember:
- Your total superannuation balance must be below $500,000 as at 30 June of the prior year before you utilise any carried forward amount (within the 5 year term); and
- In some cases, an additional 15% tax can apply (30% total) to concessional contributions made to super where income and concessional contributions exceeds certain thresholds ($250,000 in 2018-19). Your income could be higher than usual in the year when you sell an asset for a capital gain.
7. Cash/accrual things to take into account
- Defer Billing – If you aren’t in desperate need of funds, think about holding off on your invoicing until after 30 June. This will mean you pay tax on the income next financial year rather than now. Bear in mind however that some customers might want you to bill them before 30th June so that they can claim the deduction on it.
- Write off bad debts – Review your outstanding invoices prior to 30th June to identify any bad ones that you really don’t think will be paid, and simply write it off.
- Bring forward expenses – If there is a work expense that you know is pressing, go ahead and organise it now so you can use the deduction rather than wait until next year.
If you have any questions you think could be good for this series, please send us through your thoughts using the contact form below.
We’d love some suggestions!
If you’d love to hear these tax tips for the 2019 financial year, head over to our facebook or instagram page to follow our journey, be reminded about key business due dates and see some fun behind the scenes pictures of our staff and office. See you there!
