Q: Do i need an ABN?
I have a full time job and a side job managing a website. I spend about 12 hours a month working on the website and was told to send him an ‘invoice’ so does this mean i am a contractor? I personally think it is a hobby but my friends said to open an ABN ‘just to be safe’. If so how do i declare this additional income when i don’t have an ABN.
A: Hi Tony,
If the person that you are invoicing is looking to claim a tax deduction for the amount they pay you then they would require a tax invoice from you and for that tax invoice to be valid it would need to have a valid ABN included.
I’m sure there are many costs that you would be incurring in order for you to generate that income that you would consider prior to you including that income in your tax return. Good luck,
Kind regards, David
Q: Hi there,
I have been working for the same company for 9 years and have been offered a redundancy package. I’m trying to calculate my entitlements and I’d like to ask if I should do the calculations from the time they made the offer or to my last day which would be in 6 weeks. Do I include a percentage long service leave as an entitlement even though I’m 6 months away from 10 years’ service?
A: Hi Shaun,
I hope this all works out well for you.
The date you should use for calculation purposes is your last day of work.
With respect to the LSL my understanding is that if your employer instigated your departure then you are entitled to LSL (in most circumstances) after 5 years service.
2 years ago we started a new business and spent about $300,000 so far. It’s not working out as well as we hoped and now thinking about closing it down and getting a job – the question we have is about the losses we have in business… can they be offset against the future income when we find employment?
A: Hi Sam,
It's important to understand which entity is in business. If it is you personally and you don't get caught by the "non-commercial loss provisions" then the loss incurred can generally be carried forward and offset against future taxable income.
If the losses incurred in a separate taxpayer (company or trust) Then the losses will be available to offset against income of that taxpayer in the future
Q: Does someone (not working) need to lodge a tax return?
Circumstances: Over 65 and retired. Approx. $10,000 of investment income (including franking credits) plus an additional $10,000 of assessable capital gains (after 50% discount).
So, with SAPTO and LITO, they won't have to pay any tax. But, their total income is over the $18,200 tax free threshold.
On the ATO website on the 'do you need to do a tax return' tool, one of the things says "Does dividends and distributions exceed $18,200"? and if you pick yes, then it says you do need to do a tax return. Dividends/distributions haven't exceeded $18,200 but they've had a capital gain that has resulted in taxable income being over $18,200.
So, do they need to lodge a return or can they just submit a franking credit refund form for their franking credits?
A: Hi Glenn,
The taxpayer would need to lodge a tax return in order to get the franking credit refund.
If they had not have been any franking credits then you could lodge a "return not necessary" notification.
Good luck with it.
Q: Hi there, I was made redundant 4 months ago and had a novated lease with my previous employer. I have now been offered a 'vehicle hand back option' regarding the car from the Lease Protection insurance company. They will cover up to 25k (less car payments and petrol costs already paid) if I hand back the car to the financier. The current payout figure is 39k on a 2016 Jeep Grand Cherokee. Is there anything I need to consider before I decide?
A: Hi Fiona,
I agree with the previous comments. Novated leases can be tricky, particularly if you leave employment prior to the end of the lease term, and take the car with you.
It is worth enquiring of the finance company as to what alternatives are available to you. Usually there is an option where you can keep the car, take over paying the lease payments for the remaining term and claim them as a tax deduction (if your circumstances allow) to the extent of your business use.
This may be preferable to incurring a loss on the payout as it appears from your comments.
Good luck with it.
Q: My husband and I are looking to purchase a property with my parents in a discretionary trust we had set up 12 months ago. Are we able to add my parents to an established trust and is it easy to be able to obtain finance under this structure?
A: Hi Martina,
I concur with the previous comments. You should get some specific advice.
Whilst the asset protection and succession planning issues are positive issues previously mentioned, there are some other issues to consider.
One issue not raised previously will relate to land tax. generally you will not get a land tax threshold in a discretionary trust.
