GMP Partners

Sydney Chartered Accountants and Tax Consultants

GMP Partners

Practice Update – June 2022

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ATO priorities this tax time

The ATO has announced four key areas that it will be focusing on for Tax Time 2022:

  • Record-keeping.
  • Work-related expenses.
  • Rental property income and deductions.
  • Capital gains from crypto assets, property, and shares.

Before claiming income tax deductions for their expenses, taxpayers must ensure:

  • they spent the money themselves and were not reimbursed;
  • if an expense is for both income-producing and private use, only the portion relating to producing income is claimed; and
  • they have a record to prove it.

Download our checklists

Year-end Checklist for Business
Individual Tax Return Checklist

Avoid double dipping on your deductions

Taxpayers are reminded not to make the mistake of ‘double dipping’ on deductions (that is, claiming expenses twice) in their tax return this year.

Some of the ‘double dipping’ mistakes commonly made relate to the following deductions:

Working from home expenses

A common mistake involves using the ‘shortcut method’ to claim working from home expenses and then claiming additional amounts for expenses such as mobile phone and internet bills, as well as the decline in value of equipment and furniture.

The working from home shortcut method is all-inclusive.

There are three methods available to claim a deduction for working from home expenses depending on individual circumstances; namely, the shortcut, fixed rate and actual cost methods.

The method that gives the best outcome can be used, as long as the eligibility and record-keeping requirements for the chosen method are observed.

Car expenses

A common mistake involves using the ‘cents per kilometre’ method to claim car expenses, and then double dipping by separately claiming expenses such as fuel, car insurance, and registration.

The cents per kilometre rate is all-inclusive and already covers decline in value, registration, insurance, maintenance, repairs, and fuel costs. 

Reimbursed expenses

Taxpayers cannot claim expenses that have already been reimbursed by their employer.

Get ready for super changes from 1 July 2022

As the new financial year approaches, employers need to be aware of two important super changes.

From 1 July 2022, employees can be eligible for super guarantee (‘SG’), regardless of how much they earn, because the $450 per month eligibility threshold for when SG is paid has been removed. 

Employers only need to pay super for workers under 18, when they work more than 30 hours in a week.

Furthermore, the SG rate will increase from 10% to 10.5% on 1 July 2022.  Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July, even if some or all of the pay period is for work done before 1 July.

Employers should update their payroll and accounting systems to ensure they continue to pay the right amount of super for their employees.

ATO to start clearing backlog of ENCC release authorities

Due to “unavoidable delays caused by improvements to” its systems, the ATO will start issuing requests to release excess contributions and other charges for individuals who did not make an election on the tax treatment of their excess non-concessional contributions (‘ENCC’) for prior financial years.

This may result in a higher than normal number of release authorities for members of superannuation funds over the coming months while the ATO works through the backlog.

ATO warns about GST fraud

Taxpayers are being warned to be on the lookout for dodgy online ads, often on social media platforms, promising easy GST refunds.

The ATO recently issued a media release about large-scale GST fraud attempts exceeding $850 million, that involve customers setting up an ABN without operating a business, and then submitting fictitious BAS statements to get a GST refund.

The ATO said it has already successfully stopped $770 million in attempted fraud before payment.

“The people who are involved in these activities aren’t accidentally ticking a box on an online form.  They’re signing to say that they’ve set up an ABN for a business that doesn’t exist, then lodging a BAS with false information on it, to receive GST refunds that they are not entitled to,” the ATO said.

Taxpayers who think they’ve been involved in this arrangement are urged to let the ATO know (before the ATO contacts them) by calling 1300 130 017.

Confidential reports of suspected tax evasion or crime can be made online (visit ato.gov.au/tipoff) or by calling the ATO’s Tax Integrity Centre on 1800 060 062.

Employers need to prepare for changes under STP expansion

Single Touch Payroll (‘STP’) reporting has been expanded.

This expansion, known as ‘STP Phase 2’, means that employers will need to start reporting extra information to the ATO each time they run their payroll.

Some digital service providers (‘DSPs’) needed more time to update their products and applied for deferrals, which cover their customers – therefore, when an employer can start Phase 2 reporting depends on when their payroll product is ready.

Employers that have not already started Phase 2 reporting should ask their DSP when their product will be ready (if they don’t already know).

