Chartered Accountants
After waiting for what seems like an eternity, the government has finally put to Parliament its draft legislation around two of its schemes.
Read the full October Newsletter here
Look before you leap: the small business CGT concessions.
The CGT relief concessions that are available to small business can be very generous. However they can also be complex and confusing so knowing a few of the finer details can go a long way to ensuring your small business can take best advantage of them.
Read the full September Newsletter here
As part of the 2016-17 Budget, the Government announced that it intended to reduce the corporate tax rate progressively from 30% to 25% for eligible small business and legislation has now been passed to officially enact this reduction effective from 1 July 2016.
Further, the definition of small business entity for the purposes of accessing this reduced tax rate is, broadly, a business with an aggregated turnover of less than $10 million (an increase from the previous $2 million turnover threshold).
Additional Small Business Concessions
In addition to the lower tax rates, small businesses that qualify under the increased $10 million threshold may also have the ability to utilise further concessions for small businesses including:
We note that the increase in the turnover threshold for small business does not extend to the Small Business CGT concessions. The aggregate turnover threshold for these concessions will remain at $2 million.
Changes to Imputation/Franking Credits
With the reduction in the small business company tax rate to 27.5% commencing 1 July 2016, a corresponding change in the level of imputation credits will also apply. From 1 July 2016, imputation credits attached to dividends paid from small business entities to their shareholders will only be able to be franked to a maximum level of 27.5%.
This change will likely impact on small businesses that have already issued dividends and provided statements to their shareholders showing a 30% franking credit. As the law was only passed on 19 May 2017, it is possible that dividend statements issued since 1 July 2016 will show a 30% rate and will therefore be incorrect.
Should this be the case, the ATO has issued a draft practical guideline on how to deal with this.
The team at Montague Partners are available to help you through these issues or any other tax and business queries you may have.
A travel allowance is a payment made to employees to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home overnight in the course of duties.
In most circumstances, when claiming other deductions, you will be expected to be able to substantiate the expense being claimed with documentary evidence, and produce that evidence should the ATO request it.
However an exception to substantiate claims applies to travel allowance expenses if the ATO considers the total claimed to be “reasonable” (more below) and to be no more that the allowance provided. Guidelines on these amounts are updated annually.
There are three administrative concessions that relate to travel allowances – for employees there is the substantiation exception as mentioned above, but for employers there is also a withholding exception and a payment summary exception.
Recently the ATO has been at pains to emphasise that the first of these travel allowance concessions does not extinguish the requirement for the employee to actually incur the expense. The taxpayer may not be required to substantiate it in a written form like other deductible work expenses, but the expense must still have actually been incurred to be able to claim a deduction.
It will also pay to remember that if you rely on the exception from substantiation, the ATO may still require you to show the basis for determining the amount claimed, that the expense was actually incurred, and that it was for specific travel costs and for work related expenses.
And remember, the ATO seems to be at pains to emphasis that this tax time it is targeting work related expense claimed such as travel costs – a point specifically referred to by Tax Commissioner Chris Jordan in an address made to the Press Club in Canberra in early July.
The general rule is that you can claim deductions for expenses your business incurs in it’s task of generating assessable income. Many of these deductions are obvious – rent, materials, supplies and so on – but there are also some less obvious options left available just before the end of the income year, should your circumstances suit, to further reduce your enterprises tax burden for the year.
If your business has taken out a loan, any interest accrued but not physically paid by June 30 is potentially deductible (the crucial factor of course being that the loan was used to produce assessable income, which most business loans are) – assuming that the business accounts for tax on an accruals basis. In a similar vein, see if you can negotiate with your finance provider to make upfront interest payments – that is, they may not be “due” until after July 1, but the finance provider will accept them before then.