Pre filling information is now updated With millions of pieces of information now pre-filled, including information from banks, employers, government agencies and private health insurers, the ATO has given the 'green light' to lodge your tax returns. The ATO reminds taxpayers that the rules regarding how and when you can claim a deduction can change, including in relation to car expenses and working from home costs. Therefore, you should not just 'copy and paste' your deductions from last year, and speak with our accountants for your claims. The ATO notes that taxpayers using a registered tax agent normally have the extended due dates. Business self-review checklist: GST classification of products GST classification errors can lead to significant under-reporting of GST for some taxpayers. The ATO recently issued guidance for small to medium businesses on self-reviewing GST classification of food and health products. The use of this guide is not mandatory, although the ATO encourages small to medium businesses to regularly self-review the GST classification of supplies, and adopt better practice processes and controls as listed in the accompanying checklist. The checklist provides practical, step-by-step guidance for entities to: self-review the GST classification of their supplies (products they import, purchase as stock or produce for sale); and assess the robustness of their business systems, processes and controls that directly impact their GST classification systems. Small business food retailers with turnover of $2 million or less may use one of the 'GST simplified accounting methods' to account for GST instead. Receiving payments or assets from foreign trusts Additional tax liabilities may arise when money or assets of a foreign trust are paid to a taxpayer or applied for their benefit, and they are a beneficiary of the foreign trust. These can include: loans to them by the trustee directly or indirectly through another entity; amounts paid by the trustee to a third party on their behalf; amounts that are described as gifts from family members, but are sourced from the trust; and distributions paid to them or trust assets transferred to them by the trustee. Taxpayers who receive money from a foreign trust may need to ask further questions to determine whether the amount must be included in their assessable income, including: whether they are a beneficiary of the foreign trust; where the foreign trust obtained the money; and why the money was paid to them, e.g., is it a payment for services, a gift, a distribution or a loan. Record keeping for work-related expenses Taxpayers need to consider what work-related expenses they will be looking to claim in the new financial year, and what records they will need to substantiate those deductions. Records can be kept as a paper version, an electronic copy, or a 'true and clear' photo of an original record. Working from home deductions Taxpayers can use two different methods to calculate their working from home deductions, and they each have different requirements: With the fixed rate method, taxpayers will need a record of the actual number of hours they worked from home for the whole financial year, and at least one record for each of the additional running expenses they incurred that the rate includes (e.g., an electricity bill). To use the actual cost method, taxpayers must also keep records for any additional running expenses they incurred, and the depreciating assets they bought and used while working from home, and show how they apportioned work-related use for their expenses and depreciating assets. Please contact our office if you need any assistance with your record keeping requirements, such as logbook requirements for car expenses. Tax incentives for early stage investors The ATO is reminding investors who purchased new shares in a qualifying 'early stage innovation company that they may be eligible for tax incentives. These tax incentives provide eligible investors who purchase new shares in an ESIC with: a non-refundable carry forward tax offset equal to 20% of the amount paid for their eligible investments – this is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year; and modified capital gains tax ('CGT') treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than 10 years may be disregarded – capital losses on shares held less than 10 years must be disregarded. The maximum tax offset cap of $200,000 does not limit the shares that qualify for the modified CGT treatment. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

Are you Audit Safe? The possibility of being selected for an audit or investigation is increasing each year as the Australian Taxation Office (ATO) and other government agencies widen the scope of their investigation activities utilising data collection/detection capacity, data matching and benchmarking/risk profiling. Even if you can substantiate your claim for an allowable deduction, if queried, you must still go through the audit process. To alleviate the cost and stress we have offered you to take out our audit protection and you should have received an offer letter from us few weeks ago. It is a cheap and efficient way of dealing with an ATO audit. For more information, please contact our office. Tips for correctly claiming deductions for rental properties Taxpayers to consider the following factors in determining claims for rental deductions. Repairs and general maintenance are expenses work done to remedy or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year the expense occurred. Initial repairs include any work done to fix defects, damage or deterioration existing at the time of purchase. These are capital repair expenses and cannot be claimed as a deduction. Capital works are structural improvements, alterations and extensions to the property, claimed at 2.5% over 40 years with some exceptions. Deductions for capital works can