Major new COVID-19 support package to help NSW businesses The NSW Government has announced a major new grants package and Dine & Discover changes to help small businesses and individuals across NSW impacted by the current COVID-19 restrictions. The package includes grants of between $5,000 and $10,000 for small businesses, payroll tax deferrals for all employers, an extension of the Dine & Discover program to 31 August 2021 and the ability for people to use Dine & Discover vouchers for takeaway delivered directly to their home by the venue itself. The centrepiece of the package is the small business support grants which will help businesses by alleviating cashflow constraints while trading is restricted. This can be used for business expenses such as rent, utilities and wages, for which no other government support is available. Three different grant amounts will be available for small businesses depending on the decline in turnover experienced during the restrictions: $10,000 for a 70% decline $7,000 for a 50% decline, and $5,000 for a 30% decline. Unfortunately businesses continue to incur costs such as rent, power and lost produce whilst the current restrictions are in place. The new grants will be available across NSW and available to sole traders and non-profit organisations, with expanded criteria to assist most hospitality and tourism operators impacted by COVID-19 restrictions during the school holiday period. Businesses will be able to apply for the grants through Service NSW from later in July and will need to show a decline in turnover across a minimum two-week period after the commencement of major restrictions on 26 June 2021. Business grants will be divided into two streams: 1. Small Business COVID-19 Support Grant Available to businesses and sole traders with a turnover of more than $75,000 per annum but below the NSW Government 2020-21 payroll tax threshold of $1,200,000 as at 1 July 2020. These businesses must have fewer than 20 full time equivalent employees and an ABN registered in NSW or be able to demonstrate they are physically located and primarily operating in NSW. 2. Hospitality and Tourism COVID-19 Support Grant Available to tourism or hospitality businesses that have a turnover of more than $75,000 and an annual Australian wages bill of below $10 million as at 1 July 2020. These businesses must have ABNs registered in NSW or be able to demonstrate they are physically located and primarily operating in NSW. NB: Full criteria for both streams will be available in coming days on the Service NSW website. Other key elements of the announced package Dine & Discover vouchers will be able to be used for takeaway from eligible and registered Dine businesses during the restriction period, but food must be delivered direct to the home by the restaurant or café and not picked up. Dine & Discover vouchers cannot be redeemed for takeaway using third party delivery platforms. A further one-month extension of Dine & Discover vouchers until 31 August 2021 to allow more time to use them. Optional deferral of payroll tax payments due in July 2021 and the deferral of hotel June quarter gaming machine tax, with the Chief Commissioner of State Revenue able to provide for appropriate repayment arrangements on a case by case basis. More information on small business support grants including Dine & Discover program changes will be available on the Service NSW website soon. To prepare a grant application or check proof of identity and auditing requirements, contact the team at Collins Hume on 02 6686 3000. Source: NSW Government

Australia has had its fair share of disasters over the last few years. Drought, bushfires and floods have ramped up the volume of insurance claims. Most people would assume that if and when they need to claim on their insurance, the insurance payout covers the damage and is not income assessed for tax purposes - but this is not always the case. Insurance payouts for damaged or destroyed personal items are generally not taxed. For example, any insurance payout you receive for your family home won't necessarily be taxed. But, the rules are different if you have used your home to produce an income, for example, you have used part of your home as a home business or you have rented out part of your home. The rules are also different if the item is a personal asset costing more than $10,000 or if the asset is a collectible that cost more than $500. Where the insurance proceeds exceed the original cost of the asset, that is, the asset appreciated in value, then capital gains tax might apply. And, if the asset damaged is related to a business or an income producing asset like a rental property, the rules are also different. Business premises, trading stock and depreciating assets For businesses that have had trading stock damaged or destroyed, any insurance payout is taxable. For example, the payouts on claims coming through from the enforced lockdowns for spoiled perishable stock would need to be included in the business's tax return. This is because the insurance premiums would have been claimed by the business as an expense. It is just a question of how the insurance is taxed. If your business premises are damaged and the insurance covers repairs, then the amount you receive is generally taxed as income if you can claim a deduction for the repair costs. Where the premises are damaged or destroyed, then we'll need to work with you to identify if you have made a taxable gain or loss. When it comes to depreciating assets like machinery, then it starts getting more complex. In general, if the insurance payout exceeds the written down value, then the payout is included in the business's assessable income, and if less, you can claim a deduction for the difference. However, there are also special rules for work cars, small businesses, and where a replacement item is purchased. Rental properties A rental property is an income producing asset and, in most cases, the cost of insurance policies relating to the property would have been claimed as an expense. For example, if you receive a payout for your rental property as a result of a disaster, generally, you will need to include at least part of this amount as income in your tax return. This could include insurance payouts for loss of rental income, repairs, replacements of destroyed assets, or money received from a relief fund. The treatment of the insurance proceeds depends on what the payout is for, how the insurance is used, and whether the rental property was vacant or in use. A recent case before the Administrative Appeals Tribunal (AAT) shows how tricky this area of the tax rules can be. In this case, the taxpayer initially received insurance proceeds of $24,000 for lost rental income after their property sustained storm and flood damage. The taxpayer had declared this amount as income. All good so far. Then, the taxpayer received an additional $250,000 from the insurer with the payment described as "in consideration of the taxpayer releasing the insurer from all liability past, present and future under the insurance policy". The taxpayer did not believe this money was for him to repair his property so did not claim it in his tax return. But, he did claim a deduction for repair costs totalling $130,000 in two income years. The ATO subsequently audited the taxpayer and issued an assessment for the full $250,000. The AAT agreed with the ATO even though the taxpayer had only claimed $130,000 in repairs. It's possible this case will go to appeal but it serves as a warning that any lump sum payouts need to be very carefully assessed and dealt with. If you have been impacted by a disaster and are uncertain of how any insurance proceeds will be taxed, please talk with Collins Hume and we can work with you to help you understand your position on 02 6686 3000 (Ballina and Byron Bay).

