Tax Bulletin – August 2019
Continued tax cuts become law
The Government has announced that more than 10 million Australians will receive immediate tax relief following the passage of legislation through the Parliament, which increases the top threshold for the 19% tax rate from $41,000 to $45,000 and increases the low-income tax offset from $645 to $700 in 2022/23. In combination with the legislated removal of the 37% tax bracket in 2024/25, the Government is also "delivering structural reform to the tax system" by reducing the 32.5% tax rate to 30%.
Low- and middle-income tax offset also now law
In addition, from the 2018/19 income year (i.e., last income year):
The low- and middle-income tax offset ('LAMITO') has been increased from a maximum amount of $530 to $1,080 per annum and the base amount increased from $200 to $255 per annum; and
Taxpayers with a taxable income:
of $37,000 or below can now receive a LAMITO of up to $255;
above $37,000 and below $48,001 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080;
above $48,000 and below $90,001 are now eligible for the maximum LAMITO of $1,080; and
above $90,000 but is no more than $126,000 are now eligible for a LAMITO of $1,080, less an amount equal to 3% of the excess.
The ATO is implementing the necessary system changes so taxpayers that have already lodged their 2018/19 tax return will receive any increase to the LAMITO they are entitled to (any tax refund should be deposited in the taxpayer's nominated bank account). There will not be any need to request an amendment. Those who are yet to lodge their tax return will have any offset they are entitled to taken into account during the normal processing of their return.
ATO "puts the brakes" on dodgy car claims
The ATO is making work-related car expenses a key focus again during Tax Time 2019. Assistant Commissioner Karen Foat said, “We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.” One in five car claims are exactly at the maximum limit that doesn’t require receipts. Under the cents per kilometre method, taxpayers don’t need to keep receipts, but they do need to be able to demonstrate how they worked out the number of kilometres they travelled for work purposes.
‘Cash in hand’ payments to workers no longer tax deductible
The ATO has reminded employers that any ‘cash in hand’ payments made to workers from 1 July 2019 will not be tax deductible. ‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go ('PAYG') withholding obligations. Payments made to contractors where the contractor does not provide an ABN and the business does not withhold any tax will also not be tax deductible from 1 July. In addition, employers caught not complying with their PAYG withholding obligations may be penalised for failing to withhold and report amounts under the PAYG withholding system.
FBT and taxi travel
Taxi travel by an employee is an exempt benefit for FBT purposes if the travel is a single trip beginning or ending at the employee's place of work. However, the ATO is reminding taxpayers that this exemption is limited to travel undertaken in a vehicle that is licensed to operate as a taxi by the relevant State or Territory, and does not extend to travel undertaken in a ride-sourcing vehicle or other vehicle for hire that do not hold such a licence.
CORPORATE AND INTERNATIONAL
Thin capitalisation: debt deductions of non-ADIs
The ATO have issued Taxation Determination TD 2019/12 to help non-ADIs work out the types of costs that qualify as debt deductions. The TD lists a number of examples which include tax advisory services; establishment fees; fees for restructuring a transaction; duties; regulatory filing fees; legal costs; maintaining the right to draw down funds; and borrowing expenses.
Charities risk losing charity status
More than 2,000 charities registered with the Australian Charities and Not-for-profits Commission (ACNC) are at risk of losing their charity status, after failing to submit their annual reporting to the national charity regulator. These organisations will lose their registration as a charity if they do not submit their outstanding Annual Information Statements by 26 August.