April 2016
Fringe Benefit Tax (FBT) Updates
At the beginning of 2016, the ATO reminded employers about the Fringe Benefit Tax (FBT) advantages that may apply to eligible Business Owners, such as office event and work-related electronic devices tax deductions.
Further details include:
The ATO reminded employers over the previous Festive Season that employers who provide entertainment to their employees, both during the Festive Season or at any other time of the year, should remember to think about the following:
- When providing food, drink or recreation may be considered ‘entertainment’
- Whether the entertainment is subject to Fringe Benefits Tax
- The methods available for valuing entertainment fringe benefits
Depending on the sort of entertainment you provide to your employees, there may be different FBT implications.
Talk to your tax adviser about the entertainment you provided to your employees over the Festive Season – Did you have a party? Did you give your employees any gifts?
- FBT exemptions for work-related electronic devices
From 1 April 2016, Small Business employers (with turnover of less than $2 million) will be able to provide your employees with multiple electronic devices to use for work without incurring a Fringe Benefits Tax liability.
You can provide:
- Mobile Phones
- Tablets
- Laptops
- Calculators
- GPS Navigation Receivers.
Note that providing these devices may be a benefit in addition to or part of your employee’s salary or wages package.
If you are planning on providing multiple devices to your employees, talk to your tax adviser first to ensure you properly comply with the FBT rules.
Claiming website development costs
If you incur expenses creating or maintaining your business’ website, you may be able to claim some of these costs as a deduction in your tax return.
- Capital expenditure
You might be able to claim costs incurred before you start up your business over a 5 year period after your business starts up (ie claim 20% of the cost per year).
- Simplified depreciation rules
If you have started your small business already and have chosen to use the simplified depreciation rules, you might be able to deduct the expense immediately.
- If you incur the cost between 12 May 2015 and 30 June 2017 and the cost is:
- less than $20,000 – you may claim a deduction for the full cost in the income year you incurred the expenditure;
- $20,000 or more – you may allocate the cost to a general small business pool.
- If you incurred the cost between 1 January 2014 and 12 May 2015 and the cost is:
- less than $1,000 – you can claim a deduction for the full cost in the income year you incurred the expenditure;
- $1,000 or more – you can allocate the cost to a general small business pool.
Different rules apply if you have elected to allocate expenditure on in-house software to a software development pool. From 1 July 2015, in-house software expenditure incurred and allocated to a software development pool is deductible over five years.
- Non-capital expenditure
You may also be able to claim a deduction for the ongoing expenses of running and maintaining your website, such as domain name registration and server-hosting in the income year that you incur this cost.
Seek professional advice from your tax agent or adviser about how to claim website development costs.
Reviewing Taxable Payments Annual Reports
The ATO is contacting businesses in the building and construction industry about information that businesses have provided on their Taxable Payments Annual Report. The ATO will be contacting businesses who have:
- provided a report with missing or invalid ABNs;
- included amounts paid for GST when the contractor isn’t registered for GST;
- not lodged a report, when ATO records indicate they should;
- advised the ATO they are not required to report, but the ATO’s records indicate the business should have reported.
The ATO will advise businesses that are reviewed what the review has found and will suggest ways to make it easier for the business to complete their reports more accurately in the future, such as using the ABN Lookup tool or ATO app to check a contractor’s ABN or if they are registered for GST.
National Innovation and Science Agenda – Tax Changes Announced
On 7 December 2015, a suite of new Tax and Business incentive measures was announced under the Commonwealth government’s National Innovation and Science Agenda (NISA): Prime Minister’s media release (7 December 2015); Treasurer’s media release (7 December 2015).
The intention is that the government’s tax and business incentives under the NISA will encourage smart ideas to encourage innovation, risk taking and build an entrepreneurial culture in Australia.
Tax and business incentives
The following tax and business incentive measures have been announced as part of the agenda. The government will:
- Provide new tax breaks for early stage investors in innovative startups. Investors will receive a 20% non-refundable tax offset based on the amount of their investment, as well as a capital gains tax exemption. This scheme is based on the successful Seed Enterprise Investment Scheme in the United Kingdom, which has resulted in over $500 million in funding to almost 2,900 companies in its first two years. The new arrangements will apply from the date of Royal Assent and are expected to commence from 1 July 2016
- Build on the recent momentum in venture capital investment in Australia including by introducing a 10% non-refundable tax offset for capital invested in new Early Stage Venture Capital Limited Partnerships (ESVCLPs), and increasing the cap on committed capital from $100 million to $200 million for new ESVCLPs. The new arrangements will apply from the date of Royal Assent and are expected to commence from 1 July 2016
- Relax the “same business test” that denies tax losses if a company changes its business activities, and introduce a more flexible “predominantly similar business test”. This will allow a startup to bring in an equity partner and secure new business opportunities without worrying about tax penalties. Legislation is expected to be introduced in the first half of 2016. The “predominantly similar business test” will apply to losses made in the current and future income years
- Remove rules that limit depreciation deductions for some intangible assets (like patents) to a statutory life and instead allow them to be depreciated over their economic life as occurs for other assets. The new arrangements will apply to assets acquired from 1 July 2016.
