Recently, the Australian government has introduced a new GST legislation on the imported low value goods. The new legislation will be effective from 1 July 2018 and it will affect thousands of online platform overseas sellers whose annual GST turnover is over $75,000, such as Ebay, Amazon sellers etc. These overseas sellers under the new legislation will be required to registered GST and reporting their GST on a monthly, quarterly or annually return.

GST is a type of tax enforced by Australian government on the provision of goods and services. Once the business registers GST, it has to charge GST on the goods and services it provides which is 10% of the original price unless the goods or service is a GST free or input taxed item. Every month, quarter or year, the business needs to remit the collected GST on sales to Australian Taxation Office; in the meantime, it will also get credit of the GST charged on the consumptions. For those online platform overseas sellers, once they register GST, they will be requested to do exactly the same as described above except they choose simplified GST registration which cannot claim GST credit at all.

The new legislation doesn’t affect the old rule that GST paid at border on the imported goods over $1000. So that means the business doesn’t need to charge GST on the invoice when a bundle of goods valued over $1000 imported through custom and GST paid at border.

The government haven’t given explicit measure how to scrutinize the compliance of the overseas seller. However, some discussion is on stopping the IP address of the online seller if their GST is not complied, so they cannot continue to sell on the online platform to the Australian consumers. Some others argue that the online platform or other operators can charge and collect the GST on behalf of overseas sellers and remit to the Australian Taxation Office. No matter how, since the new legislation has been kicked in, overseas sellers had better to prepare for registering and complying the government’s request as earlier as possible to avoid the penalty notice from the Australian Taxation Office and business damage caused by blocking of IP address.

Pitt Martin Accountants and Tax Advisers are here to look after your business. If you think the new legislation might be affecting you and you are concerning about it, please feel free to call us on +61292213345 or email robert@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

If we metaphorize a business to a building, structure to the business will be as important as foundation to the building. A suitable structure can provide tax effectiveness and assets protection to a business. Contemporarily, sole trade, company and trust are common structures used in business. Next, we will use a table to illustrate the difference between these structures. 

As you can see, cost wise, sole trader is cheaper than company and trust to be set up and managed. As a sole trader, you can either use your own name or register a business name. Like other business entity, a sole trader can register ABN, GST, PAYG Withholding, etc. Because of the complexity of company and trust, in addition with government and document platform charges, the cost of company and trust’s setting up and management are comparatively higher.

In terms of the tax rate, sole trader used to be the same to individual tax rate. There is an 8% discount capped with $1000 however for the sole trader with less than $5 million business turnover from 1 July 2016 due to the government new legislation announcement. The discount rate will be gradually increased to 16% in about a decade time and the capped amount is so far is still the same. Company tax rate has been dropped from 30% to 27.5% since 1 July 2016 for business turnover under $10 million and the turnover threshold will be increased to $25 million from 1 July 2017. The company tax rate will be finally reduced to 25% for all business with less than $50 million turnover in about a decade time. Trust net income is usually taxed in the hands of beneficiary. Therefore, if beneficiary is an individual, individual tax rate will be applied; likewise, company tax rate will be applied to corporate beneficiary.

Sole trader business runs under the personal capacity; therefore, the business owner’s personal assets will be exposed to all creditors. Assets protection is vastly low in the sole trader business structure. Proprietary limited gives company comparatively higher assets protection to both shareholders and directors. However, director may be forced to be personal liable to company debt under the Corporate Act 2001. Since trust structure separate the legal ownership and beneficiary of trust assets, trust assets generally protected well from beneficiary’s personal bankruptcy. Nevertheless, care needs to be taken of when trust structure is set up and trust income is distributed.

Employer superannuation guarantee is not compulsory to sole trader him or herself but they are still liable for employee’s superannuation guarantee payment. Company and trust need to pay superannuation guarantee if they hire  employee and pay them over $450 a month. This includes director himself.

