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If you have disposed of any assets (which can include the loss, destruction or sale of an asset) which are subject to capital gains tax, you need to let us know as soon as possible. These are known as capital gains events, which can affect the way in which a capital gain or loss is calculated, and when it is included in a net capital gain or loss.
The type of CGT event that applies to your situation may affect the time of the CGT event’s occurrence, and exactly how to calculate your capital gain or loss. As mentioned earlier, a CGT event can involve the loss of an asset, the destruction of an asset or the sale of an asset.
The Sale Of An Asset
If there is a contract of sale, the CGT event happens when you enter into the contract.
A common CGT asset involved with contracts of sale that is often sold is the house. The CGT event, in that case, happens on the date of the contract, not on the date of settlement.
If there is no contract of sale, the CGT event is usually when you stop being the asset’s owner.
Your capital gain or loss for the assets is usually the selling price, less the original cost and certain other costs associated with acquiring, holding and disposing of the asset.
Loss Or Destruction Of An Asset
If a CGT asset that you own is lost, stolen or destroyed, then the CGT event happens when you first receive compensation for the loss, theft or destruction. In this way, the capital gain for such an asset is the amount of compensation less the asset’s original cost. If you do not receive compensation for the asset, the CGT event happens when the loss is discovered or the destruction occurred. Replacing the asset may result in being able to defer (or “roll over”) the capital gain until another CGT event occurs (e.g. selling the replacement asset).
The best way to ensure that you are doing the right thing when it comes to CGT tax is to keep your records up to date. This will assist us in ensuring that you are remaining compliant Any CGT events that have occurred need to be recorded (including asset disposals for at least five years after the event occurred. The best way to ensure this is to keep track of:
- receipts of purchase, transfer or sale
- if money was borrowed and details of interest
- receipts for insurance, rates and land taxes
- receipts for the cost of maintenance, repairs and modifications
- any market valuations
- brokerage on shares and cryptocurrency
- digital wallet records and keys.
Keeping accurate and well-maintained records for CGT events is of utmost importance, as it allows us to ensure that you are accurately reporting your transactions and lodging your return correctly. If they incur any net capital losses, this needs to be reflected in the return as they may be able to offset these against capital gains in a later year. Once a loss has been offset against a capital gain, you need to keep the records about that CGT event for two years (for individuals and small businesses) or four years (for other taxpayers).
If you are in the process of disposing of a capital gains asset, you will want to be certain that you are doing the right thing. Capital gains tax can be a tricky issue, with plenty of rigamarole. Come speak with us to ensure that your returns are lodged with the most accurate and correct information needed for submission.Read more. "
As a property investor, you might find yourself implementing repairs and renovation work onto a property to ensure that you are maximising its value on the market. However, though both can be claimed on your tax return, it’s of paramount importance that you know how to claim them. Getting it wrong can be both costly, and unlawful.
A rental property improvement is a renovation where something is improved beyond its original state and must be claimed with depreciation. This means that you are claiming a deduction for the decline in the value over the effective life of the renovation. For example, a rental property improvement that could be claimable by a property investor could include a bathroom getting retiled.
Maintenance and repairs however can be claimed differently, with all records kept containing accurate information on that work. This will assist in working out the depreciation of assets of the property.
A depreciation schedule is a report that outlines all available tax depreciation deductions for a residential investment property or commercial building. These depreciations can be claimed in your tax return each financial year and could help you to save thousands.
Investors who renovate and lodge their tax returns prior to ensuring that they have updated their tax depreciation schedule correctly could get caught out in making a mistake between the two types of work. Those who fail to properly record rental property improvements in a tax depreciation schedule risk making inaccurate claims and inviting the scrutiny of the Australian Taxation Office (ATO).
Your tax obligations and entitlements when renovating your property may change depending on how you go about it. Depending on whether you are a personal property investor, engaged in the profit-making activity of property renovations or carrying on a business involved in renovating properties, you will have to abide by certain requirements outside of maintaining the depreciation schedule.
Personal Property Investor
As a personal property investor engaging in renovations to a property:
- The net gain or loss gained from the renovation is treated as a capital gain or capital loss.
- Capital gains tax concessions such as the CGT discount and the main residence exemption may reduce your capital gain.
- You will not be required to register for GST as you are not conducting an enterprise.
Profit-Making Activity of Property Renovations
Consider yourself a ‘flipper’ of properties? You will be required to:
- Report your net profit or loss from the renovation in your income tax return as a result of the profit-making activity.
- Have an Australian business number.
- May be required to register for GST if the renovations are substantial.
