The Australian Government recently changed the laws regarding the Complusory HECS repayments, which you now need to report your income earnt overseas or worldwide income by either MyGov or through and Australian registered tax agent.

If you plan to live and work overseas and have a HECS, study or training support loan, you are required to:

lodge your worldwide income or a non-lodgment advice.

This applies to people with the following types of loans:

Higher Education Loan Program (HELP – formerly known as HECS)VET Student Loan (VSL)Trade Support Loan (TSL).

The deadline for you to report your overseas income for the Australian income year (1 July to 30 June) is 31 October. It's important you lodge on time, even if you can't pay straight away, as you'll avoid a late lodgement penalty.

You can use an Australian registered tax agent to lodge on your behalf. They can lodge after the usual 31 October deadline. The due date will depend on your personal circumstance. You should contact your tax agent for advice.

After you have reported your worldwide income, you will receive a notice confirming:

how much you owe or will be refundedthe due date for payment.

Your student or training loan will continue to be indexed each year until it is paid. You can make additional voluntary repayments from overseas at any time to reduce the balance. These will not reduce any compulsory repayment or overseas levy obligations you may have.

Please contact us, if you would like us to update your details with the ATO and lodge your annual obligations

Disclaimer

*This information is not to be relied upon without speaking to your tax agent.

This post is for anyone who is self employed, freelancers, contractors, and owners of business.

The ATO gives you a few options to pay for your taxes.

You could opt for that bulk end of year payment or you could decide to proceed by paying your tax quarterly. It all depends on how you want to pay really, but then again, not everyone is good at saving, therefore if you fall in such a category of persons, it is highly advisable paying quarterly to avoid that big end of year tax bill.

Due dates for quarterly installments – for most taxpayers

1st Quarter

Period July–September

Due Date - 28 October

2nd Quarter

Period October–December

Due Date - 28 February

3rd Quarter

Period - January–March

Due Date - 28 April

4th Quarter

Period - April–June

Due Date - 28 July

Here are some steps you should take

1. Make Quarterly Payments

It would always come as a great set back if at the end of the year, a huge tax bill comes, and you can’t pay. Knowledge of who you are is one of the greatest assets anyone could have in the quest for success, so if you are aware of the fact that you’re not a good saver, it’s better to opt for quarterly payments. Quarterly payments help keep your business accounts stable and splitting the payments into 4 smaller payments can relief yourself from the possible stress at the end of the year. Moreover the dangerous situation of accrued taxes plus interest would never befall you.

2. Save Receipts

To ensure time management and avoid the uncalled for headache of searching for your receipts at the end of the year, you have to save all your receipts that are deductible and related to your business. You could keep them in an itemized folder, or scan them all into your computer. Keep the records of everything you paid or received in relation to your business throughout the year.

3. Stay Organised

There is this professional accounting program that helps you record all your expenses, invoices, bills and payments called Xero. Why not use such a program(s) to help you stay organised; Xero is a program designed to make your life easier and equally help you stay organised. Moreover an amazing thing about this program is that most accountants use it, and they can easily take over your Xero account and do all your bookkeeping and accounting for you, without wasting time or transferring the information to another program.

4. Take Out Your Deductions

Make sure to take out your right deductions. As a business owner you’re entitled to a lot of deductions; a lot of the deductions that a regular employee doesn’t get to file such as car and home expenses, you would be entitled to put down as your deductions and possibly get more money back or own less.

Here are a few deductions you can have if you are self employed.

• Advertising and Promotion

• Vehicle Expenses

• Bank Fees

• Business Licenses and Permits

• Consultation

• Cost of Good sold

• Dues and Subscriptions

• Education

• Equipment Rental

• Gifts Given (professional)

• Home Office

• Interest Expense

• Legal and Professional Fees

• Meals and Entertainment

• Merchant Processing Fees

• Office Expenses

• Repairs and Maintenance

• Subcontractor

• Rent

• Telephone

• Travel

• Utilities

• Any, expenses specific to your industry.

