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Receive A Relief Or Support Payment? Here’s What You Need To Watch Out For This Tax Season

Posted on 12 July '21 by admin

Have you, over the course of the past financial year, received a government assistance payment, support payment or disaster relief supplement?

There have been a number of cases where people who received financial assistance from the government were hit with additional owed tax to the ATO, due to their payments increasing their income threshold.

When lodging your individual income tax return this year, you will need to declare certain Australian Government payments, pensions and allowances in your tax return. If you did not elect to pay tax on those payments, this could affect the payment received from your return (or mean that you actually owe money to the ATO).

Some of the taxable payments that you may need to include in your tax return include:

Most of these pensions, payments and allowances will pre-fill in your tax return if you lodge online. You will need to make sure that all information submitted is correct though. Verify the pre-filled information with your own records to ensure that you are lodging the right information, and not missing anything.

Do you have concerns about your tax return this year? Uncertain about deductions, or if certain taxes will apply to you? Want a little more help or information about your government payments?

Be prepared for your individual income tax return with a consult with us. We can advise you on your tax returns, and potentially help you minimise the tax you will end up paying.

Choosing A Structure For Your Business: The Co-Operative Explained.

Posted on 5 July '21 by admin

Sometimes you might want to set up a structure where you will share in the spoils with everyone that deals with that structure.  There is a specific type of structure for this and it is known as a Co-Operative.

A co-operative business structure (or co-op) is a legally incorporated business entity that is designed to serve the interests of its members. Co-operatives may be profit-sharing enterprises or not-for-profit organisations.

A cooperative business serves members by providing goods and services that may be unavailable or too costly to access as individuals. There are two types of cooperatives that businesses can be set up as.

Distributing cooperatives are able to distribute any annual profits to members of the cooperative. They are required to share the capital that they make, and members of this type of cooperative must own the minimum number of shares specified in the co-op’s rules.

Non-distributing cooperatives cannot share their profits with members of the cooperative. All profits must further the cooperative’s purpose, and the cooperative may or may not issue shares to the members. Members may be charged a subscription fee if there is no share capital

Some popular cooperatives business structures include:

ATO Says Different Payments Will Have Different Tax Treatments.

Posted on 30 June '21 by admin

The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received. 

 

Jobkeeper

Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.

 

Jobseeker

All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.

 

Stand Down Payments

If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable. 

 

COVID-19 Disaster Payment For People Affected By Restrictions

The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.


Tax Treatment Of Other Assistance Payments

The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return. 

 

Early Access To Superannuation

If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.

 

If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help. 

Recent Changes To Your Superannuation That You Need To Know

Posted on 28 June '21 by admin

 

There were a few changes to superannuation that were passed by the Senate recently.

 

You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.  

 

Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.  

 

This new age limit will apply to contributions made on or after the 1st July 2020.  This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.

 

From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members.  The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case). 

 

Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution. 

 

If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.  

 

There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.

 

This change was never announced and was not part of government policy but made it through anyway.  One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.

 

Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030. 

 

For example, Peter took his $20,000 under the Covid Release package.  Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.  

 

The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.

 

Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuation

The ATO Warns Gig Economy Workers To Declare Their Income, Or Face Severe Penalties

Posted on 21 June '21 by admin

The inexpensive and profitable side hustle is under the ATO’s watchful eye when it comes to declaring income this tax season. With many gig economy workers often earning their income as independent contractors, the ATO warns that a failure to report all income from all of the work that they carry out could land them with severe penalties. 

 

The ATO is expected to employ advanced data-matching from platforms that play host to large proportions of Australia’s gig economy to ensure that tax is declared and paid on the income from workers of the gig economy. Those workers may include Uber workers, Doordash, Lyft, Airbnb and many more similar side hustle income earners.

 

There is a silver lining for gig workers this tax time. Many gig economy workers may find themselves more eligible for tax deductions – but are warned against claiming more than they are allowed to.

 

Gig workers are eligible to claim deductions for most costs incurred while earning their income (such as travel or vehicle expenses, financing and marketing). These deductions, however, can only be claimed for the work-related proportion of the claim. You won’t be able to claim the whole amount for the deduction if the claim is made because you picked up an Uber fare on the way back from your Grandma’s for example, it will only be deductible from when you picked up your passenger. 

