It’s tax time 2018! What you need to know about the key changes
It’s that time of year again – tax return time!
Before you complete your tax return for 2018, here are some key dates, changes and information that you should be aware of in case they affect you.
What’s new for small business?
Several new tax time-related changes have happened since last year that may affect you. Here are a few of them to be aware of.
From 1 July 2017, companies that are base rate entities will apply the 27.5% corporate tax rate.
A company is a base rate entity for 2017-18 if it has an aggregated turnover of less than $25 million and is carrying on a business for all or part of the income year.
The company tax rate will remain at 30% for other companies that are not base rate entities.
The lower 27.5% company tax rate will progressively apply to base rate entities with a turnover less than $50 million by the 2018-19 income year. From 2024-25, the lower company tax rate will reduce each year until it is 25% by 2026-27.
2. $20,000 instant asset write-off threshold extended
The $20,000 instant asset write-off threshold has been extended until 30 June 2018. This means that if you bought an asset before 30 June and it cost less than $20,000, you can write off the business portion in your 2018 tax return.
If you are a small business, you can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased:
This deduction is used for each asset that costs less than $20,000, whether new or second-hand.
In the latest Federal Budget, there was a proposal to extend the $20,000 instant asset write-off threshold to 30 June 2019. This change is not law yet.
3. Expanded access to small business concessions
More businesses are now eligible for most small business tax concessions.
A range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold) from 1 July 2016. The previous turnover threshold was $2 million.
The $10 million turnover threshold applies to most concessions, except for:
The turnover threshold for fringe benefits tax (FBT) concessions increased to $10 million from 1 April 2017.
4. Single touch payroll
Single touch payroll (STP) is a reporting change for employers. It started on 1 July 2018 for employers with 20 or more employees.
You will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation information from your payroll solution each time you pay your employees.You can do this through your existing payroll software (such as accounting software) as long as it is updated to offer STP reporting. Payroll software providers are updating their products now. Talk to your provider to find out
how and when your product will be ready
5. Sale of low value goods
If your small business is registered for GST and imports low value goods for business use in Australia, you may not need to pay GST. You simply need to tell your overseas supplier that you are registered for GST, and provide them with your ABN.If you are not registered for GST, GST can apply to these purchases.
What business income do I need to declare?
When thinking about business income, start by including all of your gross earnings received through the ordinary course of your business. This includes any cash, EFTPOS, credit or debit card, and online sales.
There may be other sources of business income you need to declare, depending on your circumstances.
Some common examples include:
Note! If you are running a business and are paid mainly for your personal efforts, skills or expertise, you may be earning personal services income (PSI).
What can I claim for my business at tax time?
You can claim most expenses you incur in running your business. While different businesses will have different costs, here are common expenses:
can claim business travel expenses such as bus, plane, Uber or taxi trips. If you have a vehicle for your business, you can claim motor vehicle expenses associated with running and maintaining the vehicle such as petrol, rego and insurance.
4 golden rules for claiming work-related deductions
For all your business expenses, keep these four golden rules in mind:
Expenses and deductions checklist
and electricity. If you then sell your home, you may have to pay CGT on the business portion and declare it in your tax return.
- penalties and traffic fines
- private or domestic expenses childcare fees and clothes for your family
- expenses related to income that is not assessable, such as money you earn from a hobby.
What concessions can small businesses tap into this tax time?
There are a range of tax concessions that your small business might be eligible for. Here are a few you should consider for your 2018 tax return.
$20,000 instant asset write-off
If you bought and installed business assets by 30 June, you may be able to write them off in your 2018 tax return.
Tip! You need to pool depreciating assets that cost $20,000 or more in a small business asset pool. Your tax adviser will have more information on how to do this.
You can claim a deduction this year if you have prepaid an expense that ends in the 2019 financial year – eg the rent for your business premises or an insurance policy.
Prepaid expenditure incurred by a small business entity is immediately deductible under the 12-month rule if:
Simplified trading stock rules
This concession allows you to estimate the value of your trading stock at the end of the financial year to report in your tax return.
