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Are You Declaring Your “Odd Jobs” Income From Gig Economy Sites?

“Gig economy” platforms like Airtasker are allowing Australians to earn some extra cash by completing a staggering variety of odd jobs – everything from gardening to data entry and even standing in line for concert tickets! But if you earn money from these platforms, you must ensure you meet your tax obligations.

 

Have you ever considered joining a site like Airtasker to make some extra cash? If so, you’ll need to keep the ATO happy. Here, we explain the tax issues that arise when you earn money performing “gigs” through Airtasker, or any other online platform that connects workers with third-party hirers looking for help with one-off tasks.It’s important to understand that these platforms are used by everyone from “moonlighters” making some extra dollars on top of their regular job, through to self-employed people running substantial businesses (eg tradespeople) who use these platforms to pick up extra clients. Certain tax issues like GST registration can therefore depend on the person’s particular circumstances.

 

Is this money assessable income?

Yes, you must declare this income in your tax return. This means you must keep records of the amounts you earn.

 

If the platform charges you a fee or commission, you must declare the gross amount of income you earn. For example, if Sally earns $100 from a gardening gig and pays the platform a $15 service fee, she must declare the full $100 as income in her tax return.

 

However, you’re entitled to claim relevant deductions, including platform fees and commissions. You may also be able to deduct other expenses you incur in generating the income, including equipment and some car expenses. If your expenses also entail some personal use, you’ll only be able to claim a portion of the expenses. Your tax adviser can explain exactly what you’re entitled to deduct and how to substantiate this. In the meantime, ensure you keep receipts of all expenses related to your gigs.

 

How does GST work?

If your annual turnover is $75,000 or more, you must register for GST. Below this threshold, registration is optional. Being registered for GST means:

-You must report and remit GST of 10% to the ATO. This involves additional administration, and you’ll need to take this into account when deciding what price you’re willing to perform a “gig” for. Other workers you’re competing against who aren’t GST-registered may be willing to perform a gig at a lower price.

-However, you can claim GST credits on the GST components of business expenses you incur, including the GST included in any platform fees. (Note that where you can claim a GST credit for an expense, you can only claim the GST-exclusive part of that expense as an income tax deduction in your annual tax return.)
If you’re below the $75,000 threshold, seek advice from your adviser about whether GST registration would be worthwhile in your situation.

 

Do I need an ABN?

If you must register for GST (or wish to do this voluntarily), you’ll need an ABN. But what if your turnover is below $75,000 and you don’t want GST registration? While you’re not legally required to have an ABN, there are downsides of not having one: in some cases, businesses who hire you may have to withhold tax at the top marginal rate from the payment if you don’t provide an ABN.

Anyone who carries on an “enterprise” may apply for an ABN. Most gig platform users, as independent contractors performing services to make money, arguably carry on an enterprise. If you’re only planning to use gig platforms very occasionally (or as part of a genuine “hobby” like photography or crafting, rather than to make a profit), talk to a tax adviser about your ABN needs.

 

More time earning, less time on tax!

Whether you’re using gig platforms occasionally or as part of a significant business, let us handle all your tax issues. We offer expert advice and assistance with deductions, ABNs and GST, freeing you up to spend more time pursuing your income-earning opportunities.

Lifting standards in the financial advisory industry

Education, training and ethical standards in the financial advice industry are about to be lifted, with ASIC releasing proposed updates to various competence requirements for financial advice licensees. The framework ASIC currently uses to assess compliance with organisational competence has 5 options for demonstrating the knowledge and skills of their responsible managers, but the proposed update seeks to incorporate a 6th option which would reflect the higher levels of competence expected in the industry.

 

The Australian Securities and Investments Commission (ASIC) has released proposed updates to organisational competence requirements for financial advice licensees, in a bid to lift education, training, and ethical standards in the financial advice industry. The proposal is based on existing draft guidance published by the Financial Adviser Standards and Ethics Authority (FASEA).