South East Queensland Floods February 2022 Help for people directly affected by a natural disaster event, such as flooding, in disaster declared areas. The Australian Government Disaster Recovery Payment (AGDRP) is a one-off, non-means-tested payment of $1,000 per eligible adult and $400 per child adversely affected by a major disaster either in Australia or overseas. The AGDRP may be activated when the impact of a disaster on individuals and families requires an additional Australian Government response to support short-term recovery needs. Current status The Australian Government has announced support for people seriously affected by floods in South East Queensland . Claims opened at 1 pm AEST Monday 28 February 2022. The Australian Government has announced support for people seriously affected by floods in NSW. More information will become available. The Australian Government has announced the Disaster Recovery Allowance for people who’ve lost income due to the South East QLD Floods. More information will become available. How to claim There are 3 steps to claim the Australian Government Disaster Recovery Payment. Read all the details at Steps to claim Australian Government Disaster Recovery Payment . Also watch the government websites for any updates as new LGAs are added.

Australian Government Disaster Recovery Payment (AGDRP) of $1,000 per eligible adult and $400 per eligible child is now available for people impacted by a flooding event. Residents in 26 flood-affected local government areas across New South Wales and Queensland can start applying for Commonwealth financial support through Services Australia from 9am today. Eligible residents can claim support via myGov or by calling Services Australia on 180 22 66 Claims for AGDRP and DRA for NSW local government areas will be open at 2pm (AEDT) from 1 March 2022 Affected Queensland local government areas can claim AGDRP from 9am (AEST) and can claim DRA from 1pm (AEST) from 1 March 2022 The DRFA assistance provides grants of up to $180 per person, to a maximum of $900 for a family of five or more. Financial support has now been activated for Northern New South Wales local government areas of Ballina, Bellingen, Byron, Clarence Valley, Coffs Harbour, Kyogle, Lismore, Richmond Valley and Tweed. Queensland residents in Brisbane, Fraser Coast, Gold Coast, Ipswich, Lockyer Valley, Logan, Moreton Bay, Noosa, Redland, Scenic Rim, Somerset, South Burnett, Southern Downs, Sunshine Coast and Toowoomba local government areas are also included. These communities are in addition to the local government areas of Gympie and North Burnett, who became eligible to apply on 28 February 2022. Payments are available in Gympie and North Burnett local government areas and the Queensland Government is responsible for activating these payments. The AGDRP is a one-off, non-means tested payment and is available to eligible people in those affected local government areas who have suffered a significant loss, including a severely damaged or destroyed home or serious injury. Disaster Recovery Allowance The Disaster Recovery Allowance (DRA) will also be provided into the 26 affected local government areas. The DRA assists employees, small business persons and farmers who experience a loss of income as a direct result of a major disaster. This allowance provides for a maximum of 13 weeks payment from the date you have or will have a loss of income as a direct result of a disaster. The DRA payment is set at the maximum equivalent rate of Jobseeker Payment or Youth Allowance, depending on your personal circumstances, and is taxable. Australian Defence Force personnel continue to support the emergency response efforts and will do more once the water recedes and the recovery effort starts. This includes the arrival of the ADF in Lismore to assist NSW. For more information on support available, visit servicesaustralia.gov.au/disaster Source: pm.gov.au

Temporary full expensing enables your business to fully expense the cost of the following in the first year of use: new depreciable assets improvements to existing eligible assets, and second-hand assets Introduced in the 2020-21 Budget and now extended until 30 June 2023, this measure enables an asset’s cost to be fully deductible upfront rather than being claimed over the asset’s life, regardless of the cost of the asset. Legislation passed by Parliament last month extends the rules to cover assets that are first used or installed ready for use by 30 June 2023. Some expenses are excluded including improvements to land or buildings that are not treated as plant or as separate depreciating assets in their own right. Expenditure on these improvements would still normally be claimed at 2.5% or 4% per year. For companies it is important to note that the loss carry back rules have not as yet been extended to 30 June 2023 – we’re still waiting for the relevant legislation to be passed. If a company claims large deductions for depreciating assets in a particular income year and this puts the company into a loss position then the tax loss can generally only be carried forward to future years. However, the loss carry back rules allow some companies to apply current year losses against taxable profits in prior years and claim a refund of the tax that has been paid. At this stage the loss carry back rules are due to expire at the end of the 2022 income year, but we are hopeful that the rules will be extended to cover the 2023 income year as well. How to contact us Start your year-end tax planning now. Contact Collins Hume Accountants & Business Advisers in Ballina on Byron Bay on 02 6686 3000. The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

