2021 Tax

It is tax time again in Australia.

I thought I would publish some questions flowing from my client base.

Samantha – Cremorne

Hi Peter. I am ready for you to do my return. What information do you require?

Hi Samantha, The ATO provides a pre-filler that outlines income earned as reported through the Single Touch Payroll (STP) system. Additionally, Private Health Funds report your details to the ATO, and dividends paid are also reported to the ATO. This covers most of what I need to start your return. These details should be through by July 15th, so stay patient and I will get on to your return when I have this.

Ben – Dee Why

Hi Peter , I heard that company contributions to super go up to 10% this year. Do I have to do anything to receive this?

Hi Ben. No Your employer is required via STP to contribute 10% of wages and salary paid. It will appear on your pay slip. You don’t have to do anything, but I recommend you check with your fund each quarter to make sure that the super has been paid. All employers must pay this within 30 days of the end of each quarter.

Tess -Company owner Collaroy

Hi Peter, we have decided to wind up the company following Covid impact. Would you please advise on the process to wind up the company?

Hi Tess, this is quite complex and is subject to any winding up provisions within the company constitution. Nevertheless, in the circumstances this is a good decision if the company is no longer required. There is no reason to continue paying regulatory and accounting fees if the company has no useful purpose. Essentially the process is this. First, we must finish the year end accounts and define the distribution any residual assets to the shareholders. Then we advise ASIC that the company is financial able to pay its debts (Form 520 Declaration of Solvency), then the directors pass a special resolution to wind up the company and submit this to ASIC (form 205). Finally, after  the distribution of residual assets, and the closure of all bank accounts, the company is officially wound up upon confirmation from ASIC.

Phil Sole Trader – Dee Why

Hi Peter, I bought a ute in June 21. How will this be treated in my tax? Can I write it off this year?

Hi Phil, well that is a good question. The instant asset write off provisions were extended and modified again in the May 21 budget. SBE depreciation including 100% write off for assets costing less than $150,000 if purchased by December 30, 2020 and installed ready for use by June 30 2021 under simplified depreciation rules. However, in an increasingly complex extension termed ‘temporary full expensing’ the effect of instant asset write off was extended to June 30, 2022. So it would appear that you are good to go. A complying asset can also be second hand. This also applies to tools and other machinery used in producing income. The rules are client specific so contact me if you have any queries.

Adriana – Randwick

Hi Peter , I recently returned from the USA where I worked in IT for 3 years in California. My previous accountant calculated a substantial tax bill here in Australia for the years that I was working overseas. Should I be paying tax to the Australian government in tax years where I received no income from Australian employers?

A good question Adriana. If you are an Australian resident for tax purposes, then your taxable income in Australia is your worldwide income. i.e. you pay income tax to the USA authorities and you also pay tax to Australian authorities after conversion to $AUS. If Australia has a tax treaty with the international body (we do with USA), then a full credit is applied for the foreign tax paid when you lodge your return. It is unusual for additional tax to be paid so I would suggest you get another professional opinion. You are entitled to a foreign tax credit on all taxes deducted as income tax on wages and salaries. The tax treaty is designed so that you do not pay double tax. N.B. I had a client in Brazil in similar circumstances. There is no tax treaty between Australia and Brazil …tough

Franco – Air BNB operator Umina Beach

Hi Peter, we let out part of our home via BNB during the year. I have all the income and expenses detail. Is there any way we can claim part of our electricity, home loan payments etc?

Thanks for the question Franco. It is sensible that you account for all income received. The ATO is vigilant this year. In principle you can claim 100% of all direct expenses relating to the area used for BNB. E.g. crockery, cutlery, heaters, BNB charges,linen.

Common expenses are deductible including all holding costs of the property used partially for commercial and private purposes. i.e. all insurance, interest on mortgage, rates and taxes, Cleaning, photography, dvd/games etc gardening, repairs, depreciation, guest linen, electricity & gas. Deductions are 100% for related costs, 50% for common area usage.

Essentially any cost directly incurred to rent an area is 100% deductible (e.g. Linen, letting fee, depreciation of rental specific new assets). All other costs must be apportioned based on the relative floor area, or if they relate to common areas e.g. garden use, kitchen, living area, balcony, they can be apportioned at 50% of the total property costs. i.e. all property holding costs.

The rental period is important. E.g. if the area was rented for 150 days of any one year, all deductions must be factored by 150/365.

Keep all receipts.

All the best for the 2021 tax season

Peter Cox

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