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Single Touch Payroll is a government initiative to streamline business reporting obligations, which is due to become compulsory from 1 July 2018. When a business pays its employees, the payroll information will be sent to the ATO via the business’s payroll software. We can help to get set ready before 30/06/2018. Call S & H Small Business Tax Accountants.

Reporting under the Single Touch Payroll (STP) system removes the requirement to issue payment summaries, provide annual reports and tax file number declarations to the ATO. During the first year of its introduction, the ATO says employers will not be liable for a penalty for a late STP report.

Important points to keep in mind for the transition to STP include:

• Employers with 20 or more employees will need to start reporting through STP from 1 July 2018.
• You will report salary or wages, pay as you go (PAYG) withholding and super guarantee information to the ATO when employees are paid.
• To determine if you are required to report through STP, you will need to do a headcount of employees on 1 April 2018 (more below).
• You may have the option to invite employees to complete tax file number (TFN) declarations and super standard choice forms online.
• Payroll software will need to be updated to a version that supports STP.
• If your software was already STP enabled, you could have already been able to report through STP from 1 July 2017.

Employee end-of-year pay information
If you report an employee’s details through STP, you will not have to provide that employee with a payment summary at the end of financial year. You also won’t be required to provide the ATO with a payment summary annual report for those employee’s details.

You will need to notify the ATO when the payment summary data is considered final. The ATO will make that information available to employees (and their tax agent) through myGov, and as pre-filled information in their tax return.

Employer checklist to help you get ready

Step 1: Do a headcount of the employees you have on 1 April 2018

Count the number of employees you have on your payroll on 1 April 2018 to find out if you are a “substantial employer”. If you have 20 or more employees on that date you will need to report through STP. (See panel at left/right/below.)

Step 2: Update your payroll solution when it’s ready

Right now, payroll software and service providers are updating their products. A software product catalogue is available on the Australian Business Software Industry Association (ABSIA) website (search for “absia product catalogue”). The catalogue will be updated as payroll solutions are STP-enabled.

You may wish to talk to your payroll software or service provider or third party provider to find out more information about your product, and when it will be ready.

Step 3: Start reporting through Single Touch Payroll

You can start reporting when your payroll solution is ready. Also note that:

• You will not be penalised. You will not be liable to pay a penalty for a late report during the first 12 months you are required to report through STP, unless the ATO first gives you written notice advising that a failure to report on time in the future may attract a penalty.
• It’s okay if you make a mistake. When you start reporting through your STP-enabled payroll solution, you will be able to correct any errors you make in a later STP report.
• PAYG withholding payments. You will still have the option to pay your PAYG withholding more regularly, for example, when you pay your staff. However, there is no change to current payment due dates.

Who is and is not an employee?

The following employees need to be included in the headcount:

• full-time employees
• part-time employees
• casual employees who are on the payroll on 1 April and worked any time during March
• employees based overseas
• any employee absent or on leave (paid or unpaid)
• seasonal employees (staff who are engaged short term to meet a regular peak workload – the ATO example is harvest workers

When performing the headcount, the following are not included:

• any employees who ceased work before 1 April
• casual employees who did not work in March
• independent contractors
• staff provided by a third-party labour hire firm
• company directors
• office holders
• religious practitioners.

We have experienced team of small business accountants in Cranbourne and surrounding suburbs. We help small businesses in Malvern East area with accounting needs. Contact us on 1300 SAH TAX.

The ATO has issued guidance on making claims for mobile phone use as well as home phone and internet expenses, and says that if you use any of these for work purposes you should be able to claim a deduction if there are records to support claims.

But the ATO points out that use for both work and private matters will require you to work out the percentage that “reasonably relates” to work use.

Substantiating claims
In this area of deductions, it is a general ATO requirement that records are kept for a four-week representative period in each income year to claim a deduction of more than $50. These records can include diary entries, including electronic records, and bills. “Evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate that you are entitled to a deduction,” its guidance says.