In addition, as previously raised, any losses may be "locked up" in the trust.
In addition, if the parents are not potential beneficiaries, be sure that if adding tem specifically doesn't create a question of a resettlement of the trust.
Good luck with it.
I am managing director of a company in SA.
Basically there are unauthorised creditor invoices that have been entered in to our internal accounting system.
We are not being actively pursued for the money, there is no written legal warnings and the claimed debt may be over a year old in some cases. Is it legal to process a credit in our internal accounting system so risk of inadvertent payment is averted and aged creditor is not exaggerated; without written approval from the Creditor ?
A: Hi David,
It seems appropriate and correct that you update your creditors ledger to correctly reflect that only amounts that are true liabilities are included.
If the amounts are not legitimately owed there are some potential negative outcomes by not deleting them.
If you are paying tax under the accruals method of returning income you may have incorrectly claimed a tax deduction and in addition incorrectly claimed GST input credits. In addition any user of your financial statements (eg banks) will see your financial position as worse than it actually is.
Hope this helps.
Q: land Was purchased for $62,000 in 1998.upon divorce in 2003 land was valued at $220,000 which half total was paid to x-wife.now land is valued at $700,000 how much capital gains tax will I pay if I sell?
A: Hi Luis,
Assets acquired as part of a family law financial settlement are generally deemed to be acquired at the value the disposing person acquired the asset for. There is no capital gains tax event at the time of the financial settlement. Specifically in your circumstance 50% of the land was acquired by you in 1998 for $31k, and the second 50% (part of your financial settlement) is deemed to be acquired by you for $31k too. At the time you did your financial settlement there should have been an allowance for capital gains tax that would be payable in the future by you.
Given it is land, your cost base (for CGT) is your purchase price $62k plus holding costs since acquired eg. rates interest repairs etc
There may be other relevant factors such as other capital losses you might have.
I wish you all the best.
Q: What are the tax rules around gifting a large sum of money? Eg. $200k
A: Hi Justin,
No tax implications of a gift to the recipient.
The person disposing of the asset may have some issues if he/she is attempting to enhance pension entitlements or if the gift is not money but an asset subject to income tax or capital gains tax.
Q: My husband is self employed and looking at buying a new vehicle for work. Our accountant was saying that if he pays less than $20k for the van it will lower his taxable income. Didn't quite understand what he meant. Can you please explain or clarify a bit more so we can make an informed decision moving forward? Thanks for your time. Sarah
A: Hi Sarah,
Under the current ATO rules you get an immediate 100% tax deduction for equipment purchased that is less than $20k. If it is more than $20k you need to depreciate the asset over its useful life
Hope that makes sense
Q: Just started our own business and wondering which accounting solution other business owners prefer to use Xero or MYOB?
A: Hi Pati,
I'd go for XERO. Myob is better left to the bookkeepers of the world
Q: Hi I have been trying to change accountants from a Melbourne firm to a Sunshine Coast Firm the new Accountants have sent a ethical Letter to the old accountants to release documents and tax records but an outstanding bill of my ex wifes hasn't been paid and they wont release any information or even respond to my emails and phone calls by business and tax returns are being held up by this. Can you please advise what I can do ?
A: Hi Chris,
There are a couple of issues. Is the Melbourne accountant a member of the institute of Chartered Accountants? If so it is unlikely that they have the capacity to withhold your records.
Was there an engagement letter stating their right to do that that you agreed to?
Further, the records cannot be withheld in any event as the fee dispute is with a seperate client/taxpayer (again subject to engagement letter).
If you feel you are on solid ground (and I suspect you are) I would call the accountant's office and say you required a call back within 2 business days or you will report them to their professional body. If no resolution, Then call the professional body and make a formal complaint.
Having said all that, I agree with Brendan do a deal on the fees and get on with life.
All the best with it.
