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