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The ATO has reminded taxpayers in a property business or thinking about investing in property that there are things they should know, such as:

•  hey need a clearance certificate from the supplier when buying property over $750,000;
• they may have to pay the GST on the sale of brand new residential property separately to the ATO; and
• income from property activities could increase their total business turnover.

The ATO says taxpayers with property should keep accurate and complete records where they:

•  rent it out as a residential property (even short-term through the sharing economy);
• flip houses; and/or
• build a new house to sell for a profit.

In addition, when it’s time to lodge, taxpayers should remember:

• Some expenses need to be claimed over time.
• It is only possible to claim expenses for:

–    periods when the property is genuinely available for rent; and

–    travel related to renting property, if the taxpayer is in the business of letting properties.

Small business entity (‘SBE’) taxpayers who choose to depreciate their assets under the simplified depreciation rules are entitled to an immediate deduction with respect to low-cost assets in the year they are first used or installed ready for use for a taxable purpose.

Thanks to recent changes, SBE taxpayers may be entitled to an immediate deduction in the 2019 income year for acquiring certain depreciating assets costing up to $30,000 (net of entitlement to GST input tax credits) for assets used or installed ready for use from 7:30pm AEST on 2 April 2019 until 30 June 2019.

Assets acquired prior to 2 April 2019 may also be eligible for immediate write-off, although the thresholds may be lower (e.g., the threshold is $20,000 for assets used or installed ready for use from 1 July 2018 until 28 January 2019, and $25,000 for assets used or installed ready for use from 29 January 2019 until 7:30pm AEST on 2 April 2019).

On top of this, for the first time, medium sized businesses (with an aggregated turnover of less than $50 million) may also be eligible to claim an immediate deduction for acquiring assets from 2 April 2019.

The ATO has also reminded employees that how they get their end of financial year information from their employer, showing their earnings for the year, depends on how their employer reports their income, tax and super information to the ATO.

Specifically:

• Employers that are not yet reporting through STP will continue to provide employees with a payment summary by 14 July.
• Employers that report through STP are no longer required to give employees a payment summary; instead this information will be provided in an ‘income statement’, available via the employee’s myGov account by 31 July (i.e., when the employer marks it as ‘Tax Ready’).

The ATO has updated its list of ‘What attracts our attention’, with six items that specifically relate to fringe benefits tax (‘FBT’), as follows:

• Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
• Incorrectly calculating car parking fringe benefits due to:

–     significantly discounting market valuations;

–     using non-commercial parking rates; or

–     parking rates not being supported by adequate evidence.

• Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer’s tax return.
• Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
• Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates.
• Not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.

FBT: Record-keeping exemption threshold

The exemption threshold for the FBT year commencing 1 April 2019 is $8,714 (up from the amount of $8,552 that applied in the previous year).

FBT: Benchmark interest rate

The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year).

This rate is used to calculate the taxable value of:

• a fringe benefit provided by way of a loan; and
• a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

Example

On 1 April 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan.

The actual interest payable by the employee for the current year is $2,500 (i.e., $50,000 x 5%).

However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is $185 (i.e., $2,685 – $2,500).

The Government has released draft legislation on “improving the integrity of GST on property transactions”, as announced in the 2017/18 Federal Budget.

They intend to amend the GST law so that, from 1 July 2018, purchasers will withhold the GST on the purchase price of new residential premises and new residential subdivisions, and remit the GST directly to the ATO as part of settlement.

This is to address tax evasion through “phoenixing arrangements”, where developers collect GST from their customers but dissolve their company to avoid paying it to the ATO.

To provide certainty for contracts that have already been entered into, the draft legislation provides a two-year transitional arrangement – contracts entered into before 1 July 2018 will not be affected as long as the transaction settles before 1 July 2020.

Editor: In addition, the GST Act has been amended to ensure that supplies of digital currency receive equivalent GST treatment to supplies of money (particularly foreign currency).