October 2023 – Accounting and SMSF Roundup

October Round up

Our October Roundup focuses on:

1. Cryptocurrency
2. Deductions for superannuation contributions
3. Gifts and donations

Cryptocurrency

Crypto assets are a digital representation of value that you can transfer, store, or trade electronically.

Crypto assets are a subset of digital assets that use cryptography to protect digital data and distributed ledger technology to record transactions. They may run on their blockchain or use an existing platform such as Ethereum. A blockchain is a secure digital ledger used to store a record of crypto transactions.

Crypto generally operates independently of a central bank, authority, or government. However, crypto asset transactions usually are subject to the same tax rules as assets. There are no special tax rules for crypto assets. The tax treatment will depend on how you acquire, hold, and dispose of the purchase.

For tax purposes, crypto assets are not a form of money.

Taxation

You can acquire or dispose of a crypto asset on a crypto trading platform or directly from a digital or hardware wallet. You can exchange or swap crypto assets for other crypto assets, fiat currency or goods and services.

Using or transacting with crypto assets will determine how you treat them for tax purposes. The most common use of crypto assets is as an investment (investors acquire and hold crypto assets to make a financial profit from holding or disposing of them).

Generally, for investors:

  • crypto assets are taxed as CGT assets, including for self-managed super funds (SMSFs) investing in crypto assets.
  • rewards for staking crypto are ordinary income for tax purposes.

Businesses transacting in crypto assets may need to account for them as trading stock or ordinary income (that is, on the revenue account rather than as investment capital gains or losses). In these circumstances, the cost of acquiring crypto assets and the proceeds from disposing of them is ordinary income or a deductible expense, depending on the nature of the transaction.

In some circumstances, crypto assets are not kept mainly for investment but for personal use. Where specific conditions are met, crypto assets are not subject to CGT because they are considered personal use assets.

 Tax Calculation

As with other CGT assets, if your crypto assets are held as an investment, you may pay tax on your net capital gains for the year. This is:

  • total capital gains.
  • less any capital losses.
  • less entitlement to any CGT discount on your capital gains.

Before you calculate CGT on your crypto assets, you will need to:

  • check you have records for your crypto assets and crypto transactions.
  • convert the value of the crypto assets into Australian dollars.

You need to keep details for each crypto asset as they are separate CGT assets. You can work out your CGT using the ATO’s online calculator and record-keeping tool.

This can be a complex area of the taxation law. For this reason, reach out to us if you are still determining your crypto tax position and the records you are required to keep.

Deduction for Superannuation Contributions

Did you know you can make retirement provisions while improving your tax position? This can be achieved by creating a personal, after-tax contribution to your superannuation fund.

You’re eligible to claim a deduction for personal super contributions if:

  1. You made the contributions to your fund that was not a:
    • Commonwealth public sector super scheme in which you have a defined benefit interest.
    • constitutionally protected fund (CPF) or other untaxed fund that would not include your contribution in its assessable income.
    • super fund that notified us before the start of the income year that they elected to treat all member contributions to the super fund as non-deductible.
      • defined benefit interest within the fund as non-deductible.
  1. You meet the age restrictions. If you are under 67, you meet the limits. If you are 67 to 74, you must meet the work test, meaning you must work 40 hours or more in a consecutive 30-day period in the financial year to make contributions.
  2. You have given your fund a notice of intent to claim in the approved form.
  3. Your fund has validated your notice of intent form and sent you an acknowledgement.

Example

Narrelle is a fulltime teacher. During 2022/23, she earned $85,000 before tax.

She makes a personal $15,000 contribution to an eligible superannuation fund during the income year and notifies it that she intends to claim a deduction.

Narrell’s superannuation fund acknowledges that she will claim a $15,000 deduction and taxes the contribution at 15% ($2,250).

Narrelle is eligible to claim a deduction for $15,000 and does this in her 2022/23 income tax return.  This deduction will increase her tax refund by $5,175, an overall tax saving of $2,925.

Please feel free to contact us if you have any questions about this strategy or the taxation of superannuation more generally.

Email: david@ppatkins.com.au77 Willarong Rd
Caringbah, nsw 2229 Australia

September 2023 – Accounting and SMSF Roundup

September Roundup

Our September Roundup focuses on GST rules and maximising GST claims, differences in paying employees travel or living-away-from-home allowances, considerations for appointing SMSF auditors and tax implications of the sharing economy.

Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.

Small Business Lodgement Penalty Amnesty

Small Business Lodgement Penalty Amnesty

The ATO is offering a lifeline to eligible businesses with outstanding tax debts.

Small businesses have a one-off amnesty to lodge outstanding tax returns without penalties.

The amnesty operates until 31 December 2023 and allows small businesses to lodge outstanding tax returns and business activity statements (BAS) that were due between 1 December 2019 and 28 February 2022, without incurring penalties.

The Federal Government has established the amnesty as part of the 2023-24 Federal Budget, to recover some of the estimated $30 billion in small business tax debt.

It applies to businesses with an annual turnover of under $10 million at the time the original lodgement was due.

How will the amnesty assist my business?

Lodging a tax form late can expose your small business to a $1,100 penalty. If you utilise the amnesty, that penalty will be automatically waived. Lodgements need to be done by 31 December 2023.

ATO repayment options

The outstanding lodgements are only one part of the issue. Many small businesses have outstanding tax debts, and getting your tax lodgements up to date may crystalise further tax debts.

If you are concerned about finding the funds to make payment, you should contact an advisor to discuss your available options and effectively manage your obligations. We are already seeing an increase in ATO debt recovery actions and we expect the ATO to further ramp up enforcement activities once the amnesty has ended.

An option that might be available to your business is establishing a repayment plan with the ATO. At present, the tax office has around 400,000 active payment plans – 300,000 of which belong to small businesses.

There are several repayment options offered by the ATO:

  • Self-service payment plan: This is only available to tax debts under $100,000 and has a standard 28-day processing time. The proposed plan should enable the debt to be paid off in two years or less, and the first payment must be scheduled within seven calendar days of the request.
  • Proposing a payment plan: These plans are offered on a case-by-case basis and the ATO considers many factors when assessing eligibility including compliance history, risk mitigation and the size and age of debts

How do I access the amnesty?

To access the small business lodgement penalty amnesty, lodge your relevant forms either independently or through a registered tax agent.

Failure to Lodge penalties may appear on your business’s ATO account, however eligible fines will be remitted.

While the amnesty only covers outstanding tax obligations originally due for lodgement within the period mentioned above, we urge businesses to lodge all overdue forms as the Australian Taxation Office considers circumstances on a case-by-case basis and may waive penalties.

It’s also important to communicate with the ATO because outstanding obligations and a lack of communication can trigger an ATO review or audit.

August 2023 Roundup

In this month’s issue we focus on the impending superannuation rate rise, small business energy incentives, fuel tax credits and car expense claims. There are also important discussions on the review of business restructuring and small business lodgement amnesty.