Employers need to be across the changes and get ready to start Phase 2 reporting.  This includes:

  • checking if changes need to be made to payroll pay codes/categories so they align with Phase 2 requirements;
  • reviewing allowances employers pay and how they need to be reported in Phase 2;
  • understanding changes to salary sacrifice reporting; and
  • understanding how to assign an income type to each payment.

The ATO is also reminding employers that amounts paid to ‘closely held payees’ should now be reported through STP.

A ‘closely held payee’ is an individual directly related to the entity they receive payments from. For example, family members of a family business, directors or shareholders of a company and beneficiaries of a trust.

There are concessional reporting options for closely held payees reporting which include the following:

  • Reporting actual payments on or before the date of payment (along with arm’s length employees).
  • Reporting actual payments quarterly.
  • Reporting a reasonable estimate quarterly.

Editor: Should you have any questions (or require any assistance) about any of the issues raised in this update, please feel free to contact our office.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

2021/22 Individual Tax Return Checklist

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Tax saving strategies prior to 1 July 2022

A strategy often used to reduce taxable income (and, in turn, tax payable) in an income year is to bring forward any expected or planned deductible expenditure from a later income year.  However, in light of the continued impact of the COVID-19 pandemic, any tax planning for individuals with potentially reduced income for the 2022 tax season may require consideration of deferring any deductible expenditure (if possible).

Resident taxable income thresholds for the 2020/21 income yearTax payable1
0 – $18,200Nil
$18,201 – $45,00019% of excess over $18,200
$45,001 – $120,000$5,092 + 32.5% of excess over $45,000
$120,001 – $180,000$29,467 + 37% of excess over $120,000
$180,001 and over$51,667 + 45% of excess over $180,000
1. The Medicare levy of 2% generally applies in addition to these rates.

Common claims made by individuals

The following outlines common types of deductible expenses claimed by individual taxpayers, such as employees and rental property owners, and some strategies for increasing their deductions for the 2022 income year.

1. Depreciating assets costing $300 or less

Salary and wage earners and rental property owners will generally be entitled to an immediate deduction for certain income-producing assets costing $300 or less that are purchased before 1 July 2022. 

Some purchases you may consider include:

  • tools of trade;
  • electronic tablets;
  • calculators or electronic organisers;
  • software;
  • books and trade journals;
  • stationary; and
  • briefcases/luggage or suitcases.

2. Clothing expenses

Individuals may pay for work-related clothing expenses before 1 July 2022, such as:

  • compulsory (or non-compulsory and registered) uniforms, and occupation specific and protective clothing; and
  • other associated expenses such as dry-cleaning, laundry and repair expenses.

3. Self-education expenses

Employees may prepay self-education items before 1 July 2022, such as:

  • course fees (but not HELP repayments or student contribution amounts), student union fees, and tutorial fees; and
  • interest on borrowings used to pay for any deductible self-education expenses.

They may also bring forward purchases of stationery and text books (i.e., those that are not required to be depreciated).

4. Other work-related expenses

Employees may also prepay any of the following expenses before 1 July 2022:

  • Union fees.
  • Subscriptions to trade, professional or business associations.
  • Seminars and conferences.
  • Income protection insurance (excluding death and total/permanent disability).
  • Magazine and professional journal subscriptions.

Note: If prepaying any of the above expenses before 1 July 2022, ensure that any services being paid for will be provided within a 12-month period that ends before 1 July 2023.  Otherwise, the deductions will generally need to be claimed proportionately over the period of the prepayment.

Information Required

You will need to provide us with information to assist in preparing your income tax return.  Please check the following and provide any relevant statements, accounts, receipts, etc., to help us prepare your return.

Income/Receipts:

  • Details of your employer(s) and wages.
  • Lump sum and termination payments.
  • Government pensions and allowances.
  • Other pensions and/or annuities.
  • Allowances (e.g., entertainment, car, tools).
  • Interest, rent and dividends.
  • Distributions from partnerships or trusts.
  • Details of any assets sold that were either used for income-earning purposes or which may be liable for capital gains tax (‘CGT’).
  • Other Income (e.g., foreign income).