Compared to sole trader and company structure, one of trust structure’s advantage is that it can stream the prior-taxed income to beneficiaries at different proportion each year. Therefore, it can fully use the tax free threshold of each beneficiaries and their tax loss if any. This strategy is often used by a family trust and hence the family members can overall pay less tax.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Investment property tax return can be very tricky and complicated, especially new laws will be enacted according to the recent federal budget. No matter you are in Australia or an overseas investor, you will have to lodge the tax return by 31 October every year if you are having an investment property and earning rental income or capital gain in Australia.

Generally, you need to report all rental income including the bond or compensation made by tenant due to their damage to your property. Of course, you also can claim all eligible tax deductions, such as mortgage interest, borrowing expenses, advertisement, insurance, cleaning, land tax, council rate, strata levy, water, real estate agent management fee, travel expenses, capital allowance, capital work, repair and maintenance etc. Among them, travel expenses and second-hand property capital allowance will be wiped out after 1 July 2017. Also, some of the above expenses can be deducted in one year while others need to be deducted by spreading out for a few years. Some of the expenses even cannot be deducted at all, such as initial purchase cost.

Another type of income from investment property can be the capital proceed from the selling. This might trigger capital gain tax which needs to be put on your tax return as well. Generally speaking, capital gain tax is the tax charged on the gains by deducting the capital proceeds with the cost base and other related transaction cost. There might be adjustment of the depreciation depending on the year of the purchase of the investment property. Some investment property might even be exempted to capital gain tax whereby the six years rule applies. Given the rapid growth of Australia property price, capital gain tax of selling an investment property can be stunning. One of the strategy is selling the investment property in the year when you receive less other income and hold the investment property more than 12 months which will gives you 50% discount on the taxable capital gain.

In Pitt Martin, we specialised in investment property tax return and advise. We can prepare your tax return through email and telephone meeting, so you don’t have to be physically coming into our office considering you are overseas or busy with your daily work. All we need is your personal details, TFN, rental statement, interest and property depreciation schedule if any. Please be mindful that investment property tax return can lead to thousands dollars difference if you do not do it in a proper way. So please speak to us if you are not sure.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Along with the closing of financial year 2017, here comes the tax return time again. During the years, we have seen many clients made mistake with their tax return and led to either ATO penalty or hundreds and thousands dollars losing in tax payment which shouldn’t have happened if it had prepared by a qualified tax agent.

For most income tax returns, tax deduction is the critical part to reduce your tax liability. When completing your income tax return, you would probably have some expenses that are tax deductible. Australian Taxation office (ATO) sets three basic principles for a work-related deduction:

1. You must have spent the money yourself and weren’t reimbursed
2. It must be directly related to earning your income
3. You must have a record to prove it

Under these principles, what are some common categories of tax deductions that you can claim? Today, we will give you some examples to have better understand of those tax deductions.

1. Cost of travelling directly between two separate workplaces, or cost of travelling from your normal workplace to an alternative workplace while still on duty, and back to your normal workplace or directly home.

E.g. Alex works as a nurse in a child care centre on a full-time basis in Botany. After this job, he travels to Woolworth near his home to do the evening part time shift. Alex can claim tax deductions for travel expenses between the child care centre and Woolworth in her income tax return because they are two separate workplaces.

Notice: you can’t claim tax deduction for normal trips between home and work – this is considered private travel.

2. Car expenses for using your own car in performing your employment duties (including a car you lease or hire). Generally, car expenses can be deducted either through logbook method or cents per kilometer method.

E.g. Colin works as a business analyst in a commercial bank in Sydney CBD. During his normal working hours, he was asked by his manager to pick up some documents from another branch in Parramatta. Colin decided to drive his car to complete this job. After collecting the documents, Colin drove back to his workplace in Sydney CBD. Colin can claim tax deductions for car expenses for trip between the CBD branch and Parramatta branch in his income tax return because he used his own car in the course of performing his job as an employee.

