ATO warning regarding work-related expense claims for 2017
The ATO is increasing attention, scrutiny and education on work-related expenses (WREs) this tax time.
Assistant Commissioner Kath Anderson said: “We have seen claims for clothing and laundry expenses increase around 20% over the last five years. While this increase isn’t a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention.”
Ms Anderson said common mistakes the ATO has seen include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.
“I heard a story recently about a taxpayer purchasing everyday clothes who was told by the sales assistant that they could claim a deduction for the clothing
if they also wore them to work,” Ms Anderson said.
“This is not the case. You can’t claim a deduction for everyday clothing you bought to wear to work, even if your employer tells you to wear a certain colour or you have a dress code.”
Ms Anderson said it is a myth that taxpayers can claim a standard deduction of $150 without spending money on appropriate clothing or laundry. While record keeping requirements for laundry expenses are "relaxed" for claims up to this threshold, taxpayers do need to be able to show how they calculated their deduction.
The main message from the ATO was for taxpayers to remember to:
- Declare all income;
- Do not claim a deduction unless the money has actually been spent;
- Do not claim a deduction for private expenses; and
- Make sure that the appropriate records are kept to prove any claims.
GST applies to services or digital products bought from overseas
From 1 July 2017, GST applies to imported services and digital products from overseas, including:
- digital products such as streaming or downloading of movies, music, apps, games and e-books; and
- services such as architectural, educational and legal.
Australian GST registered businesses will not be charged GST on their purchases from a non-resident supplier if they:
- provide their ABN to the non-resident supplier; and
- state they are registered for GST.
However, if Australians purchase imported services and digital products only for personal use, they should not provide their ABN.
Imposition of GST on 'low-value' foreign supplies
Parliament has passed legislation which applies GST to goods costing $1,000 or less supplied from offshore to Australian consumers from 1 July 2018.
Using a 'vendor collection model', the law will require overseas suppliers and online marketplaces (such as Amazon and eBay) with an Australian GST turnover of $75,000 or more to account for GST on sales of low value goods to consumers in Australia.
The deferred start date gives industry participants additional time to make system changes to implement the measure.
It should be noted that this is a separate measure to that which applies GST to digital goods and services purchased from offshore websites, as outlined above.
New threshold for capital gains withholding
From 1 July 2017, where a foreign resident disposes of Australian real property with a market value of $750,000 or above, the purchaser will be required to withhold 12.5% of the purchase price and pay it to the ATO unless the seller provides a variation (this is referred to as 'foreign resident capital gains withholding').
However, Australian resident vendors who dispose of Australian real property with a market value of $750,000 or above will need to apply for a clearance certificate from the ATO to ensure amounts are not withheld from their sale proceeds.
Therefore, all transactions involving real property with a market value of $750,000 or above will need the vendor and purchaser to consider if a clearance certificate is required.
Action to address super guarantee non-compliance
The Government will seek to legislate to close a loophole that could be used by unscrupulous employers to short‑change employees who choose to make salary sacrificed contributions into their superannuation accounts.
The Government will introduce a Bill into Parliament this year that will ensure an individual’s salary sacrificed contributions do not reduce their employer’s superannuation guarantee obligation.
Change to travel expenses for truck drivers
The ATO has released its latest taxation determination on reasonable travel expenses, and it includes a big change for employee truck drivers.
For the 2017/18 income year, the reasonable amount for travel expenses (excluding accommodation expenses, which must be substantiated with written evidence) of employee truck drivers who have received a travel allowance and who are required to sleep away from home is $55.30 per day (formerly a total of $97.40 per day for the 2016/17 year).
If an employee truck driver wants to claim more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the amount in excess of the reasonable amount.
Note: The determination includes an example of a truck driver who receives a travel allowance of $40 per day in 2017/18 ($8,000 over the full year for 100 2-day trips), but who spent $14,000 on meals on these trips.
In terms of claiming deductions for these expenses, he can either claim $14,000 as a travel expense (if he kept all of his receipts for the food and drink he purchased and consumed when travelling), or just rely on the reasonable amount and claim $11,060 ($55.30 x 200 days) as a travel expense (in which case he will need to be able to show (amongst other things) that he typically spent $55 or more a day on food and drink when making a trip (for example, by reference to diary entries, bank records and receipts that he kept for some of the trips).