In The Business Of Renovating Properties
If you are carrying out the business of renovating or flipping properties:
- They are regarded as trading stock (even if you live in one for a short period of time.
- The costs associated with buying and renovating them form part of the cost of your trading stock until they are sold.
- You calculate the business’s annual profit or loss in the same way as any business with trading stock
- You’re entitled to an Australian business number (ABN)
- You may be required to register for GST if the renovations are substantial.
In this instance, CGT does not apply to assets held as trading stock. Similarly, the CGT concessions (such as the CGT discount, small business concessions and main residence exemption) will not be applicable to the income gained from the sale of the properties.
If you are concerned about any of the topics discussed above, or want to know more about claiming property improvements on your tax return, you can come and speak with us for further information and advice.Read more. "
Small businesses are facing a set of challenges once again that can make fulfilling tax obligations seem like a daunting task. However, as a small business, capital gains tax concessions on assets used to conduct your business may be of interest to you. These assets are known as “active assets” and can, for example, be a tangible asset (such as commercial property), or an intangible asset (such as goodwill).
The turnover threshold for such CGT concessions is $2 million, according to the ATO. If your turnover is more than $2 million, then you need to satisfy an assets test.
There are stringent eligibility requirements and conditions that you must meet in order to access these concessions.
If you have owned an active business asset, you may only be required to pay tax on 25% of the capital gain when the asset is disposed of.
If you are 55 years of age or older, and are retiring or are permanently incapacitated (and have owned an active business asset for at least 15 years), you may not have to pay any CGT when disposing of an asset by sale, gift or transfer. You might also be able to contribute the amount that you make from this exemption to your super fund without affecting your non-concessional contributions limits (you can speak with us about this if you are unsure about this process).
If you are under 55, the taxable 25% of the disposal of an asset can be paid into a complying fund or a retirement savings account. There is then a full CGT exemption on the sale of an active business asset of up to $500,000 (the lifetime limit). Any amounts earned from this exemption to CGT may be able to be paid into your super fund without affecting the non-concessional contributions limit).
Disposing of an active asset, but are going to buy a replacement asset or improve on an existing one? You can defer your capital gain in this instance until a later year. The replacement asset can be acquired one year before or up to two years after the last CGT event in the income year that you choose the roll-over for.
If the asset is a share in a company or an interest in a trust, there will be additional conditions that you will be required to meet as well. If you are a small business, there are other CGT exemptions, rollovers and concessions specific to small businesses that you may be able to access, if you meet the eligibility criteria. These small business CGT concessions will reduce the taxable capital gain and in some cases result in no tax being paid at all on the gain.
Speak with us to find out what you may be entitled to when it comes to CGT and your business to ensure that you are doing the right thing with your tax obligations after selling an asset.Read more. "
Have you, over the course of the past financial year, received a government assistance payment, support payment or disaster relief supplement?
There have been a number of cases where people who received financial assistance from the government were hit with additional owed tax to the ATO, due to their payments increasing their income threshold.
When lodging your individual income tax return this year, you will need to declare certain Australian Government payments, pensions and allowances in your tax return. If you did not elect to pay tax on those payments, this could affect the payment received from your return (or mean that you actually owe money to the ATO).
Some of the taxable payments that you may need to include in your tax return include:
- the age pension
- carer payment
- Austudy payment
- JobSeeker payment
- Youth allowance
- Defence Force income support allowance (DFISA) where the pension, payment or allowance to which it relates is taxable
- veteran payment
- invalidity service pension, if you have reached age-pension age
- disability support pension, if you have reached age-pension age
- income support supplement
- sickness allowance
- parenting payment (partnered)
- disaster recovery allowance (but not in relation to 2019–20 bushfires)
Most of these pensions, payments and allowances will pre-fill in your tax return if you lodge online. You will need to make sure that all information submitted is correct though. Verify the pre-filled information with your own records to ensure that you are lodging the right information, and not missing anything.
Do you have concerns about your tax return this year? Uncertain about deductions, or if certain taxes will apply to you? Want a little more help or information about your government payments?
Be prepared for your individual income tax return with a consult with us. We can advise you on your tax returns, and potentially help you minimise the tax you will end up paying.Read more.
The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received.
Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.
All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.
Stand Down Payments
If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable.
COVID-19 Disaster Payment For People Affected By Restrictions
The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.
Tax Treatment Of Other Assistance Payments
The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return.
Early Access To Superannuation
If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.
If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help.Read more.
The inexpensive and profitable side hustle is under the ATO’s watchful eye when it comes to declaring income this tax season. With many gig economy workers often earning their income as independent contractors, the ATO warns that a failure to report all income from all of the work that they carry out could land them with severe penalties.