Expenses/Deductions (in addition to those mentioned above):

  • Award transport allowance claims.
  • Bank charges on income-earning accounts (e.g., term deposits).
  • Bridge/road tolls (if travelling on work).
  • Car parking (if travelling on work).
  • Conventions, conferences and seminars.
  • Covid-19 testing costs for work purposes.
  • Depreciation of library, tools, business equipment (incl. portion of home computer).
  • Gifts or donations.
  • Home office running expenses, such as:
    • cleaning;
    • cooling and heating;
    • depreciation of office furniture;
    • lighting; and
    • telephone and internet.
  • Interest and dividend deductions, such as:
    • account keeping fees;
    • ongoing management fees;
    • interest on borrowings to buy shares; and
    • advice relating to changing investments (but not setting them up).
  • Interest on loans to purchase equipment or income-earning investments.
  • Motor vehicle expenses (if work-related).
  • Overtime meal expenses.
  • Rental property expenses, including:
    • advertising expenses;
    • council and water rates;
    • insurance;
    • interest;
    • land tax;
    • property management fees;
    • genuine repairs and maintenance; and
    • telephone expenses.
  • Superannuation contributions.
  • Sun protection items.
  • Tax agent fees.
  • Telephone expenses (if work-related).
  • Tools of trade.

2021/22 Year-end Checklist for Business

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Many business clients like to review their tax position before the end of the income year and evaluate any strategies that may be available to legitimately reduce their tax. Traditionally, year-end tax planning for profitable small businesses is based around accelerating deductions and deferring income.

Small Business Entities (‘SBEs’) – i.e., those with an aggregated turnover of less than $10 million – often have greater tax planning opportunities compared to other businesses, due to certain concessions generally only applying to them. SBEs usually also have the flexibility to pick concessions that suit their circumstances. However, for 2021/22, many of the SBE concessions are now also available to medium-sized businesses (‘MSBs’), i.e., businesses with an aggregated turnover of less than $50 million.

The following are common strategies that may be considered for all business taxpayers.

Maximising deductions for non-SBE business taxpayers

Deductions can be maximised for non-SBE business taxpayers by prepaying expenses, accelerating expenditure and/or accruing expenses that have been incurred.

Prepayment strategies

Any part of an expense prepayment relating to the period up to 30 June is generally deductible. 

In addition, non-SBE taxpayers may generally claim prepayments in full for expenditure that is:

  • under $1,000;
  • made under a ‘contract of service’ (e.g., salary and wages); or
  • required to be incurred under law.

Note: Medium-sized businesses (‘MSBs’) may fully deduct prepayments made before 1 July 2022 (refer  below).

Accelerating expenditure (including depreciation deductions)

Accelerating expenditure involves bringing forward expenditure on regular, on-going deductible items. 

In fact, this is a useful strategy for any business taxpayer (i.e., including SBEs)  because  businesses can generally claim deductions for expenses they  ‘incurred’ during 2021/22, even if the expenses have not actually been paid by 30 June 2022.

Examples of accelerated expenditure that may be incurred and claimed as a tax deduction in 2021/22 by a business taxpayer include the following:

  • Repairs.
  • Maintenance.
  • Consumables/spare parts.
  • Advertising.
  • Fringe benefits.  Any benefits to be provided, such as property benefits, could be purchased and provided prior to 1 July 2022.
  • Superannuation  contributions made to a complying fund, to the extent the contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June 2022).

In addition to accelerating expenditure on business items such as those listed above, for 2021/22, non-SBE businesses may claim the following accelerated depreciation deductions for depreciating assets first used (or installed ready) for business use by 30 June 2022: 

  • Non-SBEs with an aggregated turnover of (generally) less than $5 billion can fully expense the cost of eligible assets as well as eligible improvements, regardless of cost. 
    Note: Non-SBEs may choose to opt out of full expensing on an asset-by-asset basis.
  • If full expensing does not apply, or an opt-out choice is made, non-SBEs can generally claim the following depreciation deductions (if applicable) for their business assets:
    • Assets costing less than $1,000 may be allocated to a Low Value Pool and depreciated at a rate of 18.75% (in 2022) and 37.5% thereafter.
    • In most other cases, the asset’s cost is depreciated over its effective life
      (as determined by the taxpayer or the  ATO).

