You may be planning to reward your staff for the festive season?
However, you must consider the tax implications.
Year-end (and other) staff parties
Issues to consider, including the possible FBT and income tax implications of providing ‘entertainment’ (including Christmas parties) to staff and clients.
Minor Benefit Exemption
The minor benefit exemption provides an exemption from FBT for most benefits of ‘less than $300’ that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.
The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.
However, entertainment expenditure that is FBT-exempt is also not deductible.
‘Less than’ $300 means no more than $299.99! A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.
Example: Christmas Party
An employer holds a Christmas party for its employees and their spouses – 40 attendees in all.
The cost of food and drink per person is $250 and no other benefits are provided.
If the actual method is used:
If the 50/50 method is used:
This illusion of “someday” is very pervasive, soothing, and even tranquilizing.
But life doesn’t fit into this illusion: the daily newspaper offers reports of people dying in car accidents on their way to work everyday.
These people didn’t wake up expecting that to happen, they had plans to do things someday. They were certain that it was just another day at work.
Reality can be very cruel in its surprises and horrible when it intrudes on our hopes and dreams.
When we put pictures of our dreams, hopes, and wants into the category of “someday”, we separate ourselves from the immediacy of living.
Someday may never come. There is only now.
The key changes introduced by the SA Land Tax Bill, which commence from 1 July 2020, include a reduction in the marginal rates of Land Tax, increases to the thresholds at which each rate applies, and new aggregation rules.
We will see the top Land Tax rate drop from 3.7% down to 2.4% with effect from 1 July 2020. Additionally, the top threshold at which this rate kicks in will increase to $1.35m in 2020 and to $2m from 1 July 2022. These changes will bring us closer to the other States, where the average top rate is below 2%.
New aggregation rules will also come into place. The law will assess each owner on the total value of land held in their name, regardless of whether the land is held jointly with others.
Land held by related corporations will also be aggregated and assessed on the total value of the land held by all related corporations. Each company that is a related corporation will be jointly and severally liable for the Land Tax assessed.
Land Tax will be imposed at a surcharge rate for land held in trusts, but trustees may nominate a beneficial owner of the land to access a lower rate of Land Tax.
Other sweeteners are,
A transition fund of $25 million over 3 years to compensate investors negatively impacted by the aggregation measures,
Land Tax concessions for developers holding greenfield and brownfield land for developing 10 or more residential allotments, and
Concessions for land held by eligible developers of affordable housing, where the land intended to be developed will not be aggregated with other land held by the developer.
For discretionary trusts that held South Australian land at 16 October 2019, it will be imperative to obtain advice to consider whether it is advantageous to nominate a beneficiary as the notional “owner” for Land Tax purposes and access the lower rates of tax. There is a fixed deadline of 30 June 2021 to make a nomination under these provisions. Depending on the group structure and asset portfolio, this nomination can create some significant differences in the total Land Tax cost for the group.
Hopefully, now that the Bill has finally passed, we are expecting the market to lift, as confidence in the property sector is restored.
Employers have wanted to know why they now have to report their payroll data digitally to the ATO. Now, the tax office has revealed the first use of these real-time insights, in a warning to errant employers.
ATO deputy commissioner James O’Halloran said the agency is now “heavily focused” on Superannuation Guarantee (SG) obligations, having recently completed an examination of SG contributions for 75 million payment transactions for the first three quarters of 2018–19 from around 400,000 employers.
“From this data, we can already see that between 90 per cent and 92 per cent of contribution transactions by volume were paid on time and that between 85 per cent and 90 per cent of the transactions by dollar value were paid on time,” Mr O’Halloran said in a speech to the Australian Institute of Superannuation Trustees (AIST) 2019 Chairs Forum.
“We’re now starting to actively use the data to warn employers who appear not to be paying the required SG on time, in full or at all, that they should change their behaviour.”
The ATO has attributed the increased in data visibility to the introduction of Single Touch Payroll (STP) reporting as well as improvements in super funds’ reporting through the Member Account Transaction Service (MATS).
A new SG campaign is now underway, with Mr O’Halloran noting that 2,500 employers who have been identified as having paid some or all of their SG contributions late during 2018–19 set to be contacted this week.
A further 4,000 employers will begin receiving due-date reminders from the ATO.
“It should be noted this is the first direct use of the Single Touch Payroll reporting arrangements, based on what your funds report to us relating to SG payments,” Mr O’Halloran said.
“It’s a tangible action which demonstrates our increasing ability to effectively follow up in relative real time apparent late or non-payment of SG.”
