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The ins and outs of “entertainment” business deductions

As a tax concept, “entertainment” can be relevant not only to fringe benefits tax (FBT), but also to income tax and even goods and services tax (GST). For a business, whether a business expense is “entertainment” will generally also determine whether the cost is deductible. If the expenditure can be shown to be directly connected with the carrying on of a business, it should be deductible.

The example of someone taking a client out to lunch can certainly be shown to be in connection with a business. However, there is still a lurking danger within the relevant sections of the tax law that says that if such an expense also represents “entertainment”, by the Australian Taxation Office (ATO) view, then that cost can be taken out of the deductibility equation. In this article, we explore these ins and outs in some detail. […]

Regulatory Roundup – December 2017

Square-peg expense won’t fit in a round-hole deduction? It could be a D15

Now and then you may be required to look around for a suitable item on your tax return to place an expense that simply doesn’t “fit” in the items reserved for other categories of expenses. These are known as “D15” deductions, and sits in the section of the supplementary tax return where claims can be made that do not fit neatly into the other deduction items that precede it. […]

Regulatory Roundup – November 2017

Changes to the depreciation of intangible assets
Business taxpayers will know that asset depreciation is an important aspect to their business’s tax health and longevity. However the importance, and revenue generation role, of knowledge-based or intangible assets has become much more common in the modern business landscape.

Innovative companies know that changes in the economy, including globalisation and digitisation, have elevated the importance of intellectual property and other intangible assets, which has not been adequately recognised in the tax system.

For purposes of income tax, certain intangible assets have been depreciated over a number of years, set by statute (taxable effective life). However intangible assets with a statutory effective life can’t be self-assessed to bring their tax life in line with the economic life of the asset. This can reduce the depreciation benefit and increase the cost of investment in these assets. […]

Regulatory Roundup – October 2017

How to keep your SMSF compliant even while travelling

Are you an SMSF trustee who loves to travel? Sounds like a great lifestyle, however while planning your summer break you need to be aware that there can be negative consequences if you are out of the country for too long.

If you are a trustee and you relocate overseas for an extended period, the residency status of the SMSF, its compliance status and its ability to receive tax concessions may be affected.

Prevent your SMSF becoming non-compliant

If your SMSF becomes non-compliant it will lose its concessional tax rates (non-compliant funds are taxed at the highest marginal rate). There are three practical considerations you must take care of to retain compliance in these circumstances, however the first of these is relatively easy to satisfy.

The fund must be deemed to be an “Australian” fund, which for most (if not every) SMSF will be satisfied as the initial contributions are likely to have been made and accepted by the trustee/s in Australia.
Central management and control of an SMSF is required to be in Australia
The active member test must be fulfilled.

[…]

Regulatory Roundup – September 2017

Deduction for association subscriptions — eligibility can endure into retirement
Many professional, business or trades people are members of an association, and during their working life subscribe to an appropriate organisation. Deduction for association subscriptions

In most cases the membership of a trade union for example, or professional association relevant to workers in a particular occupation, would qualify for deduction under the general deduction provisions of the tax laws. See taxation ruling TR 2000/7 for details.

What is the test for deductibility?
Broadly, the test for deductibility under the rules is whether the payment is an outgoing that is relevant and incidental to the derivation of assessable income. In most cases, where the taxpayer is in receipt of a salary or contractor fees, the membership of a relevant association would qualify under this section of the regulations and the entire amount of the subscription can be claimed as a deduction.

[…]

Regulatory Roundup – April

Updated data applied to small business benchmarks

The ATO has updated its small business benchmarks with information from key financial ratios drawn from information provided by businesses through activity statements and tax returns. The most recent complete data (for the 2014–15 financial year) allows businesses and their tax agents to use the benchmarks to compare business performance against similar business entities.

Benchmarks are updated on an annual basis, which the ATO says will ensure the benchmarks reflect an accurate performance of businesses over time. You can find the small business benchmarks by business type here (businesses listed A-Z), or by industry here. […]

Regulatory Roundup

 

Federal Court rules that ride-sourcing is taxi travel
The Federal Court has handed down a decision in a case that deems ride-sourcing is taxi travel within the meaning of the GST law. If the applicant in this particular case appeals this decision, the ATO has announced that it will continue to administer the law according to […]

Is Franchising Still Worth It?

7-Eleven and the franchising sector have been in the headlines lately, but for all the wrong reasons.

Allegations of wage theft have surfaced, and further claims that a “half-pay scam” had the complicit involvement of senior management. The claims include fiddling with time sheets, “ghost” workers, nil penalty payments and alleged rates of as little as […]

ACCC issues scam warning

The Australian Competition and Consumer Commission (ACCC) has issued a warning to accountants to be on the lookout for scams targeting their small business clients.

ACCC deputy chair Michael Schaper, who spoke last week at the IPA’s Tasmanian congress, said the commission receives thousands of complaints every year about scams targeting small businesses and said accountants […]

Simple Mistake on Share Transfer

A taxpayer who thought he was making a simple and standard family transaction was caught for Capital Gains Tax.
A taxpayer, who owned some public company shares, asked the share registry to register the shares in joint names (with the spouse). The change became obvious to the tax office when the dividends decreased the following year […]