November 2017

Are you?
– A taxpayer currently building or renovating property.

At a glance:
– Building and renovating property may have certain capital gains tax (CGT) and goods and services tax (GST) implications.

You should: 
– Keep records to demonstrate your intentions whilst developing property.
– Contact us if you require any clarification or advice.

If you are renovating one or more properties you need to work out if you are:

• A personal property investor;
• Engaged in a profit-making activity of property renovations; or
• Carrying on a business of renovating properties.

If you are considered a personal property investor, your net gain or loss from the renovation may be treated as a capital gain or capital loss respectively.

If you are carrying out a profit-making activity of property renovations, you may need to report in your income tax return your net profit or loss from the renovation.

If you build new residential premises for sale:

• You are liable for GST on the sale; and
• You can claim GST credits for your construction costs and any purchases you make related to the sale.

Residential premises include houses, units and flats that are occupied or can be occupied as residences.

Businesses in the building and construction industry need to report to the Tax Office each year, the total payments they make to each contractor for building and construction services.

For more information, click here

Remember:
– For personal property investors, CGT concessions such as the CGT discount and the main residence exemption may reduce their capital gain.

This article was published on 31/10/2017 and is current as at that date

Are you?
– A taxpayer who owns shares in a company

At a glance:
– As a shareholder, you may receive an offer from a company to buy back some or all of your shares in the company and this may have capital gains tax (CGT) implications.

You should: 
– Pay tax on your capital gains in the correct financial period.
– Contact us if you require any clarification or advice.

If you disposed of shares back to the company under a share buy-back arrangement, you may have made a capital gain or capital loss from that capital gains tax (CGT) event.

To work out whether you have made a capital gain or capital loss, you compare the capital proceeds with your cost base and reduced cost base.

When you make the capital gain or capital loss will depend on the conditions of the particular buy-back offer. For example, it may be the time you lodge your application to participate in the buy-back, or if it is a conditional offer of buy-back, the time you accept the offer

If shares in a company:

• Are not bought back by the company in the ordinary course of business of a stock exchange; and
• The buy-back price is less than what the market value of the share would have been if the buy-back had not occurred and was never proposed; then
• The capital proceeds are taken to be the market value the share would have been minus the amount of any dividend paid under the buy-back.

In this situation, the company may provide you with the market value or a class ruling obtained from the Tax Office.

Under other off-market buy-backs, where a dividend is paid as part of the buy-back, the amount paid excluding the dividend is your capital proceeds for the share.

For more information, click here.

Remember:
– A capital gain or capital loss on an asset is the difference between what it cost you and what you receive when you dispose of it.

This article was published on 31/10/2017 and is current as at that date

Are you?
– Purchasing a car for your business.

At a glance:
– If you use a motor vehicle solely in carrying on your business and you are registered for GST, you are generally entitled to claim a GST credit for the GST included in the price of the vehicle, provided you have a tax invoice.

You should: 
– Only claim partial GST credit if you use a motor vehicle partly in carrying on your business.
– Contact us if you require any clarification or advice.

Generally, if you purchase a car for your business and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of that limit. Currently the car limit is $57,466, therefore the maximum GST credit you can claim is $5,224 – that is 1/11 x $57,466.

In certain circumstances you may be able to claim GST credit for the full amount of GST included in the price of a car even if the car costs more than the car limit. The car must be solely used in carrying on your business and at least one of the following conditions must be met:

• The car was held solely as a trading stock, other than holding the car for hire or lease;
• Research and development was carried out for the manufacturer of the car;
• The export of the car in circumstances where the export is GST free;
• It is an emergency vehicle;
• It is a commercial vehicle that is not designed for the principal purpose of carrying passengers;
• It is a motor home or campervan; or
• It is a vehicle specifically fitted out for transporting disabled people seated in wheelchairs

If you lease a car, you may be entitled to a GST credit for the GST included in each lease payment, based on the amount you use the car in carrying on your business.

If you purchase a second-hand motor vehicle from someone who is not registered for GST and you are purchasing the vehicle to sell or exchange it, you may be entitled to claim a GST credit. If the value of the vehicle is more than $300, you can claim the GST credit when you sell the vehicle, provided the sale is a taxable sale.

For more information, click here.

Remember:
– You cannot claim a credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business

This article was published on 30/11/2017 and is current as at that date

Are you?
– An employer.

At a glance:
– The Tax Office has a guide explaining how employers who are terminating an employee’s employment, calculate and report the tax on any termination payments.

You should: 
– Provide this information to employees with your letter of offer or PAYG payment summaries.
– Contact us if you require any clarification or advice.

Employees can be paid several types of ‘lump sums’ that are taxed and reported differently to normal income. A lump sum payment is a one-time payment, usually provided instead of having to make recurring payments over a period of time.

An employment termination payment (ETP) is one of these lump sums.

A ‘life benefit ETP’ is paid to an employee. If the employee has died, a ‘death benefit ETP’ is paid to their estate.

ETPs include gratuities and severance pay but not payments for accrued annual leave or the tax-free part of genuine redundancy payments.

Accrued annual and long service leave payments are not part of the employee’s ETP but may receive concessional tax treatment.

Termination because of genuine redundancy or early retirement payments are tax free up to a certain limit.

An ETP has a tax-free component if part of the payment is for invalidity or work done before 1 July 1983. You do not withhold from this component.

ETPs are concessionally taxed up to a certain limit, or ‘cap’. There are two caps and their use depends on the type of payment.

You withhold from the taxable component of the ETP at concessional rates up to the applicable cap and at the highest marginal rate for amounts above the cap.

For more information, click here

Remember:
– A payment must generally be made within 12 months of termination to qualify as an ETP and receive a concessional tax treatment.

This article was published on 30/11/2017 and is current as at that date