DEDUCTIONS YOU CAN CLAIM
According to the Australian Taxation Office (ATO) website, there are 4 things you need to claim a work-related deduction:
The ATO allows you to claim up to $300 for work related expenses without having kept any receipts – but you must have spent the money and it must be related to your employment.
If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.
If the cost of any item is over $300, it will have to be depreciated (a portion of the cost claimed each year over its effective life).
THE “TAX TRAP” YOU NEED TO AVOID
Everyone wants to increase their tax refund (or reduce their tax payable). Henson Lloyd here to help you to do this!
Tax saving strategies generally involve you spending money on “something” which creates for you a tax deduction. The “something” you spend your money on could be an expense, an asset, or an investment related payment (like superannuation or prepaid interest on an investment loan).
However – please don’t fall into a common trap of spending money just to get a tax deduction. You only save tax based on the marginal tax rate proportion on the amount you spend, NOT the full amount you spend.
For example, if you earn say $85,000 a year, your marginal tax rate (including Medicare levy) is 34.5%. This means any extra dollar you earn will be taxed at 34.5%, and any extra dollar you claim as a deduction will save you 34.5%.
So, if you spend $100 on something that you can claim a deduction for, you will get back $34.50 from the ATO. But it will still cost you $65.50. So only spend money on what you NEED, not just to create extra tax deductions for yourself.
LINKS TO MORE INFORMATION ABOUT SPECIFIC DEDUCTIONS
It’s our job as your accountants to make the lodgement of your Tax Returns as easy and simple as possible.
We do this every day, so we know all the ins and outs of what to claim to make it easy for you.
If you want to have a look at some of the specific deductions you can claim, here are links to the ATO website (it’s actually pretty good for the ATO):
We’re here to help you! To make an appointment with us to discuss and prepare your 2019 Tax Return please contact us on the phone numbers below.
Effective first full pay period after 1st of July 2019
Minimum adult rate is now $19.49 – you need to add 25% loading if casual.
Applies to an Award/Agreement free employee – other than juniors, trainees and employees with disabilities – See Fair Work Site for further information.
Undeclared cash-in-hand payments to employees and contractors will no longer be eligible for a tax deduction, the ATO has warned, as part of a crackdown on undeclared earnings.
The new rule was unveiled as part of the 2018–19 federal budget. It will take effect for all payments made from 1 July this year, for income tax returns lodged for the 2019–20 financial year and beyond. According to the ATO, the new rule aims to level the playing field where businesses pay workers in cash to avoid PAYG withholding obligations, and where contractors do not provide an ABN or withhold any tax and cash payments they receive.
ATO assistant commissioner Peter Holt said in a statement that the removal of tax deductions for cash payments is just one way it is tackling the black economy. “It’s fairly straight-forward: do the right thing and you can claim a deduction. Deliberately do the wrong thing and you’ll miss out on a deduction and risk being penalised,” he said. “The Black Economy Taskforce estimates that the black economy is costing the community as much as $50 billion, which is approximately 3 per cent of gross domestic product (GDP). This is money that the community is missing out on for vital public services like schools and roads. “Businesses that operate in the black economy are undercutting competitors and gaining a competitive advantage by not competing on an even footing.”
Mr Holt also warned that employers not complying with PAYG withholding requirements can be penalised. He noted that cash is “a legitimate way of doing business, and we recognise that some industries do tend to take more cash than others”, but that it is often being used to avoid paying tax and superannuation. “When cash is used to deliberately hide income to avoid paying the correct amount of tax or superannuation, it’s not only unfair, it’s illegal,” Mr Holt said.
Every day, ten men go out for beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this…
The first four men (the poorest) would pay nothing
The fifth would pay $1
The sixth would pay $3
The seventh would pay $7
The eighth would pay $12
The ninth would pay $18
The tenth man (the richest) would pay $59
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you areall such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20”. Drinks for the ten men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But whatabout the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would eachend up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of thetax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare theirsavings.
“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man, “but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too.
It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “we didn’t get
anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks so the nine sat down and had their beers without him. But when it came time to pay the bill,they discovered something important. They didn’t have enough money between all of them for even half of the bill!
That my dear friends, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier
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From all of us at Henson Lloyd, HAPPY EASTER!
For any urgent queries, please contact Wayne Henson – 0417 801 755
Henson Lloyd Accountants invites you to join our 2019 Footy Tipping Competition.
FIRST GAME: THURSDAY 21ST MARCH 2019
1st, 2nd & 3rd Prizes up for grabs
End of season celebratory presentation for all participants.
Follow the link below for more info and to register: https://www.footytips.com.au/comps/HensonLloyd
Password: moustache Or contact Danielle at the office – 08 8431 1644