 

Those who prepare their deductions based on a representative period are also warned to prepare an additional record for this period, as the pandemic has induced numerous tax challenges for many gig economy workers involved in declining and rising fields of the economy. 

 

Workers who fail to declare cash income from the gig economy may incur penalties in the form of interest on their tax bills or potential criminal charges. It is vital that you ensure your tax return is correctly lodged and all income is declared if you are a gig economy worker of any kind. If you need assistance regarding your tax return lodgment process, you can always contact us for advice.

1 July 2021 Will See Super Guarantee Rate Rise

Posted on 21 June '21 by admin

Many years ago Julia Gillard’s government announced increases in the Superannuation Guarantee rate from 9% at the time, up to 12%.  The impact of the Global Financial Crisis has led subsequent governments to continually postpone these increases. So far, Australia has only received two increases, back in 2013 and 2014, when the superannuation rate went up to 9.5% over two years.  It has remained at 9.5% since 2014.

 

Now it is time for the next increase. This will happen on 1 July 2021 when the rate of superannuation that you have to pay for most of your employees will be 10% of their salary or wage instead of the current 9.5%.

 

For most employers that are using payroll software, this change will happen automatically. You should however confirm with your software provider (either directly or through someone like us) that this will happen to ensure that you remain compliant without needing further action.

 

For most employees, this will mean an extra 0.5% added to their current salary plus super.  But where an employee is on a contract where their salary is superannuation inclusive it could be that they will receive a corresponding reduction in their salary to offset the extra superannuation.  Employers and employees will need to have a discussion about this so that everyone knows the situation they will be in for the new financial year.

 

The proposed increase to 12% is still scheduled to happen in 0.5% increments each financial year until the 2025-26 year when the Superannuation Guarantee rate will peak at 12%.  The rates applicable to each financial year are proposed to be:

 

           1 July 2021 to 30 June 2022                 10%

           1 July 2022 to 30 June 2023                 10.5%

           1 July 2023 to 30 June 2024                 11%

           1 July 2024 to 30 June 2025                 11.5%

           1 July 2025 onwards                             12%

 

It is also possible that the government will delay the increases as it has done in the past, but you will be kept informed regarding that information. 

High School Students, It’s Time To Get Creative About Tax & Super

Posted on 16 June '21 by admin

The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.

Working as a part of a team or individually, students are invited to write, make or film an entry for their topic:

* Junior (Year 7–9) are asked to highlight the value of tax or super (or both) in the community

* Senior (Year 10–12) must discuss your first job and what you need to know about tax and super.

Shortlisted entries in 2019 included raps, songs, animations, video skits and even a board game. If you’re a high school student interested in competing this year or are the parent of one, this resource is a great way to see how people have gotten involved previously (and that you can draw inspiration from as well).

The competition opened on 24 May, but entries will be accepted until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos who is one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.

Tax Office Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.

“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.

You can watch Sally explain how to get involved on ATOtv.

Winners of the 2021 Tax, Super + You competition will be announced in September.

Looking for more information about the 2021 Tax, Super + You competition? Visit www.taxsuperandyou.gov.au/competition to find out more details.

Your First Tax Return: What You Need To Know

Posted on 15 June '21 by admin

Tax return season is quickly approaching for individuals. You may need to begin thinking about the process sooner rather than later to ensure that you have everything ready for your accountant. If you’ve never had to complete a tax return before (and it’s your first time) or are still uncertain about what you need to do, this process can feel a bit like a Mount Everest you need to climb.

Putting it simply, if you are earning or will earn more than $20,542 this year, you will need to lodge a tax return. However, if you haven’t made that amount but your employer has taken tax out of your pay, you should lodge a return anyway to receive some (if not most) of that money back.

How much money you receive back from the tax return will be affected by how much income you have earned. Some debts (such as HECS or HELP) will begin to take money out of your return after reaching a certain income threshold level (currently set at $46,620).

