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Financial help for relocating job seekers

Job seekers can now take advantage of the government's relocation assistance of up to $9,000 when they relocate to take up an on-going work, including an apprenticeship, provided the position (both work and apprenticeship) is for more than 20 hours a week with a duration of more than 6 months. The scheme commenced 1 May 2021 and is designed to help job seekers with the cost of relocating to take up vacant job positions. Job seekers who are participating in employment service programs such as jobactive, Disability Employment Services, ParentsNext, Transition to Work, or Community Development Programs may be immediately eligible for help with their moving costs. Where you relocate to take up ongoing work, the new location must be within Australia, be at least 90 minutes away from where you currently live (based on your normal mode of transport), and not be within the same capital city. Those individuals that relocate to a regional area may be eligible for up to $6,000 with an extra $3,000 available if a dependent is also relocating. For those relocating to another capital city, $3,000 of relocation assistance may be available with an extra $3,000 if relocating with a dependent. However, relocation assistance for capital cities are only available if the destination city has a lower unemployment rate than the capital city you're relocating from. For example, according to the latest unemployment rate published by Australian Bureau of Statistics, the NSW unemployment rate is 5.4% and Victoria is 6.1%. So, it is likely that an individual moving from Melbourne to Sydney would get the relocation assistance although they would not receive the assistance if they were moving from Sydney to Melbourne. The relocation assistance received can be used for a variety of costs including rent, travel costs, and some employment-related expenses. The assistance can be received either as a reimbursement or the employment services provider can make payments directly to the supplier. Individuals experiencing hardship may also be able to obtain $2,000 up front to help with the cost of relocating. In addition, only one member of a couple may apply for relocation assistance. To apply for the relocation assistance, individuals are encouraged to contact either their local employment services provider or the employment services information line. Evidence that you've received an accepted an offer for an eligible job in an eligible location will be required. Furthermore, you must also sign a relocation assistance agreement with an employment services provider and make available any quotes, invoices, and receipts of relocation costs. If after accepting relocation assistance, you leave your job without valid reason, or you don't commence employment or relocate, penalties may apply. However, in instances where you lose the job through no fault of your own, for example, a redundancy or a business closure, penalties would not apply.

Independent resolution process now permanent

Small businesses now have another pathway to resolve tax disputes with the ATO making its independent review service a permanent option for eligible small businesses (ie those with a turnover of less than $10m). The service was initially conceived as an avenue for small businesses to obtain early and fair resolution in relation to audit positions. The original pilot commenced in 2018 and centred around income tax audits in Victoria and South Australia which was later expanded in 2020 to include all other States and Territories along with other areas of tax including GST, excise, luxury car tax, wine equalisation tax, and fuel tax credits. After what the ATO considered to be a successful multi-year pilot, the service has now become a permanent feature. An independent review can be requested by an eligible small business if they disagree with some or all of an audit position and an offer for an independent review has been made by the ATO. However, the review will not be the first opportunity small businesses have in responding to audit findings. Initial findings will be disclosed in an interim positions paper and small businesses are able to raise areas of disagreement before the final audit letter is sent out. If your small business is eligible for a review, your ATO audit case officer will contact you and a written offer of independent review will also be included int the audit finalisation letter. If you wish to proceed with the review, you will need to contact the ATO through the relevant email address within 14 days of the date of the audit finalisation letter. The ATO notes that the email must clearly specify and outline each area of disagreement with the audit position. As a part of the review process, you will also be asked to complete and return a consent form to extend the amendment period which will allow the ATO to complete the review before the period of review for the relevant assessment ends. According to the ATO, the review cannot be commenced unless the consent form is provided. Where your small business obtains approval to use the independent review service, an independent reviewer will be allocated to your case and contact you to discuss the process. Although this process involves an in-house ATO officer, this officer will be from a different part of the ATO and will not have been involved in the original audit. It is important to note that the areas of superannuation, FBT, fraud and evasion finding, and interest are not covered under the independent review service. Therefore, if your dispute relates to those areas or if you do not want to pursue the independent review process, other options including lodging an objection or the use of in-house facilitation service may be utilised. You can also raise your matter with the Inspector-General of Taxation and Tax Ombudsman or the Australian Small Business and Family Enterprise Ombudsman.