The ATO is expected to employ advanced data-matching from platforms that play host to large proportions of Australia’s gig economy to ensure that tax is declared and paid on the income from workers of the gig economy. Those workers may include Uber workers, Doordash, Lyft, Airbnb and many more similar side hustle income earners.
There is a silver lining for gig workers this tax time. Many gig economy workers may find themselves more eligible for tax deductions – but are warned against claiming more than they are allowed to.
Gig workers are eligible to claim deductions for most costs incurred while earning their income (such as travel or vehicle expenses, financing and marketing). These deductions, however, can only be claimed for the work-related proportion of the claim. You won’t be able to claim the whole amount for the deduction if the claim is made because you picked up an Uber fare on the way back from your Grandma’s for example, it will only be deductible from when you picked up your passenger.
Those who prepare their deductions based on a representative period are also warned to prepare an additional record for this period, as the pandemic has induced numerous tax challenges for many gig economy workers involved in declining and rising fields of the economy.
Workers who fail to declare cash income from the gig economy may incur penalties in the form of interest on their tax bills or potential criminal charges. It is vital that you ensure your tax return is correctly lodged and all income is declared if you are a gig economy worker of any kind. If you need assistance regarding your tax return lodgment process, you can always contact us for advice.Read more.
Tax return season is quickly approaching for individuals. You may need to begin thinking about the process sooner rather than later to ensure that you have everything ready for your accountant. If you’ve never had to complete a tax return before (and it’s your first time) or are still uncertain about what you need to do, this process can feel a bit like a Mount Everest you need to climb.
Putting it simply, if you are earning or will earn more than $20,542 this year, you will need to lodge a tax return. However, if you haven’t made that amount but your employer has taken tax out of your pay, you should lodge a return anyway to receive some (if not most) of that money back.
How much money you receive back from the tax return will be affected by how much income you have earned. Some debts (such as HECS or HELP) will begin to take money out of your return after reaching a certain income threshold level (currently set at $46,620).
A tax return is where you report all of your income earned over the past financial year. It should include ATO-reported income (which you generally won’t have to worry about as we have access to it automatically) such as salary or non-ATO reported income. This income may be income that has not been sent to the ATO and could include tips, any income you’ve earned while working under an ABN or payments from a family trust. You need to work out all of the income that you have earned and report it to remain compliant with the ATO.
In a tax return, you will also be entitled to make tax deductions on certain items if they apply to your situation. This means that you may receive a greater amount in your tax refund.
You will be entitled to tax deductions on items such as:
- Uniforms and protective clothing
- Certain travel expenses between workplaces, e.g. travel between sites (but not travel expenses from home to work)
- If an apprentice or trainee, if you have had to buy any of your tools or equipment out of pocket, you can claim them as a tax deduction (but cannot do so if your employer purchased them for you)
- Union fees
- Any donations that you have made
- Costs that may have been incurred in the process of educating yourself (e.g. course, seminars, training)
If you want to make sure that you understand precisely what you need to do to lodge your tax return, keep this in mind:
- If you earned money, you need to report it.
- If you can’t prove an expense, you can’t claim it.
- If you want to make extra sure that you’ve got it right, see a tax agent
For assistance during the lodgement of your tax return, you can seek advice from us. We’re here to help ensure you meet your tax obligations by reporting your income correctly for this financial year.
Cryptocurrency investments are on the ATO’s radar this tax return season, with 100,000 taxpayers to be alerted by the ATO of their tax obligations from their cryptocurrency investments this financial year.
It’s an outcome that has resulted from a growing concern that many taxpayers who invest in cryptocurrency believe their gains to be tax-free, or only taxable when their holdings are cashed into Australian dollars.
This proactive prompt to taxpayers is a repeat of the ATO’s 2020 attempt, which resulted (after contacting 100,000 taxpayers) in the lodgement of 140,000 returns.
Cryptocurrency’s current popularity as an investment solution for many taxpayers, due to the fairly consistent returns, is causing the ATO to evaluate the digital asset’s tax implications further.
Currently, those who invest in cryptocurrency need to be aware of the capital gains tax implications that may eventuate from selling or buying and any losses or gains that may come about due to investing, particularly in how it impacts their reportable income tax.
The ATO will also be heading into tax time with access to more data and the ability to track those investing in crypto-assets and ensure they are meeting their tax obligations.
