July, as the fresh start of a new financial year, represents an opportune time to reflect and to look forward for individuals and businesses alike. It's that time of the yearagain to lodge your income tax returns to comply with your income tax obligations. We've got some important news and tax updates to share.
Tax Returns 2018
"Substantiation will be a key focus": ATO drums in tax time 2018 hit list
The tax office further detailed what type of work-related expenses will be in focus this tax time and signalled a particular focus on documentation where “red flags” are automatically triggered in its system.
‘Other’ work-related expenses will be an area of focus for record-keeping. Expenses of this nature can include home office, union fees, mobile phone and internet, overtime meals and tools and equipment. The ATO is also warning against claiming private expenses where they are bundled with work expenses.
The ATO is focusing on work-related clothing and laundry expenses this tax time and will closely examine taxpayers’ clothing claims.
ATO's top tax targets for FY2018
The ATO continues to compare your last year claims with industry benchmarks and flags you if they identify your claims are higher than the average for the given industry and the occupation. The ATO uses real-time data to compare taxpayers with others in similar occupations and income brackets to identify higher-than-expected claims this tax time.
The temporary budget repair levy of 2% has finished and no longer applies for 2017–18.
From 1 July 2017, most taxpayers under 75 years old (including those aged 65 to 74 who meet the work test) are able to claim a deduction for personal super contributions regardless of their employment arrangement.
From 1 July 2017, the income threshold for claiming the tax offset for spouse super contributions increased from $10,800 to $37,000. The maximum tax offset of $540 gradually reduces for income above this level and completely phases out for income above $40,000. There are also new eligibility rules where taxpayers cannot claim this offset if their spouse who received the contribution either: exceeded their non-concessional contributions cap had a total super balance of $1.6 million or more at 30 June 2017.
Updates for rental property owners
From 1 July 2017, taxpayers are no longer able to claim any deductions for the cost of travel they incur relating to a residential rental property. They may only claim travel deductions if they are carrying on a business of property investing or are an excluded entity.
From 1 July 2017, taxpayers cannot claim depreciation of second-hand plant and equipment in rental properties used for residential accommodation. These changes apply to second-hand plant and equipment acquired at or after 7.30pm on 9 May 2017 unless acquired under a contract entered into before this time.
Additionally, taxpayers cannot claim plant and equipment installed on or after 1 July 2017 if they have used it for a private purpose.
Update on reportable fringe benefits amount
The treatment of reportable fringe benefits amount has changed. This affects the way adjusted taxable income is calculated for certain tax offsets.
Updates for Foreign residents
The foreign resident capital gains withholding rate and threshold has changed. It applies to contracts entered into on or after 1 July 2017.
In the 2017-18 Budget, the government announced that foreign residents will no longer be entitled to claim the main residence exemption when they sell property in Australia. This change is not yet law and is subject to parliamentary process.
Updates for business owners
From 1 July 2017,some companies will be eligible to apply the 27.5% lower corporate tax rate (base rate). The company tax rate will remain at 30% for other companies that are not eligible for the base rate . Check with your accountant if your company is eligible to apply the base rate and also be a small business entity to gain the benefits of small business concessions.
The maximum franking credit that can be allocated to a frankable distribution is based on a company's applicable corporate tax rate for imputation purposes. For the 2017–18, a company's corporate tax rate for imputation purposes may be either 27.5% or 30%, depending on the company's circumstances.
Small businesses can claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, up until 30 June 2018, if each depreciable asset costs less than $20,000. Your accountant may apply the same on the balance of the general small business pool if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2018 (including an existing general small business pool). The 'lock out' laws for simplified depreciation have also been suspended for the simplified depreciation rules until the end of 30 June 2018.
From 1 July 2017, the 'defined benefit income cap' limits the amount of tax-free income taxpayers can receive from a capped defined benefit income stream (pension or annuity). For 2017–18, the defined benefit income cap is $100,000. Taxpayers who are 60 years old or over (or are a death benefit dependant and the deceased died at 60 years old or over) and their capped defined benefit income exceeds the defined benefit income cap may have additional tax liabilities.
If a taxpayer receives an unfunded (untaxed) component of their income stream, the 10% tax offset will not apply to untaxed-sourced benefits above the $100,000 cap.
Since 1 July 2017, self-managed super funds cannot claim deductions under the anti-detriment provision. This change ensures consistent treatment of lump sum death benefits across all super funds. Super funds may claim a deduction for anti-detriment payment as part of a death benefit if a fund member died on or before 30 June 2017. The super fund has until 30 June 2019 to pay the benefit. Super funds cannot claim a deduction for anti-detriment payments as part of a death benefit if the member died after 30 June 2017 or if the payment is made after 30 June 2019.
Taxable Payment Annual Report
You need to lodge a Taxable payments annual report by 28 August 2018 if you operate in the building and construction industry and some or all of your contractor expenses are for building and construction services including architectural services, surveying and mapping services, engineering design and consultancy services.
ATO Processing timelines, Prefilling & Data-matching
The ATO will start full processing of 2017–18 tax returns on 6 July 2018 and expect to start paying refunds from 17 July 2018.
Pre-filling data is available for tax agents from 1 July as we receive it, with substantial amounts available by mid-August. The ATO cross-check information provided with over 650 million transactions from third parties such as employers and banks to ensure all income is declared and the correct offsets and exemptions are claimed.
The ATO has recently expanded their data matching to include areas such as:
capital gains from the disposal of shares and property, foreign source income, income from payments made by government agencies, partnership and trust distributions, employee share schemes, subcontractor payments for certain targeted industries.
We take extra care when preparing your returns at the start of the financial year and you will be required to provide all necessary information if prefilling is not available for you at the time of your appointment.
Book your tax appointment early!
Uplift Accounting is dedicated to partnering with you and making your individual and business tax returns as easy as possible, so you can focus on making your business a success and getting your personal finances in order. We want to make tax season as streamlined and stress-free as possible for you and urge you to make your appointment early as possible so you can beat the rush, enjoy peace of mind and get a faster return.
If you'd like to speak to your Accountant/Tax agent, call Uplift Accounting in Mulgrave on 03 8510 7527 to schedule an appointment or submit your enquiry via our contact us form.
Small business issues we address:
Business Structuring - We advice you in deciding the right business structure for your specific circumstances when starting up your business. We can assess whether you're in the right structure for your business and guide you through the process of restructuring.
Compliance - We help you to work ON your business, streamline your processes and improve your day-to-day efficiencies. Our certified bookkeepers and qualified accountants can take care of all your bookkeeping, payroll, and admin tasks.
Tax Planning - Our tax planning session (usually conducted in Apr-May each year) will help you to save on tax legitimately. Remember, you will need to execute the tax plan recommendations to reap the benefits.
Statutory Financials & Tax Returns - We help you remain compliant with your tax obligations and get the most from your annual return.
Benchmark reporting - We can provide you with informative benchmarking reports that enable you to see how your business compares to your competitors, understand more about how the rest of your industry works and analyse the key performance indicators in your industry
Management reporting - We can create relevant management reports so that you can make better decisions from right information at the right time.
Value add-ons - We advise our clients what value add-ons are right for your business and how choosing the right add-on can help you improve your business productivity and efficiencies. If required, we're happy to conduct relevant research and help you with integrations.
We are located in Mulgrave, Victoria, but we cater for small to medium businesses right across Australia thanks to modern technology and cloud based accounting.