 Accrued expenditure

Business taxpayers (including SBEs) are entitled to a deduction for expenses incurred as at 30 June 2022, even if they have not yet been paid.

Examples of expenses that may be accrued and claimed as a tax deduction in 2021/22 include:

  • salary or wages and bonuses accrued for the number of days that employees have worked but have not been paid as at 30 June 2022;
  • accrued interest outstanding on a business loan that has not been paid;
  •  commission  payments owing to employees or other external parties;
  • the fringe benefits tax (‘FBT’) instalment for the June 2022 quarter, if it is due but not payable until July 2022; and
  • directors’ fees payable as at 30 June 2022, where the company is definitively committed to the payment.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE  taxpayers  by accelerating expenditure and/or prepaying deductible business expenses (and also by accruing expenditure – refer above).

Accelerating depreciation expenditure

In addition to accelerating expenditure on various business items (refer above), for 2021/22, SBE taxpayers that use the simplified SBE depreciation rules may claim the following deductions
in relation to depreciating assets:

  • A full deduction for the cost of eligible assets first used or installed ready for business use by 30 June 2022 (as well as eligible improvements), regardless of cost.
    Note: SBE taxpayers that use the simplified SBE depreciation rules cannot directly opt out of fully expensing depreciating assets. Instead, they will need to firstly opt out of the simplified SBE depreciation rules entirely, and then opt out of full expensing an asset-by-asset basis.
  • The SBE closing pool balance (before current year deductions), if any, will be fully claimed in the 2022 income year.
    Note: SBE taxpayers using the simplified SBE depreciation rules cannot opt out of  full expensing with regards to their SBE general pool (i.e., even if they opt out of the simplified SBE depreciation rules). 

If appropriate, SBE taxpayers should consider purchasing and using (or installing ready for use) these items by 30 June 2022.

 Prepayment strategies (SBEs and MSBs)

SBEs and medium-sized businesses (‘MSBs’) that make prepayments before 1 July 2022 can choose to claim a full deduction in the year of payment
(i.e., in 2021/22), if they cover a period of no more than 12 months (ending before 1 July 2023). 

Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

  • Rent on business premises or equipment.
  • Lease payments on business items such as cars and office equipment.
  • Interest – check with your financier whether it’s possible to prepay up to 12 months interest in advance.
  • Business trips.
  • Training courses that run from  1 July 2022.
  • Business subscriptions.

Information Required

This is some of the information we will need you to bring to help us prepare your income tax return:

  • Stock-take details as at 30 June 2022.
  • Debtors listing (including a list of bad debts written off) as at 30 June 2022. 
    Note: To claim a tax deduction, the debt must be written off on or before 30 June.
  • Creditors listing as at 30 June 2022.

Practice Update – March 2020

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Court confirms ATO’s position on foreign income tax offsets

The ATO has welcomed the decision of the High Court to basically uphold the decision of the Full Federal Court in a case which the ATO won, in relation to foreign income tax offsets (‘FITO’).

An Australian tax resident had sold some US investments and paid US tax on the gains.

The taxpayer was then basically taxed on half of those gains in his assessable Australian income (i.e., the gains were eligible for the CGT discount in Australia).

The taxpayer included the whole of the US tax paid in his FITO to offset against his Australian income tax.

However, when determining the FITO available, the ATO only allowed the proportion of the US tax paid that related to the capital gain included in his Australian assessable income.

The Full Federal Court affirmed the ATO’s position.

“This decision reminds taxpayers that they can only claim the foreign income tax offset to the extent that the capital gain is assessable in Australia, rather than the full amount assessed in a foreign jurisdiction,” Deputy Commissioner Tim Dyce said.

“We believe that others may have similarly incorrectly claimed the foreign income tax offset.  Now is the time to review any claim and make any necessary voluntary amendments as we intend to commence compliance activity on this issue in the near future.”

Employer’s requirements and the deductibility of WREs

Some employees may wonder whether a work-related expense (or ‘WRE’) becomes deductible merely because their employer specifically requires the employee to incur the expense. 

Importantly, the ATO’s recent draft ruling on the deductibility of work-related expenses reiterates that an employer’s requirements do not determine the question of deductibility.