Eligible small businesses can use these simplified rules if there is a difference of $5,000 or less between:
If you estimate that the difference between your opening and closing trading stock is $5,000 or less, then under the simplified rules, you don’t need to do a stocktake. Instead, you can include the same amount for your opening and closing stock in this year’s tax return.
Small business income tax offset
The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax you pay by up to $1,000 each year.
You can get an offset of up to $1,000 if you’re a sole trader or have a share of net small business income from a partnership or trust.
The offset, which is worked out on the proportion of tax payable on your business income, is:
The offset increases to:
Deductions for start-ups
Deduct the full cost of certain start-up costs for your new business, including professional advice in your tax return.
The range of deductible start-up costs includes professional, legal and accounting advice and government fees and charges.
Accelerated depreciation for primary producers
Primary producers can:
Primary producers who are small businesses can also use the simplified depreciation rules including instant asset write-off.
As a small business, you may be eligible for super concessions. These include:
How does my business compare to other businesses?
Small business benchmarks are a guide to help you compare your business' performance against similar businesses in the same industry.
The easiest and quickest way to see how your business compares to competitors is by using the business performance check tool.
Outside the benchmark?
Your benchmark might be above or below the range for your business turnover in your industry. There could be a number of reasons why this has happened, including:
What’s on the ATO’s radar this tax time?
The ATO is paying close attention to a few expenses this year. Find out what is attracting the ATO’s attention.
Clothing and laundry claims
The ATO is closely examining claims for work-related clothing and laundry expenses this year.
You can legitimately claim work-related clothing and laundry if you were required to wear either a uniform that is unique and distinct to your employer, protective or occupation specific clothing.
Did you know?
Shares and capital gains
The ATO is also paying close attention to taxpayers who have sold or transferred shares and the amount they are reporting as capital gains. Speak to your tax adviser for more information.
Claims for work-related car expenses
The ATO is concerned about taxpayers making mistakes or deliberately lodging false claims in relation to work-related car expenses this tax time.
This year, the ATO will be particularly focused on people claiming things they’re not entitled to. For example, claiming things like home to work travel or other private trips; making claims for trips that they didn’t do or claiming expenses that their employer has already paid for or reimbursed.
Did you know? Last year around 3.5 million people made a work-related car expense claim, and together they totalled about $8.8 billion.
Unusual behaviours and characteristics
Broadly, the following behaviours and characteristics may attract the ATO’s attention:
Things you need to know about donating to drought relief
As the drought in Australia continues, many Australians have started donating to charities or relief funds to help those who are most in need of help. Many Australians have also started raising funds or donating through crowdfunding platforms.
Tip! There are tax implications associated with donating or raising funds. If you are planning to donate, direct your generosity to registered charities or organisations that are deductible gift recipients (DGRs) and are focussed on rural assistance.
Donating to drought relief?
Donations of $2 or more will be tax deductible only where donations are made through an organisation that is a DGR.
To claim a tax deduction for a donation or gift, it must meet four conditions:
Note! You cannot claim a tax deduction for donations made to crowdfunding platforms if they are not a DGR.
What is drought assistance crowdfunding?
Crowdfunding is the practice of using internet platforms, mail order subscriptions, benefit events and other methods to find supporters and raise funds for a project or venture.
Drought assistance crowdfunding is when someone is planning to raise funds through crowdfunding platforms to assist those affected by the current drought.
If you're involved in crowdfunding – regardless of your role – you need to be aware of the tax consequences. These vary depending on the nature of the arrangement, your role in it and your circumstances.
There are usually three parties (or roles) in a crowdfunding arrangement:
Each party may have income tax and GST obligations, depending on their circumstances and the nature of the crowdfunding arrangement.
Are you raising funds through crowdfunding?
If you are planning to raise funds through crowdfunding platforms, you need to be aware of the potential tax implications.
Payments you receive from crowdfunding platforms may be assessable income depending upon how the funds are used. For example:
This means, for most farmers, there should be no tax payable in relation to money donated to them for their farm expenses. Income tax will likely be payable should the farmer make a net business profit.