only be claimed afterthe work has been completed. Improvements or renovations that are structural are also capital works. Work going beyond remedying defects, damage or deterioration which improves the function of the property are improvements. Repairs to an 'entirety' are also capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item Depreciating assets must be claimed over time according to their effective life. Small business energy incentive Businesses with an aggregated annual turnover of less than $50 million that had upgraded or purchased a new asset that helps improve energy efficiency during the 2024 income year should consider the small business energy incentive. This new measure gives them the opportunity to claim a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support more efficient use of energy. This incentive applies to eligible assets that were first used or installed ready for use for a taxable purpose between 1 July 2023 and 30 June 2024. Eligible improvement costs must have been incurred during this period to be eligible for the bonus deduction. Up to $100,000 of total expenditure is eligible under this incentive, with the maximum bonus deduction being $20,000 per business. This 20% bonus deduction is on top of other existing ones. Businesses can claim both the ordinary deduction for the expense as well as the bonus deduction. Claiming work-related expenses The ATO is advising taxpayers that having records to substantiate claims is essential to prove deductions can be claimed, having regard to the following in particular: A bank or credit card statement on its own will generally not be enough evidence to support a work-related expense claim. Taxpayers instead need detailed written evidence such as a receipt. If a taxpayer's total claim for deductible work expenses is $300 or less, they can claim a deduction without written evidence, but they must still be able to show that they spent the money and how they calculated the amount being claimed. While some deduction types do not require receipts (e.g., laundry expenses), some kind of record may still be necessary. Taxpayers may also need a record that shows their private and work-related use (e.g., a diary), and how the amount claimed as a deduction was calculated. Federal Court overturns AAT's tax resident decision The Federal Court has recently overturned an Administrative Appeals Tribunal decision that a taxpayer was a resident of Australia for tax purposes even though he was mostly living and working overseas during the relevant period. The taxpayer was a mechanical engineer who became an Australian citizen in 1978. He lived and worked in Dubai, United Arab Emirates, from September 2015 until 2020, and he spent less than two months in Australia for each of the 2017 to 2020 income years visiting his family. The AAT nevertheless held that he was a tax resident of Australia for each of the 2016 to 2020 income years, as he "maintained an intention to return to Australia and an attitude that Australia remained his home." On appeal to the Federal Court, the taxpayer succeeded in having the AAT's decision overturned. The Federal Court held, in considering whether the taxpayer was a resident of Australia according to 'ordinary concepts', that the AAT applied the wrong test, confusing it with the 'domicile test'. Also, in relation to the 'domicile test', the Federal Court noted that the AAT further misunderstood how to establish that a person had a 'permanent place of abode' outside of Australia. The Federal Court accordingly held that the taxpayer's appeal be allowed, and the matter be remitted to the AAT for determination according to law. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

Welcome to the start of the new financial year, we sincerely thank you for your support and for partnering with us over the past 12 months. Our team is up to date with the changes to tax rules this year, so it’s time to start thinking about completing your 2024 tax returns. If you have not yet organised your tax appointment, please book an appointment using the link below or get in touch with us asap. We conduct appointments at the office, via Zoom or Phone. Level 1, 86-88 Charles Street Kew VIC 3101 03 9853 1000 admin@crawfordaccountants.com.au Book Now Are you Audit Safe? The possibility of being selected for an audit or investigation is increasing each year as the Australian Taxation Office (ATO) and other government agencies widen the scope of their investigation activities utilising data collection/detection capacity, data matching and benchmarking/risk profiling. Even if you can substantiate your claim for an allowable deduction, if queried you must still go through the audit process. To alleviate the cost and stress we have offered you to take out our audit protection and you should have received an offer letter from us few weeks ago. It is a cheap and efficient way of dealing with an ATO audit. For more information, please contact our office. Tax Deductions Tax deductions will help you minimise your tax, but there are three golden rules for tax deductions: Expenses must be related to business/ work and not private. If a portion of the expense if private, the deduction must be apportioned. You must have records to prove the deduction such as receipts The expense must not be reimbursed The super guarantee rate is increasing Businesses that have employees, or hire eligible contractors, will need to ensure that their payroll and accounting systems are updated to reflect the new super guarantee rate of 11.5% for payments of salary and wages that are made from 1 July 2024. Businesses need to calculate super contributions at 11.5% for their eligible workers for payments of salary and wages they make from this date. Super contributions for the quarter ending 30 June (due by 28 July 2024) are still calculated at the 11% rate for payments of salary and wages made prior