As Australia braces for another bushfire season, it’s crucial to be prepared for a range of challenges, from evacuation plans to emergency-go-bags. Amidst all the chaos, you might wonder if your tax obligations should be a top priority. While it may not be your primary concern, understanding how to handle your tax records in the event of a natural disaster can be a lifesaver.

Reconstructing Tax Records After a Natural Disaster

When your tax records have been lost, damaged, or destroyed due to a natural disaster, there are steps you can take to reconstruct them. The Australian Taxation Office (ATO) is there to help in such unfortunate situations. Here’s how they provide support:

• Lodgment Deferrals: The ATO allows for deferrals of activity statements or tax returns without penalties, giving you some breathing room to address more immediate concerns.
• Time to Pay Tax Debts: You’ll have additional time to pay tax debts without incurring general interest charges, offering financial relief during a difficult period.
• Tax Payments by Instalments: If needed, the ATO can arrange for tax payments to be made in instalments, making it more manageable for those affected.
• Fast-Tracking Refunds: To expedite the process, the ATO fast-tracks refunds, helping individuals and businesses regain some financial stability.
• Field Visits: In some cases, the ATO can arrange field visits to assist in reconstructing tax records, ensuring you’re not alone in this process.

Recovering Lost Tax Documents

In the aftermath of a natural disaster, the ATO can hold and re-issue or supply copies of essential tax documents, including:

• Income tax returns
• Activity statements
• Notices of assessment

If you’ve lost your Tax File Number (TFN), don’t worry. You can still access your tax information by contacting the ATO. They can verify your identity using alternative information like your date of birth, address, or bank account details.

Employer and Bank Support

Your employer should have copies of your PAYG payment summaries, which can be crucial for your tax records. Additionally, banks can often provide bank records that have been destroyed, helping you reconstruct your financial history.

Claiming Deductions for Replacement Services

If your bank charges a fee for replacing bank records or providing services to help reconstruct records due to a disaster, you can claim a deduction in the income year when those fees are charged. This helps alleviate some of the financial burden of replacing lost documents.

Claiming Without Substantiation

In cases where it’s impossible to obtain the original documents to substantiate your claims made in tax returns or activity statements due to damage or destruction, the ATO can accept the claim without substantiation. They understand that some situations make it challenging to provide the usual documentation.

In a time of crisis, like a bushfire or other natural disasters, your focus is understandably on safety and immediate needs. However, understanding the support available from the ATO and knowing how to handle your tax records can help ease your financial burden and keep you on the right track even in the face of adversity. Remember, you’re not alone, and there are resources and assistance available to help you recover and rebuild.

Could your small business claim a 20% bonus deduction on technology expenditure that supports their digital operations or the digitisation of their operations?

The small business technology investment boost is a broad measure intended to cover a wide range of business expenses and assets; however, questions may arise when you go to claim.

Can I Claim The Boost? 

To access the small business technology investment boost, your business needs to meet the standard aggregated annual turnover rules (with an increased $50 million threshold).

The expenditure must:

• already be deductible for your business under taxation law
• be incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2023.

If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for a taxable purpose by 30 June 2023.

What Can I Claim With The Boost? 

A good indicator of eligibility is to consider if the small business would have incurred the expense if they didn’t operate digitally. That is if they hadn’t sought to adopt digital technologies in the running of their business. Using this rule of thumb, the costs below are eligible:

• advice about digitising a business
• leasing digital equipment
• repairs and improvements to eligible assets that aren’t capital works.

Eligible expenditure may include, but is not limited to, business expenditure on:

• digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks
• digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design
• e-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth
• cyber security – cyber security systems, backup management and monitoring services.

Whether some expenditure is eligible for the boost will depend on its purpose and link to digitising the operations of the specific small business. For example, the cost of a multifunction printer would not be eligible if it were intended only to make copies of paper documents. However, it would be claimable if it was being used to convert paper documents for digital use and storage

New and ongoing subscription costs can also qualify as eligible expenditures if related to your client’s digital operations. For example, your ongoing subscription to an accounting software platform for your business would qualify. Likewise, a new subscription for digital content that is used in developing web content to advertise their business would be eligible.

In these cases, you should keep explanations of how the expenses relate to digitising their business, as well as accurate records of all their claims.

Where the expense is partly for private purposes, the bonus deduction can only be applied to the business-related portion.

Special rules apply if claiming the bonus deduction for eligible expenditure on a depreciating asset.

To avoid confusion or complications around applying the small business technology investment boost, it may be best to speak to your trusted tax agent. We’re here to help.

Are you looking at the approaching 31 October deadline for individual income tax returns with plenty of questions? Don’t worry – your trusted tax professionals are here to help.

One of the more common questions we encounter around this time of the year involves declaring income – or, sometimes, when you do not need to declare income.