Contact us today if you have any questions.

Disclaimer

*This information is not to be relied upon without speaking to your finance broker, tax agent or financial adviser.

Tax time is here. It is a stressful time for most people. You have to keep everything in order, itemise your income and expenses and keep your house in order. After all, you wouldn’t want to get caught up in the ATO’s web. So that this doesn’t happen, we have highlighted the five simple mistakes you should totally avoid if you don’t want to get audited.

1. Unnecessary Oversight

One of the biggest reasons why people get audited by the ATO is based on a couple of honest mistakes and oversights that they have made while preparing their tax return. Before you send anything to the ATO, it is good practice to go over your files a couple more times to see confirm you haven’t missed anything. Many people rely on the judgement of a hired accountant to get this done. You should understand that even though they are professionals, they are humans too. That means they are also susceptible to making mistakes. So always ensure you review your tax return before they send it in could save you a lot of trouble. When doing your review, you will want to look at the maths to make sure they add up and all your income and expense have been included, check your ABN, TFN, addresses and bank details.

2. Non-declaration of all your Income

You should know that the ATO is meticulous enough to go through the data submitted by your employers and match it to yours. If the numbers don’t tally, you could be putting a big red dot over your own forehead. That is why you should never leave out your source(s) of income – either wholly or partially.

It is good practice to keep a spreadsheet for recording all the income you receive in a year – especially if you have multiple streams of such income. Income from royalties, casual work, one-off gigs and so on should also be made available to your accountant. If you think it is taxable, for no reason should you leave it out of your income bracket

3. Bogus Deductions

Deductions provide a great way to lower your income which would be taxable. However, there is a point where the deductions are deemed so much, that you become a point of interest for the ATO.

The best thing to do is speak with your accountant to know what you can deduct and what you shouldn’t. If you are a self-employed person, you will find out that you can deduct a little more without going overboard.

Some of the common deductions a good accountant will look into for you are:

Vehicle expensesCapital costsTransaction fees (bank, credit cards, online remittance survives e.g. PayPal, etc.)Business membership feesInternet billsPhone subscriptionRunning costs of business and Utilities, to mention but a few

4. Inflated Charitable Contributions

Many people try to get out of a higher tax bracket by inflating how much they have donated to charity in the financial year under review. The ATO is composed of a group of intelligent accountants who can always see what income level you fall in, determine your standard of living and from there, make estimates of what a reasonable donation from you should have been. Thus, it is better to keep the receipts from any and all donations and deduct them from the total taxable income accordingly. No more, no less!

5. Writing off Bad Business Losses

The ATO understands that the first year of setting up a business could end in losses. What they won’t understand is if you keep writing off the business as making losses some 3 – 4 years after establishment. This sure sets the bells ringing, making them peg such a business as a front to avoid payment of taxes. The worst part of this is not only that you could get audited. You will also have to pay more taxes and might have your right to deductions taken away from you in partiality or totality.

Getting Audited? That is not the end of the line.

Hire a good accountant such as us, to handle the audit for you. Provide us with all the necessary information to see where you might have been the wrong and we’ll handle the ATO for you.

Should you believe that the ATO is at fault, don’t hesitate to fight back against the system – following the regulated paths, of course.

Contact us today if you need help.

Disclaimer

*This information is not to be relied upon without speaking to your finance broker, tax agent or financial adviser.

This year the ATO announced that they were looking to disclose your business debt to credit agencies. Effectively this could have a negative impact on your ability to attract new business and alleviate yourself from any cash flow issues. The business debt would need to have the following three characteristics before being sold on to a credit agency;

You have an ABN,The debt is more than $10,000 and overdue by more than 90 days,The business in question is not effectively engaging with the ATO.