 

The ASIC Commissioner said: “Our proposals are designed to strengthen the organisational competence of financial advice licensees by ensuring that advisers are supervised by at least one responsible manager who satisfies the new education and training standards”.

 

Broadly, the new education and training standards apply to all those who hold an AFS licence or authorised representatives/employees, and ensures that all relevant licence holders must:

-have a relevant bachelor or higher degree, or equivalent qualification;
-pass an exam;
-meet continuing professional development (CPD) requirements each year;
-complete a year of work and training (professional year);
-comply with a code of ethics and be covered by a compliance scheme that monitors and enforces compliance with the code of ethics.

Under the Corporations Act, an Australian Financial Services (AFS) licensee must maintain competence to provide the services covered by its licence, which is known as “organisational competence obligation”. When ASIC assesses an AFS licensee’s ability to comply with the competence obligation, it looks at the knowledge and skills of the people who manage the financial services business, or “responsible managers”.

 

The framework ASIC currently uses to assess compliance with organisational competence has 5 options for demonstrating the knowledge and skills of their responsible managers:

-meet widely-adopted or relevant industry standards or relevant standard set by APRA and have 3 years relevant experience over the past 5 years;
-be individually assessed by an authorised assessor as having relevant knowledge equivalent to a diploma and having 5 years relevant experience over the past 8 years;
-hold a university degree in a relevant discipline and complete a relevant short industry course as well as having 3 years relevant experience over the past 5 years;
-hold a relevant industry-specific or product-specific qualification equivalent to a diploma (or higher) and have 3 years relevant experience over the past 5 years; or
-a written submission that satisfies ASIC that the responsible manager has appropriate knowledge and skills for their role that also addresses all the information covered in the relevant regulatory standard.

 

The proposed update seeks to incorporate a 6th option which would reflect the higher levels of competence expected in the industry.

 

The new 6th option would require advice licensees to have at least one responsible manager who satisfies a knowledge component (ie financial adviser exam, degree requirement, and CPD requirement), and a skills component (3 years of relevant experience over the past 5 years). Both new and existing responsible managers who wish to satisfy the 6th option would have until 1 January 2021 to pass the exam, and until 1 January 2024 to satisfy the degree requirement, according to the proposal.

 

Want to find out more?

Improvements are coming to the financial services industry, albeit slowly. If you would like some simple financial product advice about SMSF and your existing holdings, or some class of product advice about simple managed investment schemes, super products, securities, general insurance, life risk insurance or basic deposit products, your accountant with a limited AFS licence may be able to help. Contact us today to find out how.

Catching Up On Superannuation Contributions

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The government’s new measure to allow those with less than $500,000 in superannuation to “catch up” on missed superannuation contributions is a great opportunity for anyone who takes time out of work or otherwise has “lumpy” income that means they have a varying capacity to make contributions from year to year. Individuals who want to fully take advantage of this strategy by making contributions up to their concessional cap plus additional catch-up amounts may need to consider strategies for how to fund those catch-up contributions.

 

Individuals with a total superannuation balance (TSB) below $500,000 are now able to “carry forward” their unused concessional contributions (CC) cap space to future years in order to catch up on contributions later when they have the capacity to do so. Usually, an individual’s CCs are capped at $25,000 per financial year, and exceeding the cap will generally attract an excess contributions tax penalty. CCs include:

 

-compulsory superannuation guarantee (SG) contributions;

 

-additional salary-sacrifice contributions made by your employer; and

 

-personal contributions you make yourself from your after-tax income for which you claim a deduction. Anyone under the age of 75 is now entitled to claim a deduction for personal contributions.

 

The new “catch-up” scheme allows eligible individuals to carry forward unused CC cap amounts on a rolling basis over five years. This means that if you do not use up all of your cap in one financial year, the unused amount can be carried forward and utilised in a future year for up to five years, allowing you to contribute more than the annual cap without penalty.

 

Unused cap space that has not been used after five years will expire.

