Archive for the ‘Capital Gains Tax’ Category

Issues for businesses

Monday, June 24th, 2019

Lower company tax rate

From 1 July 2016, the income tax rate applicable to qualifying companies has reduced to 27.5%. For the year ending 30 June 2019, this lower tax rate now applies for companies with aggregated turnover of up to $50 million, as long as they satisfy the “passive income test”.

Small business restructure rollover relief

Small businesses (<$10 million turnover threshold) have access to the small business restructure relief, which allows eligible taxpayers to transfer assets between related entities, including companies, trusts and individuals, without any income tax or CGT consequences. While this rollover can be very beneficial to a small business, and can lead to substantial tax savings, the eligibility rules can be complex, so care is needed.

Super guarantee contributions
The rate for super contributions paid by employers on behalf of their employees under the super guarantee for the year ended 30 June 2019 is 9.5%.
If you’re an employer, you must make super guarantee contributions for your employees quarterly, within 28 days after the end of each quarter (September, December, March and June).
TIP: Although the June 2019 quarter super guarantee contribution doesn’t have to be paid until 28 July 2018, it’s worth considering an early payment – you can only claim deductions on this year’s return for contributions that employees’ super funds receive by 30 June 2019.

Guidance on when a company carries on a business

Wednesday, May 8th, 2019

With reduced company tax rates available for some businesses in recent years, and changes in eligibility for capital gains tax (CGT) small business concessions, it’s become increasingly important for us to understand how the law and the ATO deal with concepts like “small business entity” and “carrying on a business”.
New guidance is now available on the types of factors the ATO considers when deciding whether a company “carries on a business in a general sense”, and how the scope and nature of the business come into play when the ATO determines the tax consequences of a company’s activities and transactions.
The guidance emphasises that it’s not possible to definitively state whether a company is carrying on a business, but it’s a question of fact that the ATO must decide on a case-by-case basis by looking at a range of indicators across the company’s features and activities. One key indicator is whether the company’s activities have the purpose of making a profit. The ATO accepts that where a profit-making purpose exists, it’s likely the other indicators will support a conclusion that the company carries on a business.

Property used for storage an active asset for small business CGT concession purposes

Wednesday, April 17th, 2019

The Administrative Appeals Tribunal (AAT) has decided that a property a small business owner used to store materials, tools and other equipment was an active asset for the purpose of the small business capital gains tax (CGT) concessions.
The taxpayer carried on a business of building, bricklaying and paving through a family trust. He owned a block of land used to store work tools, equipment and materials, and to park work vehicles and trailers. There was no business signage on the property.
After the property was sold in October 2016, the ATO issued a private ruling that the taxpayer was not entitled to apply the small business CGT concessions to the capital gain because the property was not an “active business asset”.
However, the AAT concluded that the business use of the land was far from minimal, and more than incidental to carrying on the business. This meant the CGT concessions could be applied.

Reviewing the tax treatment of granny flats

Friday, February 1st, 2019

The Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of “granny flat” arrangements, recommending potential changes that take into account the interactions between tax laws and the social security rules. This request for review is in response to the 2017 Australian Law Reform Commission’s report Elder abuse: a national legal response.
Currently, homeowners may have to pay capital gains tax (CGT) where there is a formal agreement, for example, for an older parent to live with their child, either in the same dwelling or a separate granny flat. This may deter families from establishing a formal and legally enforceable agreement, leaving no protection of the rights of the older person if there is a breakdown in the informal agreement.

CGT on grant of easement or licence

Tuesday, December 4th, 2018

Taxation Determination TD 2018/15, issued on 31 October 2018, considers the capital gains tax (CGT) consequences of granting an easement, profit à prendre or licence over an asset.
In the ATO’s view, CGT event D1 (creating contractual or other rights) rather than CGT event A1 (disposing of an asset) happens when any of the following rights are granted over an asset:
• an easement, other than one arising by operation of the law;
• a right to enter and remove a product or part of the soil from a taxpayer’s land (a profit à prendre); or
• a licence (which does not confer the exclusive right to possess the land).

Tax on compensation received for inappropriate advice

Monday, November 12th, 2018

On the heels of the banking and financial services Royal Commission, the ATO has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.
Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.
TIP: Contact us if you’ve received compensation from your bank or adviser and need to know more.