Car depreciation limit for 2017/18
The car limit for the 2017/18 income year is $57,581 (the same as the previous year). This amount limits depreciation deductions and GST input tax credits.
In July 2017, Laura buys a car to which the car limit applies for $60,000 to use in carrying on her business. As Laura started to hold the car in the 2017/18 financial year, in working out the car’s depreciation for the 2017/18 income year, the cost of the car is reduced to $57,581.
Div.7A benchmark interest rate
The benchmark interest rate for 2017/18, for the purposes of the deemed dividend provisions of Div.7A, is 5.30% (down from 5.40% for 2016/17).
The New World of Superannuation!
Changes were made to superannuation on 1 July 2017 that affect superannuation contributions and the way superannuation and retirement income is taxed. Amongst these changes are additional reporting requirements to the Australian Tax Office (ATO). Here we explain how the changes may affect you, whether you are contributing to superannuation, about to retire or already retired.
1. Pension Transfer Balance Cap Reporting
- The ATO says its proposed new reporting rules should have a “minimal impact” on self-managed super funds (SMSFs), with many likely to have to report transactions only once.
- For SMSFs without members in retirement, there probably would be no additional reporting requirements until a pension income stream was started.
- For existing pensions at 1 July 2017, we understand that the ATO is likely to allow SMSFs to delay reporting until 30 June 2018.
- After 1 July 2018, reporting to the ATO will need to be completed within 28 days of the end of the quarter in which it occurs.
- For example, a pension starting on 1 July 2018 would be reported no later than 28 October 2018.
- A pension starting on 31 December 2018 would be reported no later than 28 January 2019.
- These timeframes and the events they involve have yet to be finalized but it is clear that more urgent reporting will be required from SMSFs in the future.
- The ATO have confirmed “Income stream value fluctuations, pension drawdowns and the ceasing of a pension (due to no funds remaining) are not events that need to be reported through the transfer balance account report”
2. New Pay As You Go (PAYG) reporting for Market Linked Pensions
- Historically, it has not been necessary to lodge PAYG payment summaries for anyone receiving a Pension who is over 60;
- This will change from 1 July 2017 where the pension is a “capped defined benefit pension” (i.e., existing market linked, complying lifetime or complying life expectancy pensions).
3. Funds electing for Capital Gains Tax (CGT) Relief
- This election must be made in the 2017 Annual return
- This is particularly relevant for those who lodged the 2015/16 return late – they will only have until 31 October 2017 to lodge their 2016/17 return.
If you wish to discuss these changes and their impact in more detail, or have any other questions about self-managed superannuation funds, please contact our office and make a time to meet with one of our team members “
SMSF Adviser of the Year Award
Congratulations to Victoria Kogan.
Victoria has been shortlisted as a finalist to win the SMSF Adviser of the Year Award for the prestigious Women in Finance Awards 2017.
In its inaugural year, the Women in Finance Awards, which covers 28 categories, recognises the outstanding work of women within financial services.
“We are set for a superb awards presentation. The judges have a tough job on their hands this year and there will no doubt be much excitement to hear their verdicts. “The winners will not only represent inspirational high achievers from the financial sector, but also recognise the rising stars of tomorrow,” Jim Hall said.
The winners will be announced at a black-tie awards dinner on Thursday, 21 September at The Star, Sydney.
We wish Victoria the very best of luck.
Important: Clients should not act solely on the basis of the material contained in Cents & Sensibility. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Cents & Sensibility is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
Please contact us if you wish to discuss how the points raised in this edition specifically affect you.Yours faithfully,
The knp Team
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IN THIS ISSUE
- ATO warning regarding work-related expense claims for 2017
- GST applies to services or digital products bought from overseas
- Imposition of GST on ‘low-value’ foreign supplies
- New threshold for capital gains withholding
- Action to address super guarantee non-compliance
- Change to travel expenses for truck drivers
- Car depreciation limit for 2017/18
- Div. 7A benchmark interest rate
- The new world of superannuation!
- SMSF Advisor of the Year Award