The 2018–2019 financial year is the first year in which individuals can accumulate and carry forward unused cap space, which means the 2019–2020 financial year will be the first year in which individuals can start to make additional catch-up contributions. To be eligible to make a catch-up contribution (ie above the usual annual CC cap), the person must have had a TSB below $500,000 just before the start of the financial year in which they wish to make the contribution (ie as at 30 June of the previous financial year).

 

How might this work in practice?

To utilise unused cap space from earlier years, an individual must have the capacity to fund the catch-up contribution. Some ways in which a person with prior unused cap space might be able to contribute more than $25,000 in a financial year include:

 

-Making additional salary-sacrifice contributions, particularly for higher income earners who have not yet accumulated $500,000 in superannuation. Once someone reaches annual earnings of $216,120 per annum (which yields around $20,531 p.a. in compulsory SG contributions), their employer is not required to make further SG contributions. However, some workers, including many who earn well under $216,000 p.a., choose to salary-sacrifice additional amounts all the way up to their CC cap of $25,000. Using any unused cap space from earlier years may be attractive to those who want to heavily salary-sacrifice beyond the usual cap.

 

-Contributing an inheritance or windfall, or some other source of surplus funds.

 

-Contributing proceeds from the sale of an asset. It is important to remember, however, that selling an asset may have immediate tax consequences, and selling the family home in particular could affect the person’s entitlement to the Age Pension.

 

Anyone considering these strategies will need to ensure the contributions make sense for their particular circumstances from a tax and financial viewpoint. Individuals aged 65 or over will also need to meet the work test in order to make voluntary CCs (subject to an exception for certain eligible recent retirees).

 

 

Start thinking ahead now

If you have fluctuating income and you would like to explore the possibility of utilising unused CC cap space in future years, talk to us today. Catch-up contributions can form part of an overall contributions strategy designed to boost your retirement savings in a tax-effective manner.

ATO Continues Its Blitz On The Sharing Economy

The sharing economy is booming in Australia with a large proportion of the population either making it their full-time job or making a little extra money on the side. However, with the boom comes the all-seeing-eye of the ATO which is now firmly focused on the sharing economy. Its latest target are those people who rent/hire their car out in car sharing arrangements, but this is by no means its only focus, and comes on the back of a data-matching program on online accommodation platforms.

 

The sharing economy has become a big disrupter in the Australian market, particularly in the areas of accommodation, transport, food delivery, or car sharing. It seems like everyone is getting in on the action of making a little extra money on the side whether it be renting out a spare room, driving for a ride sharing service, or even sharing their cars. It is no surprise then that the ATO is keeping a close eye on the participants in this sector.

 

In the latest round of salvos against people in the sharing economy that may be flouting tax laws, the ATO is turning its attention to car sharing platforms. This interest has been prompted by the growing popularity of third party services such as Car Next Door, Carhood and DriveMyCar Rentals.

 

If you receive income from sharing your car, no matter how little, you need to include it in your tax return, and cannot avoid tax by calling it a hobby.

 

However, the flip-side is that you are entitled to claim deductions directly related to renting, hiring or sharing of your car. These expenses can include: platform membership fees, availability fees, cleaning fees, and car running expenses. The deductions you can claim depends on the car sharing agreement you have. For example, different agreements require either the car borrower or car owner to bear the costs of refuelling the car. Therefore, you can only claim expenses if you actually paid for them.  Another thing to keep in mind is keeping accurate records and retaining all your receipts to back up any expense claims should the ATO come knocking.

 

If you participate in car sharing arrangements you should also be aware that deductions for running expenses may differ depending on the vehicle that’s being shared. Cars designed to carry a load of less than one tonne can use the cents-per-kilometre method or the logbook method, but motorbikes and vehicles designed to carry more than one tonne or more than 8 passengers cannot use the cents-per-kilometre method.

 

Other pitfalls of car sharing include situations where you jointly own a car, in which case, all income and deductions need to be apportioned based on your share of ownership. In addition, if your car sharing activities amount to more than occasionally renting out your own car (ie you’re considered to have an “enterprise” of renting or hiring your car), you may be required to register for GST. In those instances, you will have to pay GST on the payments you receive, but will be able to claim GST credits provided you use them in carrying on your “enterprise”.