COVID-19 test expenses From 1 July 2021, if you're an employee, sole trader or contractor and you pay for a COVID-19 test for a work-related purpose, you can claim a deduction. When you can claim COVID-19 testing From 1 July 2021, to claim a deduction for the cost you incur to pay for a COVID-19 test, you must: use the test for a work-related purpose, such as to determine if you can attend or remain at work get a qualifying COVID-19 test, such as a polymerase chain reaction (PCR) test through a private clinic other tests in the Australian Register of Therapeutic Goods, including rapid antigen test (RAT) kits pay for the test yourself (that is, your employer doesn't give you a test or reimburse you for the cost) keep a record to prove that you incurred the cost (usually a receipt) and were required to take the test for work purposes. You can only claim the work-related portion of your expense on COVID-19 tests. For example, if you buy a multipack of COVID-19 tests and use some for private purposes (such as by other family members or for leisure activities), you must only claim for the portion of the expense you use for a work-related purpose. When you can't claim COVID-19 testing You can't claim the cost of a COVID-19 test where any of the following apply: you use the test for private purposes – for example, to test your children before they return to school or daycare you receive a reimbursement for the expense from your employer or another person you work from home and don't intend to attend your workplace. You also can’t claim a deduction for the travel or parking expenses you incur to get your COVID-19 test because these expenses don't have a sufficient connection to you using a COVID-19 test. Keeping records for COVID-19 tests You need to keep records of COVID-19 tests to demonstrate that you paid for the test and the test was required for work-related purposes. This may include a receipt or invoice, and correspondence from your employer stipulating the requirement to test. If you don't have a record of your expenses before the law changed on 31 March 2022, the ATO will accept reasonable evidence of your expenses. Reasonable evidence is documentation that shows the cost of the test and the requirement to take it for work purposes. This may include: bank and credit card statements a diary or other documents, including receipts, that show a pattern of buying COVID-19 tests after the law change that could reasonably have applied from 1 July 2021. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Source: ATO

Applications now open for one-off $10,000 small business northern flood grants If your small business or not-for-profit organisation in Northern NSW was impacted by storms and floods in February and March 2022, you may be eligible for a one-off $10,000 small business northern flood grant. Applications close on 31 July 2022. Apply online here » Your small business or not-for-profit organisation must be physically located and operating in one of the following highly impacted Northern Rivers local government areas (LGAs) to be eligible: Ballina Byron Clarence Valley Lismore Kyogle Richmond Valley Tweed Shire. This grant is to help pay for your business’ operating costs during your immediate recovery period. Covered costs could include, but are not limited to: salaries and wages utilities and rent government fees and charges (including local government rates) financial, legal or other services marketing or communications perishable goods other business costs. Note : If you're unsure about which financial support best suits your situation, you can get a list of NSW flood grants your business may be eligible for by completing a 2-minute questionnaire . Consider your options carefully as you will not be eligible for this grant if you have received any of the following grants: February and March 2022 storm and flood disaster recovery small business grant of up to $50,000 Northern Rivers medium-sized business grant of up to $200,000 – get notified when applications open in mid-May Primary producer special disaster grant of up to $75,000 for the February 2022 NSW floods Rural Landholders Grant of up to $25,000 for the February 2022 NSW floods. A qualified accountant, registered tax agent or registered BAS agent may apply on behalf of your business. Your accountant will need to provide a letter of authority from you to show that they are authorised to act on behalf of your business if they are not listed as an associate on the Australian Business Register. Visit the Service NSW website for full eligibility and application deadlines. Know your options Receiving one grant may make you ineligible for another one, so consider your options carefully. You can get a list of NSW flood grants your business may be eligible for by completing a 2-minute questionnaire . Medium businesses in the highly impacted Northern Rivers LGAs that suffered direct damage from the floods may be eligible for a grant of up to $200,000. Get notified when applications open .