When you can’t claim a deduction for your phone
Of course if your employer provides you with a phone for work use and also pays for usage (phone calls, text messages, data) then plainly you will not be able to claim a deduction. It would be the same if you pay for usage but are subsequently reimbursed by your employer.

How to apportion work use of a mobile phone
As there are many different types of plans available, you will need to determine the work use using a reasonable basis.

Incidental use
If your work use is incidental and you are not claiming a deduction of more than $50 in total, you can make a claim based on the following (without having to analyse the relevant invoices):

• $0.25 for work calls made from a landline
• $0.75 for work calls made from a mobile
• $0.10 for text messages sent from a mobile.

Usage is itemised on bills
If you have a phone plan where you receive an itemised bill, you need to determine the percentage of work use over a four-week representative period, which can then be applied to the full year.

This percentage needs to be worked out using a reasonable basis. This could include:

• the number of work calls made as a percentage of total calls
• the amount of time spent on work calls as a percentage of total calls
• the amount of data downloaded for work purposes as a percentage of total downloads.

Usage is not itemised on bills
If however you have a phone plan where you don’t receive an itemised bill, you can determine work use by keeping a record of all calls over a four-week representative period and then calculate the claim using a reasonable basis.

The ATO uses an example to further explain this.
Ahmed has a prepaid mobile phone plan that costs him $50 a month. He does not receive a monthly bill so he keeps a record of his calls for a four-week representative period. During this four-week period Ahmed makes 25 work calls and 75 private calls. He worked for 11 months during the income year, having had one month of leave. He therefore calculates his work use as 25% (25 work calls out of 100 total calls). He claims a deduction of $138 in his tax return (25% x $50 x 11 months).

Bundled phone and internet plans
Nowadays phone and internet services are often bundled together. The ATO says that when you are claiming deductions for work-related use of one or more services, you will need to apportion costs based on your work use for each service. “If other members in your household also use the services, you need to take into account their use in your calculation,” it says.

If you have a bundled plan, you need to identify work use for each service over a four-week representative period during the income year. This will allow you to determine your pattern of work use, which can then be applied to the full year.

A reasonable basis to work out work-related use could include:

Internet:

• the amount of data downloaded for work as a percentage of the total data downloaded by all members of the household
• any additional costs incurred as a result of work-related use – for example, if work-related use results in you exceeding your monthly cap.

Phone:

• the number of work calls made as a percentage of total calls
• the amount of time spent on work calls as a percentage of total calls
• any additional costs incurred as a result of work-related calls – for example, if work-related use results in exceeding the monthly cap.

Again, the ATO uses a worked example to illustrate.

Des has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan. There is no clear breakdown for the cost of each service. By keeping a record of the calls he makes over a four-week representative period, Des determines that 25% of his calls are for work purposes. Des also keeps a record for four weeks of the data downloaded and determines that 30% of the total amount used was for work.

He worked for 11 months during the income year, having had one month of leave. As there is no clear breakdown of the cost of each service, it is reasonable for Des to allocate 50% of the total cost to each service.

Step 1 – work out the value of each bundled component.
Internet: $45 per month ($90/2 services).
Home phone: $45 per month ($90/2 services).

Step 2 – apportion work related use.
Home phone: 25% work related use x $45 per month x 11 months = $124.
Internet: 30% work related use x $45 per month x 11 months = $149.
In his tax return Des claims a deduction of $273 ($124 + $149) for the year.

Please ask for our help and guidance should you wish to make a claim for mobile and home phone and internet costs.

If you need to lodge your 2019 tax return then contact S & H Tax Accountants on 1300 SAH TAX .

If you produce assessable income at home, or some of it, and you incur expenses from using that home as your “office” or “workshop”, the ATO will generally allow that a taxpayer could be in a position to be able to claim some expenses and make some deductions. Otherwise the ATO takes the view that expenditure associated with a person’s place of residence is more likely to be of a private nature.

Deductions may be available from the use of your home to earn income in two circumstances. First, if it is used in connection with your income earning activities but isn’t a place of business (that is, your home is not your principal place of business, but you might do a few hours of work there). The second situation in which you may be able to claim a tax deduction is when the home is also being used as a place of business. The tax implications are different depending on which of these circumstances applies.

