New Rules for Super Age Limits and Work Test

Changes to superannuation legislation in July 2020 have adjusted the rules around age limits and the work test, allowing older workers to continue making superannuation contributions.

Super Contributions

Superannuation guarantee contributions made by employers on behalf of employees can be paid into the employee's super fund, for workers of any age.

For other contributions, (after-tax, pre-tax, government and spouse contributions), individuals need to satisfy a work test before the super fund can accept the contributions.

For downsizer contributions, individuals must be aged 65 or older, but there is no requirement to meet the work test and no maximum age limit.

Age Limit and the Work Test

The work test now applies to people aged 67 up to age 75. Individuals need to have worked at least 40 hours during a consecutive 30-day period in each financial year that contributions are made, up to the non-concessional cap of $100,000.

The work test means people must be 'gainfully employed' for those 40 hours. This means the individual must have been paid wages, bonuses, commissions or any other form of taxable employment income. For self-employed people, they must have worked in their own business and received business income.

Volunteer work does not meet the work test, even if you have been paid for expenses incurred during volunteer work.

For workers over 75, the only allowable contributions are employer super guarantee contributions and downsizer contributions.

Further amendments are expected to extend the bring-forward rule for non-concessional contributions to the age of 67 from 65, providing more opportunity to contribute. This change has not passed through parliament yet.

Work Test Exemption

If you satisfied the work test last financial year, and you plan to make contributions this year, you may be exempt from meeting the work test this year. If your total superannuation balance is less than $300,000 at the end of last financial year, and you did not rely on the work test exemption in a previous year, then the work test exemption may apply to you, allowing you to contribute to super in this financial year. The work test exemption can only be used once, allowing people to make voluntary contributions for an additional year.

Non-concessional Contributions

Non-concessional contributions are made into your super fund after tax and are not taxed again within the fund, up to a limit of $100,000. If you exceed the non-concessional cap you may need to pay the top rate of tax on the excess amount.

There are some exclusions from the non-concessional cap – for example injury settlement and downsizer payments. Your super fund must be notified of exclusions.

Start Planning Now to Maximise Your Super Contributions This Financial Year

Managing super can be complex and there are many rules to understand. Even if you enjoy managing your own superannuation, we recommend an objective review of your superannuation and retirement plans to help you take advantage of contributing to your super for as long as you can.

Alternatively, it may be time to hand over the management of your superannuation – talk to us now to learn more about maximising your super contributions and making the administration of it easy.

Your December quarter activity statement is due soon

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Your December quarter activity statement is due soon

Your December quarter activity statement is due soon. If you are lodging your own quarterly activity statement you need to lodge and pay by the 28th of January. If you lodge using our registered agent electronic services you will have until the 28th of February to lodge and pay.

 

Make sure you have checked off the following:

 

  • Have you allocated all bank transactions to the correct accounts?
  • Have you verified that the bank balance listed in your accounting software matches the balance in your bank account?
  • Do you have tax invoices and receipts for all business-related transactions?
  • Have you checked the GST tax codes for all transactions?
  • Have you checked tricky transactions like agency arrangements, insurance or overseas purchases for GST tax code accuracy?
  • Have you got paperwork for asset purchases or new finance arrangements?
  • Do you need to include figures for PAYG instalment, fringe benefits tax, or fuel tax credits?
  • If you have to report PAYG withholding for employees, you also need to check that your payroll categories and tax calculations are correct for the quarter, (or last month for employers who lodge a monthly IAS).

 

Checking the figures at each of the BAS reporting labels means your statements are more likely to be accurate and less likely to need GST or PAYGW adjustments at the end of the financial year. Plus, you'll have a more accurate picture of your liabilities throughout the year and be able to plan accordingly.

 

Need help?

 

Talk to us today. We can help you prepare your activity statements or review your business accounting systems to make it easy, accurate and efficient.