A tax return is where you report all of your income earned over the past financial year. It should include ATO-reported income (which you generally won’t have to worry about as we have access to it automatically) such as salary or non-ATO reported income. This income may be income that has not been sent to the ATO and could include tips, any income you’ve earned while working under an ABN or payments from a family trust. You need to work out all of the income that you have earned and report it to remain compliant with the ATO.

In a tax return, you will also be entitled to make tax deductions on certain items if they apply to your situation. This means that you may receive a greater amount in your tax refund.

You will be entitled to tax deductions on items such as:

If you want to make sure that you understand precisely what you need to do to lodge your tax return, keep this in mind:

For assistance during the lodgement of your tax return, you can seek advice from us. We’re here to help ensure you meet your tax obligations by reporting your income correctly for this financial year.

 

Crypto Tax Crackdown Announced By ATO

Posted on 8 June '21 by admin

Cryptocurrency investments are on the ATO’s radar this tax return season, with 100,000 taxpayers to be alerted by the ATO of their tax obligations from their cryptocurrency investments this financial year.

It’s an outcome that has resulted from a growing concern that many taxpayers who invest in cryptocurrency believe their gains to be tax-free, or only taxable when their holdings are cashed into Australian dollars.

This proactive prompt to taxpayers is a repeat of the ATO’s 2020 attempt, which resulted (after contacting 100,000 taxpayers) in the lodgement of 140,000 returns.

Cryptocurrency’s current popularity as an investment solution for many taxpayers, due to the fairly consistent returns, is causing the ATO to evaluate the digital asset’s tax implications further.

Currently, those who invest in cryptocurrency need to be aware of the capital gains tax implications that may eventuate from selling or buying and any losses or gains that may come about due to investing, particularly in how it impacts their reportable income tax.

The ATO will also be heading into tax time with access to more data and the ability to track those investing in crypto-assets and ensure they are meeting their tax obligations.

The best way to ensure that your tax returns are lodged correctly when it comes to cryptocurrency reporting is to keep immaculate records. You should ensure that you have records of:

Be sure that you are meeting your tax obligations this tax return season (especially to avoid the harsh penalties resulting from incorrect reporting or lodgements) by speaking with us. We can advise you further about your particular situation and give you the advice you need to suit your circumstances.

 

Getting a Double Deduction for your Super Contributions?

Posted on 7 June '21 by admin

Each year we are entitled to a tax deduction for a certain amount of superannuation contributions. The tax deduction is available to your employer if they contribute on your behalf but it can also be available to you personally when you make extra contributions to super.

The amount that you can claim as a tax deduction is limited to what is known as your Concessional Contributions Cap.  There is a standard Cap of $25,000, though that is increasing to $27,500 on 1st July 2021. There are certain people that can add amounts that haven’t been used in previous years to this cap amount.

If you go over your Concessional Contributions Cap, the excess contributions are merely added to your taxable income so you don’t get any tax benefits out of the contribution.

For example, let’s say your Concessional Contributions Cap is $25,000 but you make $35,000 in concessional contributions.  The extra $10,000 will be added to your taxable income but you will receive a credit for the $1,500 in contributions tax paid by the super fund.

But there is a little known trick to allow you to “bring forward” a tax deduction for your concessional contributions.  This “hack” is commonly known as a Contributions Reserving Strategy and it has been approved by the Tax Office.  If done correctly it allows you to take some of next year’s Concessional Contributions Cap and bring it into this financial year.  But it must be done correctly and if you take advantage of it, you need to lodge a specific form with the Tax Office to let them know. The ATO will almost certainly audit what you have done.

It is also important to note that it is really only achievable to do this strategy with a Self Managed Superannuation Fund.  It is also important to note that you are merely bringing forward your contribution (using it this year) and that you won’t be able to use that amount next year, so careful planning is also needed.

This type of strategy is used by people who will have an unusually higher taxable income this year than they will next year.  So, for example, you might have a large capital gain this year or you might be retiring and have no taxable income next year.

Leaving it until the new year to discuss this strategy is way too late and it absolutely cannot be done after late June so it is essential that you talk to us if you feel next year’s taxable income will be a lot lower than this year.

 

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