 

This focus on car sharing comes on the back of an ongoing data-matching program on online accommodation platforms which will collect data to identify people providing accommodation through online platforms during the 2016-17 to 2019-20 income years. Details collected from this data-matching program include: listing owner and property details (name, residential address, phone number, date of birth, rental property address etc), financial transactions per listing (bank details of owner, gross rental income, nights books etc), property activities (listing date, conversion rate, host/owner block out dates, price per night etc). The program will also obtain various information from financial institutions of the platform providers.

 

Need more information?

Contact us if you would like more information on the ATO’s blitz on car sharing, online accommodation or the sharing economy in general. We have the expertise to help you get it right whether you’re renting out your home or car occasionally, or whether you’re running an enterprise.

FBT On Work Christmas Parties and Gifts

With Christmas fast approaching, the ATO has reminded employers and business owners about the potential FBT implications of providing office Christmas parties and gifts to employees. Whether or not the party or the gift attracts FBT depends on a number of factors including how much it cost, where the party is held, or the type of gift that is given. One of the essential things to remember is to keep good records so if you’re unsure about your FBT implications down the track an experience professional can help.

 

Ahead of the holiday season, the ATO has reminded employers about the potential FBT implications of providing Christmas parties and gifts. When planning Christmas parties, the ATO says employers need to check how much it will cost and where and when it is held. This is because a party held on business premises on a normal work day is treated differently to an event outside of work. The ATO said it is also necessary to keep good records and consider who is invited – is it just for employees, or are partners, clients or suppliers also invited?

 

The ATO noted that Christmas presents or gifts may also attract FBT, so employers should consider:

-the value of the gift;
-the type of gift (noting that gifts of wine or hampers are treated differently to gifts like tickets to a movie or sporting event); and
-who the gift is given to.

 

There are different rules depending on whether gifts are given to employees and clients or suppliers, the ATO said.

 

FBT exempt benefits – minor benefits

Minor fringe benefits with a taxable value (if subject to FBT) of less than $300 are (with certain exceptions) exempt benefits under s 58P of the Fringe Benefits Tax Assessment Act 1986. According to Ruling TR 2007/12, exempt minor benefits (which are valued at less than $300) are likely to include Christmas gifts and a Christmas party.

 

The ATO’s FBT guide for employers says a single gift at Christmas time to each employee of, say, a bottle of whisky or perfume would be an exempt benefit, where the value was less than the $300 threshold for exempt minor benefits. However, if the gift is provided at a Christmas party, the ATO says the gift needs to be considered separately to the Christmas party when considering the minor benefits threshold.

 

Need help with your FBT obligations?

The silly season is fast approaching, if you’re planning the office Christmas party of getting gifts for your employees, your business may be subject to FBT. If you’re unsure of how to manage your FBT affairs, get in touch with us today, we have the expertise to help.

Government Debts And Your Travel Plans

The government has started a crackdown on individuals who owe welfare debts by preventing them from leaving the country, even for a holiday, until either the debts have been paid or they enter into a repayment plan. Some of the welfare debts are as small as $10,000, so is this the start of the government using Departure Prohibition Orders (DPOs) more frequently as a tool to pressure individuals from paying their government debts, including money owed to the Tax Office?

 

Departure Prohibition Orders (DPOs) have long been used as a tool by the government as a way to stop those who owe debts from leaving the country before they pay their debts, even if they are just going on a holiday. It has been used successfully for more than a decade in the enforcement of child support payments, and by the ATO as well.

 

Now the government has started applying DPOs to prevent former welfare recipients from leaving the country over debts as small as $10,000.

 

So far, more than 20 DPOs have been issued and the Department of Human Services is looking to increase the use of DPOs to help recover more than $800m owed by more than 150,000 who are no longer in the welfare system. Those that are currently receiving a welfare benefit will not be caught under this measure and those that are experiencing genuine hardship can have their repayments deferred.