3. Accommodation costs (and meal and incidental expenses, if applicable) if you need to do work away from home for a short period of time. However, there are different way to deal with this kind of tax deductible expenses. Please see details in following examples.

E.g.1. Jane works with a company in Brisbane, but is required to attend training at the company’s head office in Sydney one week every month. Jane stays at a hotel close to the head office in Sydney for the weeks she is required to be in Sydney for training. Jane receives a travel allowance from her employer to cover the costs of accommodation, meals and incidental expenses for the periods she is required to stay in Sydney. The travel allowance is not shown on her payment summary. Jane spends her travel allowance on accommodation, meals and incidental expenses when in Sydney for work. Jane chooses not to declare her travel allowance on her income tax return and does not claim her expenses. At the end of financial year when Jane needs to lodge her income tax return, she can choose not to declare her travel allowance as income and does not claim her expenses, or to declare her travel allowance as income and claim her expenses.

E.g.2. John works for a company in Melbourne, but is required to attend the Adelaide branch for one working week each fortnight. John purchases a two-bedroom apartment in Adelaide to stay in when he is there for work. During the time he is not there for work, the apartment is vacant. John receives a travel allowance from his employer to cover the costs of accommodation, meals and incidental expenses for the periods he is required to stay in Adelaide. The travel allowance is shown on his payment summary. The costs of financing, holding and maintaining the apartment in Adelaide for the year are not disproportionate to the cost of John obtaining suitable short-term commercial accommodation for the periods he is required to stay in Adelaide. John does not use the Adelaide apartment for private or domestic use during the year. John must include the travel allowance as income in his tax return because it is shown on his payment summary. John can claim a deduction for the costs of financing, holding and maintaining the Adelaide apartment for the year.

4. The cost of buying and cleaning occupation-specific clothing, protective clothing and unique, distinctive uniforms.

E.g. Mark works as a tally clerk in a supermarket. He has two sets of uniform that have the supermarket’s logo permanently attached and the uniforms are not available to the public. Mark can claim tax deductions for the cost of purchasing and cleaning the uniforms in his income tax return.

5. Gifts or donations to organisations that have the status of deductible gift recipients.

E.g. Terrence works as an interior designer. He makes $50 monthly donations to an environmental organization endorsed by ATO. Terrence doesn’t receive any material benefit or advantage from the environmental organization he makes donations to. Terrence can claim a tax deduction for his donations to this environmental organization. However, if he received an equivalent valued gift in return for the donation, that donation will not be deductible.

6. Home expenses including a computer, phone or other electronic devices you are required to use for work purposes, as well as a deduction for running costs. Deduction on occupancy cost need to be careful, such as mortgage interests, strata rate, building depreciation, etc. The may trigger capital gain tax.

E.g. Denis works as a car dealer in Rockdale. He is required by his manager to organize an office contact number to keep touch with clients. Denis bought a new cell phone to set up the office contact number in JB Hi-Fi. During his business trips, he needs to make regular phone calls to his manager and clients. Denis can claim tax deductions for the cost of purchasing a new cellphone and making phone calls.

7. Expenses incurred in earning interest, dividend or other investment income.

E.g. Eunice works as a financial adviser. She has a cash management account for investment purposes. She also has an investment property using borrowed money. Eunice can claim tax deductions for account-keeping fees and interest charged on money borrowed.

8. Self-education expenses if your study is work-related or if you receive a taxable bonded scholarship. The first $250 is not deductible though.

E.g. Healey works as an assistant accountant. She decides to take a CPA course to obtain the CPA qualification. The CPA course has a sufficient connection to her current employment and maintains or improves the specific skills or knowledge she requires in her current employment, or result in, or is likely to result in, an increase in her income from her current employment. Healey can claim a tax deduction for the CPA course expenses.

9. If you buy tools, equipment or other assets to help earn your income. Assets under $300 can be deducted in full in the purchased financial year otherwise it has to be depreciated over a period.