Q: I have just received a land tax bill for my primary place of residence, I purchased the property a little over 12 months ago. I know I'm not liable for this as it is my primary residence which I can easily prove, but why would the OSR have assumed it is an investment property? Would it be something incorrect with the settlement documentation? From the time of purchase our intention has always been to reside at this property.
A: Hi John,
I agree it seems odd. Settlement sheet information should not alter based on your intention.
Perhaps the previous owner was liable for land tax and the OSR continued thinking it was liable for land tax.
Q: Question about managing income and tax implications of being a contractor with my income coming from one business. What is the best method/software to track income and how much to put aside for tax?
A: Hi Graham,
Good luck with the new business.
Keeping track of your income and expenses would be easier if you used one bank account for all your business transactions. The bank statements will then serve as primary documentation and then there are a number of software programs that would be available to you. Xero is one. You can have a 30 day free trial of Xero and try it for yourself.
If you intend to invoice more than $75,000 per annum then you probably should be registered for GST.
I presume you're not registered for GST and therefore the amount you need to put aside is for income tax only. 20% will probably be close to sufficient if you have no other income.
Another item to consider is if you are contracting to one client and you are providing labour only services then you might not meet the 80/20 guidelines and potentially you may be deemed to be an employee. Without further information is difficult to comment one way or the other.
Q: Is it better to take maternity pay at half or full pay? My work provides 14 weeks full pay or 28 weeks at half pay. I have no concerns over my ability to budget I am just trying to work out which approach will work better financially. Factors to consider.
1. My pay goes straight onto my mortgage which has interest calculated daily
2. Maternity leave begins in December if I take it at full pay it will all be used by the end of the financial yearn half pay will roll into next year.
A: Hi Mary, as the previous two comments have raised, from a tax perspective, it will principally depend on what your taxable income will be in the 2019 year ( as compared to your 2018 year) and planning the timing of the receipt of your taxable income to attempt to level out your taxable income between the 2018 and a 2019 years.
Whilst getting the money earlier allows you to save interest on the mortgage, I suspect the tax savings in the 2019 year if your other 2019 income is modest, would be greater than the interest savings.
Good luck with what must be exciting time for you.
I have 5 friends and we have an option on a building site - we have a company at the moment.
We want to build the project. We will pay cash from all 5 people for the land but through a vehicle ie trust or company and then that vehicle will need development finance. What is the best vehicle to use unit trust? and how does stamp duty work and how does the title transfer at the end.
A: Hi Daniel,
A lot will depend on what is being built and what each of the 5 partners intend to do at the completion of the project.
Start with the end in mind, but with flexibility if circumstances change.
If it's multiple dwellings and some wish to keep consider a partnership (of trusts, companies or individuals). Stamp duty on completion you want to minimise as well as crystallisation of gains.
Good luck with it.
Q: I'm looking to start a new company with two others. Our new accountant recommended that we use a unit trust as the business entity. The reasons being is that we have varied business billing amounts, frequency and scenarios so we will operating and managing cost centres within the company. The idea is that the unit trust is a distribution mechanism and we are operating like individual businesses within. Tax implications? Is this a weird business structure?
A: Hi Terence,
Without knowing exactly what your budgeted income and expenditure/cashflow is it may be difficult to land on the most appropriate structure.
You might like to consider a partnership of your various entities, companies or trusts or combinations.
This will allow to share income and losses and not have losses "locked up" if they occur, or arise from timing of expenses and income (all subject to tax consideration).
Good luck with the ventures.
Q: Hi, My organisation changed from Incorporation to Limited, but the bookkeeper before me kept using the same ABN number, though a different ABN was available. The IAS, BAS has been lodged with old ABN as well. Wondering what are the consequences? and if there are some, how can I do this. I have start using the correct ABN from onwards.
A: Hi Satish,
Easiest thing to do is to lodge amended GST returns for the old entity and tell the ATO that they were $Nil from the date you ceased trading in that entity, and lodge GST returns relating to the new entity with the correct financial information included.
It's important to match the income included in the income tax return with the correct ABN.
