Car expenses on the ATO's radar

With almost 4 million Australians making work-related car expense claims, the Australian Tax Office has the practice in it's headlights.

Not only are they on the lookout for people wrongly claiming, but they are also armed with enhanced technology to check these claims.

As a result, you need to make sure that if you claim your car expenses, or if your employees use a company car for private use, that you are sticking to the rules, not double dipping and not misrepresenting actual usage.

ATO driven to act

In 2016-17, the ATO says more than 3.75 million people made a work-related car expense claim totaling some $8.8 billion. Indeed, 40 per cent of all claims are for car-related expenses so it's not surprising that they have decided to crack down.

The ATO acknowledges that the rules around deductions for vehicles can be complex and mistakes easy to make. Whether by accident or design, it believes many employees are making errors.

The key problem areas are:

  • Private trips
  • Trips that never occurred
  • Car expenses paid for by employees and reimbursed

The ATO says there are three golden rules when employees claim car related expenses:

  • You must have spent the money yourself
  • Your claim must be directly related to earning your income
  • You need a record to prove it.

The ATO cites a case where someone claimed $3,800 saying he needed to transport bulky tools to and from work as there was no secure storage area at his workplace. When the tax office consulted his employer they discovered that not only was he provided with a company car at all times but that he was given all his tools so has no need to transport them. As a result, the claim was disallowed and the employee had to pay a penalty.i

Penalties can be up to 200 per cent of the tax avoided although generally they are 25 per cent to 75 per cent of the shortfall between the correct liability and the amount the taxpayer paid. If it is seen as a genuine oversight, then penalties are usually avoided.

Novated leases can also present issues. If you have a novated lease, then it is your employer who owns the car and incurs the running costs of the car, not you. So, if you try and claim you would be viewed as double dipping.

Logbooks must also be accurate. If you create a logbook and the ATO discovers it was filled out, say, a year after the event, then they can deem the claim invalid unless you can prove that you actually undertook that mileage.

FBT and employers

For employers, Fringe Benefits Tax is an issue. The tax is payable when a company owns or leases a car and makes it available for employees' private travel such as travel between home and work.

Some vehicles are exempt from FBT. For instance, a single cab ute (two seats) qualifies for full exemption while a dual cab (four/five seats) is only exempt for work-related use.

There are two ways to calculate a deduction for car expenses: you can use either the cents per kilometre method or the ATO logbook. The choice will depend on how much you travel. If you travel less than 5000km a year then cents per kilometre is preferable; if more, then consider using the logbook.

If you use the former, then you can claim 68c for each kilometre. While you do not need a logbook to substantiate the cents per kilometre method, you do need to have actually driven that distance. As the tax office says: the cents per kilometre method is there to simplify record keeping not to provide a free ride.

With the logbook you monitor your usage over a 12-week period and then determine the percentage of business use. You can claim running costs, insurance, repairs, depreciation and registration of the vehicle for that percentage.

If you want to make sure you stay on the right side of the ATO, call is to discuss the tax treatment of your vehicle.

Tax and your website: What can you claim?

Most small businesses and independent contractors have a website these days. If you are planning to launch a new website or refreshing an existing one, it's important to understand the tax implications. As with all things tax, it's not always easy.

The complexity of the technology and associated services that go with running a website can make it tough to determine what you can claim upfront as a tax deduction and what you need to depreciate over time.

Read more…

2018 Year in Review

Investors started 2018 full of hope, with the global economy and financial markets in good shape, but by year's end they were uncertain and a little anxious about what lay ahead. Markets responded with last minute falls across all asset classes.

The issues that weighed heavily at the end of  2018 were the unresolved trade dispute between the US and China, confusion over the final Brexit deal, rising US interest rates, falling oil and commodity prices and the US government shutdown. Australians were also distracted by political instability and falling house prices in Sydney and Melbourne. With so much focus on what may, or may not, lie ahead, it was easy to lose sight of the solid progress we've made.

Read more…

New year - same you but better

We hear the phrase 'New Year, new you' bandied around a lot at this time of year. As if the current you were an apartment on The Block, getting ready for major renovation on January 1st.

The truth is you don't need to be a whole new you every year. 2018 may have been filled with lots of moments you really treasure. And I bet your nearest and dearest thing the current 'you' is just fine the way you are.

However, a life well lived is not a static life - we all need to keep growing and learning and part of this is understanding what we like about ourselves, what gives us joy, and what we're proud of. So, with this in mind, let's look at how this New Year you can be the same you, but better.

