Looking at your lifestyle
Do you own “lifestyle assets” such as an expensive car, fine art or a boat? If so, the ATO may be checking to see that your declared income can support your lifestyle.
The ATO has instructed over 30 insurance companies to provide information on clients with any of the following assets:
- aircraft valued at $150,000 or more;
- marine vessels valued at $100,000 or more;
- fine art valued at $100,000 or more per item;
- motor vehicles valued at $65,000 or more;
- thoroughbred horses valued at $65,000 or more.
Approximately 350,000 individuals are being targeted.
Trading stock taken for private use
It is common in a number of industries for trading stock to be used for private purposes. If you do this, you are treated as having sold it for its cost just before the change in use and as having bought it back for the same amount.
Because it is difficult in many cases to keep accurate records of transactions involving goods taken from stock for private use, the ATO publishes each year standard values (excluding GST) that can be used by proprietors of certain businesses. The latest amounts (for the 2019-20 tax year) were published in early January.
| TYPE OF BUSINESS | AMOUNT (EXCLUDING GST) FOR ADULT/CHILD OVER 16 YEARS | AMOUNT (EXCLUDING GST) FOR CHILD 4 to16 YEARS OLD |
| Bakery | $1,350 | $675 |
| Butcher | $850 | $425 |
| Restaurant/café (licensed) | $4,640 | $1,750 |
| Restaurant/café (unlicensed) | $3,500 | $1,750 |
| Caterer | $3,790 | $1,895 |
| Delicatessen | $3,500 | $1,750 |
| Fruiterer/greengrocer | $880 | $440 |
| Takeaway food shop | $3,440 | $1,720 |
| Mixed business (includes milk bar, general store and convenience store) | $4,260 | $2,130 |
Table taken from Taxation Determination TD 2019/1
https://www.ato.gov.au/law/view/document?docid=TXD/TD20201/NAT/ATO/00001
When labour costs might not be deductible
It is commonly assumed that all labour costs are deductible when you incur them. But the ATO has released a draft taxation ruling saying that labour costs will not be deductible if they are incurred “specifically for constructing or creating capital assets”. Capital assets can be intangible (e.g. licences, intellectual property and trademarks) as well as tangible.
The cost of workers or employees whose role has a remote connection with constructing or creating capital assets, or who have a broader role that involves incidental activities, are likely to be deductible. An example would be
a security guard who is responsible for the security of a project site where capital assets are being constructed. In some cases, the labour costs may have to be apportioned between deductible expenses and capital.
Tip! Talk to your tax agent if you are not sure how labour costs should be treated. And even if labour costs are not deductible when you incur them, you may be able to write them off as part of the cost of a depreciating asset.
Do you provide car parking fringe benefits?
If you do, and you have engaged an arm’s length valuer to value the benefits, the ATO may contact you from February.
According to the ATO, some valuers have prepared reports using a daily rate that doesn’t reflect the market value. As such, the taxable value of the benefits is significantly discounted or even reduced to nil.
The ATO said that it is your responsibility to confirm the basis on which valuations are prepared. You must examine any valuation you suspect is incorrect or which considerably reduces your liability.
https://www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Valuing-car-parking-fringe-benefits/
Activity statement financial processing
The ATO has come up with another acronym – ASFP – which stands for “activity statement financial processing”. The ASFP project has moved all activity statement and franking deficit tax financial information into the one ATO system, delivering a single accounting system with multiple accounts.
The ATO says your business will benefit from ASFP as there will be more consistency when interacting with the ATO online. You will also have increased visibility of your activity statement information online, making it easier to understand your financial position with the ATO, and payment due dates are clearer.
The introduction of ASFP also means most taxpayers won’t need to phone the ATO anymore to set up direct debit payment arrangements for your activity statement.
In addition, how activity statements and other account transactions are displayed online has been simplified. PAYG withholding director penalties are also viewable on the director’s account.
Tip-off to keep the competition fair
Businesses that deliberately do the wrong thing by not meeting their tax and super obligations put others at an unfair disadvantage. The ATO is encouraging people to tip them off if you If you know or suspect a business is taking part in phoenix, tax evasion or black economy activities, or feel something is going on that isn’t quite right.
To make a tip-off:
- complete a Tip-Off Form on the ATO’s website at ato.gov.au/tipoff or in the ‘contact us’ section of the ATO app; or
- phone the Black Economy Hotline on 1800 060 062.
SMS scam – tax refund notification
The ATO has alerted taxpayers to another scam where messages are texted to people asking them to click on a link and provide personal identifying information to receive a refund. To make the messages seem more legitimate, scammers are using technology that causes them to appear in your genuine ATO message feed.
The text messages say something like “We’ve noticed you have a positive balance 320.70 AUD from last financial year. Please verify your information to provide the funds.” It then provides a link to a website. However, the website is a fake myGov website which asks users to provide their bank details, along with other personal identifying information, for “verification purposes”.
The ATO warns people not to click on any links and not to disclose the information requested.
Compensation for administrative bungles
No organisation is perfect, including the ATO. If you have suffered a loss because of an administrative bungle, you might be entitled to compensation under the Compensation for Detriment Caused by Defective Administration (CDDA) Scheme.
Following a review of the ATO’s implementation of the CDDA Scheme, small business should see some improvements, including:
- claims being investigated by ATO officers who are separate to the officers involved in the tax matters that led to the claim;
- an independent reviewer for the most complex or sensitive cases;
- the adoption of a lesser standard of proof; and
- ATO staff being required to take into account a small business’ financial and personal capacity to respond to review, audit or other compliance processes.
https://www.ato.gov.au/Media-centre/Articles/ATO-statement-on-the-Review-of-the-CDDA-Scheme/
Read our complete February 2020 Taxwise Business Newsletter here