Specifically, a number of examples contained in the draft ruling confirm that a WRE expense may be deductible without an employer requiring the expenditure.  For example, a taxpayer incurring expenditure in relation to a course directly connected to their current employment (without their employer’s specific support) may still be in a position to claim self-education deductions.

Alternatively, expenses may be non-deductible despite an employer’s specific directions, such as a restaurant requiring its waiters to dress in ‘black and whites’, or support such as where an employer encourages a dental practice receptionist to undertake a ‘Certificate in Dental Assisting’ so as to open up a new career opportunity.

SMS scam targeting natural disaster victims

The ATO is warning the community about a new SMS scam which promises an 8% bonus on 2020 tax returns to victims of recent natural disasters.

The scam text message says: “Due to natural disasters, Australians are entitled to an 8% bonus on their tax return. Please begin the process by filling out the form below. Link: https://my.gov.verification-digital.com.”

ATO Assistant Commissioner Karen Foat said this is a classic case of fraudsters impersonating the ATO in an effort to collect personal information from people like names, addresses, emails, phone numbers and online banking login details.

This particular scam includes a link to a fake myGov website which looks genuine.

Over the past few years the ATO has seen an increasing number of reports of scammers contacting members of the public pretending to be from the ATO by SMS, email, and phone, and the scammers are becoming more and more sophisticated.

“Last year, over 15,000 people reported to us that they provided scammers with their personal identifying information”, Ms Foat said.

“If you receive an SMS, call, or email and aren’t sure if it’s genuine, it’s OK to not respond.”

The ATO does send SMS and emails, and also makes phone calls to taxpayers, but note that the ATO does not project their phone number onto the recipient’s caller ID — so people can be sure that, if there’s a number on their caller ID, it’s not the ATO calling.

Further STP developments

Editor: In an indication of the far-reaching changes that Single Touch Payroll (‘STP’) will be bringing, Treasury has recently finished consulting on draft legislation that expands the data that may be collected through STP by the ATO (as announced in the 2019/20 Budget).

The legislation, if enacted, will broaden the amounts that employers can voluntarily report under the STP rules, to include employer withholding of child support deductions from salary or wages and child support garnishee amounts from salary or wages that are paid to the Child Support Registrar.

Amendments will also be made to ensure that if employers choose to report under STP to the Commissioner of Taxation, they do not also have to report the amounts to the Child Support Registrar.

STP and employer clients

The ATO has advised that over 580,000 small employers have made the transition to STP reporting, and they are encouraging tax practitioners to help any clients who have yet to engage with STP reporting make the transition now.

They will also send reminders to small employers who are not yet reporting through STP.

Editor: So if you receive any such correspondence and/or simply want to discuss this with us, please call our office.

Valuing car parking fringe benefits

Where businesses provide car parking fringe benefits to their employees, the taxable value of these benefits must be calculated correctly to ensure they are meeting their fringe benefits tax (‘FBT’) obligations, regardless of the method used.

The ATO has advised they may directly contact businesses who have engaged an arm’s length valuer, as required under the ‘market value method’.

According to the ATO, in some instances, valuers have prepared reports using a daily rate that doesn’t reflect the market value, meaning the taxable value of the benefits is significantly discounted or even reduced to nil.

The ATO wants businesses to understand that engaging an arm’s length valuer does not mean they’ve met all the requirements for working out the taxable value of their car parking fringe benefits.

It is actually the business’s responsibility to confirm the basis on which valuations are prepared, and they are expected to examine any valuation they suspect is incorrect or which considerably reduces their liability.

Editor: We can help check if a valuation report required under the market value method meets the ATO’s requirements.

In addition to the valuation report, businesses need a declaration relating to the FBT year that includes the:

  •     number of car parking spaces available to be used by employees;
  •    number of business days; and
  •     daily value of the car parking spaces.

Practice Update – Jan/Feb 2020

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Lifestyle assets continue to be an ATO audit target

The ATO has revealed it will request a further five years’ worth of policy information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high-value motor vehicles and aircraft.

The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2016 to 2020 as part of its data-matching program.

This information (provided by insurers) is intended to be used by the ATO as part of its compliance profiling activities. 

For example, ATO Deputy Commissioner Deborah Jenkins said:

“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three million dollar yacht then this is likely to raise some red flags.”