 

The Department has made it clear that they will only issue DPOs in cases where the individual has consistently refused to repay their debts and have ignored multiple warnings. In addition, those who are subject to a DPO will also continue to have interest charged on their debt until they take action to repay the money they owe. The real question is whether this increased used of DPOs as a way to exert pressure on individuals to pay their debts will spread to other areas such as ATO debts.

 

The ATO guidelines on DPO indicate that the Commissioner can issue a DPO where an individual has a tax liability and the Commissioner believes on reasonable grounds that it is desirable to issue a DPO to ensure that the individual does not depart Australia without wholly discharging the tax liability or making arrangements for the tax liability to be discharged. This is regardless of whether the individual intends to return. In addition, DPOs can apply to both Australian citizens and foreign nationals who are liable to pay Australian tax.

 

In deciding whether to issue a DPO, the ATO will take into account all relevant facts and circumstances, including whether: the debt can be recovered; disposal of assets had occurred; information to suggest concealment of assets exists (eg AUSTRAC reports); the individual has sufficient assets overseas to maintain a comfortable lifestyle; transfer of any assets overseas; the actual need for travel; recovery proceedings or audit activity in progress; and involvement in criminal activity.

 

It should be noted that the issuing of DPOs will only be pursued after initial collection activity which involves issuing a notice calling for payment and then having the debt referred for collection activity. While the ATO acknowledges that a DPO imposes significant restrictions on normal rights of individuals and deprives them of their liberty, it needs to be balanced with the protection of revenue.

 

Therefore, the Commissioner already has a wide remit to issue DPOs in circumstances he considers to be appropriate. Data from past years indicate that the majority of DPOs were issued in relation to tax fraud/evasion on an international scale, related to wealthy or high-net-worth individuals or their related entities. Even then, the fact that the ATO has issued relatively few DPOs in the past few years may be an indication that it will not be applying this method to pressure individuals with smaller tax debts.

 

Need help with a tax debt?

Even though the ATO is unlikely to stop you from going on holidays because you have a tax debt, it may still be prudent to take care of any debt you may have outstanding with the ATO, even if it’s a small one. We can save you money in interest charges and potentially get penalties remitted. Contact us today.

Does Your SMSF Have A Sole Purpose?

The sole purpose test is one the fundamental requirements for SMSFs to obtain tax concessions. It requires that the SMSF be maintained for the sole purpose of providing retirement benefits to its members or their dependents if a member dies before retirement. Broadly, the test can be contravened when a member or a related party, directly or indirectly obtains a financial benefit when making an investment decision. Trustees need to be careful of this area as the ATO has a very high standard in relation to the compliance required under this test.

 

To be eligible for tax concessions available to super funds, SMSFs need to meet the sole purpose test. Essentially, this means that the SMSF needs to be maintained for the sole purpose of providing retirement benefits to its members or their dependents if a member dies before retirement.

 

Although the question of whether the sole purpose test has been contravened is usually determined on the facts of each case. Broadly, the sole purpose test can be contravened when a member or a related party, directly or indirectly obtains a financial benefit when making an investment decision, other than increasing the return of the SMSF.

 

The ATO, which administer the relevant super laws in relation to SMSFs, has a very high standard in relation to the compliance required under the sole purpose test. It requires “exclusivity of purpose” but does accept that the provision of incidental, remote or insignificant benefits that fall outside of the scope of those specified in legislation may occur in certain circumstances.

 

According to the ATO, the sole purpose test is particularly concerned with how an SMSF came to make an investment or undertake an activity. 

 

Therefore, trustees need to ensure that they do not provide a purposeful benefit to members when undertaking SMSF activities, this is the case even if there is no net cost to the SMSF in providing the benefit. Ultimately, it is the object purpose of providing the benefit rather than the net financial impact of the arrangement on the SMSF’s resources that determines whether the sole purpose test is contravened.