Another issue you should consider if your business has a value was there a capital gains tax event when you ceased trading and commenced trading in a new entity?
It would appear as though you would have capital gains tax rollover relief available to you, however you would need to be aware and take the necessary steps to ensure you achieved an affective capital gains tax rollover.
Kind regards and good luck with your business,
Q: Hi, I have recently purchased half of the Family farm. For accounting/ bookkeeping purpose, is it best to set up a partnership or trust? Open to other suggestions
A: Hi Tammy,
As has been stated, It seems that you have acquired the real estate in whatever name you have acquired it. It would most likely be too costly to change, and perhaps not even necessary.
If you were to commence a business, then maybe that business could be set up in a separate entity, different from the land owner, and that entity could pay rent to the landlord for the use of the premises.
As to what entity is the most appropriate, he would be dependent upon all of your other personal circumstances.
Good luck with the venture, I hope it goes very well for you.
Q: When selling a portion of your business do you need to pay capital gains tax on the percentage that you are selling?
A: Hi Michael,
This will principally depend on whether you've made a capital gain or not.
How you would to detirmine that is by assessing your net sale proceeds and comparing that to your proportionate total cost of acquisition of the business (whatever proportion you are selling) in addition to any costs that you've capitalised on the way through, you take the proportion that you're selling of each of those and determine if you made a capital gain.
If you've made a capital gain it would usually would be accessible.
Good luck with it,
Q: My mum has a substantial amount of shares that were left to her by her father 840000 she is wanting to leave them to my sister and I in her will. She doesn't want to sell them as she said she would have to pay nearly half back in tax. as they were a lot cheaper when he bought them?. What happens with the price of them when left to us thanks?
A: Hi Tiffany,
I agree with the other comments, however you should seek some specific advice.
1. I'm assuming your grandfather acquired the shares pre 19 Sept 1985, and died after that date. If that's the facts your mother is deemed to have acquired the shares at market value st the date of death.
2. If he died pre Sept 1985, your mother has a pre CGT asset and you and your sister will be deemed to have acquired them at market price at the date of your mothers death.
In any event when your mother dies you (and your sister) will be deemed to have acquired the shares in 1. Current market value (at date of your mothers death) or 2. At your mothers cost base.
As you can see there are a number of "moving parts".
In any event consideration should be given as to whether it might be preferable for your mother to sell them, realise any gain as she may pay less yax than you and your sister.
Good luck with it.
Q: USD interest
I have > $250k sitting in a zero interest acct in the US. I am awaiting a drop in the Aud before bringing home.
I think the US share market is at a high and so do not think Shares or ETF's will preserve the capital. I dont think I can have a USD interest bearing account as a foreigner.
Any thought on where I could park this money?
A: Hi Mike,
Perhaps set up a $US account in Australia and transfer $US to $US (but in Australia). You will most likely get the same interest rate (ie not much) but it will be here.
Best of luck with it,
Q: I am about to setup a Pty Ltd company (July 2017) and would like to know if my company can pay my residential rent. I can't seem to find anything online / ATO re this ?
A: Hi Brad,
The comments raised above are absolutely on the money. There is no hard and fast rules as to what percentage you can claim it's just a question of the facts. For example if 25% of your house is being used for your business then generally 25% of the occupancy costs including rent you could claim.
If you were to claim any more it could be argued that it is not a cost of running the business and therefore not deductible or maybe subject to FBT which essentially is a cost taxed at the highest tax marginal tax rate, so generally better to stay out of that world.
I wish you all the best with your business.
Q: I have a GST question. How is GST treated on a New Residential development? If an apartment is sold off the plan for $800k. Given there has been GST paid in the construction costs , does the developer still need to pay the GST?
A: Hi Justin,
There are a number of issues to consider here.
Generally when there is a first sale of a residential property there is GST payable on that sale.
The calculation of that GST would generally be based on the margin scheme which is rather complex and requires a detailed analysis of the facts.