A series of reforms and changes will commence on 1 July 2022. Here’s what is coming up: For business Superannuation guarantee increase to 10.5% The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025. If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments. $450 super guarantee threshold removed From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation. For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week. Profits of professional services firms The ATO has been concerned for some time about how many professional services firms are structured - specifically, professional practices such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed. New ATO guidance that comes into effect from 1 July 2022, takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Tax Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Significant penalties can also apply when Part IVA is triggered. A new method of assessing the level of risk associated with profits generated by a professional services firm and how they flow through to individual practitioners and their related parties, will come into effect from 1 July 2022. Professional firms will need to assess their structures to understand their risk rating, and if necessary, either make changes to reduce their risks level or ensure appropriate documentation is in place to justify their position. Lowering tax instalments for small business – PAYG PAYG instalments are regular prepayments made during the year of the tax on business and investment income. The actual amount owing is then reconciled at the end of the income year when the tax return is lodged. Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government has set this uplift factor at 2% instead of the 10% that would have applied. The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year: Up to $10 million annual aggregated turnover for GST instalments, and $50 million annual aggregated turnover for PAYG instalments The effect of the change is that small businesses using this PAYG instalment method will have more cash during the year to utilise. However, the actual amount of tax owing on the tax return will not change, just the amount you need to contribute during the year. Trust distributions to companies The ATO recently released a draft tax determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If the amount owed by the trust is deemed to be a loan then it can potentially fall within the scope of the integrity provisions in Division 7A. If certain steps are not taken, such as placing the unpaid amount under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate. The ATO guidance deals specifically with, and potentially changes, when an unpaid entitlement to trust income will start being treated as a loan depending on the wording of the resolution to pay a distribution. The new guidance applies to trust entitlements arising on or after 1 July 2022. For you Home loan guarantee scheme extended The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. An additional 25,000 guarantees will be available for eligible first home owners (35,000 per year), and 2,500 additional single parent family home guarantees (5,000 per year). Your superannuation Work-test repeal – enabling those under 75 to contribute to super Currently, a work test applies to superannuation contributions made by people aged 67 or over. In general, the work test requires that you are gainfully employed for at least 40 hours over a 30 day period in the financial year. From 1 July 2022, the work-test has been scrapped and individuals aged younger than 75 years will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps. The work test will still apply to personal deductible contributions. This change will also see those aged under 75 be able to access the ‘bring forward rule’ if your total superannuation balance allows. The bring forward rule enables you to contribute up to three years’ worth of non-concessional contributions to your super in one year. Downsizer contributions from age 60 From 1 July 2022, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home. Currently, you need to be 65 years or older to utilise downsizer contributions. Downsizer contributions can be made from the sale of your principal residence that you have owned for the past ten or more years. These contributions are excluded from the age test, work test and your total superannuation balance (but not exempt from your transfer balance cap). First home saver scheme – using super to save for a first home The First Home Super Saver Scheme enables first home buyers to withdraw voluntary contributions they have made to superannuation and any associated earnings, to put toward the cost of a first home. At present, the maximum amount of voluntary contributions you can make and withdraw is $30,000. From 1 July 2022, the maximum amount will increase to $50,000. The benefit of this scheme is the concessional tax treatment of superannuation. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »

Tax time targets If you dispose of an asset — property, shares, crypto or NFTs, collectables (costing $500 or more) — you will need to calculate the capital gain or loss and record this in your tax return. Capital gains tax (CGT) does not apply to personal use assets such as a boat if you bought it for less than $10,000. Crypto and capital gains tax A question that often comes up is when do I pay tax on cryptocurrency? If you acquire the cryptocurrency to make a private purchase and you don’t hold onto it, the crypto might qualify as a personal use asset. But in most cases, that is not the case and people acquire crypto as an investment, even if they do sometimes use it to buy things. Generally, a CGT event occurs when disposing of cryptocurrency. This can include selling cryptocurrency for a fiat currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services. Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event. Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of the coin. Record keeping is extremely important – you need receipts and details of the type of coin, purchase price, date and time of transactions in Australian dollars, records for any exchanges, digital wallet and keys, and what has been paid in commissions or brokerage fees, and records of tax agent, accountant and legal costs. The ATO regularly runs data matching projects, and has access to the data from many crypto platforms and banks. If you make a loss on cryptocurrency, you can generally only claim the loss as a deduction if you are in the business of trading. Gifting an asset might still incur tax Donating or gifting an asset does not avoid capital gains tax. If you receive nothing or less than the market value of the asset, the market value substitution rules might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted for the purpose of your CGT calculations. For example, if Mum & Dad buy a block of land and then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a capital gains tax liability. It does not matter that Mum & Dad did not receive any money for the land. Donations of cryptocurrency might also trigger capital gains tax. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency. The ATO has flagged four priority areas this tax season where people are making mistakes. With tax season upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season. Record-keeping Work-related expenses Rental property income and deductions, and Capital gains from crypto assets, property, and shares. In general, there are three ‘golden rules’ when claiming tax deductions: You must have spent the money and not been reimbursed. If the expense is for a mix of work-related (income producing) and private use, you can only claim the portion that relates to how you earn your income. You need to have a record to prove it. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »

Anthony Albanese has been sworn in as Australia’s 31st Prime Minister and a Government formed We look at what we know so far about the policies of the new Government in an environment with plenty of problems and no easy fixes. The economy The Government has stated that its economic priority is, “creating jobs, boosting participation, improving and increasing productivity, generating new business investment, and increasing wages and household incomes.” A second Federal Budget will be released in October this year to set the fiscal policy direction of the Government. The Albanese Government has stated that its focus is on growing the economy as opposed to increasing taxes, but it is a delicate balance to keep growth ahead of inflation. Treasurer Jim Chalmers has said that the Government will look to “redirect spending from unproductive purposes to more productive purposes.” In a recent speech , Treasury Secretary Dr Steven Kennedy, summed it up when he said that the most significant economic development of late has been the, “…higher-than-expected surge in inflation. Headline inflation reached 5.1% in the March quarter of 2022, the highest rate of inflation in more than 2 decades… Price increases are reflecting a range of shocks, some temporary and some more persistent.” These shocks include: Increased global demand for goods straining supply chains, increasing shipping costs, and clogging ports; The Russian invasion of Ukraine which sharply increased the price of oil, energy and food. Russia accounts for 18% of global gas and 12% of global oil supply. Together Russia and Ukraine account for around one-quarter of global trade in wheat; and COVID-19 lockdowns in China impacting supply chains. China maintains a zero-COVID policy. In Australia, energy prices have contributed strongly to inflation (the temporary reduction in fuel excise ends on 28 September 2022). Personal income tax The 2019-20 Budget announced a series of personal income tax reforms. Stage 3 of those reforms is legislated to commence on 1 July 2024. Stage 3 radically simplifies the tax brackets by collapsing the 32.5% and 37% rates into a single 30% rate for those earning between $45,001 and $200,000. Mr Albanese told Sky News, “People are entitled to have that certainty of the tax cuts that have been legislated… We won’t be changing them. What we want going forward is that certainty.” Where will the money come from? It is unclear at this stage how the Government intends to tackle the $1.2 trillion deficit. The general commentary from Finance Minister Katy Gallagher is that Treasury and Finance have been tasked with working through the Budget line by line to, “…see where there are areas where we can make sensible savings and return that money back to the Budget.” Multinationals Multinationals paying their fair share of tax was a go-to target during the election campaign. The plan for multinationals implements elements of the OECD’s two-pillar framework to reform international taxation rules and ensure Multinational Enterprises (MNEs) are subject to a minimum 15% tax rate from 2023. Australia and 129 other countries and jurisdictions, representing more than 90% of global GDP, are signatories to the framework. The Government’s multinational policy supports the OECD framework by: Limiting debt-related deductions by multinationals at 30% of profits, consistent with the OECD's recommended approach, while maintaining the arm's length test and the worldwide gearing ratio. Limiting the ability for multinationals to abuse Australia's tax treaties when holding intellectual property in tax havens from 1 July 2023. A tax deduction would be denied for payments for the use of intellectual property when they are paid to a jurisdiction where they don’t pay sufficient tax. Introducing transparency measures including reporting requirements on tax information, beneficial ownership, tax haven exposure and in relation to government tenders. The reforms will follow consultation and are not anticipated to take effect until 2023. No change to SG rate and rate increase No change to the legislated superannuation guarantee rate increase. The SG rate will increase to 10.5% on 1 July 2022 and steadily increase by 0.5% each year until it reaches 12% on 1 July 2025. ATO refocus on debt collection The ATO has not pursued many business tax debts during the pandemic and allowed tax refunds to flow through even if the business had a tax debt. That position has now changed and the ATO has resumed debt collection and offsetting tax debts against refunds. If you have a tax debt that has been on hold, expect the ATO to offset any refunds against this debt, and take steps to actively pursue the payment of the debt. Small business account for around two-thirds of the total debt owed to the ATO. If you have a tax debt, it is important that you engage with the ATO to work out how this debt will be paid. The ATO has flagged four priority areas this tax season where people are making mistakes. With tax season upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season. Record-keeping Work-related expenses Rental property income and deductions, and Capital gains from crypto assets, property, and shares. In general, there are three ‘golden rules’ when claiming tax deductions: You must have spent the money and not been reimbursed. If the expense is for a mix of work-related (income producing) and private use, you can only claim the portion that relates to how you earn your income. You need to have a record to prove it. How to contact us We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »

Everyone knows you don’t pay tax on your family home when you sell it, right? We take a closer look at the main residence exemption that excludes your home from capital gains tax and the triggers that reduce or exclude that exemption. Capital gains tax (CGT) applies to gains you have made on the sale of capital assets (assets you make money from). Unless an exemption or reduction applies, or you can offset the tax against a capital loss, any gain you made on an asset is taxed at your marginal tax rate. What is the main residence exemption? Your main residence is the home you live in. In general, CGT applies to the sale of your home unless you have an exemption, partial exemption, or you are able to offset the tax against a capital loss. If you are an Australian resident for tax purposes, you can access the full main residence exemption when you sell your home if your home was your main residence for the whole time you owned it, the land your home is on is or is under 2 hectares, and you did not use your home to produce an income – for example running a business from your home or renting it out. If the home is on more than 2 hectares, if eligible, you can treat the home and up to 2 hectares of the land it is on as one asset and claim the main residence exemption on this asset. However, if you use your home to produce an income by running a business from home or renting it out, CGT can apply to the portion of the home used to produce income from that time onwards. What’s a main residence? For CGT purposes, your home normally qualifies as your main residence from the point you move in and start living there. However, if you move in as soon as practicable after the settlement date of the contract, that home is considered your main residence from the time you acquired it. If you cannot move in straight away because you are in the process of selling your old home, you can treat both homes as your main residence for up to six months without impacting your eligibility to the main residence exemption. For example, where you have moved into your new home while finalising the sale of your old home. This applies if you were living in your old home for a continuous period of 3 months in the 12 months before you disposed of it, you did not use your old home to produce an income (rented it out or used it as a place of business) in any part of that 12 months when it was not your main residence, and your new property becomes your main residence. If the sale takes more than six months and if eligible, the main residence exemption could apply to both homes only for the last six months prior to selling the old home. For any period before this it might be possible to choose which home is treated as your main residence (the other becomes subject to CGT). If your new home is being rented to someone else when you purchase it and you cannot move in, the home is not your main residence until you move in. If you cannot move in for some unforeseen reason, for example you end up in hospital or are posted overseas for a few months for work, then you still might be able to access the main residence exemption from the time you acquired the home if you move in as soon as practicable once the issue has been resolved. Inconvenience is not a valid reason and you will need to ensure that you have documentation to support your position. Proof that your property is first established or continues to be your main residence is subjective and if the issue is ever queried, some of the factors the ATO will look at include: The length of time you have lived in the dwelling Where your family lives Whether you moved your personal belongings into the dwelling The address you have your mail delivered Your address on the Electoral Roll Your connection to services such as telephone, gas and electricity, and Your intention. Foreign resident or resident? The main residence rules changed in 2017 to exclude non-residents from accessing the main residence exemption. [1] The rules focus on your tax residency status at the time of the CGT event (normally the time the contract of sale is entered into). That is, in most cases if you are a non-resident at the time you enter into the contract of sale, you will be unable to access the main residence exemption. This is the case even if you were a resident for part of the ownership period. Conversely, if you are a resident at the time of the sale, and you meet the other eligibility criteria, the rules should apply as normal even if you were a non-resident for some of the ownership period. For example, an expat who maintains their main residence in Australia could return to Australia, become a resident for tax purposes again, then sell the property and if eligible, access the main residence exemption. It’s important to recognise that the residency test is your tax residency not your visa status. Australia’s tax residency rules can be complex. If you are uncertain, please contact us and we will work through the rules with you. The tax rules also contain integrity provisions that can deny the main residence exemption where someone circumvents the rules by deliberately structuring their affairs to access the exemption – for example, transferring the property to a related party prior to becoming a foreign resident to access the main residence exemption. Can I treat my home as my main residence even if I don’t live there? Once you have established your home as your main residence, in certain circumstances, you can treat it as your main residence even if you have stopped living there. The absence rule allows you to treat your home as your main residence for tax purposes: For up to 6 years if it's used to produce income, for example you rent it out while you are away; or Indefinitely if it is not used to produce income. Applying the absence rule to your home normally prevents you from applying the main residence exemption to any other property you own over the same period. Apart from limited exceptions, the other property is exposed to CGT. Let’s say you moved overseas in 2019 and rented out your home while you were away. Then, you came back to Australia in 2021 and moved back into your house. Then in early 2022, you decided it is not your forever home and sold it. You elected to apply the absence rule to your home and didn’t treat any other property as your main residence during that same period. In this case, you