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What to watch as online retail takes off

The retail sector is experiencing a dramatic shake up with massive growth in online shopping indicating a shift in how consumers interact with products, sales and spaces.

Recent figures speak for themselves. Domestic online sales represented more than 50% of 2017 total retail sales growth in Australia as opposed to three years ago when they accounted for less than 10%.i

This rapid growth is staggering in a sector that has otherwise been sluggish of late. But what does it mean for consumers? With Christmas just around the corner, now's the perfect time to look at current trends in online shopping, what to watch out for, and how you can bag a bargain while saving a heap of time in the process.

Read more…

Keep your cash flowing

As we head into the Christmas holiday season you are most likely looking forward to some relaxing times ahead, but one thing that should not be taking a break is your cash flow.

Invariably there will be a blowout in your personal spending over the Christmas period on food, presents and holidays, while the normal household bills keep rolling in.

It's much the same for businesses. It can be all too easy in the busy lead-up to Christmas to let chasing bad debts and invoicing clients take a back seat. But if you don't act now, you may not see any cash until February. Meanwhile your regular bills will still be coming in and wages will also need to be paid.

So what can you do to make the holiday season financially stress free?

Read more…

'Black Economy' rules target tax avoidance

Small businesses are likely to find themselves kept busy with the progressive transition to the Single Touch Payroll system and new rules designed to beat Australia's 'black economy'. Here's a round up of the latest tax news:

New rules cast a wide net

Even businesses not seeking to avoid tax could find themselves affected by a new Bill designed to curtail Australia's 'black economy'.

The Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 was introduced into the House of Representatives in late September. If passed, the Bill will deny a tax deduction for employee/contractor payments if a business is not seen as complying with its obligation to withhold PAYG tax.

Although the Bill provides safeguards for errors, businesses will need to carefully review their internal systems to ensure they are capturing all payments likely to require PAYG withholding. Unusual payments - such as bonuses or commission payments - that are not properly identified as being subject to withholding, could have their tax deduction denied.

The new Bill also requires businesses providing road freight, information technology or security, investigation or surveillance services to report annually to the ATO under the Taxable Payment Reporting System (TPRS). The TPRS was first introduced to the building and construction industry and requires a business to report any payments made to contractors, as the Government believes contractors servicing these industries are at high risk of not disclosing income.

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Salary Packaging Unwrapped

Many employers offer salary packaging to attract and retain employees with additional benefits. If it's done well it can be good for both the employer and the employee. The employer benefits from being able to attract top quality candidates; the employee benefits from a lower tax liability.

In a nutshell, salary packaging is where an employer offers their staff the opportunity to pay for certain goods and services out of pre-tax income. These goods and services can include such things as computers, cars, health insurance, childcare and superannuation contributions (commonly known as salary sacrificing).

By paying for these goods and services before tax, it reduces your gross salary so that your tax liability is lower. As a result, it is more likely to be tax effective if you are in a higher tax bracket.

Read more…

Take Control of the Future of Your Business

What are your plans for the future of the business? Are you wanting to find more time to relax and enjoy your lifestyle? Are your children prepared to take on the family business when you retire? Have you actually had a family discussion about succession plans?

Succession planning is very much more than about making sure there is enough money in the bank. It is about ensuring the future generation is able to be successful with the day-to-day running of the business without struggling with the weight of a job they are unprepared for, or with experience they don't have.

With the knowledge that every business and family is different, Symes Accountants provides a 5-Step Succession Plan Process which works with every family circumstance.

For more information, download our Family Business Succession Planning brochure here, or contact our team today to arrange your first succession planning meeting.

Attitude is Everything

In August 2018, Symes Accountants hosted work experience student Lauren for the week. She gained a great insight into working as an Accountant during the busy ITR season and the importance of good working relationships. Below is her personal account of her experience.

Attitude goes a long way, this is shown through the everyday life at Symes Accountants. At Symes everyone has the right attitude towards their work and especially towards their clients, this is shown through their hard work and determination to ensure that they can do everything in their power to help their clients. Seeing Symes employees interact with their clients was an experience that can never be forgotten, they are open and honest with their clients, they ask about their client's family and make sure that they are doing everything within their power to help. Having a helpful and determined attitude makes Symes a successful business. Everyone within the Symes community has a role to play, and it is their attitude toward that role that can ensure their continued success.

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