In broad terms, expenses fall into the categories that are listed in the following table.

Home office expenses you can and can’t claim
Expenses	Home is principal workplace with dedicated work area	Home not principal workplace but has dedicated work area	You work at home but no dedicated work area
Running expenses	Yes	Yes	No*
Work-related phone & internet expenses	Yes	Yes	Yes
Decline in value of office equipment	Yes	Yes	Yes
Occupancy expenses	Yes	No	No

* Generally, an employee who works at home and who does not have a dedicated work area will not be entitled to claim running expenses or their claim for running expenses will be minimal. This is due to the fact that they can only claim the additional running expenses incurred as a result of working from home.

Running expenses

You can generally view running expenses as those costs that result from you using facilities in your home to help run the business or home office, so these would include electricity, gas, phone bills and perhaps cleaning costs. But again you can only claim a deduction for the amount of usage from the business or home office, not general household expenses.

Using your floor area may be an appropriate way of working out some running expenses. For example, if the floor area of your home office or workshop is 10% of the total area of your home, you can claim 10% of heating costs. An alternative can be to compare before and after average usage for each cost. Another possibility is to keep a representative four-week diary to work out a pattern of use for your home work area for the entire financial year.

Instead of recording actual expenses for heating, cooling or lighting, it may be easier to use the ATO’s “acceptable” rate for these expenses, which is 52 cents per hour based on actual use or an established pattern of use (from 1 July 2018, it was 45 cents before then).

To use the 52 cents per hour method of claiming, keep a diary to record the amount of time you use your home office for work purposes. The diary must show a representative period of at least four weeks to establish a pattern of use for the whole year.  Remember to always keep these diaries with your tax return paperwork as you may be required to support this deduction should the ATO review your return.

Communications

If you use a phone exclusively for business, you can claim a deduction for the phone rental and calls, but not the cost of installing the phone. If you use a phone for both business and private calls, you can claim a deduction for business calls (including from mobile phones) and part of the rental costs.

You can identify business calls from an itemised phone account. If you do not have an itemised account, you can keep a record for a representative four-week period to work out a pattern of business calls for the entire year. A claim of no more than $50 can be claimed with limited documentations

If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyse your bills:

• $0.25 for work calls made from your landline
• $0.75 for work calls made from your mobile
• $0.10 for text messages sent from your mobile.

If you have a bundled phone and internet plan, you need to identify your work use for each service over a four-week representative period during the income year. This will allow you to determine your pattern of work use which can then be applied to the full year.

A reasonable basis to work out your work-related internet use could include:

• the amount of data downloaded for work as a percentage of the total data downloaded by all members of your household
• any additional costs incurred as a result of your work-related use – eg if your work-related use results in you exceeding your monthly cap.

Decline in value

There are deductions available for a “decline in value” (depreciation) of items such as electrical tools, desks, computers and other electronic devices, as well as for desk, chairs and so on.

If you use your depreciating asset solely for business purposes, you can claim a full deduction for the decline in value (generally over its “effective life”). Remember however that if you qualify as a small business (ask us what this means) you could immediately write off most depreciating assets that cost less than $20,000 (proposed to increase to $25,000 for a limited period, but this is not law yet). You may also be able to pool most other depreciating assets and claim a deduction for them at a rate of 15% in the first year and 30% thereafter.

However, if you also use the depreciating asset for non-business purposes, you must reduce the deduction for decline in value by an amount that reflects this non-business use. Talk to this office for more information about claiming depreciation expenses.

Deductions for occupancy

Occupancy expenses can only be claimed if you are using your home as a place of business, not just conveniently working from home as a salaried employee.  This means that the ATO expects you to have an area of your home set aside exclusively for business purposes. Occupancy expenses are those expenses you pay to own, rent or use your home. These include:

• rent, or mortgage interest
• council rates
• land taxes
• house insurance premiums.