She clarified that the data will not be used to initiate automated compliance activity.

“Taxpayers selected for compliance activities are identified through other methodologies. The data is made available to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or may not prompt the compliance officer to pursue a particular line of enquiry.”

Aside from helping identify taxpayers who may be understating their income, the data from insurers may be used by the ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this to the ATO.

It will also be used by the ATO to identify incorrect claims for GST input tax credits where taxpayers are incorrectly claiming GST credits as if the (private) item was a business asset.

Additionally, SMSFs the ATO suspects may be acquiring lifestyle assets purely for the personal enjoyment of the fund’s trustee or beneficiaries are also likely to be looked at by the ATO.

Insurers are required to provide the ATO with policy information where the value of assets is equal to or exceeds the following thresholds:

l    Marine vessels $100,000

l    Motor vehicles $65,000

l    Thoroughbred horses $65,000

l    Fine art $100,000 per item

l    Aircraft $150,000

Editor: If you feel that you may be targeted by this latest ATO data collection activity and are concerned about the implications, please feel free to contact our office to discuss your individual circumstances.

Ref: ATO website, 18 December 2019

Disclosure of business tax debts – Declaration made

Following the enactment of legislation in late 2019, the ATO can disclose certain business tax debt information to external credit reporting bureaus.

This information will primarily be used when issuing external creditworthiness reports in relation to relevant businesses, effectively treating tax debts in a similar manner to other business debts.

More recently, the Government issued a Declaration to determine exactly what class of entities may be subject to such disclosures, including entities that:

l    are registered in the Australian Business Register and are not a complying superannuation fund, a DGR, registered charity or government entity; and

l    have one or more tax debts totalling at least $100,000 that are overdue for more than 90 days, disregarding:

–     tax debts where the entity has an arrangement to pay the ATO by instalments (i.e., via a payment plan);

–     tax debts subject to an application for release on grounds of hardship; and/or

–     tax debts subject to dispute via an objection, AAT or Federal Court review that has not been finalised.

Additionally, the Declaration does not allow debt disclosure for taxpayers who have an active complaint concerning the disclosure of tax debt information that is, or could be, the subject of an Inspector-General of Taxation (‘IGOT’) investigation. 

Importantly, if there is such a complaint, the ATO can only proceed with a disclosure of the debt where it is not aware of it after taking reasonable steps to confirm whether the IGOT has such a complaint.

Ref: Taxation Administration (Tax Debt Information Disclosure) Declaration 2019

MYEFO – 2019/20

Treasury has released its Mid-Year Economic and Fiscal Outlook (‘MYEFO’) for 2019/20 forecasting a surplus of approximately $5 billion.

Proposed new record-keeping course

One new tax-related measure of note in the MYEFO was the announcement the ATO would be provided with a new discretion to direct taxpayers (found to be lacking in their substantiation efforts under audit) to undertake an approved record-keeping course, instead of applying financial penalties.

This is yet another measure designed to tackle the ‘black’ or ‘cash’ economy.

Specifically, the Commissioner will be given the discretion to direct taxpayers to undertake the course where he reasonably believes there has been a failure by the taxpayer to comply with their reporting obligations.

The Commissioner will not apply this discretion to those who disengage with the tax system or who deliberately avoid their record-keeping obligations.

Editor: Such a proposal raises obvious concerns as to the onerous nature of having to comply with such a course, particularly for small business owners whose main priority is to run their business.

Interestingly, there is a precedent for similar ATO directions to taxpayers (i.e., to undertake an approved course), with legislation passed earlier this year allowing the Commissioner to require employers to undertake a superannuation guarantee obligations course where there has been a failure by an employer to comply with those obligations.

New ‘gig’ economy reporting

Additionally, the MYEFO also announced the Government’s intention to implement a new third party reporting regime for the sharing economy. 

This will apply to businesses who operate via online platforms within the ‘sharing’ or ‘gig’ economy (e.g., Uber and Airbnb).

It is proposed to be introduced in two stages, starting from 1 July 2022 (for ride-sharing and accommodation platforms) and from 1 July 2023 (for asset sharing, food delivery and tasking-based platforms).

The online platforms will be required to report identification and income information for all its participating members (i.e., both the sellers and providers).

These reports will go directly to the ATO for data-matching (i.e., review and audit) purposes.