should be able to access the full main residence exemption assuming you are a resident for tax purposes at the time of sale. The 6-year period also resets if you re-establish the property as your main residence and subsequently stop living there but rent it out in between. So, if the time the home was income-producing is limited to six years for each absence, it is likely the full main residence exemption will be available if the other eligibility criteria are met. What happens if I have been running my business from home? If your home is also set aside as a dedicated place of business (i.e., you do not have another office or workshop), then you might only be able to claim a partial main residence exemption. This is because income-producing assets are excluded from the main residence exemption. If you are running a business from home, you can usually claim a tax deduction for occupancy expenses such as interest on the mortgage, council rates, and insurance. If you claimed or were eligible to claim these expenses, then you will only be able to access a partial main residence exemption. These rules apply even if you have not claimed these expenses as a deduction; the fact that you are eligible to make a claim is enough to impact your access to the main residence exemption. In many cases, if your home would have qualified for a full main residence exemption before it is used as a dedicated place of business, the cost base of your home for CGT purposes should also be reset to its market value at that time. Also, if only a partial main residence exemption is available, you will need to check whether you can access the small business CGT concessions on any remaining capital gain. As these rules are complex, please contact us and we will work through the rules with you. However, if you have only been working from home out of convenience and there is another office that you normally work from, then your eligibility to access the main residence exemption should be unaffected. The ATO has confirmed that all that time working from home temporarily during the pandemic should not impact your ability to access the main residence exemption. If I rent out a room on AirBnB, can I still claim the exemption? If your home has been used to produce income while you are living in it, the portion used to produce income will be excluded from the main residence exemption. The rules might apply differently if you move out of the home completely – see Can I treat my home as my main residence even if I don’t live there? Before you start renting out a portion of your home, it is a good idea to have it valued. If you would have qualified for the main residence exemption just before it was rented out, there are some rules that can apply in most cases and for CGT purposes, you are taken to have re-acquired your home for its market value at that time. So, if your home has increased in value over and above its cost base, this should reduce any gain when you eventually sell. Can I have a different main residence to my spouse? Let’s say you and your spouse each own homes that you have separately established as your main residences for the same period. The rules do not allow you to claim the full CGT exemption on both homes. Instead, you can: Choose one of the dwellings as the main residence for both of you during the period; or Nominate different dwellings as your main residence for the period. If you and your spouse nominate different dwellings, the exemption is split between you: If you own 50% or less of the residence chosen as your main residence, the dwelling is taken to be your main residence for that period and you will qualify for the main residence exemption for your ownership interest; If you own greater than 50% of the residence chosen as your main residence, the dwelling is taken to be your main residence for half of the period that you and your spouse had different homes. The same rule applies to the spouse. The rule applies to each home that the spouses own regardless of how the homes are held legally i.e. sole ownership, tenants in common or joint tenants. Divorce and the main residence rules The last two years have seen the highest divorce rate in Australia for a decade. When a property settlement occurs between spouses and if the conditions are met, the marriage breakdown rollover rules apply to ignore any CGT gain on the property settlement. Assuming the home is transferred to one of the spouses (and not to or from a trust or company), both individuals used the home solely as their main residence over their ownership period, and the other eligibility conditions are met, then a full main residence exemption should be available when the property is eventually sold. If the home qualified for the main residence exemption for only part of the ownership period for either individual, then a partial exemption might be available. That is, the spouse receiving the property may need to pay CGT on the gain on their share of the property received as part of the property settlement when they eventually sell the property . I have inherited a property, if I sell it, do I have to pay CGT? Special rules exist that enable some beneficiaries or estates to access a full or partial main residence exemption on the inherited property. Assuming the house was the main residence of the deceased just before they died, they did not then use the home to produce an income, and the other eligibility criteria are met, a full exemption might be available to the executor or beneficiary if either (or both) of the following conditions are met: The dwelling is disposed of within two years of the deceased’s death; or The dwelling was the main residence of one or more of the following people from the date of death until the dwelling has been disposed of: The spouse of the deceased (unless they were separated); An individual who had a right to occupy the dwelling under the deceased’s will; or The beneficiary who is disposing of the dwelling. An extension to the two-year period can apply in limited certain circumstances, for example when the will is contested or complex. If the deceased did not actually live in the property prior to their death and other eligibility criteria are satisfied, it still might be possible to apply the full exemption where the home was treated as their main residence under the absence rule. If the full exemption is not available, a partial exemption might apply. If you have any questions about how the main residence rules might apply to you, please drop us a line and we will be happy to work through it with you. [1] Transitional rules ended on 30 June 2020.