Benefits of family trusts

Many of you have heard of family trusts, but perhaps don't know too much about their benefits and how they differ from the usual non-fixed trusts. Essentially, a family trust is a trust where the trustee has made a valid family trust election (FTE) for tax purposes. By becoming a family trust, the trust is able to access certain tax concessions which may be beneficial. In order to make an FTE, the trust must pass the family control test at the end of the income year to which the election relates to. The family control test can generally be passed if the person that controls the trust is limited to the individual specified in the relevant family trust election, members of that person's family, legal or financial advisers of either, or a combination of these persons. Once a valid FTE is made and the trust becomes a family trust, it will have concessional treatment in relation to trust losses. For example, if a non-fixed trust has carried forward losses, it will need to satisfy all the trust loss recoupment tests related to ownership or control of the trust. However, a family trust is only subject to a concessional income injection test. The second concession relates to company loss tracing. To utilise a loss, a company must satisfy ownership and control tests which require tracing the ownership or control of the company to specific individuals through trusts. In cases where the shareholder of a company with losses is a family trust, there is a tracing concession that applies so that a single person will be taken to own the interest in the company, thus absolving the need to trace past the family trust. The third concession for family trusts relate to the small business restructure rollover which allows small business entities to restructure their businesses by moving active assets into, or out of, a trust, a company, partnership, or a combination without adverse CGT consequences provided certain conditions are met. Non-fixed trusts that are family trusts may use an alternative economic ownership to access this concession. There is also a concession for family trusts in relation to administrative matters of the trust, specifically, the trustee beneficiary reporting rules. Generally, the rules require the trustee of a closely held trust to advise ATO of certain details including beneficial entitlements. However, family trusts do not have to satisfy these reporting rules. In addition to this, trustees and beneficiaries of a family trust that receive franked dividends may benefit from a franking credit concession. Now that you've heard about the benefits of making an FTE, it should be noted that there are also downsides to making a non-fixed trust a family trust. Generally, once a valid FTE is made in writing and in approved form, it cannot be varied or revoked except in some limited circumstances. Furthermore, if distributions are made outside the family group, a special family trust distribution tax will be payable at the top individual marginal rate plus Medicare levy.

Steps to get a deduction for bad debts

As many of the government's COVID-19 economic supports coming away, economists predict there'll be many business failures to follow. If your business is unable to obtain payment from a debtor, depending on the accounting method used by your business, you may be able to claim a tax deduction for the unpaid amount. If you account for your income on an accruals basis, you may be able to claim a tax deduction for a bad debt. In order to claim a deduction for a bad debt, you must have included the amount in your assessable income. You will also need to determine that the debt is genuinely bad, rather than merely doubtful, at the time you write it off. The next step in claiming a bad debt deduction is to write-off the debt as bad. This usually means that you have to record the decision in writing to write-off the debt before the end of the income year in which you intend to claim a deduction. In instances where you have dealt with the bad debt in other ways, for example, waived or forgiven the debt, extinguished the liability in another way, or sold the debt, the debt is no longer in existence and you cannot write it off as a bad debt . Companies that want to deduct bad debts will have the additional hurdle of satisfying the continuity of ownership test (COT). There may also be GST consequences for businesses when writing-off bad debts. For example, where the business accounts for GST on a non-cash basis, a decreasing adjustment can be claimed where you've made the taxable sale and have paid the GST to the ATO and have subsequently not received the payment. However, the debt will need to have been written off as bad and has been overdue for 12 months or more. Businesses that account for income on cash basis will not be able to claim a deduction for bad debts. This is because these businesses only include an amount in their assessable income when it is received, therefore, bad debts will have no income tax consequences. If non-payment from customers or debtors is getting your business down, we can help you sort out the bad debts from the others and help you get a tax deduction or a GST adjustment when the time comes. Call us today for expert advice.

