October Practice Update

October Practice Update

Practice Update – October 2018

Increased scrutiny of home office claims

Last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, which includes home office expenses.

Reportedly, due to a high number of mistakes, errors and questionable claims for home office expenses, the ATO has recently advised that it will be increasing attention, scrutiny and education on these claims this tax time.

In particular, the ATO has flagged their concerns relating to taxpayers who are claiming:

  • expenses they never paid for;
  • expenses that their employer has reimbursed them for;
  • private expenses; and
  • expenses with no supporting

Whilst additional costs incurred as a direct result of working from home can be claimed, care must be taken not to claim private expenses as well.

The ATO has indicated that one of the biggest issues they face is people claiming the entire amount of expenses (e.g., their internet or mobile phone), rather than just the extra portion relating to work.

Provided the taxpayer is able to demonstrate that they have incurred additional costs of running expenses (e.g., electricity for heating, cooling and lighting), then these are generally deductible.

In contrast, employees are generally not able to claim any portion of occupancy-related expenses (e.g., rent, mortgage repayments, property insurance, land taxes and rates).

Taxpayers are warned that the ATO may contact their employers to verify expenses claimed for working from home.

In addition, the ATO expects to disallow a lot of claims where the taxpayer has not kept adequate

records to prove that they have legitimately incurred the relevant expense and that the expense was related to their work.

As with the claiming of deductions in general, supporting records must be kept when claiming work-from-home expenses, which may include receipts, diary entries and itemised phone bills.

Importantly, only the additional work-related portion of the relevant expense is deductible.

Advancement in technology has allowed the ATO to deploy sophisticated systems and analytics to spot claims that do not ‘add up’ and claims that are out of the ordinary compared to others in similar occupations, earning similar income.

Finally, the ATO has reminded taxpayers of the ‘three golden rules’ to follow when claiming work-from-home deductions, being:

  • the taxpayer  must  have  spent  the  money themselves and have not been reimbursed;
  • it must be directly related to earning the taxpayer’s income, not a personal expense; and
  • the taxpayer must have a record to prove the expense.

More help for drought-affected farmers

As part of the next phase of its drought assistance policy (which includes various other measures), the Government announced that farmers will be able to immediately deduct the cost of fodder storage assets.

Previously, these types of assets (such as silos and hay sheds used to store grain and other animal feed storage) were required to be depreciated over three years.

This measure is designed to make it easier for farmers to invest in more infrastructure to stockpile fodder during the drought.

This measure is available for fodder storage assets first used, or installed ready for use, from 19 August 2018 (being the date of the announcement), and complements the $20,000 instant write-off already available to small business entities.

Editor: The relevant legislation giving effect  to this announcement was fast-tracked through Parliament to provide certainty for these drought- stricken farmers, passing both Houses on 20 September 2018.

Increase in Private Health Insurance excesses

Legislation has been passed by Parliament to implement the Private Health Insurance (‘PHI’) reforms announced by the Government in October 2017.

The measures are designed to simplify PHI and make it more affordable for consumers by improving the value of PHI either in the form of lower premiums and/or improved cover for  certain benefits.

Of particular interest from a tax perspective is the increase in the maximum voluntary excess levels for products providing individuals with an exemption from the Medicare levy surcharge.

The increased levels of voluntary excesses that insurers can apply are:

  • $750 (up from $500) in any 12-month period for singles; or
  • $1,500 (up from $1,000) in any 12-month period for couples/families.

These increases will apply from the 2019 income year, with private health insurers permitted to offer products with the new higher excesses from 1 April 2019.

Editor: This is a positive change, as the excess levels have not changed since 2000.

Whilst there is no requirement for consumers to move  to  products with higher excesses, it is expected that more affordable PHI will encourage more people to take out cover.

Legislation to combat illegal phoenix activity

The Government has announced a package of reforms to tackle illegal phoenix behaviour. By way of background, phoenixing occurs when the controllers of a company strip the company’s assets and transfer them to another company, to avoid paying the original company’s debts. The proposed measures will deter and  disrupt the core behaviours of phoenix operators by:

  • creating new criminal and civil offences, attaching the highest penalties available under the law, to target those who engage in and facilitate illegal phoenix transactions;
  • preventing directors from backdating their resignations to avoid personal liability;
  • preventing sole directors from resigning and leaving a company as an empty corporate shell with no directors;
  • restricting the voting rights of related creditors of the phoenix company at meetings regarding the appointment or removal and replacement of a liquidator;
  • making directors personally liable for GST liabilities, as part of extended director penalty provisions; and
  • extending the ATO’s existing power to retain refunds where there are outstanding tax lodgements.