Ref: MYEFO 2019/20

The ATO’s Bushfire crisis response

In response to the devastating bushfires across large parts of Australia, the ATO has been keen to advise those impacted that it understands peoples priority is their family and community.  

If taxpayers live in one of the identified impacted postcodes, the ATO will automatically defer any lodgments or payments, meaning that income tax, activity statement, SMSF and FBT lodgments (and their associated payments) are deferred until 28 May 2020.

For those affected not in the current ATO postcodes list, assistance can still be provided, with impacted taxpayers encouraged to phone the ATO’s Emergency Support Infoline on 1800 806 218.

Editor: Please contact our office if you have been impacted by this or another disaster for assistance. Ref: ATO website, 20 January 2020 and ATO media release, 20 January 2020.

Christmas and other Year End Parties

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During the well earned December/January holiday season, many employers will reward staff with a celebratory party or event.  However, there are important issues to consider, including  the possible FBT and income tax implications of providing ‘entertainment’ (including Christmas parties) to staff and clients. 

FBT and ‘entertainment’

Under the FBT Act, employers must choose how they calculate their FBT meal entertainment liability, and most use either the ‘actual method’ or the ’50/50 method’, rather than the ’12-week method’.


Using the actual method

Under the actual method, entertainment costs are normally split up between employees (and their family) and non-employees (e.g., clients).

Such expenditure on employees is deductible and liable to FBT.  Expenditure on non-employees is not liable to FBT and not tax deductible.


Using the 50/50 method

Rather than apportion meal entertainment expenditure on the basis of actual attendance by employees, etc., many employers choose to use the more simple 50/50 method.

Under this method (irrespective of where the party is held or who attends) 50% of the total expenditure is subject to FBT and 50% is tax deductible.


However, the following traps must be considered:

  •       even if the function is held on the employer’s premises – food and drink provided to employees is not exempt from FBT;
  •       the minor benefit exemption* cannot apply; and
  •       the general taxi travel exemption (for travel to or from the employer’s premises) also cannot apply.


(*) Minor benefit exemption

The minor benefit exemption provides an exemption from FBT for most benefits of ‘less than $300’ that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.


The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.

However, entertainment expenditure that is FBT-exempt is also not deductible.

Editor:  ‘Less than’ $300 means no more than $299.99!  A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

Example: Christmas party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all.

The cost of food and drink per person is $250 and no other benefits are provided. 

If the actual method is used: 

  •       For all 40 employees and their spouses – no FBT is payable (i.e., by applying the minor benefit exemption), however, the party expenditure is not tax deductible.

If the 50/50 method is used:

  •       The total expenditure is $10,000, so $5,000 (i.e., 50%) is liable to FBT and tax deductible.

Christmas gifts

Editor:  With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled ‘tax-wise’.

Gifts that are not considered to be entertainment

These generally include a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers or a pen set, etc.  

Briefly, the general FBT and income tax consequences for these gifts are as follows:

  •       gifts to employees and their family members – are liable to FBT (except where the ‘less than $300’ minor benefit exemption applies) and tax deductible; and
  •       gifts to clients, suppliers, etc. – no FBT, and tax deductible.

Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

  •       gifts to employees and their family members – are liable to FBT (except where the ‘less than $300’ minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and
  •       gifts to clients, suppliers, etc. – no FBT and not tax deductible.

Non-entertainment gifts at functions

Editor:  What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees are given a gift or a gift voucher (for their spouse) to the value of $150?

Actual method used for meal entertainment

Under theactual method no FBT is payable, because the cost of each separate benefit (being the expenditure on the Christmas party and the gift respectively) is less than $300 (i.e., the benefits are not aggregated). 

No deduction is allowed for the food and drink expenditure, but the cost of each gift is tax deductible.


50/50 method used for meal entertainment

Where the 50/50 method is adopted:

  •       50% of the total cost of food and drink is liable to FBT and tax deductible; and
  •       in relation to the gifts:

       –     the total cost of all gifts is not liable to FBT because the individual cost of each gift is less than $300; and

       –     as the gifts are not entertainment, the cost is tax deductible.

Editor:  We understand that this can all be somewhat bewildering, so if you would like a little help, just contact our office.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.