Small businesses and Start-Ups
The government will:
- Support incubators which play a crucial role in the innovation ecosystem to ensure startups have access to the resources, knowledge and networks necessary to transform their ideas into globally scalable new businesses; and
- Make existing employee share scheme (ESS) rules more user friendly. The new rules will allow companies to offer shares to their employees without having to reveal commercially sensitive information to their competitors. These changes build on the recent reforms to ESS, which included deferring the taxing point for employees and introducing an additional concession for those working in startup companies. Legislation is expected to be introduced in the first half of 2016.
The full text of the National Innovation and Science Agenda is available on the NISA website.
Single Touch Payroll Reporting
In the 2015-16 MYEFO statement, released on 15 December 2015 by the Treasurer, the Hon Scott Morrison MP, and the Minister for Finance, Senator the Hon Mathias Cormann, the government announced that it will simplify the reporting by employers of their PAYG withholding obligations and superannuation contributions by progressively implementing Single Touch Payroll (STP).
Under STP, employers will automatically report individual employee payroll information to the ATO using their business management software. STP will also introduce reporting of superannuation contributions information to the ATO when payments are made to super funds. Employers will have the option to pay their PAYG withholding at the same time they pay their staff.
The government will introduce streamlined processes for individuals commencing employment. Individuals will have the option of completing their Tax File Number declaration and Superannuation Standard Choice forms using myGov or through their employer’s business management software.
This measure will be phased in as follows:
- From January 2017, there will be a voluntary pilot of STP. The pilot will focus on, but is not limited to, targeted Small and Medium Enterprises
- From July 2017, all businesses may commence STP reporting, with the option to make voluntary payments. In addition, the ATO will commence transitioning employers with 20 or more employees to STP, and
- From 1 July 2018, employers with 20 or more employees will be required to use STP enabled software for reporting to the ATO.
To assist Small Business that wish to take advantage of the benefits of STP, the government will provide businesses with a turnover of less than $2 million with a $100 non-refundable tax offset for expenditure on Standard Business Reporting enabled software.
This offset will apply from 1 July 2017, and will be available for software purchases or subscriptions made in the 2017-18 Financial Year only.
On 12 November 2015, the ATO issued a Taxpayer Alert about arrangements where a purported partnership with a private company partner is used to enable individuals to access business profits without paying top-up income tax at their marginal rates of tax: TA 2015/4 (12 November 2015).
The ATO is currently reviewing arrangements where profits are claimed to be directed through a purported partnership that has a private company as a partner. Most of the profits are taxed to the private company at the corporate tax rate, but are accessed by one or more individuals without paying additional tax reflecting their higher marginal tax rate.
The ATO is currently undertaking a pilot compliance program reviewing a number of cases involving arrangements of this type and will be engaging with additional taxpayers over the coming months.
Should you be involved in arrangements of this kind, talk to your tax adviser to see if your arrangement could come under review by the ATO.
Data matching programs
Real property transactions – Data matching program
The ATO has announced that it will acquire details of real property transactions for the period 20 September 1985 to 30 June 2017 from State and Territory revenue and land titles departments and offices and rental bond authorities in every State and Territory in Australia: Australian Government Gazette No C2015G02019 (8 December 2015).
The objectives of this data matching program are to:
- obtain intelligence about the acquisition and disposal of real property and identify risks and trends of non-compliance across the broader compliance program;
- identify a range of compliance activities appropriate to address risks with real property transactions by taxpayers;
- work with real property intermediaries to obtain an understanding of the risks and issues, as well as trends of non-compliance;
- gain support and input into compliance strategies to minimise future risk to revenue;
- promote voluntary compliance and strengthen community confidence in the integrity of the tax system by publicising the outcomes of the data matching program; and
- ensure compliance with registration, lodgment, correct reporting and payment of taxation and superannuation obligations.
For more information about these changes and how they apply to you please contact us below
