Media

F Salce & Associates takes seriously the privacy of our clients and those that visit our website.

-Phillip Borg Businessman

P r a c t i ce Up d a t e

January/February 2020

 

Lifestyle assets continue to be an ATO audit target

The ATO has revealed it will request a further five years’ worth of policy information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high-value motor vehicles and aircraft.

The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2016 to 2020 as part of its data-matching program.

This information (provided by insurers) is intended to be used by the ATO as part of its compliance profiling activities.

For example, ATO Deputy Commissioner Deborah Jenkins said:

“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own athree million dollaryacht then this is likely to raise some red flags.”

She clarified that the data will not be used to initiate automated compliance activity.

“Taxpayers selected for compliance activities are identified through other methodologies. The data is made available to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or may not prompt the compliance officer to pursue a particular line of enquiry.”

Aside from helping identify taxpayers who may be understating their income, the data from insurers may be used by the ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this to the ATO.

It will also be used by the ATO to identify incorrect claims for GST input tax credits where taxpayers are incorrectly claiming GST credits as if the (private) item was a business asset.

Additionally, SMSFs the ATO suspects may be acquiring lifestyle assets purely for the personal enjoyment of the fund's trustee or beneficiaries are also likely to be looked at by the ATO.

Insurers are required to provide the ATO with policy information where the value of assets is equal to or exceeds the following thresholds:

l Marine vessels $100,000

l Motor vehicles $65,000

l Thoroughbred horses $65,000

l Fine art $100,000 per item

l Aircraft $150,000

Editor: If you feel that you may be targeted by this latest ATO data collection activity and are concerned about the implications, please feel free to contact our office to discuss your individual circumstances.

Ref: ATO website, 18 December 2019

 

Disclosure of business tax debts – Declaration made

Following the enactment of legislation in late 2019, the ATO can disclose certain business tax debt information to external credit reporting bureaus.

This information will primarily be used when issuing external creditworthiness reports in relation to relevant businesses, effectively treating tax debts in a similar manner to other business debts.

More recently, the Government issued a Declaration to determine exactly what class of entities may be subject to such disclosures, including entities that:

l are registered in the Australian Business Register and are not a complying superannuation fund, a DGR, registered charity or government entity; and

l have one or more tax debts totalling at least$100,000that are overdue for more than90 days, disregarding:

– tax debts where the entity has an arrangement to pay the ATO by instalments (i.e., via a payment plan);

– tax debts subject to an application for release on grounds of hardship; and/or

– tax debts subject to dispute via an objection, AAT or Federal Court review that has not been finalised.

Additionally, the Declaration does not allow debt disclosure for taxpayers who have an active complaint concerning the disclosure of tax debt information that is, or could be, the subject of an Inspector-General of Taxation (‘IGOT’) investigation.

Importantly, if there is such a complaint, the ATO can only proceed with a disclosure of the debt where it is not aware of it after taking reasonable steps to confirm whether the IGOT has such a complaint.

Ref: Taxation Administration (Tax Debt Information Disclosure) Declaration 2019

 

MYEFO – 2019/20

Treasury has released its Mid-Year Economic and Fiscal Outlook (‘MYEFO’) for 2019/20 forecasting a surplus of approximately $5 billion.

 

Proposed new record-keeping course 

One new tax-related measure of note in the MYEFO was the announcement the ATO would be provided with a new discretion to direct taxpayers (found to be lacking in their substantiation efforts under audit) to undertake an approved record-keeping course, instead of applying financial penalties.

This is yet another measure designed to tackle the ‘black’ or ‘cash’ economy.

Specifically, the Commissioner will be given the discretion to direct taxpayers to undertake the course where he reasonably believes there has been a failure by the taxpayer to comply with their reporting obligations.

The Commissioner will not apply this discretion to those who disengage with the tax system or who deliberately avoid their record-keeping obligations.

Editor: Such a proposal raises obvious concerns as to the onerous nature of having to comply with such a course, particularly for small business owners whose main priority is to run their business.