Cyptocurrency and tax: updated guidelines

Tuesday, October 2nd, 2018

The ATO says that for taxpayers carrying on businesses that involve transacting with cryptocurrency, the trading stock rules apply, rather than the capital gains tax (CGT) rules.
The ATO’s guidelines on the tax treatment of cryptocurrencies have recently been updated, following feedback from community consultation earlier this year.
The ATO received about 800 pieces of individual feedback and submissions, and has now provided additional guidance on the practical issues of exchanging one cryptocurrency for another, and the related recordkeeping requirements.

Transacting with cryptocurrency: updated ATO info

Thursday, August 2nd, 2018

The ATO says a capital gains tax (CGT) event occurs when a person disposes of their cryptocurrency (eg Bitcoin). A disposal can occur when someone:
• sells or gifts cryptocurrency;
• trades or exchanges cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency) – if the cryptocurrency received cannot be valued, the capital proceeds from the disposal are worked out by using the market value of the cryptocurrency disposed of at the time of the transaction;
• converts cryptocurrency to fiat currency like Australian dollars; or
• uses cryptocurrency to obtain goods or services.
If you need assistance with the tax treatment of cryptocurrency, or the ATO’s record-keeping requirements for taxpayers who are involved in acquiring or disposing of cryptocurrency, please contact our office.

Issues for property owners

Thursday, July 5th, 2018

There have been recent changes to:
• the tax treatment associated with residential rental properties (eg travel deduction and depreciation changes);
• CGT and GST withholding tax obligations for purchasers of property;
• superannuation measures impacting home ownership (eg the first home super saver scheme and the superannuation downsizer incentive); and
• stamp duty and land tax, which varies from state to state.
The government has also proposed to abolish the main residence CGT exemption for taxpayers who are no longer Australian tax residents at the time they sign a contract to sell their home, regardless of how long the home has actually been used as a main residence.

Issues for businesses

Thursday, July 5th, 2018

Lower company tax rates and imputation
Company tax rates are falling in Australia. Companies carrying on a business with turnover of less than $25 million will pay a rate of 27.5% in 2018 – the rate of 30% only applies if turnover is $25 million or more, or the company is not carrying on a business.
By 2027, the tax rate will reach a low of 25% for companies carrying on a business with turnover up to $50 million.
TIP: The dividend franking rate for 2018 may be different from a company’s tax rate, depending on whether turnover in 2017 was less than the current year’s turnover benchmark ($25 million for 2018).

Deductions for small business entities

Small business entities (companies, trusts, partnerships or sole traders with total turnover of less than $10 million) will qualify for a raft of tax concessions in the 2018 income tax year:
• the $20,000 instant asset write-off – an immediate deduction when buying and installing depreciating assets that cost less than $20,000.
• the simplified depreciation rules – accelerated depreciation rates of 15% or 30% for depreciable assets that cost $20,000 or more;
• the small business restructure rollover;
• an immediate deduction for start-up costs;
• an immediate deduction for certain prepaid expenses;
• the simplified trading stock rules – removing the need to do an end-of-year stocktake if stock value has changed by less than $5,000;
• the simplified PAYG rules – the ATO will calculate PAYG instalments;
• cash basis accounting for GST – the ATO will calculate the GST instalment payable and annual apportionment for input tax credits for acquisitions that are partly creditable;
• the FBT car parking exemption (from 1 April 2017); and
• the ability for employees to salary-sacrifice two identical portable electronic devices (from 1 April 2016).
These concessions are very powerful for small businesses, and can lead to substantial tax savings.

Small business CGT concessions
If you’re selling a business that has an aggregated turnover of less than $2 million (a “CGT small business entity”) or the value of its net CGT assets is $6 million or less (it satisfies the $6 million “net asset value” test), you may be able to access the small business CGT concessions.
These concessions include:
• a 15-year exemption – no CGT is payable;
• a 50% active asset reduction – a 50% CGT discount in addition to the 50% general discount;
• the retirement exemption – up to $500,000 lifetime tax-free limit; and
• the active asset rollover – minimum two years’ deferral.


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