Warning to cryptocurrency owners as tax time arrives.

If you have invested in Crypto and bought and sold this last financial year you should read this.

Tax Time 2023: where is the ATO’s focus this year?

As the 2022-2023 financial year draws to a close, it’s almost time to begin preparing tax returns again.  On 15 May 2023, Tim Loh announced that the ATO’s key focus areas this year will be claims for work-related expenses, capital gains tax (CGT) and rental property deductions.

To avoid improper or unjustifiable claims, it is important to ensure that taxpayers have maintained adequate records and have a basic understanding of the rules

How can taxpayers claim working from home expenses?

A person is eligible to claim working from home expenses if they work from home to fulfil meaningful employment duties, incur additional expenses as a result of working from home and have adequate records to prove the additional expenses incurred.

Once eligibility is established, taxpayers can calculate the deductions which they are entitled to claim by using either the ‘‘actual cost’’ or ‘‘fixed rate’’ method. The ATO is particularly focussed on working from home claims because it changed the ‘‘fixed rate method’’ in February 2023 and is monitoring to ensure that people are not simply reproducing their tax return from the 2022 tax year. A brief explanation of the two calculation methods is set out below.

The ‘actual costs’ method

The ‘actual costs’ calculation method remains unchanged from the 2022 financial year and, as its name suggests, involves the taxpayer calculating the actual additional expenses that they incur while working from home. Examples of actual additional expenses incurred are:

• energy costs (such as electricity and gas);
• phone, data and internet costs;
• home office expenses, including stationery and computers; and
• the decline in value of depreciating assets

If depreciating assets are used for both work and private purposes, taxpayers can only claim the work related portion as a deduction. The ATO has developed a useful calculator for taxpayers to ascertain the decline in the value of this equipment, available here.

The ‘fixed rate’ method

The ‘fixed rate’ calculation method allows taxpayers to claim 67 cents for every hour that they have worked at home. The fixed rate method does not include claims for the decline in the value of depreciating assets. Therefore, taxpayers can determine the deduction to which they are entitled based on the ‘fixed rate’ method using the following formula:

($0.67 x Number of hours worked at home during financial year) + Claims relating to declines in depreciating assets + Claims relating to other expenses not covered by the fixed rate (i.e. maintenance of office furniture)

Record-keeping

Maintaining proper records allows taxpayers more flexibility when electing which method to use to claim working from home expenses. At the very minimum, taxpayers will need a record of the number of hours they have worked at home and invoices relating to depreciating assets. It is also important that all claims by taxpayers have a sufficient connection to their work and have not been reimbursed.

What transactions attract CGT?

CGT is the tax paid on profits from selling assets, such as property, shares or units in a unit trust. Due to the increase of people using their homes for business purposes following the COVID-19 pandemic, the ATO has flagged that it will be ensuring that CGT is paid on the sale of all dwellings used to produce income.

While main residences are generally exempt from CGT, taxpayers may be liable to pay CGT if they have used any part of their dwelling for business purposes, including renting out rooms on Airbnb. Taxpayers will only have to pay CGT for their main residence for the period that they have used it for a business.

CGT will not apply to the taxpayer’s main residence if they do not have a specific area set aside for business activities or operate their business through a company or a trust.

Are there any relevant concessions, if there’s a CGT consequence from selling my home?

In addition, if taxpayers have used their main residence for business purposes, they should consider whether any of the small business CGT concessions apply. Gaining access to the small business CGT concessions requires that one of the following conditions must be satisfied:

• the aggregated turnover of the business is under $2 million;
• the asset is only used in the business of an affiliate or connected entity;
• the taxpayer is a partner is a partnership that is a small business entity, and the asset is either an interest in a partnership asset or an asset that is used in the partnership;
• the net value of the assets of the business and its related entities must be less than $6 million.

CGT and crypto

Further, the ATO will be paying close attention to profits from investment in cryptocurrency, which attracts CGT. Taxpayers should be aware that any form of income, such as trading shares through apps, trading in foreign exchange contracts or swapping Bitcoin for Ethereum may trigger a CGT event. The ATO regularly collects data from crypto exchanges and a new sharing economy reporting regime commenced on 1 July 2023.

What deductions can taxpayers claim for their rental properties?

There are several tax deductions that can be claimed by property owners to help offset the expenses associated with owning and maintaining a rental property. Some common examples are depreciating assets, repairs and maintenance, council rates, insurance and property management fees.

However, one particular area of concern for the ATO this year is rental owners’ treatment of interest deductions. Rental owners can only claim the interest expenses directly associated with the portion of the loan used for purchasing rental property. Any additional borrowing for personal purposes, such as for renovations or holidays, cannot be claimed as an interest deduction. The ATO has flagged that it will be looking at personal expenses that individuals may have inadvertently included in their rental property tax returns.

Further, for owners of short-term rental properties, the ATO will be paying close attention to ensure that deductions are not claimed for periods when the relevant property was used personally or rented out at a discounted rate. As discussed earlier, adequate record keeping is essential for correct and justifiable lodgements.