JobKeeper: compliance and repayment

As the JobKeeper program comes to a close, businesses should be aware that the ATO will continue to maintain the integrity of the scheme through compliance activities. While a majority of the businesses have legitimately used the JobKeeper to keep their businesses afloat, the ATO does have concerns with some businesses taking advantage inappropriately. In particular, it is looking at several areas of eligibility to the program including: the decline in turnover test; wage conditions for employees; employees that are not eligible employees or those that have not completed a nomination notice; claiming for more than one business participant by disguising them as employees; and claiming for individuals that are not eligible business participants. In addition to the above, the ATO noted it will also be reviewing businesses that appear to have contrived eligibility for the JobKeeper extension by manipulating their GST turnover to meet the actual decline in turnover tests and those that have claimed the incorrect higher tier rate for the employees/eligible business participants when they were only eligible for the lower tier payment. Businesses that have made inadvertent errors or honest mistakes are not usually required to repay any overpayments of the JobKeeper provided they contact the ATO regarding the mistake and the business has not retained any benefit (ie the JobKeeper payment was passed onto the employee). Of course, whether or not the business made an honest mistake depends on the circumstances of each case, but a mistake made earlier in the JobKeeper program would be more likely to be considered an honest mistake as there were less public guidance available. In circumstances where a business has not made an honest mistake, the ATO notes that it will be firm in requiring the repayment of JobKeeper overpayments, and in some instances it will also apply administrative penalties and/or pursue offences for false or misleading statements. Some businesses may also choose to voluntarily repay a JobKeeper amount, however, it should be noted that voluntary repayments may only be deductible in limited circumstances. According to the ATO, a deduction may be available if the repayment was made to prevent a reduction in business from negative publicity or to promote the business in the short term. It further notes that provided the business treated the original JobKeeper payments correctly as assessable income, and act in good faith to determine whether they are entitled to the deduction, compliance resources will not generally be applied to confirm if the payment was deductible. If a deduction is claimed for a voluntary payment, it must be done within the same income year in which the repayment was made.

Personal services income: a refresher

The ATO has recently updated its ruling on Personal Services Income (PSI) to incorporate a myriad of significant court and AAT decisions that have occurred since the original rulings were issued almost 20 years ago. So now is the perfect time for a refresher on the basics of PSI and associated personal services entities (PSEs). Firstly, PSI only applies to individuals and is income that is mainly reward for personal effort or skills. That is, more than 50% of the ordinary or statutory income received needs to be reward for personal efforts and skills of the individual. Income that is principally generated from supply or sale of goods, supply and use of income-producing assets, or by a specific business structure are not considered to be PSI. If you're determined to have earned PSI, the deductions that can be claimed will be limited to the deductions that you could've claimed if you were an employee and the income earned was salary and wages. This means that, for example, you'll be unable to deduct rent, mortgage, interest, rates or land tax in relation to a residence or part of a residence that you use to gain or produce PSI. To avoid that outcome, an individual/PSE can self-assess whether or not they conduct a Personal Services Business (PSB) in an income year, against one of the 4 tests set out below. If any one of the 4 tests is met during an income year, the PSI rules will not apply to limit deductions: results test – can be satisfied if at least 75% of a test individual's PSI in an income year is for producing a result as well as being responsible for the cost of rectifying all defects. The individual is also required to supply the plant, equipment and tools of trade needed to do the work. unrelated clients test – can be met if an individual or PSE gains or produces income during the year from 2 or more entities that are not associates or associates of the individual or PSE. The services must be provided as a direct result of making offers/invitations (eg advertising) to the public at large or a section of the public. employment test – is met where the individual/PSE engages one or more entities to perform at least 20% (by market value) of the individual/PSE's principal work. Note, however, test individuals of the PSE do not count towards the employment test. business premises test – can be satisfied if the individual or PSE maintains and uses business premises at all times during the income year that meet certain conditions such as being physically separate from premises used for private purposes. However, if more than 80% of the PSI or PSE's income is from one source (ie the same entity and/or its associates), then only the results test can be used to self-assess whether they conduct a PSB. Individuals and PSEs can also apply to the Commissioner for a Personal Services Business Determination to get certainty on their unique situation.

Travelling for work: what’s deductible?