to 1 July. ATO's main residence exemption tips The main residence exemption needs to be considered in a variety of situations when a taxpayer sells a property they have lived in. Following are the tips to consider. Taxpayers should consider if they have started earning income from their home (in which case they may need to get a market valuation for CGT purposes). When renting out a property that was their main residence, taxpayers need to consider whether to use the 6-year absence rule when they sell their property. Taxpayers can only have one property as their main residence at a time. The only exception is the 6-month period when they move from one home to another. Has the taxpayer's residency changed? If so, this may affect eligibility for the exemption. Family trust elections and interposed entity elections Family trust distribution tax ('FTDT') is a special, 47%, tax sometimes payable by a trustee, director or partner. It applies when a trust has made a family trust election ('FTE'), or an entity has made an interposed entity election ('IEE'),and makes a distribution outside the 'family group' of the specified individual in the election. Where such an election has been made by a trustee or another entity, it is important that the original election is retained in the approved form. FTEs and IEEs can be lodged with the ATO. Where elections are involved, taxpayers should consider the following on an annual basis: if the election is needed and whether it can, and should be, revoked; whether the specified individual remains the most suitable person and, if not, whether the specified individual can and should be varied; and the timeframes to vary or revoke elections (noting these are limited and that, outside these periods, the elections and the specified individuals cannot be changed). It is important to recognise who the members of the specified individual's family group are when making annual trustee resolutions, as distributions outside the family group will result in FTDT of 47%. ATO may cancel inactive ABNs The ATO regularly reviews, and sometimes cancels, inactive Australian Business Numbers. The ATO may review a taxpayer's ABN if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information. If the ATO thinks a taxpayer is no longer using their ABN, it will contact them by email, letter or SMS. If the taxpayer is still running a business, the ATO will tell them what they need to do to keep their ABN. If they are no longer in business, they do not need to do anything -— the ATO will cancel their ABN. Taxpayers who think they are still entitled to an ABN that has been cancelled need to reapply for it. If they restart their business activities, they should be able to reapply for the same ABN, provided that their business structure is not changing. New lodgment obligation for income tax exempt organisations Non-charitable not-for-profits with an active ABN, including community service organisations, need to lodge an annual NFP self-review return to notify their eligibility for income tax exemption. To be eligible to self-assess as income tax exempt, the organisation's main purpose must be a community service purpose. Any other purpose must be incidental, ancillary or secondary. Community service purposes are altruistic, which means the organisation must be established and operated for the wellbeing and benefit of others, and not for political or lobbying purposes. For example, a club or association that has been set up principally to improve the welfare of the community would be regarded as a community service organisation. This would not be the case, however, if its main purpose was to advance the professional interests of its members. Taxpayers able to apply CGT small business concessions The Administrative Appeals Tribunal ('AAT') recently held that a trust was entitled to apply the CGT small business concessions and, therefore, it could reduce a capital gain it made down to nil. In March 2015, a family trust entered into an agreement for the sale of its shares in a company for $3,500,000. In June 2015, the trustees of the trust passed a resolution apportioning the trust's income for that year between the four taxpayers (two brothers and their wives), and also distributing the capital gain made on the sale equally between those four taxpayers. The determination of the trust's net income for distribution to the beneficiaries took into account the 50% CGT discount and CGT small business concessions, relying on a valuation of the shares and underlying business being $3,500,000. The ATO, however, deemed the shares sold by the trust to have been disposed of for a market value of $10,640,000, based on an updated valuation report. This also meant that the trust was not entitled to the CGT small business concessions, as this valuation meant that it did not satisfy the CGT maximum net asset value. The ATO relied on the 'market value substitution' rule to substitute the value of $10,640,000 in place of the sale price of the shares. This meant that each taxpayer's share of the 2015 trust distribution was increased from $321,989 to $1,194,174. In relation to the MNAV test, the AAT needed to determine whether the net value of the CGT assets of the trust and its connected entities exceeded $6,000,000. The AAT preferred the approach taken by the valuers for the taxpayers, partly because they had given "more attention and consideration to this particular business and the circumstances and location in which it operates." The AAT accordingly concluded that the total net value of the CGT assets of the trust and connected entities was below $6,000,000, and so the MNAV test was satisfied, and the taxpayers' objections to the amended assessments should be allowed.  The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office. For all of Crawford Accountants articles and news, visit our website https://www.crawfordaccountants.com.au/blog