Interestingly, there is a precedent for similar ATO directions to taxpayers (i.e., to undertake an approved course), with legislation passed earlier this year allowing the Commissioner to require employers to undertake a superannuation guarantee obligations course where there has been a failure by an employer to comply with those obligations.

 

New ‘gig’ economy reporting 

Additionally, the MYEFO also announced the Government’s intention to implement a newthird partyreporting regime for the sharing economy.

This will apply to businesses who operate via online platforms within the ‘sharing’ or ‘gig’ economy (e.g., Uber and Airbnb).

It is proposed to be introduced in two stages, starting from 1 July 2022 (forride-sharingand accommodation platforms) and from 1 July 2023 (for asset sharing, food delivery and tasking-based platforms).

The online platforms will be required to report identification and income information for all its participating members (i.e., both the sellers and providers).

These reports will go directly to the ATO for data-matching (i.e., review and audit) purposes.

Ref: MYEFO 2019/20

 

The ATO’s Bushfire crisis response

In response to the devastating bushfires across large parts of Australia, the ATO has been keen to advise those impacted that it understands peoples priority is their family and community.  

If taxpayers live in one of the identified impacted postcodes, the ATO will automatically defer any lodgments or payments, meaning that income tax, activity statement, SMSF and FBT lodgments (and their associated payments) are deferred until28 May 2020.

For those affected not in the current ATO postcodes list, assistance can still be provided, with impacted taxpayers encouraged to phone theATO’s Emergency Support Infolineon1800 806 218.

Editor: Please contact our office if you have been impacted by this or another disaster for assistance. Ref: ATO website, 20 January 2020 and ATO media release, 20 January 2020.

 

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.

 


 

-Phillip Borg Businessman

MAKE THE MOVE TOmyGovIDand RAM  

-Phillip Borg Businessman

Christmas Parties & Gifts 2019

December2019

Year-end (and other) staff parties

Editor:With the well earned December/January holiday season on the way, many employers will be planning to reward staff with a celebratory party or event.However, there are important issues to consider, includingthe possible FBT and income tax implications of providing 'entertainment' (including Christmas parties) to staff and clients.

FBT and 'entertainment'

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the 'actual method' or the '50/50 method', rather than the '12-week method'.


Using the actual method

Under the actual method, entertainment costs are normally split up between employees (and their family) and non-employees (e.g., clients).

Such expenditure on employees is deductible and liable to FBT.Expenditure on non-employees is not liable to FBT and not tax deductible.


Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible.


However, the following traps must be considered:

even if the function is held on the employer's premises – food and drink provided to employees is not exempt from FBT;

the minor benefit exemption* cannot apply; and

the general taxi travel exemption (for travel to or from the employer's premises) also cannot apply.


(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of 'less than $300' that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.


The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.

However, entertainment expenditure that is FBT-exempt is also not deductible.

Editor:'Less than' $300 means no more than $299.99!A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all.

The cost of food and drink per person is $250 and no other benefits are provided.

If the actual method is used:

For all 40 employees and their spouses – no FBT is payable (i.e., by applying the minor benefit exemption), however, the party expenditure is not tax deductible.

If the 50/50 method is used:

The total expenditure is $10,000, so $5,000 (i.e., 50%) is liable to FBT and tax deductible.

Christmas gifts

Editor:With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

Gifts that are not considered to be entertainment

These generally include a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers or a pen set, etc.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and

gifts to clients, suppliers, etc. – no FBT, and tax deductible.

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and

gifts to clients, suppliers, etc. – no FBT and not tax deductible.

Non-entertainment gifts at functions

Editor:What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under theactual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (i.e., the benefits are not aggregated).

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible.

50/50 method used for meal entertainment

Where the 50/50 method is adopted:

50% of the total cost of food and drink is liable to FBT and tax deductible; and

in relation to the gifts: 

the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and

as the gifts are not entertainment, the cost is tax deductible.

Editor:We understand that this can all be somewhat bewildering, so if you would like a little help, just contact our office.

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.

 

-Phillip Borg Businessman

  

-Phillip Borg Businessman

  

-Phillip Borg Businessman

July 2019

 

Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.

Sent via File Attaché
 
 

-Phillip Borg Businessman