 

Make an enquiry http://www.clarkemcewan.com.au/contact_us  

Your monthly activity statement (BAS) is due on the 21st

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Your monthly activity statement (BAS) is due on the 21st

Use the following checklist to make sure you are ready for lodgement day:

  • Have you allocated all bank transactions to the correct accounts?
  • Have you verified that the bank balance listed in your accounting software matches the balance in your bank account?
  • Do you have tax invoices and receipts for all business-related transactions?
  • Have you checked the GST tax codes for all transactions?
  • Have you checked tricky transactions like agency arrangements, insurance or overseas purchases for GST tax code accuracy?
  • Have you got paperwork for asset purchases or new finance arrangements?
  • If you have to report PAYG withholding for employees, you also need to check that your payroll categories and tax calculations are correct for the quarter, (or last month for employers who lodge a monthly IAS).

Checking the figures at each of the BAS reporting labels means your statements are more likely to be accurate and less likely to need GST adjustments at the end of the financial year. This results in you having a more accurate picture of your liabilities throughout the year and being able to plan accordingly.

Any questions? Talk to us. We can help you set up the processes to make this area of your business easy - and you can focus on your business.

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Your December quarter superannuation guarantee contribution is due soon

Prepare now for your quarterly superannuation guarantee (SG) contribution lodgement and payment.

 

Things to review before finalising the quarterly superannuation lodgement:

 

  • Have you allocated all payroll related bank transactions to the correct accounts?
  • Have you checked for errors such as duplicate pay runs?
  • Have you checked that all payroll categories used this quarter have had super correctly applied or excluded?
  • Have you checked superannuation accrual reports for accuracy?
  • Do you have any salary sacrifice amounts to include?
  • Have you had to make any termination payments this quarter? If so, check which payroll categories have super calculated or exempted.
  • Do you have complete and up-to-date contact details and a super choice form for all employees?

 

Most superannuation clearing houses (including SuperStream compliant software companies) require payment by the 14th of the month in order to distribute the funds to the relevant super funds for each employee.

 

If you use the ATO Small business Clearing House (SBSCH) you have until the 28th to lodge and pay.

 

Checking the figures thoroughly each quarter ensures that you report and pay accurate amounts for each employee. You will also have a more accurate picture of your superannuation liability and be able to plan accordingly.

 

Penalties for late super can be severe. Superannuation calculations can be difficult if your payroll software is not set-up for correct accruals of superannuation guarantee.

 

We can help you review of your super set-up and the SG accounts used in your accounting software.

 

Christmas Parties and Presents - and Tax!

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Christmas Parties and Presents - and Tax!

Christmas is a great time to acknowledge and reward your employees and other associates by celebrating and giving gifts. But don't get caught out by entertainment rules! Claiming entertainment and gifts as business expenses is not always straight-forward, as there are implications for GST, income tax and fringe benefits tax (FBT).

Is it Entertainment?

Entertainment is generally not a deductible business expense. Entertainment rules can be tricky, but in general, the more lavish the meal or event, the more costly, the later in the day and if alcohol is involved then it will generally be called entertainment.

Fringe benefits tax may apply to entertainment benefits provided to employees, and if an event or gift is considered to be entertainment then you cannot claim a business deduction or GST.

A Christmas party for employees, spouses, suppliers and customers may or may not be classed as entertainment. Check with us to see if any of the party costs can be claimed.

Keep it Free From FBT

  • If you give gifts to your employees keep them under $300 each. Benefits provided which have a value of less than $300 are exempt from FBT.
  • Give gifts to employees that they otherwise would have claimed as a tax deduction. For example, you could pay for a professional development course or give new tools.
  • Give gift cards or vouchers up to the value of $300. (Vouchers are not considered to be entertainment).
  • Avoid giving 'entertainment' gifts over $300, such as membership to clubs, tickets to events or travel.
  • Pay a Christmas bonus. Process through payroll like any other wage payment and withhold tax. Remember that superannuation applies to bonus wages.

Enjoy the Party

Talk to us when planning your Christmas gifts and events to check how much may be claimed as business expenses. Once you know the costs of throwing a party and giving gifts and bonuses, you can put your feet up and enjoy your own party!



In a decision of the Administrative Appeals Tribunal, a taxpayer, Mr Bell, was a denied a deduction for $21,565.73 of work-related vehicle expenses for the 2016 income year. Mr Bell was a construction worker who predominantly worked on a construction site in an eastern suburb of Melbourne and lived approximately 100 kilometres away from that worksite.

Mr Bell owned a ute that had a load carrying capacity of more than one tonne – so it fell outside the definition of a 'car' for the purposes of the ITAA 1997.

