Christmas Crackers…

Our whole team here at Lidgerwoods Accountants is looking forward to having a few weeks well-earned time away from the office.

But as we move into the festive season, we just could not pass up the opportunity to show you some of the bad jokes we found in our Bon-Bon’s last year…..

How does Santa value his sleigh?
A. Net Present Value

What do you call an accountant without a spreadsheet?
A. Lost

What did the overworked asset say to the other overworked asset?
A. I’m feeling under depreciated

Why did the accountant cross the road?
A. So they could claim the travel expense

Why did the accountant fall out of bed?
A. Because they didn’t have a balanced sheet

As usual with all our newsletters, we’ve attached are some articles and tax updates that might affect your personal situation, so we ask that you take a little bit of time to read these, and contact us if you need anything clarified.

See you at the Kitchen Bench in 2023…..

The Team at Lidgerwoods

SOPHIE, MARC, SHARON, LOUISE, DAVID, JACOB, DARCY & KYLIE

Changes to car and home office claims in 2023

The ATO has updated the cents per kilometre rate relating to individual car expenses for the 2023 tax year to now be 78 cents per business kilometre.

The cents per kilometre method:

• uses a set rate for each kilometre travelled for business;
• allows taxpayers to claim a maximum of 5,000 business kilometres per car, per year;
• does not require written evidence to show exactly how many kilometres were travelled (but the ATO may ask taxpayers to show how they worked out their business kilometres, for example by means of diary records); and
• uses a rate that takes all vehicle running expenses (including registration, fuel, servicing and insurance) and depreciation into account.

The cents per kilometre rate was 72 cents for the 2021 and 2022 income years, thus this represents an increase in $300 for the maximum claim.

The ATO has also indicated recently in a draft ruling that the home office claims for the 2023 tax year will change from the current 52c and 80c per hour claims. The new rate of claim will be 67c per hour for the work completed at home, and you will need to keep records of the actual costs incurred for cleaning, occupancy, repairs to home office equipment, and depreciation of such equipment including IT equipment.

To be able to claim this you will need your estimated hours for the first six months to the end of December 2022, and then document the actual hours with proof for the following six months to the end of June 2023. You will also have to provide proof that you incur the running costs at home, and these are not paid by others on your behalf.

Editor: This all applies in next years tax in 2023 therefore it’s handy to know what records now need to be kept.

Tax time focus on rental property income and deductions

The ATO is focusing on four major concerns this tax season when it comes to rental properties.

Concern 1: Include all rental income

When preparing tax returns, make sure all rental income is included, such as from short-term rental arrangements, renting part of a home, and other rental-related income like insurance payouts and rental bond money retained.

Concern 2: Accuracy of expenses

Not all expenses are the same – some can be claimed straight away, such as rental management fees, council rates, repairs, interest on loans and insurance premiums.

Other expenses such as borrowing expenses and capital works need to be claimed over a number of years.

Depreciating assets such as a new dishwasher or new oven costing over $300 are also claimed over their effective life.

Concern 3: Capital Gains Tax upon sale of a rental property

When selling a rental property, capital gains tax (‘CGT’) needs to be considered and any capital gains or capital losses need to be reported.

When calculating a capital gain or capital loss, it’s important to get the cost base calculation right.

It is also important to note that when selling any property for $750,000 or more, vendors/sellers must have a clearance certificate otherwise 12.5% will be withheld.

These clearance certificate applications can take up to 28 days to process so to avoid delays, sellers should apply as early as practical using the online form.

Concern 4: Record keeping

Records of rental income and expenses should be kept for five years from the date of tax return lodgments or five years after the disposal of an asset, whichever is longer.

Editor: We are seeing lots of capital gains tax issues for clients who have used the high property market position to dispose of their rental properties, and in doing so have incurred big tax bills in the year of contracted sale. You must keep records of what the property cost you since inception, and a timeline of events regarding this property if you ever lived in it yourself and want to claim some CGT exemptions for living in it. If you have sold your rental property, please contact our office in the year of contracted sale to see if there are any ways to minimise your capital gains tax position.