The best way to ensure that your tax returns are lodged correctly when it comes to cryptocurrency reporting is to keep immaculate records. You should ensure that you have records of:
- Dates of transactions
- The value of the cryptocurrency in Australian dollars at the time of the transaction
- What the transactions were for
- Who the other party was (even if it’s just their wallet address)
Be sure that you are meeting your tax obligations this tax return season (especially to avoid the harsh penalties resulting from incorrect reporting or lodgements) by speaking with us. We can advise you further about your particular situation and give you the advice you need to suit your circumstances.
Due to the impacts of COVID-19, how Australians claim work-related expenses on their tax returns every other year is sure to be different this year. The ATO is warning Australians that they will be watching what is claimed and how the impacts of COVID-19 are reflected in tax returns.
During the 2020 tax return season, up to 8.5 million Australians claimed nearly $19.4 billion in work-related expenses, with new trends and figures of claims reflected in their returns.
Expenses in the 2021 tax return season are expected to reflect the changing nature of how Australians work, given the ongoing impact of COVID-19 is still being felt by workers.
In 2020, the value of car and travel-related expenses decreased by nearly 5.5% (as a result of lockdowns, office closures and the pandemic). There was a slight increase of up to 2.6% in terms of clothing expenses (in part a result of frontline workers’ first time needs for items such as hand sanitiser and face masks so that they could continue doing their jobs.
As an example, though working from home claims are expected to rise in this year’s tax returns, the ATO would not expect to see a marked increase in claims for travelling between worksites, laundering uniforms or business trips in those same returns for someone who was predominantly based at home, and not working out and about.
Though some work-related expenses may still be the same this year, the ATO is warning against simply copy-pasting tax returns from previous years, as without significant evidence or record of the claim, you may find yourself in legal difficulties.
So how can you ensure that you’re doing the right thing when making claims on your tax return? Knowing exactly how COVID-19 may have affected what exactly you can claim on your tax return is a good starting point.
As a result of COVID-19, the ATO introduced the temporary shortcut method to quickly calculate the expenses of working from home at an all-inclusive rate of 80 cents per hour for every hour that you work from home. All you need to do is multiply the hours worked at home by 80 cents, keeping a record such as a timesheet, roster, or diary entry showing the hours you worked.
Personal protective equipment that you may have purchased for use at work, paid for by you and not reimbursed by your work, can be claimed as a work-related expense on your tax return. These items could include gloves, face masks, sanitiser or anti-bacterial spray but must be linked back to use at your workplace. You must have a record to support the claim, but this can be done simply with a purchase receipt.
Similarly, with the marked decrease in the value of work-related expenses for cars, travel, non-PPE clothing, and self-education due to the introduction of travel restrictions and limits on the number of people who could gather in groups, tax returns are expected to reflect your claims regarding these amounts. If you are working from home due to COVID-19 but need to travel to the regular office sometimes, you will not be allowed to claim the cost of travel from home to work in this instance as these are private expenses.
If you are unsure about any of the expenses that you are looking to claim on your tax return this year or are concerned about claiming for the wrong expenses, you can come and speak with us for clarification on what you can and cannot claim on your tax return this year.Read more.
When you’re buying a property, there’s a high likelihood that you’re going to need to pay a tax known as stamp duty on top of the price originally agreed on for that property. Stamp duty is a tax levied by all Australian states and territories on property purchases. It is considered one of the most expensive costs you will encounter when buying a property in Australia. It may also be incurred for motor vehicle registrations, insurance policies, leases and mortgages, hire purchase agreements and transfers of property.
The amount that a buyer pays for stamp duty when it comes to a property, for example, is based on the property purchase price, location and loan purpose and can vary in rate depending on which state the property is purchased in.
As a rule of thumb, the more expensive the property is when buying, the higher the amount of stamp duty to be paid. What you pay for stamp duty may vary depending on the state, as it depends on factors such as first home buyer benefits and concessions that some states may not currently have in place.
A property that is worth $500,000 for example may incur an estimated stamp duty tax of over $11,000 in the ACT. Still, in South Australia, a property priced the same may have to pay an estimated $25,000 in stamp duty tax instead.
The revenue from the stamp duty tax is added to the state government’s budget, and then redirected to other government sectors to finance further improvements.
Under certain circumstances, concessions or exemptions from paying stamp duty may be available to you.
In NSW for example, there is a stamp duty concession for first home buyers where they are exempt from paying stamp duty on new and existing homes valued up to $650,000.
Buyers of first homes that were used as a residential property and which are worth between $650,000 and $800,000 could be eligible for stamp duty discounts of several thousand dollars.
These rules vary depending on the state or territory, so it’s crucial to find out what applies to you to save you money. We may assist you with finding out whether or not you may be eligible for concessions or exemptions, so come speak with us.Read more. « Older Entries