Mr Bell claimed a total deduction for $24,865.73 for motor vehicle expenses and received an allowance under his Enterprise Bargaining Agreement. This allowance did not vary with the amount of travel undertaken and totalled $15,221 for the year.

Mr Bell contended that he was required to use his vehicle to transport heavy/bulky goods (tools) between his home and his workplace and to collect supplies and equipment from hardware stores while travelling between his workplace and his home.

Ordinarily, travel from home-to-work (and back again) is considered non-deductible. However, if an employee is required to carry heavy/bulky equipment for which there are no secure storage facilities at work, the travel between home and work with the heavy/bulky equipment can be considered deductible. Unfortunately for Mr Bell, evidence before the Tribunal indicated that there were safe and secure storage facilities for his tools (the bulky/heavy equipment) at the worksite.

Accordingly, Mr Bell was unable to rely upon the 'bulky goods' exception to re-characterise home-to-work travel as being a deductible work expense.

Instead, it retained its ordinary private and non-deductible status. Mr Bell was unsuccessful in advancing the argument that he was entitled to a deduction in relation to the motor vehicle expenses because he was in receipt of an allowance. However, Mr Bell was able to convince the ATO that he had undertaken at least some work-related travel using his vehicle. The ATO allowed Mr Bell a deduction under the 'cents per kilometre method' up to the maximum dollar amount for 5,000 kilometres for the 2016 income year of $3,300.

Editor: This decision provides a timely reminder that simply carrying bulky equipment between home and work will not make these trips deductible, where there is a secure place for the equipment to be stored at the employee's worksite. The decision also highlights the fallacy of assuming that being in receipt of an allowance somehow entitles the taxpayer to an offsetting deduction.

The taxpayer was technically 'lucky' that he was allowed the 'cents per kilometre method' deduction for work-related travel, given that his motor vehicle fell outside the definition of a 'car'. This is because the cents per kilometre method only applies to 'cars', so it could be said that the ATO was generous to the taxpayer in these circumstances.  

This short video explains some of the points illustrated above.

Please contact our office if you have any queries as to the deductibility of work-related travel. 


Vehicles and the new accelerated depreciation measure



 Introduced last March to aid businesses through the COVID-19 troubled market environment, the stimulus measure Backing business investment includes an incentive for entities in the 2019-20 and 2020-21 income years, with aggregated turnover up to $500 million, to deduct the cost of depreciating assets at an accelerated rate.

For the period 12 March 2020 until 30 June 2021, assets first used or installed ready for use qualify (although the beefed-up instant asset deduction can't be used as well). Other qualifying conditions can be found listed on this ATO web page.

However one area of the accelerated depreciation measure that has initiated a lot of questions from taxpayers centres on vehicles - so much so that the ATO felt compelled to issue a document to answer the more common questions it has been asked (you can download a copy for your clients here).

First of all, and to clear up what could be deemed obvious, but needs to be cleared away from the outset, the following applies:

  • As mentioned, there's no claiming the instant asset write-off and accelerated depreciation for the same vehicle
  • The car must be received (not just ordered and/or paid for) before the end of the relevant income year
  • No second-hand vehicles (but this is okay for the instant asset write-off)
  • Vehicle cost excludes GST if the entity is registered for GST, and includes GST if not registered
  • The vehicle cost does not include trade-in value.

There is a limit to the value that can be depreciated, which is $57,581 for 2019-20 and $59,136 for 2020-21 (unless the vehicle has a load capacity of more than one tonne or nine passengers, which allows a full cost depreciation).

If your client is a small business using the simplified depreciation rules, an eligible new vehicle can be added to the small business pool, deducting an amount equal to 57.5% (rather than 15%) of the business portion of the vehicle in the year it is added to the pool.

If the less than $500 million turnover entity does not use simplified depreciation, they can immediately deduct 50% of the cost of the vehicle (within limit), plus depreciate the balance. Anything over the limit is not covered.

ITRs Home Office Expenses


If you perform some of your work from your home office, you may be able to claim a deduction for the costs you incur in running your home office, even if the room is not set aside solely for work-related purposes

 

COVID-19 IMPACT - NEW ARRANGEMENTS

The Australian Taxation Office (ATO) has announced special arrangements this year due to COVID-19 to make it easier for people to claim deductions for working from home. The new arrangements will allow people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.

