• Super – Assess your eligibility for the government co-contribution and spouse contribution
• Tax-deductible super contributions are a very effective and widely used tax minimization strategy, however, be sure to know your threshold limits – $25,000 for concessional contributions, $100,000 for non-concessional contributions with the option to bring forward 3 years to contribute $300,000 at once. If you have a super balance of below $500,000 and didn’t use your entire $25,000 cap in the 2018-19 financial year you may have the option to bring forward the unused portion of the cap and contribute additional amounts this year.
• If you have downsized your house and have additional funds left over from the move you also have the option to contribute an additional $300,000 into super which is not included in any of the caps. 
• Ensure your super contributions are received by your fund before the close of business 30 June otherwise they are unlikely to count as a 2019/20 deduction.
• If you have purchased a new investment property, contact a quantity surveyor to enquire about a depreciation report for the property.
• If you have made a significant capital gain in 2019/20 consider making a super contribution to offset the gain. 
• Look over car expenses, if using a logbook ensure it is current (within 5 years or the work use % hasn’t increased) and all information is in order and written down.
• There are some deductions allowable that are not related to employment. Fees paid to tax agents, ongoing management fees paid to financial planners, and donations to registered organizations are all allowable deductions.
• If you own an investment property, make sure to claim all related expenses including advertising, pest control, body corporate fees, property agent fees, repairs, gardening, insurance, interest on loans, and land tax. Please note that travel expenses are no longer a claimable deduction for an investment property.
• If you have the money available, pre-pay some interest on your investment loans (this does not include your personal mortgage).
• If considering selling a capital asset before 30 June, consider timing the sale to manage any capital gains tax you may have to pay. Always use contract date, not settlement date when selling items (shares, property, etc).

THINGS TO DO IF YOU ARE AN EMPLOYEE:

• You can claim up to $300 in work deductions without retaining receipts. If you claim in excess of that, you will need receipts therefore make sure you can prove ALL work deductions.
• Laundry claims of up to $150 do not have to be substantiated even if total income tax deductions exceed $300.
• Common work deductions include monogrammed or registered uniform purchases, work tools, work related study, work travel, computer equipment, employment related telephone, mobile and internet costs, subscriptions, union fees and motor vehicle claims.
• Ensure you claim all home office supplies such as stationary, software and general equipment you would expect to find in an office. Computers and items over $300 must be depreciated.
• Heating, cooling and lighting for home office may also be an allowable deduction. This is calculated by having a log book of at least 4 weeks to work out how many hours a year are spent working from home and a deduction claimed at a rate of 52 cents per hour of business related hours worked. Note that the ATO have also given a shortcut option this year of claiming home office at 80 cents per hour to cover heating/cooling/lighting and also all other home office expenses such as stationary, printing and mobile phone. This simple calculation may aide if receipts have not been kept however we can assess which method will give the best result for your circumstances.
• Assets for work purposes costing $300 or less can be written off immediately. Over $300 assets must be depreciated. This significantly reduces the tax deduction therefore purchasing depreciable assets costing over $300 now, will not generate any significant tax benefit for this year.
• Getting a bonus? Consider salary sacrificing it, a contribution to super will avoid the bonus being taxed in your hands. Or ask your employer to declare it in June but delay the payment to July 1, you will pay the tax one year later.

THINGS TO DO IF YOU ARE SELF EMPLOYED OR EMPLOYED BY YOUR OWN COMPANY:

• Your 9.5% super guarantee contributions must be received by your superfund by 28 July to avoid penalties. If you pay by 30 June then they are deductible in this current year
• From 12 March 2020 small business will be able to write off assets up to a cost of $150,000 (up from $30,000)
• Small business taxpayers can claim prepaid expenses up to 12 months in advance. For example, pre payment of expenses such as rent, hire purchase, interest and advertising
• Defer or bring forward income where you can
  • Write off any bad debts
  • Revalue old or damaged stock – do a stock take
  • Review plant and equipment for any obsolete items that could be written off
• If you are having trouble meeting any of your tax obligations please talk to us, we can negotiate with the ATO on your behalf to help ease the stress you are under.

TALK TO US!!
What not to do, especially without talking to us:

• Purchase stock
• Purchase motor vehicles over $150,000
• Purchase plant and equipment over $150,000

Also, a consideration this year which is new to all of us is the government Covid-19 incentives. Some of these are taxable and some are not and none are subjected to GST. When accounting for these as they come through your bank accounts please be aware that they all need to be recorded and the best way to do this is to create a new income accounts for each in your P&L and please ensure they are BAS excluded. As a quick guide.