Budget 2023-2024

The Federal Government has handed down its 2023-2024 Budget which outlines its economic forcasts and identifies key priorities including cost of living relief and growing the economy

                            Budget Papers are here

New Changes to Home Based Business Expenses

The ATO has changed their approach again now that Covid provisions have expired. Check this link for the latest details.

Need a hand with your employees”Tax and Super.

The ATO has a lot of information. Check this link regarding Engaging a Worker.

Super Changes – All you need to know about The Work Test and Work Test exemption from 1st July 2022

Last year, starting July 2021, the work test requirement for individuals was changed from 65 years to 67 years – this meant anyone who was below 67 years old could make a contribution into super without meeting the “work test”.

From 1st July 2022, if you are 67 to 74 year old and wish to make voluntary contributions to your superannuation, you must meet the work test requirement. For all other contributions, the requirement for a work test has been scrapped in the latest Treasury bill passed earlier this year (Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021).

What is the work test requirement and who do they apply to? 

The work test requirement is a proof that an individual has been gainfully employed for 30 days before any contribution is made to a superannuation fund.

Gainfully employed suggests that the individual was paid for working 40 hours over a consecutive 30 day period during a financial year, before making the voluntary super contribution.

Voluntary super contribution generally include tax deductible contributions as well as personal contributions which you don’t claim a tax deduction for. However, they do not include compulsory SG contributions your employer is required to make into your super fund.

From 1st July 2022, if you are between the age of 67 & 74 and want to make a voluntary deductible contribution, you will still be required to satisfy work test requirements. In practice this means that individuals aged between 67 and 75 years should have met the work test in the financial year before they make any personal deductible contributions (auditors please make note).

Once you reach the age of 75, you will be ineligible to make any voluntary contributions, unless it is within 28 days of you turning 75. The work test requirement does not apply if you are making a down-sizer contributions. Also note that the amount of contributions you are allowed to make is subject to your total super balance at the time of making the contribution.

Other Important information

In the current law Trustees can only accept a personal contribution from an individual between 67 and 75 years, if the individual meets the work test. From 1st July 2022 Trustees of super funds do not have to check if the individual has met the work test or not. From 1st July 2022, they must accept the contribution – however the individual can ONLY claim a deduction for personal superannuation contributions if they have met the work test. Hence the requirement for the individual to prove the work test (a declaration that he has worked before the deductible contribution is made) to the trustee of the super fund has been removed. The new SIS Regulations (from 1st July 2022) will remove the work test as a general condition for funds to accept personal contributions. Also individuals are not required to provide a notice of intention to deduct a contribution to the trustee of the fund at the time of making a contribution to the fund.

Remember, the work test will continue to apply to personal deductible superannuation contributions and effectively maintains the existing arrangements for personal deductible contributions.

Bring Forward Rule: The new age is now 75 and not 67 anymore – this means that individuals under 75 years of age may access the bring forward non-concessional contributions rule in a particular financial year. The cap amount for non-concessional contribution is $110,000 that an individual can make in each financial year – individuals can “bring forward” their non-concessional contributions from two future years if they meet certain eligibility criteria.

Conclusion

Making a contribution to super is a minefield. You must consider all the below issues before making any contribution to a super fund

– There are limits (caps) on the amount of concessional & non-concessional contributions and going over the cap amount may result in heavy penalties or additional tax

– If you are making spouse contributions, the work test requirement also applies to the receiving spouse, and so do the annual caps

– At the age of 65 you will have full access to your super account, regardless of whether you are still working or have retired – with bring forward rules extended to age 75 – opens many re-contributions strategies for pensioners to convert Taxable component of their super to Tax Free component

– The value of your super can go up or down daily (Total Superannuation Balance – TSB), hence, before making any non-concessional contributions you should also be aware of your Total Superannuation Balance.

Latest on Directors ID

Thank you to the clients who have applied and have been granted a Director’s ID. We have updated our records. For all other Directors you need to apply and for others want to become a director or are already one, you’ll need a director ID. 

You need a director ID if you’re a director of a:

• company
• corporate trustee, for example, of a self-managed super fund
• Aboriginal and Torres Strait Islander corporation
• charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation
• registered Australian body, for example, an incorporated association that is registered with the Australian Securities and Investments Commission (ASIC) and trades outside the state or territory in which it is incorporated
• foreign company registered with ASIC and carrying on business in Australia (regardless of where you live)

Here is the latest from the ABRS who are handling this. It details what you have to do to Apply for a Directors ID‘

MyGovID – You need to download this app on your mobile phone before you can apply for your Director Identification Number.

Set up your myGovID

Your myGovID is unique to you and cannot be shared. It’s your personal digital identity and should be set up using your personal email address.

Download the myGovID app from the Apple App Store or Google Play. The app is compatible with most smart devices.

External Link  External Link

All our online services can be accessed using a myGovID with a Standard or Strong identity strength.