 

Multiple people living in the same house can claim this new rate. For example, a couple living together could each individually claim the 80 cents per hour rate. The requirement to have a dedicated work from home area has also been removed.

 

This new shortcut arrangement does not prohibit people from making a working from home claim under existing arrangements, where you calculate all or part of your running expenses.

 

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and must use the pre-existing working from home approach and requirements.

 

The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.

 

WORKING FROM HOME CLAIMS FOR 1 MARCH TO 30 JUNE

 

There are three ways that you can choose to calculate your additional running expenses for the 1 March – 30 June period: 

  • claim a rate of 80 cents per work hour for all additional running expenses.
  • claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device
  • claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

The ATO has stated that the three golden rules for deductions still apply. Taxpayers must have spent the money themselves and not have been reimbursed, the claim must be directly related to earning income, and there must be a record to substantiate the claim.


WORKING FROM HOME BEFORE 1 MARCH 2020  

Claims for working from home expenses prior to 1 March 2020 should be calculated using the existing approaches and are subject to the existing requirements.

 

RUNNING EXPENSES

A deduction can be claimed for home office running expenses comprising of electricity, gas and depreciation of office furniture (e.g. desk, tables, chairs, cabinets, shelves, professional library) in the amount of:

·         The actual expenses incurred; or
·         52 cents per hour 

Like making a motor vehicle claim, diary/logbook evidence should be maintained for a 4-week period to establish a pattern of working from home and justify the number of hours you are claiming.

No deduction is allowed where no additional costs are incurred e.g. you work in a room where others are watching TV, or the income producing use of the home is incidental e.g. 52c per hour would not be allowed for a fax machine permanently left on to receive documents. 

You will need receipts for:  

·         home office equipment used for work purposes

·         repairs relating specifically to home office/furniture and equipment used for work purposes

·         cleaning expenses of home office

·         any other day-to-day running expenses for the home office

·         diary entries to record your small expenses ($10 or less) totalling no more than $200 

TELEPHONE (INC. MOBILES) + INTERNET COSTS 

If work or business calls can be identified from an itemised telephone account, then the deduction can be claimed for the work or business-related portion of the telephone account. A representative four-week period will be accepted as establishing a pattern of internet and telephone use for the entire year.

 

Telephone rental expense may be partly deductible if you are "on call" or required to contact your employer or client on a regular basis.

 

DEPRECIATION ON EQUIPMENT

 

Depreciation on home office equipment including office furniture, carpets, computer, printer, photocopier, scanners, modem etc. used only partly for work or business purposes can be apportioned.

 

The claim is based on a diary record of the income related and non-income related use covering a representative four-week period.  The diary needs to show:

  • The nature of each use of the equipment
  • Whether that use was for an income producing or non-income producing purpose
  • The period for which is was used

 

OCCUPANCY EXPENSES

 

Claims for occupancy expenses are allowed only if the home is used as a place of business. Occupancy expenses include rent, mortgage interest, water rates, repairs, house insurance premiums.

 

The claim can be made as an apportionment of total expenses incurred on a floor area basis.

 

Warning: Being able to claim theses expenses may affect your 'main residence exemption' for capital gains tax purposes if you sell your house in the future.

 

WHEN IS A HOME A PLACE OF BUSINESS?

 

The following factors, none of which is necessarily conclusive on its own, may indicate whether, or not, an area set aside has the characteristics of a place of business:

 

  • the area is clearly identifiable as a place of business
  • the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
  • the area is used exclusively, or almost exclusively, for carrying on a business, or
  • the area is used regularly for client or customer visits.  

If you use your home to carry out income producing activities as a matter of convenience, you are not entitled to a deduction for occupancy expenses. It would be rare for an employee to be able to claim occupancy expenses.

 

WHAT NEXT ?

For further information and expert assistance to prepare your tax return and maximise your tax refund, contact our office today!

 

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances. 

Lifestyle Assets ATO Audit Target




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 a three million dollar yacht 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:

Marine vessels $100,000
Motor vehicles $65,000
Thoroughbred horses $65,000 
- Fine art $100,000 per item
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

Christmas Gifts