You can generally claim the same percentage of occupancy expenses as the percentage area of your home that is used to make income, and again one common way to work this out is to use the floor area put aside for work as a proportion of the floor area of your home as a whole (as can be used for some running expenses, as mentioned above).

So if for example your home office is 10% of the total area, then you may be able to claim 10% of rent costs or mortgage interest, council rates and insurance. In some situations it may be necessary to adopt a basis other than floor area, for example where say a huge workshop attached to the home may take up a great amount of floor space but contribute much less to the value of the overall property.

Note that where you are running a business from home rather than having a home office you can opt to claim occupancy expenses, such as mortgage interest. However, you’ll be expected to account for any capital gain attributable to the business area of the home when you sell the house. Generally the family home is exempt from capital gains tax (CGT), but if you’ve carried on a business based on the above, that portion of the home attributable to the business activity will be subject to CGT. There are however some CGT concessions for small businesses, which we can detail for you should this be relevant to your situation.

Reference: Supplied by Tax and Super Australia

Individuals

The previously legislated Low and Medium tax offset of $530 (2018-19 Budget) will now be increased to $1080 per year for single and amount is $2160 for couple and the base amount will increase from $200 to $255 per year from 2018-19 to 2021-22 financial year.

Based on new Low and Medium Income Tax Offset will now provide reduction of $255 individuals with taxable income of $37K or less. For individuals with taxable income between $37k to $48K, the offset will increase by 7.5 cents per dollar to the maximum offset of $1080. Taxpayers with taxable income between 48K and $90K will be the maximum offset of $1080.00. The offset will phase out at the rate of 3 cents per dollar for taxpayers with taxable income of $90K up to $126K

Future thresholds and changes to tax rates

From 01/07/2022 the 19% bracket will be increased from $41K (18-19 Budget) to $45K and Low-income tax offset will increase from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 (as previously legislated). LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667

For Small businesses

The instant asset write-off threshold will be increased from $25,000 to $30,000 from Budget night to 30 June 2020.

The threshold applies on a per asset basis. Therefore, eligible businesses can instantly write off multiple assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020.

The instant asset write off will also be expanded to apply to both “small businesses” (those with an aggregated annual turnover of less than $10 million) and medium sized businesses (an aggregated annual turnover of $10 million or more, but less than $50 million).

ABN Obligation and Black economy

ABN holders will have to lodge their tax return on time and Business register will be revised annually for accuracy. From 01/07/2021 ABN holders required to adhere to income tax lodgement obligation and check the behaviour to disrupt the black economy. ABN will be cancelled if no activity on ABN for a period of time.

The measures announced as part of Budget 2019–20 are subject to receiving royal assent and are therefore not yet law We at S & H Tax Accountants are committed to provide exceptional services to small businesses and Individuals in Cranbourne, Clyde, and Clyde North. We offer accounting services in Chadstone and Malvern East

Disclaimer: The information provided is general in nature and every effort has been made for the accuracy of the information S & H Accountants pty ltd do not take any responsibility for damages. Info Source ATO, Tax and Super Australia

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO. Single Touch Payroll is a requirement for 19 or less employees from 01/07/2019. Some exemption available to closely held entities.

If you are using a solution that offers STP reporting, such as payroll or accounting software, you will send your employees’ tax and super information to ATO each time you run your payroll and pay your employees.

Small business and STP

• Large employers with 20 or more employees should now be reporting through STP or have applied to ATO for a later start date.
• Small employers with 19 or less employees will need to report through STP from 1 July 2019. If you’re an employer with four or less employees, you will have additional options.

We offer Payroll services to Small Business owners as little as $5/employee/Pay run. If your business is not STP compliant talk to us for obligation free meeting. S & H tax accountants Cranbourne and Tax accountant Chadstone offer payroll services to small businesses.

This is the report lodged to ATO for the contractor payments you have made during the financial year. This tells ATO about the payments are made to the contractors for providing services.

Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.

Am I required to lodge the Payment Annual Reporting or TPAR?