Next step

• Set up your myGovIDExternal Link

See also

• Verifying your identity documentsExternal Link if you’re experiencing issues verifying your identity documents or photo.

Cyber Security is a very big issue at the moment and all businesses should review their systems to avoid being hacked or subject to Ramsonware. The Government’s cyber security centre has made available seminars and resources to help protect SMEs from online attacks. Click here for the resources.

Compliance with HR Laws – Employing staff

Employing staff in the 21st Century is more complex than it has ever been. The need for professional assistance in HR has never been more important. Elmo Cloud & HR & Payroll has consultants that are available to assist. They have produced an excellent publication that should be studied before growing your team. You can access the  publication “HR’s Duty of Care – Your Guide to HR Compliance” here

HR Compliance Checklist for Australian Workplaces in a COVID-19 World.

 Elmo HR & Payroll have also produced this checklist.

MyGovID and Business Portal

If you have used an Auskey in the past you will know that it is dead. You must now have a MyGovID connection with your business to use the Business Portal now known as Online services to lodge Business Activity Statements and the monthly Jobkeeper obligations. Some clients are having great difficulty setting it up. Can I suggest you visit www.ato.gov.au and see the link on the first page. It really is very simple if you have a modern phone and a laptop or desktop computer. (not an Ipad). More information on the Employer page on this website.

• Single Touch Payroll (STP) 2 is now here and imposes more requirements on employers. See the article on our Employer page.
• Superstream – This is now firmly established and all employers must pay their employees compulsory superannuation contributions via a clearing house. Please contact us if you are not doing this and we will advise you further.
• There is a wealth of information on the ATO site at this link. Some service providers will need to charge a fee but there is a no fee option provided  by the tax office suitable for employers with less than 20 staff.
• 2023 Tax Tables have now been released . Please ensure you update employees details and pay the compulsory superannuation rate of 11.0%. Full list of current tables here. 
• Employees with HELP / HECS debt. From 1st July 2019 there have been changes to the income levels where a taxpayer will be required to pay additional tax towards a HELP or related debt. Further details are here.
• Superannuation Caps Reforms –  From the 1st July 2017 the Concessional and Non Concessional superannuation caps were reduced. The current caps are on the ATO Website at this link. Seek advice before making any decisions.
• Payroll is now a very complex thing for employers to get a grip on. You need to visit and read carefully the Fair Work Australia site, download and read the awards affecting your employees. The Australian Payroll Association is very helpful; you should consider joining. More information is here.
• ASIC InFocus Newsletter – see here for the latest edition.
• National Business names Register – ASIC Connect.  State Business names have now been brought under the one umbrella known as ASIC Connect. More information here
• Helpful Business Videos relating to GST. The ATO has released some helful videos on Youtube. Take a look, particularly if you are new to GST and Business Activity Statements. Here
• Director’s Penalties – company directors need to be aware of their obligations in regard to their company debts. Existing rules are fierce and proposed legislation will strengthen existing law, particularly relating to staff superannuation. Click here for more information.
• Employee or Contractor – Every small business who pays contractors needs to read this. What are the rules, read these reports –Difference between Employees and Contractors.
• Employee or Contractor – the ATO has provided a new information page every employer should review. You can access it here
• Small Business – The Cash and shadow economy. A new article from the Australian Tax Office. You can access it here.

• Safe Harbour from failure to lodge on time penalties
• Taxpayer’s Charter – Rights and Obligations
• Small Business Company Directors

• Treasury

• Important news from the ATO

• Employee Fraud – A Guide CPA
• Super for Employers – ATO
• Starting a Small Business Guide – NSW Gov
  – Starting a Small Business Checklist – see here
• Employer PAYG Obligations
• Workplace Relations in Australia – There is a lot of information on the internet that will provide employers and employees information about their rights and obligations. This site is worthy of review.

• MYOB
• Xero

• NSW State Government
• NSW Office of State Revenue
• NSW Residential Tenacy Laws
• Covid-19 Making Final Decisions – Moneysmart

• NSW Awards & Wages – Fair Work Australia

• Australian Stock Exchange
• Yahoo Finance – Historical Prices
• Computershare – Share Registry
• Link Market Services – Share Registry

• Australian Taxation Office
• OSR – Office of State Revenue
• Australian Government Information
• Australian Competition & Consumer Commission
• MONEYSMART – Simple guidance you can trust
• Australian Business Register
• Australian Securities & Investment Commission (ASIC)
• Centrelink – Human Services
• Australian Bureau of Statistics (ABS)
• NSW Office of Fair Trading
• NSW Office of Industrial Relations (OIR)
• WorkCover NSW – Link to changes
• icare – insurance for employers
• Family Assistance Office

• Guide to Self Managed Superannuation Funds (ATO)
• SMSF – Resources and Webinars
• Setting up a Self managed Fund
• Superannuation legislation SIS Act
• Running a SMSF
• Carrying on a Business – SMSF
• Inportant information for Trustees