 

Factors that indicate the sole purpose test being contravened include:

-trustee negotiated or sought out addition benefit, even if the additional benefit was sought out in the course of undertaking other activities consistent with the sole purpose test;
-the benefit influenced the decision-making of the trustee;
-the benefit is provided by the SMSF to a member or another party at a cost or financial detriment to the SMSF; and
-there is a pattern of events that, when viewed in their entirety, amount to a material benefit being provided that is not consistent with the sole purpose test.

 

On that other hand, factors that weigh in favour of the ATO reaching a conclusion that an SMSF is being maintained in accordance with the sole purpose test include:

 

-the benefit is inherent or unavoidable part of other activities consistent with the sole purpose test;
-the benefit is remote, isolate, or insignificant when considered in light of other activities;
-benefit was provided on arm’s length commercial terms consistent with the financial interests of the SMSF;
-all activities of the trustee are in accordance with covenants specified in the legislation; and
-all investment and activities are undertaken as part of or are consistent with a properly considered and formulated investment strategy.

 

New investment opportunity?

Determining whether an investment in an SMSF meets the sole purpose test is a complex area. This is especially true for any new or planned investments in the areas of property, club memberships/licences, artwork, discount cards, and instalment warrant arrangements. Before you decide to invest, come and see us first to make sure the investment won’t contravene the sole purpose test and leave your SMSF in the lurch.

 

 

Key Aspects of CGT Relationship Breakdown Rollover Relief

The capital gains tax (CGT) rollover relief for marriage or relationship breakdown is, suffice to say, highly significant for people who are experiencing the trauma of a relationship breakdown; especially where substantial assets may be involved. This article notes some key things about the rollover’s operation that may present planning opportunities and highlight traps to avoid.

 

As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. However, if you transfer an asset to your spouse because your marriage or relationship has ended, the related capital gain or loss for the person transferring the asset (the transferor spouse) is automatically disregarded (rolled over) in certain cases.In effect, the person who receives the asset (the transferee spouse) will make the capital gain or capital loss when they later dispose of the asset. The asset’s cost base is transferred to the transferree spouse.

 

This rollover automatically applies where a marriage or relationship ends on or after 20 September 1985, and:

-one spouse transfers an asset or a share of an asset to the other; or
-a company or trustee of a trust transfers an asset to one of the spouses.

Here are 13 important things to note about the CGT rollover relief for marriage or relationship breakdown:

 

1.    The rollover automatically applies where the conditions for it are met; it is not a optional matter.

Planning: If a transferor taxpayer wishes to realise a capital loss on an asset, the asset should be transferred independently of the tax rule requirements for the rollover.

 

2.    The transfer of the asset must occur pursuant to a specified court order or arrangements (as set out in the rollover provisions), such as a court order under the Family Law Act 1975 or a binding financial agreement between the parties under the Family Law Act 1975.

 

3.    The rollover is only available for the transfer of an asset to a spouse or former spouse (including de facto and same sex spouses). It does not, for example, apply to the transfer of an asset to the deceased estate of a former spouse.

 

Query: It is not clear, in light of this rule, whether the rollover is available for the transfer of an asset to a child maintenance trust for the benefit of any children of the relationship (albeit, the argument could be made).

 

4.    An asset transferred from a company or trust controlled by a spouse can  also qualify for the rollover. Similarly, the rollover can apply where a right is created in the former spouse (eg shares in a company controlled by the other spouse).

 

5.    The consequences for the transferor (be it a spouse or an entity controlled by the spouse) is that any capital gain or loss that would otherwise be realised on the transfer or the asset to the former spouse will automatically be disregarded.

 

6.    In the case of the transfer of an asset acquired before the 20 September 1985 (and therefore not subject to CGT), the transferee spouse will be taken to have acquired the asset at that time, and therefore will not be subject to CGT on a later sale or disposal of the asset.

