When we provide advice to clients on their tax claims, it not only protects that individual taxpayer, but, by association, every client in our firm.
In July a Brisbane accountant was in the news for a number of reasons, which included being subjected to professional discipline action and chased by the ATO for a substantial tax bill.
While it would not be appropriate to make any comment about this specific issue, it does highlight just how important it is for tax agent professionals to jealously guard their good reputations.
A good reputation is not only important to the livelihood of each registered tax agent – but by association it can protect their clients from unnecessary attention from the ATO.
Anyone who has been through an ATO audit for things like income, expenses, GST, superannuation guarantee or payroll tax will know just how stressful and time consuming these processes are – even if in the end you have done everything correctly.
If the ATO comes to the view that a tax agent is being too lax in applying the rules, there is little doubt that the clients of that practice will be subject to extra scrutiny.
For example, about 10 years ago there was a particular tax practice in Sydney which was allowing travel industry clients to make extremely large claims that were not substantiated. Once the ATO swooped, each and every travel industry client of that firm was audited and many were faced with repaying more than $10,000 of refunds based on claims that were subsequently disallowed.
This is why we work hard to keep up to date with current laws and provide you the right advice. It does not mean that our clients will never be subject to an audit – because these are a fact of life for clients of each and every accounting firm.
But it does mean that if our client gets an audit, we work hard to ensure the ATO leaves with a sense that ours is a firm that does not warrant any extra scrutiny in relation to the advice our clients are receiving.
It also is why we offer each and every client the chance to take out audit insurance. This insurance will not cover any extra tax or ATO fines, but it will cover our time to work with you to ensure the ATOs questions are answered comprehensively and in a manner that minimises the need to the ATO to undertake follow up audits in subsequent years.
Black Economy Taskforce – Beware of “cashies”
In related news, the ATO has announced it will take a tough stance on any tax agent knowingly acting and advising clients who engage in Black Economy transactions – or in other words taxpayers who accept cash payments for goods or services in a manner designed to deliberately avoid GST or income tax obligations.
Those who decide to do this type of work – often referred to as “cashies” – often then turn up at their accountants office and ask how they should best account for this off-the-books cash. Then they are surprised when we are genuinely unhelpful.
If you are a tradie who does an occasional private job for your family and they pay you with a carton of beer, you are probably not going to be in too much trouble as long as you aren’t claiming any expenses in relation to that job. But if “cashies” represent a significant part of your income, then beware the ATO has ways of looking at whether your lifestyle or materials expenses match the income you are declaring and will start asking some tough questions.
Car and Tax News
New Car Limit Thresholds From 1 July 2017 the following car threshold amounts apply.
Income tax – there is an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.
The car limit for 2017–18 is $57,581.
Goods and services tax (GST) – generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount. You cannot claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.
Luxury car tax – From 1 July 2017 the luxury car tax threshold for luxury cars increased to $65,094.
The threshold for fuel efficient luxury cars for the 2017–18 financial year remains at $75,526. In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.
The maximum tax deductible rate per km car allowance remains at 66c/km.
If you are an employer who pays a car allowance or an employee who receives a car allowance under a rate per km method, any amount you pay in excess of 66c per km will need to be taxed.
Fuel tax credit changes
Fuel tax credit rates increased on 1 August 2017 and change regularly. Those who claim fuel credits need to ensure they are claiming the correct rate when they submit their BAS.
Do You Still Need Your ABN?
If you are selling, closing or restructing your business, you need to start thinking about cancelling your Australian Business Number (ABN) or updating your details. Cancelling your ABN will:
– cancel your registrations for goods and services tax (GST), luxury car tax, wine equalisation tax and fuel tax credits
– cancel any AUSkeys linked to your ABN.
Before you cancel your ABN make sure you have met all your lodgement, reporting and payment obligations. This may include lodging Pay As You Go withholding reports or tax returns, paying outstanding tax debts or finalising your business activity statement.
If you do not cancel your ABN, you may continue to be contacted by the ATO or other government bodies about your business.
You also may need to cancel your ABN if your business structure changes. For example if the business is moving from a sole trader to a partnership, you will need to cancel your ABN and apply for a new one. However, if you restart your business in the future getting your ABN back is easy to reapply.
Big or Small – Sole Traders Need to Submit a Return
If you operate as a sole trader, you always need to lodge the following, even if your income is below the tax-free threshold:
– tax return for individuals including the supplementary section
– business and professional items schedule for individuals.
Make sure you have all the necessary information ready to go for tax time. This also is a good time to check your ABN details to see that all registrations and associated details are correct. And if you no longer operate as a sole trader, it might be time to change your business structure or cancel your ABN (as mentioned above).
It is important to keep your details up-to-date to ensure other businesses and individuals can access and verify your information.
Important Due Dates
Have you missed these?
14 July – Issue individual PAYG Summaries
21 July – June Monthly BAS
28 July – June Quarterly Super Guarantee payments due
28 July – June Quarter BAS (Self Preparers)
1 Aug – Fuel tax credit rates change
14 Aug – PAYG Witholding Annual Report
21 Aug – July Monthly BAS
25 Aug – June Quarterly BAS (Agent Prepared)
28 Aug – Taxable Payments Annual Report Due
Read Our Blogs
We post blogs on specific topics each month. The most recent ones that might interest you include:
Tax Season News
Tax season 2017 is getting into full swing and it has been great to see many regular faces and catch up with their news.
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