You only need to lodge if your business is in the following category. Here are the businesses who need to lodge a Taxable payment annual report (TPAR) by 28 August each year if you are a:

Business providing:

• building and construction services
  • cleaning services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • courier services – for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • road freight services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • security, investigation or surveillance services – for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • information technology (IT) services – for contractor payments from 1 July 2019(first report due by 28 August 2020)

What information do I need from Contractor?

The details you need to report about each contractor are generally found on the invoice you should have received from them. This includes:

• their Australian business number (ABN), if known
• their name and address
• gross amount you paid to them for the financial year (including any GST).

Can S & H Accountants help me?

Yes, we have extensive experience in this field, and we help you to lodge TPAR as well as BAS and Tax returns for your business. Talk to Accountant at S & H Accountants today to get started.

If you still have any question, feel free to contact accountant in Cranbourne and Accountant in Chadstone. We at S & H Accountants have worked with above listed businesses and lodged the TPAR for them. We are experienced accountants in Chadstone.

Airbnb is one of many examples of the “sharing economy” — connecting buyers (users) and sellers (providers) through a facilitator that usually operates an app or a website. Airbnb acts as this facilitator by allowing individuals, referred to as “hosts”, to rent out a room of their house or their whole house for a short-time basis via its online platforms.

While the focus here is on Airbnb, the tax concepts outlined could be applied in a more general sense to anyone seeking to rent out a part of their home, whether through Gumtree, Realestate.com.au, Flatmates.com.au and so on.

The tax issues raised relate to hosts who:

• own their own home;
• live in it full time; and
• want to generate some dollars by putting up an identifiable area of their home for rent.

As a host, the three major tax considerations that you need to be aware of are rental income, rental expenses, and capital gains tax.

Rental income
The main question hosts need to ask themselves here is whether a commercial amount of rent is being charged. Generally, where a room is advertised for rent at market rates to the general public through Airbnb (or a similar online directory, but we’ll use Airbnb as the generic term) the arrangement is likely to be at “arms-length” and hosts would be required to declare their rental income.

Rental expenses
Where the rental arrangement is at “arms-length” and income is declared, hosts would be entitled to tax deductions for expenses incurred in deriving that rental income.

Expenses incurred by hosts can be split into three categories:

1. Expenses that are directly associated with the rented area – deductible in full.
2. Expenses that relate to shared areas – apportionment required.
3. Expenses that relate to the host’s private area only – not deductible.

Depreciation on furniture purchased for use in the rented room is a good example of an expense that is directly associated with the rented area of the host’s home and would be deductible in full.

Some examples of other expenses that may be deductible in full include:

• commercial cleaning of a rented area;
• repairs and maintenance;
• professional photography for the listing; and
• host service fees charged by Airbnb.

Where there are expenses that relate to the entire property, apportionment is required. The ATO has indicated that floor space can be used as a general approach for apportioning expenses.

Some examples of expenses that relate to the entire property and may be deducted in this way include:

• mortgage interest;
• council rates;
• utilities; and
• insurance.

It is important to note that where capital works are undertaken in relation to the property, capital works deductions are generally not available to hosts, as they are also using the property for their own residential accommodation.

Expenses that relate to shared areas can be apportioned based on access. In regard to using floor space as an indicator, if say one tenant and one host had equal access to shared areas, the host could, therefore, claim for 50% of these expenses.

Examples of expenses that relate to shared areas only, and may be deductible in this way, include:

• depreciation on furniture and appliances located in shared areas;
• internet; and
• cable TV.

One final thing to note in relation to expenses is that they are only deductible where an area of the house is either actually rented out, or genuinely available for rent. For example, where a room in the host’s home is only available for rent for 90 days a year, say while a housemate is away, then only the portion of rental expenses that were incurred during that 90-day period would be deductible and further apportionment may be required.

Capital gains tax
In general terms, the sale of an individual’s primary residence is CGT-free under the main residence exemption if the dwelling was their main residence for the entire time they owned it, and it was not used to produce assessable income.