The ATO are declaring that this measure has been created to “provide transparency of overdue tax debts of business, supporting other businesses in making informed decisions in credit worthiness.” Whilst this is true, it also means that the ATO can sell your debt, helping to alleviate their debtors and increasing their cash flow. Your information is increasingly becoming one of the fastest growing commodities.

Although this will soon be legislation, the third debt characteristic needed for debt reporting; “effectively not engaging with the ATO” has been out to public consultation, (as it could be open to interpretation). Watch this space for an update on this ATO definition.

Note that this is only draft legislation and not law as yet.

Legislation and supporting material

Read more on the public consultation here Draft Legislation.

How can you stop your business debt from being sold?

As well as “effectively communicating with the ATO” there is another way to prevent your business debt information from being sold by the ATO. You could try talking to a financial broker to arrange a business loan or overdraft. We recommend talking to your tax accountant or a registered financial advisor or broker such as, Bear Loans. Understanding your financial situation or future is the key to winning, in such a challenging situation.

*This information is not to be relied upon without speaking to your finance broker, tax agent or financial adviser.

Who Can Use it?

Income Averaging can be utilised by Special Professionals who earn over $2,500 from their first financial-year. The following people are examples of Special Professionals:

an author of a literary, dramatic, musical or artistic work,an inventor,a performing artist,a production associate,a sportsperson

The ATO have definitions for each Special Professional and you should make sure you qualify for this concession with your Tax Accountant. Some careers are excluded, such as; umpires, referees and animal trainers.

Income that can be counted towards your Special Professionals Income could be:

rewards and prizes,income from endorsements, advertisements, interviews, commentating and any similar service,royalties from copyright of a literary, dramatic, musical or artistic work, andincome from a patent for an invention.

What is it?

As a Special Professional your income is much more likely to experience natural highs and lows. Income Averaging is a tax concession that suits these lines-of-work because it’s exactly how it sounds; You get taxed on your “average income” over a set-period of time, making it fairer.

How it Works

Your Income Average is worked out on one quarter of your total earnings, of each year, over the 4 preceding years. If you’ve worked less than 4 years, there’s a sliding scale to work out your average:

year 1 = nil,year 2 = one-third of income in year 1,year 3 = one-quarter in years 1 and 2,year 4 = one-quarter in years 1, 2 and 3.

It starts to get a little more complicated if there is an exception to the summary above. In other words, if you receive an Above-Average Special Professional Income. If you think this may apply to you contact us, so we can help you to calculate how this could possibly affect your tax. ATO link to see an example of the calculation.

Are you Above-Average?

As tax experts we would love to hear from all those Special Professionals out there in the creative and sporting fields. Do you have any particular questions regarding your taxable income? Maybe we can help tailor a tax solution to your unique situation. For those of you that work in the film industry, there are new tax incentives and offsets which may positively affect you this year. Get in touch with us today to find out more.

According to the ATO, of all of the things that can cause small businesses to fold, "high on that list is poor record keeping".

More than half of the businesses they visited in their Protecting honest business campaign needed to improve their record keeping.

Issues they found include businesses:

estimating their sales and income;using the 'no sale' and 'void' button on cash registers when taking cash payments;not keeping cash register tapes and not reconciling at the end of the day; andpaying their employees cash-in-hand.

They are writing to these businesses to recommend they attend one of the ATO's record keeping workshops, which cover why good record keeping is important and how it will save them time.

If you are keen to join a workshop please click here or contact us to find out more information.

Ref: ATO website, 27 November 2017

Currently when someone purchases Australian real property (ie, land and buildings) they are currently required to remit 10% of the purchase price directly to the ATO as part of the settlement process unless the vendor provides a certificate from the ATO indicating that they are an Australian resident for tax purposes.

You only need to provide a foreign resident capital gains withholding clearance certificate if the property is worth more than $2 million. From 1 July 2017, the withholding rate under these rules will increase by 2.5% to 12.5% and the foreign resident withholding threshold will reduce from $2 million to $750,000, capturing a greater number of taxpayers and property transactions.