E.g. Jefferey works as a graphic designer for a real estate company. During the first month of his employment, Jefferey bought an Adobe Creative license to use graphic design software which would continue to a monthly payment of $40. Jefferey didn’t receive an allowance for this monthly payment. Jefferey also uses this graphic design software for private purposes. Jefferey needs to apportion the amount of tax deductions he claims.

10. Other expenses that contribute to earning your income.

E.g. You can claim a tax deduction for accountancy fee if you let a registered tax agent to prepare and lodge your tax return and activity statements.

The above tax deductions can be applied differently from case by case. The examples are hypothetical examples and don’t represent any advice from us. Before you apply the examples to yourself, please speak to a registered tax agent.

Pitt Martin is registered tax agent and CPA practice. We specialised in individual tax return, business and all other tax returns. If you are not sure about whether you have eligible tax deductions in your tax return, please speak to one of our tax accountants.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

Recently, the NSW government has announced that the surcharge purchaser duty and land tax surcharge will be raised again to foreign person investing in residential real estate from 1 July 2017. The Surcharge Purchaser Duty will be doubled from 4% to 8% and the Land Tax Surcharge will be increased from 0.75% to 2%. NSW government also stated that the raised revenue will be used to help the first home buyer in Australia.

Firstly, let’s take a look at the difference of the stamp duty, surcharge purchaser duty, land tax and land tax surcharge prior and after the change.

* the stamp duty is about 5% when the transaction price is under 3million. However, when the transaction price is over 3 million, the premium duty rate will be 7% for the over portion. The overall stamp duty and surcharge purchaser duty will be as high as 15% for foreign person. Likewise, when the land value is over 3.357 million dollars, the rate will be 2% for the over portion. At this instance, the land tax and land tax surcharge rate will be 4% for foreign person.

The above shows the difference prior and after the change.  Now let’s see what’s the difference between the local ordinary resident and foreign person in terms of the stamp duty and land tax payment after the change.

Assume the residential real estate is 2 million dollars, the land value is 1 million dollars and not qualify for the land tax premium threshold.

As you can see, the stamp duty, surcharge purchaser duty, land tax and land tax surcharge payment will be almost tripled paid by foreign person compared to the local ordinary resident. The difference will be further increased along the future years’ land tax and land tax surcharge.

Here, we have to address that Australia permanent resident, New Zealand citizen, Australia setup companies, most family trust, etc can be treated as foreign person for the surcharge purpose. In terms of the definition of foreign person, please refer to our earlier article Land Tax Surcharge.

Pitt Martin is specialised in investment property related tax issues. If you are not sure about whether you are a foreign resident and whether your property is a residential real estate, please speak to one of our advisers.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

The Australian government has just announced 2017 Federal Budget tonight. At Pitt Martin, we closely keep update our knowledge with government tax legislation and economy changes. Here is some key points we think can be relevant to the tax payers and business owners.

Housing

• Assisting first home buyers to build a deposit inside superannuation. Voluntary contributions of up to $15,000 per year and $30,000 in total will attract concessional tax treatment under the First Home Super Saver Scheme. This voluntary contribution can be salary sacrifice. The concessional tax rate will be 15% rather than personal marginal rate which is normally over 30%. The scheme commences on 1 July 2017, and contributions and deemed earnings, net of tax, can be withdrawn from 1 July 2018;

• Allowing older Australians to contribute downsizing proceeds into superannuation. From 1 July 2018, individuals aged 65 and over will be able to make a non-concessional contribution of up to $300,000 in proceeds from the sale of a principal residence, held for at least 10 years, into their superannuation. These new contributions will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps. That means potentially such an individual can make overall $625,000 contribution into their super fund in one year from 1 July 2018 by current law;

• Capital gains tax (CGT) will be increased to 60% for investment in affordable housing. Allowing Managed Investment Trusts to be used to develop and own affordable housing, providing investors in affordable housing with greater income certainty by enabling direct deduction of welfare payments from tenants;

• Strengthening the capital gains tax (CGT) rules to reduce the risk that foreign investors avoid paying CGT in Australia, including by no longer allowing foreign or temporary tax residents to claim the main residence CGT exemption, and by expanding the scope of the CGT withholding system for foreign residents;

• Encouraging foreign owners of residential real estate to rent their properties out by applying a ‘ghost tax’ of at least $5,000 (reflecting the original application fee) to foreign owners who leave their properties unoccupied or not available for rent for 6 months or more each year.

