What’s New in Tax?
It feels like there are almost daily changes happening in today’s world, and tax law is no exception to this.
Australian tax law is constantly changing to keep up with the evolving needs of Australians, and our team is committed to keeping up with new legislation to ensure we can deliver tax effective outcomes for our clients.
We’ve included a brief update on a few things that have been happening in tax lately to keep you in the loop.
Tax Exempt COVID-19 Grants
COVID-19 restrictions and lockdowns have caused financial stress for countless businesses. The state governments have offered support in the form of government grants. But are those grants taxable? We’ve included a list of grants that are Non-Assessable Non-Exempt (NANE) income. Keep in mind that expenses incurred directly to obtaining NANE income, such as consulting fees, are not tax deductible.
$250 Non-Deductible Self-Education Expenses
Have you ever claimed a deduction for self-education expenses only to find out there is a bizarre legislation that states the first $250 of expenses incurred are non-deductible? 35+ years ago the government used to provide grants of $250 to individuals for self-education, so it made sense that the first $250 of expenses were not deductible. The grants ceased in 1985, but the legislation remained. Since then, tax agents have suggested to use a work-around by reporting non-deductible expenses of at least $250 to use up that cap. Well, the Proposed Treasury Laws Amendment (2021 Measure No 7) Bill 1 is finally proposing to abolish the $250 threshold beginning from 1 July 2022.
Non-deductible Work Related Travel
A major shift we have seen as a result of COVID-19 is people relocating for a lifestyle change. If you’ve decided to relocate, but still choose to work in the city, keep in mind that travel to and from work is not deductible. Let’s say you lived in Sydney and decided to move to the Gold Coast, but continue working your job in Sydney and fly down during the week. The flights are not deductible, as the purpose of the travel is not for work, it’s simply to commence your work duties.
Similarly, if you have two jobs, or are employed and also run your own business, travel to and from work sites for different jobs is not deductible. Again, the purpose of the travel is to commence your work duties for your second job, which is private in nature and not deductible. This is supported in the case Mfula v FCT (2021)2.
PAYG Withholding on Bonuses
Many business owners will pay themselves a bonus when profits are higher than anticipated. It can be tempting to pay that bonus with no PAYG withholding, to maximise the cash in your pocket. Did you know that from 1 July 2019 any bonuses paid without PAYG withholding tax are considered to be non-compliant payments and are thus not eligible for a tax deduction? In the recent ruling Ballintine v FCT (2021)3 an ex-CEO had requested that a $1.2 million bonus be paid to him without PAYG withholding. The taxpayer never lodged his tax return to pay the tax liability on the bonus. It’s now 7 years later and the taxpayer is suffering financial hardship, however the tax debt has not been forgiven as it was not appropriate to request the bonus be paid without PAYG withholding in the first place.
Contractor Payments Subject to Payroll Tax
If your business is liable for payroll tax it is important to remember that payments made to contractors are subject to payroll tax, unless one of the contractor exemptions apply. In the case Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue (2021)4 a medical centre was found liable for payroll tax for payments made to doctors for services provided, as amounts paid to doctors were considered ‘wages’ for payroll tax purposes. Not sure what the payroll tax contractor exemptions are? Feel free to give us a call to discuss further.
Structuring of Home Ownership
How is the ownership of your home structured and why? Many company directors will have their home owned by their spouse, to separate their home from risks associated with directorship. In FCT v Bosanac (2021)5 the ownership plan fell short. While the home was fully owned by Mrs Bosanac, the home loan was in joint names. Mr Bosanac also used the home as security over other loans. The FCT found that the home was in fact owned in joint names, and Mrs Bosanac held half the home on trust for Mr Bosanac. The value on his half of the home is now being called upon to pay his significant tax debts.
If you have any questions on how recent tax news affects your situation, please feel free to give our team a call or alternatively, you can fill out the form below and we will contact you.
All material contained herein is written by way of general comment. No material should be accepted as authoritative advice and if you wish to act upon the material contain herein, you should contact The MBA Partnership for properly considered professional advice which will take into account your own specific conditions. No responsibility is accepted for any action taken without advice by readers of the material contained herein.