If you need help acquiring a foreign resident capital gains withholding clearance certificate, please contact us today.

I am forever being asked if you can claim gifts to clients. So here is the short answer.

You can claim a deduction for the cost of gifts bought for work purposes if you are a salesperson or property manager entitled to receive your income from commission or both commission and retainer. You cannot claim a deduction if you earn a fixed income and you are not entitled to earn a commission.

Gifts you can claim include:

a Christmas hampera bottle of whiskywinegift vouchersa bottle of perfumeflowersa pen set.

Gifts you cannot claim are tickets to:

the theatrea live playa sporting eventa moviea holiday, including an airline ticketan amusement centre.

These gifts are in the form of entertainment and are not deductible.

If this is still not clear, please don't hesitate to contact us today.

We can help locate lost or missing PAYG payment summaries. Contact us today or complete our online form.

If you received salary payments during the year and your employer deducted tax, you should receive a PAYG payment summary (formerly known as group certificate) from them by the 14th July each year. This includes salary, wages, commissions and bonus payments. It will show gross income, tax withheld and the Australian Business Number of your employer.

If you do know have all of your payment summaries, or any information is wrong, you should contact your employer. Ask them to give you a signed copy, letter or statement showing the correct details.

If you cannot locate your PAYG Summary, please click here and we will locate it for you and complete your tax return at the same time.

Do you want to claim your home office expenses?

How home office expenses work....

You may be entitled to claim deductions for home office expenses:

Running costs may be deductible.Occupancy expenses are generally not deductible for an employee.You must keep records.

Running costs

If you perform some of your work from a home office, you may be entitled to a deduction for the costs you incur in running it, including:

for home office equipment such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more – see Tools, equipment and other assets)work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show youheating, cooling and lightingthe costs of repairs to your home office furniture and fittingscleaning expenses.

Occupancy expenses

As an employee, you are generally not able to claim a deduction for occupancy expenses, which include rent or mortgage interest, council rates and house insurance premiums.

Records you must keep

You must keep records of home expenses and these can be:

receipts or other written evidence of your expenses, including receipts for depreciating assets you have purchaseddiary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot get any kind of evidence for, regardless of the amountitemised phone accounts from which you can identify work-related calls or, if you do not get an itemised account from your phone company, records (such as diary entries – see below)a diary you have created to work out how much you used your equipment, home office and phone for business purposes over a representative four-week period.

The best way to prepare these expenses for your tax return is to use the calculator in the link below and pdf the results and send them to us with all your other information.

http://www.ato.gov.au/Calculators-and-tools/Home-office-expenses/

Backpackers are usually not a resident of Australia for taxation purposes under the ordinary concepts test (TR 98/17), but they maybe considered a resident under the 183 day test.

What does this mean if you are a backpacker on a short term working holiday visa?

You gain access to lower tax rates, andYou can earn up to $18,200 and pay no tax.

183 Day Test

Under the 183 day, if an individual was actually present in Australia, either continuously or intermittently, for more than 183 days in a tax year (1 July to 30 Jun) they will be deemed a resident for tax purposes, unless it can be established that, the individual’s usual place of abode is outside Australia and they have no intention to take up residence here.

Applying the 183 day test

Your presence in Australia need not be continuous for the purposes of the 183 day test. All the days you are physically present in Australia during the income year will be counted. It is important to note that the 183 day test applies in relation to the year of income, not the calendar year.

Tax implications of residency

If you're a foreign resident for tax purposes:

You declare on your tax return any income you earned in Australia, including employment income, rental income, Australian pensions and annuities, and capital gains on Australian assets. Don't declare foreign income on your Australia tax return.

If you're an Australian resident for tax purposes:

You generally have to declare all income you earned both in Australia and internationally on your tax return.However, if you have a temporary visa you're a temporary resident – this means most of your foreign income is not taxed in Australia and you don't declare it on your Australian tax return. You only declare income you derive in Australia, plus any income you earn from employment performed overseas for short periods while you are a temporary resident of Australia.