However as hosts are renting out a portion of their home on Airbnb, they are using a portion of it to produce assessable rental income and therefore would only be only eligible for a partial main residence exemption. This means that hosts may be taxed on a portion of any capital gain realised upon the sale of their main residence.

Remember that “pre-CGT” assets (bought before 20 September 1985) are not subject to CGT, regardless of whether they are used to derive rental income.

Dealing with a post-CGT main residence
The below scenarios assume the following:

• the host purchased their home post-20 September 1985 (and therefore may be subject to CGT on the sale); and
• the host would have been eligible for the main residence exemption from the time that they purchased their home until the time that they started renting out a portion of their home.

A basic scenario would be one in which a host rented out the same part of their home from the time that they purchased it until the time that they sold it. In this case, the part of the home used to produce assessable income would be subject to CGT and the private portion of the home would be CGT free under the main residence exemption. As with expenses, an apportionment based on floor space may be used to determine the portion of the property that is subject to CGT.

A more common scenario may be where the host began renting out a part of their home some time after moving in. The calculations under this scenario can differ depending on whether the host first began using their home to produce assessable before or after 7.30pm on 20 August 1996.

The reference “first used to produce assessable income” would generally be the first time a host rented a part of their home out (whether on Airbnb or otherwise). However, if the host had previously used part of their home as a home office or workshop at some time in the past, it may actually be that time that the home was “first used” to produce assessable income.

Pre-20 August 1996 property
Where the host first used their home to produce assessable income prior to 7.30pm on 20 August 1996, they would need to calculate the portion of the ownership period in which they used the entire house for private purposes and the portion in which they were renting part of the house out.

Purchased: 1 July 1991 (used 100% for private purposes)
First rented a portion of house: 1 July 1995 (30% of total floor space apportioned to tenant)
Sold: 1 July 2012
Total days house was owned: 7,671
Total days portion was rented out: 6,210
Gain on sale: $100,000
Calculation: $100,000 x 6,210/7,671 x 30% = $24,286 gross capital gain.

This gross capital gain could then be reduced further by either indexation or the general 50% CGT discount, as the property was held for at least 12 months.

Post-20 August 1996 property
Where the host first used their home to produce assessable income post-20 August 1996, the calculation is slightly different. Firstly, the host is deemed for tax purposes to have acquired the property as at the date that the house was first used to produce assessable income and secondly, a market valuation, calculated at that date, may be required, which is then taken to be their deemed cost base to be used in calculating any future capital gain. This valuation could come from a registered valuer or could be calculated by the host, however it is important to note that the ATO has the power to challenge valuations.

Purchased: 1 July 1991 (used 100% for private purposes)
First rented a portion of house: 1 July 1998 (30% of total floor space attributable to tenant)
Market value @ 1 July 1998: $200,000
Sold: 1 July 2012
Sale price: $500,000
Calculation: ($500,000 – $200,000) x 30% = $90,000 gross capital gain.
This amount may be reduced further by either indexation or the general 50% CGT discount.

These two scenarios are relatively straightforward. Where different portions of the house were available for rent during the host’s ownership period, or where the entire house was rented during some periods and was used 100% for private purposes during other periods, the CGT calculations can become very complex.

Goods and services tax
Income from renting out part of a residential property is typically “input-taxed”. This means that hosts should not charge GST on the rent that they earn from guests. Conversely, hosts cannot claim input tax credits for any rental expenses that they incur, but are entitled to claim the GST inclusive amount of any rental expenses as a tax deduction.

Be aware however that GST may apply if host is taken to provide “commercial residential premises” – which includes, among other things, accommodation that is a hotel, motel, inn, hostel or boarding house. Remember also that being registered for GST is subject to the host exceeding the $75,000 turnover threshold.

PAYG instalments
If hosts report more than $2,000 of rental income on their latest lodged tax return, they may receive a letter from the ATO notifying them that they are required to begin making periodic PAYG instalments. These are essentially prepayments of tax that are offset against the host’s final tax liability at the end of the year upon lodging their tax return

Disclaimer: Information supplied on this website is general in nature, Please take independent advice before act. information supplied by tax and super Australia.