'Talking tax' with new workers

The ATO is reminding employers that have taken on new employees that those employees can complete a TFN declaration through ATO online services, and that this is an easy way for them to provide both their employer and the ATO with the information needed.

If a new employee has a myGov account linked to the ATO, they can:

• access ATO online services;
• go to the ‘Employment’ menu; and
• select ‘New employment’ and complete the form.

This sends the TFN declaration details straight to the ATO, so the employer doesn't have to.

Employees will need their employer's ABN to complete the form and, once they’ve submitted it, they need to print it and give their employer the summary of their tax details so the employer can input the data into their system.

If an employer's payroll software can link to the online commencement forms, it will automatically receive any new employees' information from the ATO, saving them time spent otherwise entering the information manually.

Employers can also use the New employment form to collect a range of information contained in other forms, and employees can use it to authorise variations to the amount to be withheld from their pay for tax or the Medicare levy, or to advise of their choice of super fund.

They can also use it to update their tax circumstances with their employer; for example, if their residency status has changed or they are claiming the tax-free threshold from a different employer.
However, employers can continue to use their current processes when preferred, including providing a paper TFN declaration where employees can't create a myGov account or don’t have access to the internet.

Editor: Keep this in mind when onboarding new employees, or taking on new employment yourself.

Check that holiday employees get the right super

The ATO is reminding employers that the holiday season is fast approaching, and that their holiday casuals may now be eligible for super.

From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee ('SG') eligibility has been removed.

This change doesn’t affect other eligibility requirements for SG. In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.

For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150.

As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay him super on the $800 earned. However, as Anish works less than 30 hours a week at the café and is under 18, he is not entitled to super from this employer.

The ATO recommends that employers check their payroll and accounting systems are up to date so they are correctly calculating their employees' SG payments, and that registered tax agents and BAS agents can help with their tax and other obligations.

Editor: One of the single biggest mistakes made by our business clients is in failing to correctly deal with employee superannuation. If you are concerned or are having issues or need help in this regard, please contact one of our team members here.

ATO's record-keeping tips

The ATO has reminded taxpayers that they should understand the record-keeping requirements for their business and keep accurate and complete records as they occur, as this should help them avoid penalties that may apply and reduce the possibility of the ATO denying their expense claims.

The following are some of the ATO's top tips to help businesses get it right and avoid record-keeping errors (based on common record-keeping errors the ATO sees):

• Keep accurate records of all cash and electronic transactions.
• Reconcile cash and EFTPOS sales regularly (by ensuring payments recorded internally match external records) and enter the amounts into the main business accounting software system.
• Check for mistakes if things don't add up.
• For expenses that are for both business and private use, work out and record the business portion accurately.
• If the taxpayer has used trading stock for private purposes, remember to account for the stock as if the business sold it, and include the value in the business’s assessable income.
• Don't use estimates to prepare tax returns and business activity statements ('BASs').
• If claiming credits for GST, set aside the GST in a separate ledger account to make record-keeping and calculations easier.
• Most records must generally be kept for at least 5 years — from when the record was prepared or obtained, or the transaction or related acts were completed, whichever is later. Records relating to the calculation of losses may need to be kept longer, depending on when that loss is deducted (or offset against a capital gain).
• Accurate and detailed records must also be kept when paying contractors to provide certain services on behalf of the business (so the business can easily complete its taxable payments annual report at the end of each year).
• Use the ATO's Record-keeping evaluation tool to find out how well the business is currently keeping its records.

If businesses aren't sure how this information applies to their situation, the ATO recommends they ask their registered tax or BAS agent, or contact the ATO for help. The ATO says it will help businesses get back on track if they make an error.

Editor: Our annual Audit Insurance service documentation was recently forwarded to all clients of Lidgerwoods Accountants for policies starting in December 2022. Bad records could lead to an Audit by the ATO and would be one such circumstance covered under this service. To participate in this service or to find out more about this we encourage you to contact our office.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Lastly we welcome your feedback.  If you found this E-Newsletter very useful (or not?),
we’d appreciate your feedback either way.

'The Team' at Lidgerwoods Accountants