As we move to a post-COVID world where borders, both domestic and international, start to open back up, the issue of deductibility of certain business travel expenses are again back on the agenda. The ATO has gotten on the front foot by recently issuing a draft ruling and associated draft compliance guidelines which explains the circumstances under which these expenses would be deductible. Generally, if you as an employee travels for work and stays away from your usual place of residence overnight in order to perform the work duties which gain you income, the accommodation, food and drink expenses you incur will normally be deductible. However, the expenses must have a sufficiently close connection to the performance of employment duties and activities. Example Scenario 1: Ian lives in Sydney with his family and accepts a job in Cairns. He flies to Cairns at the start of each week and returns to Sydney on Friday afternoon. While in Cairns, Ian lives in a self-serviced apartment and incurs expenses relating to groceries and eating out. The accommodation, food and drink expenses incurred by Ian is not deductible as it is private and domestic. He is not required to travel by his employer, rather he has incurred the expenses based on personal circumstances (ie he has chosen not to relocate to Cairns from Sydney). Scenario 2: Now imagine Ian accepted a Job with a company that has offices all around Australia, the role is based in Cairns but he has come to an agreement with his employer to attend the Cairns office 3-days per week and work in the Sydney office for 2 days. In this scenario, Ian's expenses of travelling to Cairns, associated accommodation, food and drink expenses would still not be deductible as again the travel is explained by his personal circumstances and not his employment duties (ie instead of relocating his usual place of residence to Cairns, he chooses to stay in Sydney). Scenario 3: Ian again lives in Sydney with his family, however, this time, he is employed by a company based in Sydney that has offices all around Australia, under the terms of his employment agreement, his regular place of work is the Sydney office but as a part of his management role he is required to travel to Cairns for regular meetings. When required to travel to Cairns, Ian stays overnight at a motel, attends the meeting and returns that afternoon. The expenses Ian incurs for accommodation, food and drink while attending these meetings in Cairns will be deductible as it is explained by his income-producing activities. These 3 simple scenarios illustrate the complexity in determining whether travel expenses are deductible, it all comes down to the individual circumstances of each case. There may also be further complicating factors in terms of deductibility depending on whether you're living-away-from-home or whether you have permanently relocated. In any case, to be able to deduct an expense, substantiation requirements will need to be met, so care should be taken.

ATO reminder: lodge your TPAR

The ATO has reminded businesses that provide various services to lodge their Taxable Payments Annual Report (TPAR) for the 2019-20 income year. It estimates that around 280,000 businesses were required to lodge a TPAR for the 2019-20 financial year, and around 60,000 businesses still have not complied with the lodgment requirements under the Taxable Payments Reporting System (TPRS). The reports were originally due on 28 August 2020, to avoid penalties businesses are encouraged to lodge as soon as possible. The TPAR was introduced to combat black economy which is estimated to cost the Australian community around $50bn or 3% of GDP. It is designed to help the ATO identify contractors or subcontractors who either don't report their income or under-report their income. While it originally only encompassed the building and construction industry, it is now required for any businesses that make payments to contractors/subcontractors and provides any of the following services: building and construction including plumbing, architectural, electrical, plastering carpentry, engineering and a wide range of other activities; cleaning services including interior and exterior cleaning of structures, vehicles, machinery and cleaning for events/COVID-related matters; courier services including delivery of items or goods (ie letters, packages, food etc) by motor vehicle, bicycle or by foot; road freight services including transportation of freight by road, truck hire with driver, and road vehicle towing services; IT services including writing, modifying, testing or supporting software either on site or remotely; and Security, investigation or surveillance services including patrolling and guarding people, premises or property, watching or observing an area or security systems etc. Remember, your business does not need to provide the above services exclusively to be captured under the TPAR system, if you only provide the service for a part of the year, or even if it is only a small part of your business, you may be required to lodge a TPAR. According to the ATO, if the total payments received from the provision of any of the above services equal or exceed 10% of your total annual business income, you'll be required to lodge a TPAR. For example, during COVID, many eateries, grocery stores, pharmacies and other general retailers pivoted to providing home delivery for their customers. As such, they may have needed to engage contractors or subcontractors to provide courier services, if the total payments received for these deliveries or courier services amount to 10% or more of their total business income, they will be required to lodge a TPAR even though they may not have needed to do so previously. If your business is required to lodge a TPAR, the details you'll need to report about each contractor should be easy to find and are generally contained on the invoice you receive from them. This includes details such as their ABN, name and address, and the gross amount paid for the financial year (including GST).