Tax & Christmas It’s that time of year again — what to do for the Christmas party for the team, customers, gifts of appreciation for your favourite accountant (just kidding)? Here are our top tips for a generous and tax-effective Christmas season. For GST-registered businesses (not tax-exempt) that are not using the 50-50 split method for meal entertainment. For your business What to do for customers? The most effective way of sharing the Christmas joy with customers is not necessarily the most tax effective. If, for example, you take your client out or entertain them in any way, it’s not tax deductible and you can’t claim back the GST. There are specific rules designed to prevent deductions and GST credits from being claimed when the expenses relate to entertainment, regardless of whether there is an expectation of generating goodwill and increased business sales. Restaurants, a show, golf, and corporate race days all fall into the ‘entertainment’ category. However, if you send your customer a gift, then the gift is tax deductible as long as there is an expectation that the business will benefit (assuming the gift does not amount to entertainment). Even better, why don’t you deliver the gift yourself for your best customers and personally wish them a Merry Christmas. It will have a much bigger impact even if they are not available and the receptionist tells them you delivered the gift. From a marketing perspective, if your budget is tight, it’s better to focus on the customers you believe deliver the most value to your business rather than spending a small amount on every customer regardless of value. If you are going to invest in Christmas gifts, then make it something people remember and appropriate to your business. You could also make a donation on behalf of your customers (where your business takes the tax deduction) or for your customers (where they receive the tax deduction). Donations to deductible gift recipients (DGRs) above $2 are often tax deductible and can make an active difference to a cause. What to do for your team? Christmas is expensive. Some businesses simply can’t afford to do much because cash flow is too tight. Expectations are high so if you are doing something then it’s best not to exacerbate cashflow problems and take advantage of any tax benefits or concessions you can. Christmas parties If you really want to avoid tax on your work Christmas party then host it in the office on a workday. This way, Fringe Benefits Tax (FBT) is unlikely to apply regardless of how much you spend per person. Also, taxi travel that starts or finishes at an employee’s place of work is exempt from FBT. So, if you have a few team members that need to be loaded into a taxi after overindulging in Christmas cheer, the ride home is exempt from FBT. If your work Christmas party is out of the office, keep the cost of your celebrations below $300 per person if you want to avoid paying FBT. The downside is that the business cannot claim deductions or GST credits for the expenses if there is no FBT payable in relation to the party. If the party is held somewhere other than your business premises, then the taxi travel is taken to be a separate benefit from the party itself and any Christmas gifts you have provided. In theory, this means that if the cost of each item per person is below $300 then the gift, party and taxi travel can potentially all be FBT-free. Just remember that the minor benefits exemption requires a number of factors to be considered, including the total value of associated benefits provided across the FBT year. If entertainment is provided to employees and an FBT exemption applies, you will not be able to claim tax deductions or GST credits for the expenses. If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event. Just bear in mind that deductions are only useful to offset against tax. If your business is paying no or limited amounts of tax, a tax deduction is not going to help offset the cost of the party. Christmas gifts for staff $300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a gift to the Tax Office as well at a rate of 47%. To qualify as a minor benefit, gifts also have to be ad hoc - no monthly gym memberships or giving one person multiple gift vouchers amounting to $300 or more. Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is subject to the superannuation guarantee. Aside from the tax issues, think about what will be of value to your team. The most appreciated gift is the one that means something to the individual. Giving a bottle of wine to someone who doesn’t drink, chocolates to a health fanatic, or time off to someone with excess leave, isn’t going to garner much in the way of goodwill. A sincere personal message will often have a greater impact than a standard gift. Collins Humes offices in Ballina and Byron Bay will close at 5PM on Thursday 22 December 2022 and reopen after the break at 8AM on Monday 9 January 2023.