Some Examples from the ATO website

Kate – a visitor, working and living in one place

Facts

Kate is from Ireland and entered Australia on a working holiday visa in July 2004. She intended to, and did in fact, stay in Sydney for most of the twelve months she was in Australia. Kate is close to her brother who has migrated to Australia and lives in Sydney.

Kate had one ten day holiday travelling up the east coast just after arriving in Sydney, and another two week holiday at Byron Bay in January 2005. She spent the last three weeks of her stay in Australia travelling around Western Australia.

Kate lived in share accommodation at one location for four weeks in Sydney and share accommodation at another location in Sydney for ten months. Kate’s name was put on the lease and she made a part contribution to the bond. She also purchased her bed, other bedroom furniture and a fridge.

Kate worked in coffee shops and restaurants throughout the whole period she was in Sydney. Kate joined a library, the Irish club and a water polo club while staying in Sydney.

Outcome: why is Kate an Australian resident?

Kate’s intention was to reside and live in one location. Kate’s behaviour and abode for 11 out of the 12 months exhibited the attributes of a place of residence as contrasted with overnight, weekly, monthly or transitory accommodation of a traveller. By living and working in close proximity to her brother and establishing links in the community by joining the local library and membership of two local clubs, Kate demonstrated her family and social ties.

Kate’s behaviour during the time spent in Australia reflects a degree of continuity, routine or habit that is consistent with residing here.

Janine – combining work and travel

Facts

Janine is a British national who has longed to spend twelve months ‘down under’. After saving for years, she takes twelve months leave from her work and departs for Australia on her twenty-fourth birthday. Although she travels with considerable savings, her intention is to spend at least part of her time working. She has obtained a working holiday visa enabling her to work for no more than six months with one employer.

Through a contact in Australia, she is assured of work in Perth for the first three months. After that period, she decides to travel to the east coast via Adelaide. She spends a month in Adelaide where she works for two weeks and continues her journey to Melbourne.

Once there, she meets some friends from back home. After working for a further three months, she decides to spend the balance of her time in Melbourne and uses her savings for living expenses. To keep costs down, she leases a house with two other friends. At the end of her twelve months in Australia, she returns to the United Kingdom and resumes living in her house there, which she had been renting out while in Australia.

Outcome: why is Janine a foreign resident?

Although Janine obtains work, by travelling from place to place she has not established a pattern of habitual behaviour, even though she is physically present in Australia for twelve months and she co-leases a house. Janine’s main purpose for being here is to have a holiday and she is merely supplementing her savings by working. Janine also fails to meet the 183 day test because she had a usual place of abode outside Australia and did not intend taking up residence in Australia.

Please don’t hesitate to contact us if you need any help determining your residency status.

For more information - https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/

This information is not to be relied upon without consulting your tax agent.

What you can claim?

You can claim expenses relating to your rental property but only for the period your property was rented or available for rent – for example, advertised for rent.

Expenses could include:

advertising for tenantsbank chargesbody corporate feesborrowing expensescapital workscouncil ratesdecline in value of depreciating assetsgardening and lawn mowinginsuranceinterest expensesland taxlegal expensespest controlphoneproperty agent fees or commissionsrepairs and maintenancestationerytravel undertaken to inspect the property or to collect the rentwater charges.

If part of your property is used to earn rent, you can claim expenses relating to only that part of the property. You will need to work out a reasonable basis to apportion the claim.

Example

Timmy’s private residence includes a second storey which he rented out. The second storey represents 35% of the total floor area of the house. Timmy also shared the laundry with his tenant. The laundry takes up 5% of the total floor area of the house. If half is a reasonable figure for use of the laundry by the tenant, Timmy can claim 37.5% of the expenses for the property – that is:

35% + (1/2 x 5%) = 37.5%.

Need help with your investment property expenses? Contact us today.