Note! Crowdfunding amounts will only be assessable if they are intended for use in the business rather than for emergency relief purposes, such as food and clothing. Check with your tax adviser about the tax implications for your particular circumstances.
Paid any building and construction contractors?
Did you need to lodge a taxable payments annual report this year?
If your main business activity is in the building and construction industry and you paid contractors for building and construction services in the 2017-18 financial year, your report was due by 28 August 2018.
You can still lodge your report:
By reporting the payments you've made, you're helping to increase fairness within your industry.
Lodge overdue reports!
Do you have any overdue reports from prior years? Lodge them as soon as possible.If you're no longer in the building and construction industry or you didn't pay contractors for building and construction services in the 2017-18 financial year, submit the online taxable payments annual report – not required to lodge form.
Super guarantee payments and the self-employed
If you're a sole trader or in a partnership, you generally don't have to make superannuation guarantee (SG) payments for yourself. However, you may want to make personal contributions to super as a way of saving for your retirement.
From 1 July 2017, regardless of whether you're self-employed or not, most people will be able to claim a full deduction for contributions they make to their super until they turn 75 years old. Those aged 65 to 74 will still need to meet the work test in order to be eligible to make a contribution and claim a tax deduction. Keep in mind that contributions you make may attract extra tax if they exceed the contributions limit for that year.
Casual employees may be entitled to super
Employing casual workers provides businesses with an increased level of flexibility. However, it's important to remember that casual employees may be entitled to super.
Here are the basics:
Super guarantee is currently calculated at 9.5% of a casual employee’s ordinary time earnings. This includes their wage plus any casual or shift loadings for ordinary hours of work. It also includes commissions and some allowances, but it doesn't include overtime payments.Tip! Speak to your tax adviser to work out if your casual workers are eligible for super and whether your workers are employees or contractors.
Attention all car owners! You must declare what you share
Do you earn income through car sharing platforms? If you do, it is important to include the income – no matter how little – in your tax return. It’s no different to anyone else renting out an asset, like a house or a car park. You must declare the income and you cannot avoid tax by calling it a hobby.
The growing popularity of third party services (eg Car Next Door, Carhood or DriveMyCar Rentals) has prompted the ATO's interest.
Deductions that car sharers can claim
The good news is that individuals who rent their vehicle are entitled to claim some deductions.
The expenses claimed must relate directly to the renting, hiring or sharing of your car, and accurate records such as receipts must be maintained to back up all claims.
Car sharers can claim deductions for expenses like:
However, a deduction can only be claimed for cleaning and running expenses if you are responsible for them under your car sharing agreement. For example, different agreements require either the car borrower or the car owner to bear the costs of refuelling the car.
Do you use your car for private travel?
If you use your car for your own private travel, you will need to exclude all the related costs.
If you own a car jointly, you will need to declare income and claim expenses in proportion to your share of ownership. You must declare the income and claim the deductions in proportion to your ownership interest.
Renting or hiring your car and GST reportingIf you are registered for GST, you must account for it on the extra income you have earned. If you are not registered for GST but your turnover from all of your enterprises is $75,000 or more per year, you need to register for and report GST.
If you report GST, you should also be able to claim credits on the GST included in the price for things you purchase for renting or hiring your car.
New rate for car expenses
The rate for work-related car expenses has increased for the income year starting 1 July 2018. It is now 68 cents per kilometre.
This applies if you have chosen to use the cents per kilometre method for calculating work-related car expenses and will remain in place until the Commissioner decides it should be varied.
If you are paying your employees a car allowance in excess of 68 cents per kilometre, you need to withhold tax on the amount you pay over 68 cents.
Key tax dates
21 Sep 2018
Aug monthly BAS due
22 Oct 2018*
Sep monthly BAS due
29 Oct 2018*
Sep quarter SG due
Sep quarterly BAS due
Sep quarter PAYG instalment due
31 Oct 2018
2018 income tax returd due
21 Nov 2018
Oct monthly BAS due
28 Nov 2018
Sep quarter SG charge statement due
21 Dec 2018
Nov monthly BAS due
*Actual due date falls on a Sunday
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.