Value of goods taken from trading stock for private use by business owners
The ATO has published Taxation Determination TD 2022/15 outlining amounts that it will accept as estimates of the value of goods taken from trading stock for private use for the 2022-23 year by taxpayers carrying on a business personally or in partnership. Such amounts are deemed to be assessable income of the taxpayer.
The industries covered by the Determination include bakery, butcher, restaurant/café, caterer, delicatessen, fruiterer/greengrocer, takeaway food shop and mixed business (incorporating milk bars, general stores and convenience stores). The Commissioner notes in the Explanation that a lesser value for goods taken from stock may be used if it can be justified and conversely, where a value of goods would be significantly greater, that value should be used.
For businesses trading as companies and trusts, FBT and Division 7A would need to be taken into account.
Disclosure of business tax debts to credit reporting bureaus
The ATO has advised that, from 10 October 2022, it will begin writing to 8,500 businesses with an active Australian business number (ABN) whose business tax debts meet the criteria for disclosure to credit reporting bureaus.
This is a part of the ATO’s Disclosure of Business Tax Debts program that was announced in July 2022. Under the program, the ATO may disclose tax debts to a credit reporting bureau where a business:
has an ABN and is not an excluded entity;
owes at least $100,000, which is overdue by more than 90 days;
has not engaged with the ATO or taken other action to manage its debt; and
does not have an active complaint with the Inspector General of Taxation about the ATO’s intent to report their tax debt information.
It’s important that businesses engage with the ATO about their tax debts and don’t continually ignore correspondence from the ATO as their tax debts could be reported to a credit reporting bureau which could impact on their borrowing capacity in the future.
Rental property deductions
The ATO has previously announced that they would be focusing on rental properties this tax time. The following recent cases address some common areas of contention around claiming rental property expenses:
- Rizkallah and FCT  AATA – In this case, deductions were limited to the amount of the rental income received, where a taxpayer rented out a property to her estranged husband at less than market value. The case notes that the determination of rental income and expenses declared for tax purposes in circumstances where the property is rented out to a related party, is dependent upon the facts and circumstances specific to the situation. - Wulf and FCT  AATA – In this case repair work had been undertaken in 2014 as a result of flooding. Subsequently in 2017, further flooding occurred, which resulted in the taxpayer claiming a substantial amount for ‘repairs and maintenance’. However, it was deemed that the amount claimed predominantly related to capital improvements to the property, and as a result were not deductible. In the AAT’s view, a high proportion of the expenditure improved the condition of the property from what it was before it was first let out, and/or before the water damage first occurred. These cases highlight the importance of correctly claiming deductions for repairs & maintenance and that property let to a related party needs to be on normal arms-length terms for expenses to be fully deductible.
Banking business income to a private account
The ATO has indicated that it has no concerns with business owners banking their business takings or other sales in private accounts. However, it becomes an issue when this income isn't reported.
According to the ATO, a good way to avoid this problem is to establish a separate business bank account and only deposit sales and other business income into this account. This can help with record keeping and monitoring the cash flow of the business.
The ATO uses many tools (e.g. data matching) to identify income earned and to check if it matches income reported, so income from all sources must be declared
Director identification number (DIN) applications due by 30 November 2022
A director ID is a 15 digit identifier that ALL directors will need to apply for once and keep permanently. The director ID is similar to an Australian tax file number (TFN) and will help prevent the use of false or fraudulent director identities. This has been specifically introduced as a means of addressing phoenixing.
Anyone who was a director on 31 October 2021 (including directors of SMSF trustees) and hasn’t yet applied for a director ID needs to apply by 30 November 2022 through Australian Business Registry Services (ABRS). This requirement to obtain a DIN applies even though the person may have subsequently resigned as director. .
Applicants within Australia can apply in 3 ways:
Online which requires the following: - a myGovID that needs to be setup (different from myGov); - an individual Australian TFN; - your residential address as recorded by the Australian Taxation Office (ATO); and - to answer two questions based on details that the ATO knows about you from the required documents, such as bank account details, notice of assessment, superannuation account details, dividend statement and PAYG summary.
By paper download via ABR
Click here for further information.
The ATO has confirmed that a DIN is not required for a deceased person and the ABRS has indicated that they won’t issue one where their records indicate the person is deceased.
Taxpayer’s addictions did not warrant full remission of administrative penalty
In the case of Dowsing v FCT  AATA 3173, the Administrative Appeals Tribunal (AAT) held that the taxpayer’s drug and gambling addictions were not sufficient circumstances to warrant an exercise of its discretion to further remit the administrative penalty that had been imposed for the taxpayer’s failure to submit his 2017 tax return.
The AAT found that the taxpayer’s circumstances were at least partially a result of poor life choices rather than factors outside of his control such as ill-health or a natural disaster.
This case is a timely reminder that there are limited circumstances in which the ATO and court will remit penalties imposed on the taxpayer.
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.