ATO reporting tax debts of sole traders to credit agencies
The ATO has started disclosing tax debts of over $100,000 owed by sole traders to credit agencies – previously only company tax debts were disclosed.
Businesses that owe at least $100,000 in tax and are more than 90 days in arrears without a payment plan will be reported by the ATO to credit agencies. The $100,000 threshold includes income tax debts, activity statement debts, superannuation debts, fringe benefits tax debts, and penalties and interest charges.
The ATO will send a written letter (Intent to Disclose Notice) to a business if they plan to reporting their outstanding tax debts to a credit agency. The notice outlines the steps that need to be taken to avoid the tax debt information being reported. Businesses have 28 days from receiving the notice to take the relevant action. If your business currently has or is likely to have an ATO debt of more than $100,000, it’s important that you or your tax advisor engage with the ATO before the business is issued with an Intent to Disclose Notice.
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Claiming tax deductions for personal super contributions
Taxpayers who wish to claim a personal tax deduction for super contributions must provide a Notice of Intent to their superannuation fund.
The tax rules require taxpayers to provide this Notice on or before whichever of the following days occurs earliest:
the day the taxpayer lodges their tax return for the year in which the contributions were made.
the last day of the income year after the income year in which the contributions were made.
The taxpayer must also receive an acknowledgment from their super fund.
If the Notice of Intent has already been lodged but the taxpayer has made a mistake or no longer wishes to claim the deduction, then the Notice must be varied with the super fund before the tax return is lodged.
Failure to comply with these eligibility rules may result in the tax deduction being disallowed upon a review by the ATO.
Paying reasonable travel allowances to employees
The ATO has issued Tax Determination TD 2022/10 which sets out the reasonable allowances for the 2022/23 year for meals, domestic and overseas travel paid to employees, company directors or office holders.
The reasonable allowance for overtime meals is $33.25, while the reasonable allowances for domestic and overseas travel is set out in various tables in the Determination.
Where the amount paid falls within the relevant reasonable allowance, the person is not required to substantiate the expenses. However, the ATO still requires some written records be kept to show the allowance was expended.
Note any expenditure on accommodation overseas must be fully substantiated.
Claiming tax deductions for business travel expenses
As a business owner, the general rule is that you can claim deductions for expenses if you or your employees are travelling for business purposes
The ATO on its website has details of:
expenses you can claim (e.g. airfares);
expenses you can’t claim (e.g. souvenirs);
how expenses may be claimed (e.g. travel allowances);
when travel diaries must be kept; and
what records must be kept.
Note where a business pays for any non-business related travel expenses of employees, fringe benefits tax may apply.
2022-23 car threshold amounts
From 1 July 2022 the following car threshold amounts apply:
(1) Income tax
An upper limit applies to the value of a car that a taxpayer is able to claim depreciation based on the business use of the car - the car limit applies to the year the car is first used for business or work purposes.
The car limit for 2022–23 is $64,741 – this amount is exclusive of GST so it applies net of any GST credits claimed.
If a taxpayer purchases a car for $70,000, the maximum depreciation that can be claimed is based on the cost limit of $64,741.
(2) Goods and services tax (GST)
Where the purchase price of the car exceeds the cost limit of $64,741, the maximum GST credit that can be claimed is one-eleventh of the car limit amount which in 2022–23 is $5,885.
A GST credit cannot be claimed for any luxury car tax paid upon purchase of a luxury car regardless of any business use.
(3) Luxury car tax (LCT)
From 1 July 2022, the LCT threshold has increased to $71,849.
The LCT threshold for fuel efficient cars has increased to $84,916 for the 2022–23 year.
The LCT value of a car generally includes, the value of any parts, accessories or attachments supplied or imported at the same time as the car.
Cars with a LCT value over the LCT threshold attract an LCT rate of 33%.
Tax issues with cryptocurrency
Despite the ‘currency’ part of its name, cryptocurrency is not generally treated as currency in Australia and most world jurisdictions. Australia does not have a tax regime specific to crypto assets. The ATO, tax practitioners and taxpayers alike have to apply existing laws to specific transactions that involve cryptocurrency.
There are 3 ways that taxpayers can be assessed on the sale of cryptocurrency:
As a capital gains tax asset for crypto investors
As a crypto trader carrying on a business
On “revenue account” but not from the conduct of a business – where crypto is purchased for short term purposes with the intention of selling for a profit in in line with the Myer Emporium principle
Taxpayers who fall under categories 2 and 3 are assessed on crypto gains as ordinary income and therefore can claim crypto losses as a deduction against their other income. The ATO will no doubt be flagging investment losses claimed as deductions against other income in their 2021-22 tax returns and request additional information. Therefore contemporaneous documentation and the relevant facts will be critical.
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This information is provided solely for general information purposes and is not intended as professional advice. Readers should not act on the information contained therein without proper advice from a suitably qualified professional.
We expressly disclaim all liability for any loss or damage to any person or organisation for the consequences of anything done or omitted to be done by any such person relying on the contents of this information.