Exempt income is income you don’t pay tax on (that is, it’s tax-free). However, you may still need to report these in your tax return as the ATO use certain exempt income amounts to work out other calculations such as:

• tax losses of earlier income years that you can deduct
• adjusted taxable income of your dependants.

Exempt income includes:

• certain Australian Government pensions, such as the
  • disability support pension paid by Centrelink to a person who is under age-pension age
  • invalidity service pension paid under the Veterans’ Entitlements Act 1986 where the veteran is under age-pension age
• certain Australian Government allowances and payments, such as the
  • carer allowance
  • child care subsidy
• certain overseas pay and allowances for Australian Defence Force and Federal Police personnel
• Australian Government education payments, such as
  • allowances for students under 16 years old
  • Commonwealth secondary education assistance
• some scholarships, bursaries, grants and awards
• a lump sum payment you received on surrender of an insurance policy where you are the original beneficial owner of the policy – generally you do not earn, expect, rely on or regularly receive these payments – examples include
  • mortgage protection
  • terminal illness
  • a permanent injury occurring at work.

Lodging your tax return can be time-consuming – why not consult with one of our tax advisers for help? Start the conversation with us today.

Special provisions in tax law provide that certain items will never be tax-deductible.

Even if you have incurred this expense in earning your income, they will still not be tax-deductible. In total, there are 35 different items explicitly mentioned in this area of tax law as not being tax-deductible, with some of the more common items being:

• Penalties: You cannot claim any fines or penalties imposed under any laws (e.g. if you receive a parking fine when parking in the city for work-related purposes).
• Payments to reduce your HECS or student debt.
• Travel expenses of a relative when you travel for work-related purposes (unless they are also travelling for their work-related purposes).
• Wages paid to an associate that is more than reasonable for the work they do (e.g. your spouse cannot simply be paid $30,000/year to perform 1 hour of admin work a week for you).
• Payments to maintain your family (this usually applies to farmers, who feed their workers who may also be their family).
• Expenses to obtain or maintain membership of a recreational club.
• Expenses relating to a recreational boat more than the income earned from that boat. There is no negative gearing (‘running at a loss’) into a boat unless it is for a real and genuine business.
• Bribes to public officials both here and abroad (even if they had to be paid to get something approved).
• Expenditure relating to illegal activities.
• Superannuation guarantee charge- if you are late in paying your employee’s superannuation, you don’t get a tax deduction when you do eventually pay it.
• Interest on borrowings to make non-concessional superannuation contributions.
• Travel expenses related to a residential rental property.
• Expenses associated with holding vacant land
• Where you are required to withhold taxes from certain payments such as interest, royalties or wages and then fail to withhold the required taxes, tax deductions cannot be claimed on these payments.

Some of these expenses are avoidable (such as the superannuation guarantee charge or the failure to withhold taxes from payments). It is essential to consult with us to ensure you are not wasting money on expenses that will not provide you with a valid tax deduction.

Like how individuals and businesses must complete tax returns when it’s tax season, so too do trusts.

Trusts have their own tax file number (TFN) which should be used to complete tax returns. Trusts can also apply for an Australian business number (ABN) if the trust carries on an enterprise. If a trustee applies for a TFN or ABN, then this is in the capacity of a trustee and is separate from any other registration that the trustee may require for other capacities.

Trustees

The trustee is responsible for managing the tax affairs associated with the trust. This includes registration of the trust in the tax system, lodgement of trust tax returns, as well as paying certain tax liabilities

Beneficiaries

For beneficiaries, their share of the trust’s net income is included in their tax returns. Further, payments on the expected tax liability may need to be made, for which the pay-as-you-go (PAYG) instalment system can be used.

Looking at trusts from a tax perspective, one of the primary advantages of using them is that any income generated from business activities and investments (including capital gains) can be distributed to the beneficiaries in lower tax brackets. These may often be the spouses or children of the holder of the trust.

This means that, as the trustees of the trust have the discretion to distribute income and capital as they see fit and no beneficiary has a fixed entitlement to receive anything, the trustees can stream income in a tax-effective way on a year-to-year basis. However, as they don’t distribute the trust’s income, the trustees themselves may be liable to tax on the undistributed income (and at a rate of tax that is usually higher than what the beneficiaries would then have to pay).

Regarding trusts, you need to be aware of the potential tax consequences that can arise if they are misused. Trusts are perceived as a means of hiding income, concealing the ownership of assets and facilitating the transfer of funds (tax-free) between family and business groups. That’s why the ATO often keeps a close eye on trusts.

You will want to ensure that your trust deeds (or other constitutional documents) achieve a tax planning benefit and that any changes to them reflect this credibly (and are not credibly explainable for any other reason).

You will also need to ensure that the trusts and the beneficiaries are filling out their returns and lodging all income (including the distributions of the income from the trust).

The ATO keeps a particularly close eye on non-compliance regarding trusts.

If you want to be confident that you are doing the right thing as a holder of a trust, a trustee or a beneficiary when it comes to tax, it’s critical to speak with a professional tax expert such as us.