STP changes coming for small employers

While most businesses are already familiar with the Single Touch Payroll (STP) regime, small employers (19 or fewer employees) with closely held payees were exempt from reporting payroll information of those closely held payees through the STP for the 2019-20 and 2020-21 financial years. However, from 1 July 2021, those small employers must start reporting payments made to closely held payees through STP. In essence, closely held payees consists of individuals that are directly related to the entity from which they receive payments including family members in a family business, directors or shareholders of a company, and beneficiaries of a trust. If you're an employer with only closely held payees, you will just need to start reporting through STP from 1 July 2021, there is no need to notify the ATO of the fact that you only have closely held payees. Although, if you have both closely held payees and other employees that are at arm's length, you will need to report information for the arm's length employees through STP before each pay day. To help those small businesses with only closely held payees transition to STP, the ATO has outlined a few options available from 1 July 2021 below: report payments on or before the date of payment; report payments quarterly; or report a reasonable estimate quarterly. Generally, the STP quarterly report for your payees will include year-to-date amounts, ordinary time earnings (OTE), super liability for each payee, total gross wages for payments being reported, and total PAYG withholding payments being reported. If you choose to report quarterly, the report will be due on or before the due date for quarterly activity statements, and the quarterly option will not change the due dates for notifying and paying your PAYG withholding on your activity statement or making super guarantee contributions for your closely held payees. To use the reasonable estimates method, you as an employer must report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter. The ATO notes that it will remit any failure to withhold penalty you may incur if you report year-to-date withholding amounts and tax withheld that is equal to or greater than 25% of the payee's total gross payments and tax withheld from the previous finalised payment summary annual report across each quarter of the current financial year (in quarterly reports), and report and pay the tax withheld on time. In instances where you under-estimate amounts reported for closely held employees equalling more than 25% of their total gross payments for the last financial year and did not report this through STP, the ATO notes you may be liable for penalties and interest, as well as being unable to deduct the payment for income tax purposes.

Beware of ATO data-matching: motor vehicles

While the motor vehicle registries data-matching program has been running for around 16 years in various iterations, particular care should be taken for the current motor registries program as many businesses including sole traders would have taken advantage of the increase in the instant asset write-off threshold to purchase motor vehicles. Information will be acquired from motor vehicle registry authorities from all States and Territories for the 2019-20 through to 2021-22 income years including: identification details – names; addresses; phone numbers; date of birth for individuals; ABN; Australian company numbers for the purchasers, sellers, licenced dealers, fleet managers, leasing companies (or representatives); and the registering person for an unincorporated body. transaction details – date of transaction; type of transaction; sale price of the vehicle; market value of the vehicle; vehicle garage address; type of intended vehicle use; vehicle make; vehicle model; vehicle body type; year of manufacture; engine capacity or number of cylinders; tare weight; gross weight; VIN; registration number; transaction receipt number; state stamp duty exemption; reason for stamp duty exemption; and dealer licence number. The ATO estimates that records relating to approximately 1.5m individuals will be obtained each financial year and will be matched with internal data holdings to identify relevant cases for administrative action as well as determine the risk profile of taxpayers buying, selling or acquiring cars. The data matching program will encompass both new and used cars, any vehicles transferred or newly registered between 2019-20 to 2021-22 financial years with a purchase price or market value equal or greater than $10,000 will be captured. The data obtained will be used by the ATO in multi-pronged compliance programs to identify taxpayers buying or selling motor vehicles who may not be meeting their obligations to register and lodge returns (including activity statements) and ensure the correct reporting of income and entitlement to both deductions and input tax credits. This will involve luxury car tax, fringe benefits tax, fuel schemes, and income tax obligations. The ATO will also be using the data to support modelling/case identification and to provide a holistic view of a taxpayer's financial position in order to identify higher risk taxpayers with outstanding lodgments or undeclared income whose asset holdings may not be proportionate to their declared financial position. Following on from this, the data will also be used to support various taskforce programs including those delving into the black economy. Each financial year's data from the program will be retained by the ATO for 5 years from the receipt of the final instalment of verified data files. Therefore, taxpayers need to beware that the data obtained is likely to be used in different matching processes over multiple financial years. According to the ATO, the 5-year period supports its ability to conduct longer term analysis of the risks associated with asset accumulation.

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