The calculation of GST payable (on sales) under the margin scheme effectively gives you an input credit for the proportate value of the residential land that is contributed to the development.
Each development is different. Specific facts would need to be discussed.
All the best with your project.
Q: My partner and I purchased an investment property.She no longer works and therefore she recieves no tax benefits .Can she legally transfer her share in the property to me and incur no costs to do so.I am at present paying all costs but only recieve half of the tax benefits...??????
A: Hi Paul,
The only way you could do it would be to transfer the entire property into your name which would incur stamp duty and may have some capital gains tax implications for your partner.
Good luck with it
Q: Looking for advice around the best potential structure for a company so that its assets are protected. Some accountants have suggested:
1. Setting up a private company and allocating its shares to a discretionary trust
2. Setting up a private company and allocating its shares to a discretionary trust where the trustee is a private company
3. Setting up a private company and allocating its shares to a discretionary trust where the trustee is another discretionary trust
Which do you recommend?
A: Hi Mireille,
Option 2 is your best bet. You can change the directors and shareholders of the trustee company (if need be) easier than changing a trustee. You therefore you achieve flexibility of income/capital distributions as well as asset protection.
What steps must I take in order to set up my own business in tutoring primary school age students?
A: Hi Narelle,
Presumably you are doing this tutoring in your personal name as a sole trader.
If that's the case then you will need to have an ABN (Australian Business Number). This can we obtained from the ATO website.
You can then give your students tax invoices.
Presumably your income will be under $75,000 then you will not have to register for GST.
All the best with the tutoring.
Q: Hi, I am a policing student currently and as of mid August will be a police officer. Can I claim my student expenses this financial year as it is for my career? I am a little bit grey in knowledge around this area as I know that if you are studying something for the job you are currently in that you can claim but other than that it is generally unclaimable. Any advice will be welcomed - thankyou!
As I understand it you are actually employed as a police officer (albeit in training) whilst you are training.
Have a look at ATO ruling TR 95/17 specifically the section relating to deductions. Paragraph 22.
If you feel it fits into this category (and it seems to) specific expenses actually incurred seem deductible.
I have a joint home loan with my wife Of 400k that is linked to a offset account with 400k in it. My wife is not working now due to pregnancy and will not be working for a number of years.
We would like to purchase some shares in her name (because of her now low income) around 150k worth. Can she claim the interest on the 150k taken from the offset account. Can she claim all interest keeping in mind homeloan and offset are joint? someone mentioned me lending her the money? Loan structure?
A: Hi Peter,
The issue you face as I see it is you (or your wife) will need to incur interest in order to claim that interest. Using your own money in the bank (offset account) is not incurring interest on that money. One suggestion may be to actually pay off part of your loan with the money in your offset account, then borrow for your wife to buy the shares. You can then establish a trail of borrowing to acquire an income producing asset. Interest is then deductible. Good luck with it.
Q: Hi. If i rent out a room in my principal place of residence that i live in do i pay land tax?
A: Hi Jason,
Your principal residence is exempt from land tax. If You can establish that (all utilities at the address are in your name) then there should be no land tax.
Q: An investment property was in joint names until 30.9.1991 when it was transferred into my name only. It is valued at around $650,000. What will be implications of CGT upon death of myself or my wife. We are both 80.?
A: Hi Bob,
A couple of issues to consider.
Presumably you initially acquired the asset after 19/9/85.
On your death your beneficiary (as to this specific asset) will be deemed to have acquired the asset at the purchase price you acquired it. If your ownership is pre 19/9/85 then your beneficiary is deemed to have acquired the asset at market value.
Hope this helps.
Q: If selling 50% share in an investment property, how is the capital gains tax calculated?
A: An interest in an asset is treated as an asset. That is.. A 50% interest is the whole of "your asset".
Capital gains tax is generally payable on 50% of the gain (provided the asset is owned for more than 12 months).
The net capital gain (after 50% discount) is added to the taxpayers taxable income in the year that the gain arises.