 

7.    In the case of an asset acquired on or after 20 September 1985 (and therefore subject to CGT), the transferee spouse will be taken to have acquired the asset at the time of the change in ownership and for the transferor’s “cost”. This will include the costs of transfer incurred by either party, and any capital gain or loss to the transferee.

 

Query: It is not clear whether such costs may include legal costs incurred by the transferor  spouse in defending the proceedings as “reasonably” allocated to the asset or assets transferred.

 

8.    For the creation of a CGT asset, the transferee spouse will be taken to have acquired the asset at the time he or she comes to own it and for a cost base equal to the incidental cost incurred by the transferor in creating the asset.

 

9.    For the purpose of meeting the 12-month holding rule and qualifying for the 50% CGT discount on any later disposal of the asset, the combined period of ownership of the asset by the transferor and the transferee spouse is taken into account.

 

10.    Where a company or trust transfers an asset to, or creates an asset in, a transferee spouse, adjustments are required to reduce the cost base of interests (ie shares or trust units) held in the company or trust as a result of the transfer or creation by reference to the market value of the asset transferred.

 

Warning: The payment of money or transfer of property from a company to a transferee spouse who is a shareholder of the company or an associate will be treated as a deemed dividend (under Div 7A of the Income Tax Assessment Act 1936) in the hands of the transferee spouse. It will be frankable if appropriate (although it is not clear whether a former spouse can be an “associate” of the company for these Div 7A purposes).

 

11.    If a post-CGT dwelling is transferred between spouses, the transferee spouse will be liable for CGT on its later disposal to the extent that it did not qualify as the main residence of either spouse during the combined periods they owned it. As a result, a partial exemption may later arise to the transferee spouse under the relevant partial exemption rules.

 

Warning: As a result of this rule, it is important to factor any such potential liability into settlement negotiations between the parties.

 

12.    If a post-CGT dwelling is transferred from a company or trust and the transferee spouse makes it his or her main residence, only a partial exemption will be available on its later disposal. This is because a dwelling can never qualify as main residence when owned by a company or trust, even if it was used as a main residence by one or both of the spouses when it was owned by the company or trust.

 

13.    Where “collectables” (eg jewellery, antiques) or “personal use assets” are transferred to a spouse, they retain character as collectables or personal use assets in the hands of the transferee spouse. They are therefore subject to the rules for calculating capital gains and losses on any later sale or disposal by the transferee spouse.

Warning: This rule means it is important to maintain appropriate records.

Airbnb And Home Sharing: Taxing Implications

Do you rent out a part of your home, or a holiday home, on Airbnb, Stayz or another sharing site? Perhaps you see this as a way of making a little extra income to help the household budget or to save for that holiday. But what you may not be aware of are the long-term tax implications of such a move, which may lead to a case of short-term gain causing long-term pain.

 

These days it seems more and more people are diving head first into the sharing economy by driving Ubers or listing their properties on Airbnb and other home sharing sites. Renting out a part of your home or your whole home while you’re on holidays seems like a great way to make some extra money now, but if you go down this route what about the tax implications for you now and in the future?

 

Reporting income

Unless a home was rented out to family members or under domestic arrangements that are not commercial, all income received needs to be included in your tax return. This is regardless of whether it was a long-term rental or a short-term rental.

 

Claiming deductions

Where you are only renting out a part of your home (ie a single room), say on Airbnb or another similar platform, you can only claim expenses related to renting out that part of the home. According to the ATO, a floor area method based on the area solely occupied by the renter as well as a reasonable amount based on their access to common areas should be used to apportion the expenses claimed.

In addition, where you use the room that is rented out in any other capacity such as storage, home office, or spare bedroom, then you cannot claim deductions for any expenses for the period the room is unlet. For example, heating and electricity costs received every quarter need to be apportioned based on the number of days the room was occupied and on the floor area basis to obtain the final deductions figure.

 

Selling your home eventually

As the ATO’s Deputy Commissioner for Small Business, Deborah Jenkins, has said:

 

“Just like running a business from home, once income is earned from a primary place of residence there are Capital Gains Tax (CGT) implications. It is possible that if a property significantly increases in value, the amount of CGT owed may even be higher than the amount of income received.”