• Disallow deductions for travel expenses related to owning a residential investment property. Better target plant and equipment depreciation deductions to those expenses actually incurred by investors.

Business

• More tax breaks and red tape reduction are on the cards this year, with the $20,000 instant asset tax write-off introduced in the 2016 budget being extended for another year until 2018, and opened up to businesses with an annual turnover of up to $10 million which is used to only up to $2 million.

• From March next year, government introduce a levy on foreign workers on certain skilled visas will go towards a new Skilled Australians Fund.

Small business employer will have to pay $1200 per year for a foreign worker, along with a one-off $3000 payment. Larger businesses employer would pay $1800 a year per worker, along with a one-off payment of $5000.

• The Government is stamping out hybrid tax abuse by multinational banks and insurance companies to prevent the exploitation of tax differences between countries. The Government is also toughening the Multinational Anti-Avoidance Law by extending it to corporate structures involving foreign partnerships and foreign trusts.

• The Government is extending the taxable payments reporting system to contractors in the courier and cleaning industries and also banning technology that allows businesses to falsify sales records to avoid paying tax.

Medicare Levy

• The Government will increase the Medicare levy from 2 per cent to 2.5 per cent of taxable income from July 1, 2019 to fund the National Disability Insurance Scheme. You’ll only be exempt if your income is below the threshold of $21,655 for singles, $36,541 for families and $34,244 for pensioners. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.

If you want to find out more details about how this budget affects you, please feel free to contact us.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.

From 1^st January 2017, if you or your family and associates are a foreign person, your NSW residential land might be subject to 0.75% land tax surcharge charged by Office of State Revenue. For example, if your land value is $1 million, the surcharge will be $7,500. This is on top of the land tax if applicable which is charged $100 plus 1.6% over the threshold $549,000 and up to the premium threshold $ 3,357,000 or $45,028 plus 2% over the premium threshold. Unlike land tax, land tax surcharge is applicable even the land related dwelling is used for main residence.

A foreign person could be an individual, company, trust , foreign government, foreign government investor and partners in limited partnerships. For individual, if you are not an Australian citizen and stayed in Australia for the year less than 200 days or your visa subject to any limitation to stay in Australia, your land could be caught up with land tax surcharge. Be careful here, even you are a permanent residence in Australia and you spend less than 200 days in Australia, your property might still be subject to land tax surcharge.

If a company own the residential land and you as a foreign person together with any one or more associates hold at least 20% interests in the company or you as foreign persons together with any one or more associates hold an aggregate of at least 40% interests in the company, the company will be treated as foreign person.

If a trust own the residential land, the surcharge will be different depends on whether it is fixed trust or special trust. For fixed trust, land tax surcharge will be liable to the beneficiary who are foreign person at their proportion of the land value. For special trust including Family Trust, if any of one or more potential beneficiaries are foreign persons, the trustee is liable to the land tax surcharge on the whole value of the land held by the trust. This is mostly the case for the Family Trust whose beneficiary has foreign family member or relatives since they are the default beneficiaries in most Family Trust. To avoid the land tax surcharge because of this, you can contact Pitt Martin Accountants & Tax Advisers to amend your trust deed and you will have to make this amendment before 31 Dec 2016.

Pitt Martin Accountants & Tax Advisers is located at Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartingroup.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

Robert Liu CPA RTA MPA

Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.