A new Phoenix Hotline is also being established, which will make it easier to report suspected phoenix behaviour. Editor: According to the Government, the proposed measures are tightly targeted at those who misuse the corporate form, while minimising any unintended impacts on legitimate business restructuring. Whether they will be able to achieve this goal or not is yet to be seen…

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.

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August at Plus 1

August at Plus 1

AUGUST AT PLUS 1

Drought Transport Subsidy

Subsidies of up to 50% of the total freight cost are available through the Rural Assistance Authority to eligible primary producers. A maximum of $5 per kilometre (plus GST), up to a maximum eligible distance of 1,500 kilometres. The maximum amount available to under the program is $30,000.

Changes to the Farm Household Allowance

The government has recently announced changes to the farm household allowance, these include:

  • Increasing the time you can receive benefits from 3 to 4 years; and
  • Introducing lump sum payments to people receiving the allowance.

If you have previously received or think you could be eligible to receive the farm household allowance please give us a call.

Grants for Young Greenies

The Victorian state government have recently announced funding of $400,000 to help children across the state protect the Environment. Local junior Landcare groups are encouraged to apply for grants of up to $5,000 to boost biodiversity.

MYOB discontinuing support services for an original desktop product in 2019

From 30th September next year, MYOB is set to discontinue support services and compliance updates for their Account Right Classic product. For those clients wanting up-to-date support and systems beyond 30th September 2019, will mean a force to upgrade to one of MYOB’s cloud based products, or consider looking at an alternate software provider.

September Deadlines

September 7 – Payroll tax monthly return – August 2018

September 21 – August 2018 Business Activity Statement/Instalment Activity Statement

September 30 – 2018 PAYG payment summaries to be lodged with the ATO (if prepared by a tax agent)

On the 22nd August, the Plus 1 Wealth Advisor team visited the Kialla Children’s Centre to provide the staff a free seminar in wealth creation.

Held after hours for the staff, the Plus 1 team discussed a vast range of topics including salary sacrificing, negative gearing, dollar cost averaging, property, insurance and superannuation.

The Kialla Children’s Centre team said that the seminar opened their eyes to potential wealth creating opportunities they did not know existed, or hadn’t given thought to in the past.

If your workplace would like to host a FREE Financial Planning seminar for your staff, contact Plus 1 Wealth Advisors on (03) 5833 3000.

NEW FAMILY AND DOMESTIC LEAVE ENTITLEMENTS

From 1 August 2018, all employees (including casuals) who are covered by an industry or occupation based award will be able to access 5 days of unpaid family and domestic violence leave each year.

Modern awards will be varied to help employees deal with the impact of family family and domestic violence, by providing employees with time to attend court hearings, access police services and make arrangement for their safety or the safety of a family member.

Find out more
You can find more information about domestic and family violence leave and who it applies to at www.fairwork.gov.au

CHRISTMAS CLOSURE

It’s getting to that time of year when businesses need to start thinking about closing down their operations over Christmas. 

It is important to ensure you check the Award that applies to your business to ensure you are giving staff ample warning regarding the dates when they may be required to take annual leave.

For example, in the Road Transport and Distribution Award 2010, the Award states:

An employer may close down an enterprise or part of an enterprise for the purpose of allowing annual leave to all or the majority of the employees in the enterprise or part concerned, provided that:

a) the employer gives not less than one months notice of its intention to do so;

b) an employee who has accrued sufficient leave to cover the period of the close down, is allowed leave and also paid for that leave at the appropriate wage;

c) an employee who has accrued sufficient leave to cover part of all of the close down, is allowed paid leave for the period for which they have accrued sufficient leave and given unpaid leave for the remainder of the close-down; and

d) any leave taken by an employee as a result of a close down pursuant to this clause also counts as service by the employee with their employer

EMMA’S FINANCIAL PLANNING QUOTE OF THE DAY

As Financial advisers we don’t merely pick shares or recommend investments— we carefully analyse your personal circumstances and assess the market environment as we develop your overall investment strategy.

Looking for financial advice? Contact Emma for your FREE Financial Planning consultation on (03) 5833 3000.

PLUS 1 – PROUDLY SUPPORTING

Open Hours

Monday to Friday
8:00am to 5:00pm

Closed Public Holidays

If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

Contact Us

27 Welsford Street
Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
E: info@plus1group.com.au