 

When it comes time to sell your home and you’ve previously rented it out, you won’t be entitled to claim the full exemption for capital gains tax. This is the case even if you’ve lived in the home as your main residence and only rented out one room for a short period of time. The calculation for the portion of capital gain that will not be exempt is complex and a qualified and registered tax adviser should be consulted.

 

Want to find out more?

Renting out your home on sharing platforms may have some tax pitfalls, speak to us if you are thinking of or are renting out part of your home or your entire home. We can help you understand the intricacies and tax implications further to avoid a visit from the tax man.

Payroll Reporting: A Touchy Subject

If you are an employer the way you report payments, such as salaries and wages, pay as you go (PAYG) withholding and superannuation is changing from next year. The ATO will need you to report these payments directly from your payroll solution in real-time, at the same time as you pay your employees. This is known as single touch payroll (STP) and is intended to simplify business reporting obligations. It comes into effect in 2018 or 2019, depending on the size of your business. Are you ready for this change and how will it affect you? We can help you to prepare for the move to STP.

 

The introduction of single touch payroll (STP) is in line with the Government’s “digitisation agenda”, to make reporting more streamlined, but many small businesses will feel an extra compliance burden. Those who work in remote areas of Australia may be at a disadvantage as Single Touch Payroll reporting will require a strong internet connection.

 

In a straw poll conducted by Accountants Daily (between 5 September and 14 October), almost 90 per cent of accountants and advisers said that their clients were not ready for the shift to single touch payroll.

 

The Institute of Public Accountants (IPA) chief executive officer, Andrew Conway has said: “While initially STP delivers little benefit to small business, we acknowledge that other benefits exist such as transparency over superannuation guarantee payments.”

 

For small and micro businesses – those who employ less than five people – implementing STP by the deadline will take considerable incentive and support. The IPA supports the notion of a phased and targeted incentive approach as proposed by the Government, along with the consideration of a partial offset of costs. However, Mr Conway said the IPA would “like much more detail” to ensure small businesses are not impacted adversely by the implementation of STP. We will keep you posted on updates to this area.

 

How will this change affect you as an employer?

The change to STP means that employers won’t need to complete payment summaries at the end of the year as these will have been reported in real time throughout the year. If you have a payroll solution (software that you use in order to pay employees), you will need to update this or make sure it is updated by your service provider. If you do not have a payroll solution, you can speak to us about how to find the best solution for your business. We may be able to report using STP on your behalf. The first 12 months of STP will be considered to be a transition period, during which time you could be exempt from an administrative penalty for failing to report on time. There are other exemptions, including if you operate in an area with an unreliable internet connection or you are classed as a substantial employer for only a short period during the year (for example, if your employees are seasonal).

 

How about if you run a small business?

Mr Conway said the IPA’s concern is for 70,000 small businesses that will struggle to implement STP without help and support. If you do not use digital software for your payroll you may also need our help to adopt new technology.

 

What does it mean for employees?

With the move to STP, employees will be able to log on and make sure they are being paid the correct amount for their superannuation contributions so “this level of transparency is most welcome”.

 

What is the timeframe?

Single touch payroll will be compulsory for employers (including those in a wholly-owned group) with more than 20 employees from 1 July 2018. If your business has less than 19 employees, you have a bit longer, but you will need to get on board by 1 July 2019, subject to legislation. If you are unsure about whether you are a “substantial employer”, the advice is to do a headcount of all of your employees who are on your payroll on 1 April 2018; a total headcount includes all full-time, part-time, casual employees, those based overseas, absent employees and seasonal employees, not just your full-time equivalent (FTEs).

 

Want to find out more?

You may not feel ready to meet your compliance needs in relation to STP. You could qualify for a deferral (due to circumstances beyond your control) and you will need to make a request for this. Contact us to discuss the changes to payroll and what you need to do to make the transition seamless.

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