• Jobkeeper – taxable
• Cash boost – non-taxable
• VIC government grant – non-taxable
• Payroll tax concessions – taxable

Finally, consider Tax Audit Insurance. Audits are definitely on the increase. We usually expect to ‘win’ but there is a cost which, depending on the circumstances, can be significant.
As always, please contact us to discuss any of these tips and strategies in further detail.

Should you have any questions, please feel free to call us to discuss them at 1300 367 594

Warm regards,
Tax Store Team

It is not uncommon for professional people who provide services to set up a separate entity to run their business, be it a trust, partnership or incorporated company. The allure of course is the lower tax rate that these can secure, rather than at the top marginal tax rate that an individual would generally wear.

Running a business through such a structure can also lead to a wider range of deductions being available, depending on circumstances. So to stop taxpayers dodging their full share of tax, the tax law has in place a set of rules for income derived in this way, which the ATO has dubbed personal services income.

The personal services income regime taxes individual contractors on a similar basis as employees where income is derived mainly from the individual’s own skills, expertise or the provision of personal services. As mentioned, this also applies to companies, trusts and partnerships where income is generated primarily as a result of an individual’s personal efforts or skills.

The personal services income (PSI) rules restrict:

• the availability of tax deductions to affected individuals over and above deductions ordinarily available to employees providing the same or similar services, and
• the “alienation” of PSI through an interposed entity to utilise lower tax rates by treating the relevant income as being earned by the individual from providing personal services. The individual is taxed on the attributed income at his or her marginal rates.

The provisions apply where the individual or interposed entity is deemed to be earning PSI. However, where the relevant individual or entity can meet one of a number of carve-out tests, the normal tax position of the taxpayer will be unaffected. That is, the PSI rules will have no adverse application.

Those caught by the PSI rules are specifically excluded from being treated as employees for any other purposes under Australian law. However, PAYG withholding obligations are imposed on any interposed entity that is subject to the rules.

Income derived from the use of an asset cannot be PSI. However according to the ATO, income derived from the provision of personal services involving the use of some equipment may nevertheless be PSI. Where the substance of an agreement is the provision by an individual of his or her personal efforts or the exercise of his or her skills, or the production of a result from those efforts or skills, income would be regarded as PSI.

Income that is derived mainly for the sale and supply of goods or for granting a right to use property is not PSI.

Income derived as a result of a business structure is also not PSI. The ATO states that when determining whether income is mainly a reward for the personal efforts or skills of an individual or from a business structure, consideration should be given to the relative values of the efforts or skills of the individual and other inputs, such as the efforts of other workers, and the use of plant and equipment, intellectual or other property and goodwill.

Factors relevant to making this determination include:

• the nature of the activities being conducted that generate the income
• the extent to which the amounts paid under an agreement (whether directly to an individual or to an interposed entity) is primarily for the personal efforts or skills of a particular individual
• the extent to which the contract price has been calculated having regard to the costs to be borne by an individual or entity in providing assets to use in the performance of contractual obligations
• the market price of using any equipment, plant or tools as compared with the market price of hiring the relevant labour or skills for the same period
• the nature, size and significance of the assets used by the individual or entity in relation to the activity
• the value of the asset in relation to the total income generated under the agreement
• the uniqueness and degree to which an asset is specialised in the performance of a particular function
• the uniqueness, level of skill or degree of specialisation of an individual to provide the particular services contracted
• whether the payments made to an individual or a entity is for the transfer of the ownership or a right in respect of items produced by the individual or entity
• the existence of goodwill
• the existence of substantial income-producing assets
• the size of the business operation, and
• the contribution of other workers to the income-earning activities.

Examples
A taxpayer owns one semi-trailer and he is the only person who drives it. The income derived from driving the truck is not PSI because it is mainly produced by the use of the truck and not mainly as a reward for the personal services of the taxpayer.

A taxpayer provides a computer programming service but she does all of the work involved in providing those services and uses the client’s equipment and software to do the work. The income derived would be treated as PSI as it is a reward for her personal efforts or skills.

A taxpayer works as an accountant with a large accounting firm. None of the firm’s ordinary or statutory income is PSI because it is produced mainly by the firm’s structure and not mainly for his personal efforts or skills.

The ATO’s PSI decision tool
To make things easier, and to help with your tax planning for the year ahead, the ATO has made available an online “decision tool” to assist you to work out whether you will or have earned PSI, and if the PSI rules will apply to that income.

• We can probably help you with a lot of the information required. To answer the questions in the PSI decision tool you may need:
• details of contracts or written agreements with your business’s customers during the income year
• invoices from work performed during the income year
• records of payments to any employees or subcontractors.
• After answering a series of questions, the tool will provide you with a report that gives you:
• guidance on whether your income is PSI and if the PSI rules apply to you
• a summary of the responses you have provided
• information about what your result means for your tax obligations.

We can discuss the outcomes with you to help you plan your tax affairs.