All posts by M1 IT Support

Australian Federal Court backs 2019 ruling the controversial ‘backpacker tax’ invalid

Following an appeal by the ATO, the Australian High Court has today reaffirmed a court ruling from October 2019 which stated that the ‘Backpacker Tax’ cannot be levied on citizens from certain foreign countries, namely UK, the US, Germany, Finland, Chile, Japan, Norway and Turkey.

What does this ruling mean for Backpackers?

If you visited Australia as a working holidaymaker between 2017 – 2020, it’s highly likely that you will be entitled to a significant tax refund as a result of this case!

Put simply, if you think you have been affected by the Backpacker Tax, you should contact GM Tax.

Backpackers from other countries:

We anticipate that there will be further developments in this case which will affect backpackers from other countries.

Coronavirus – Small Business Tax Relief

A great concern for all small businesses at the moment is the impact the Coronavirus will have on your business and business around you.  The Australian government is working through this difficult time to introduce various tax relief packages for small businesses and those affect by the Coronavirus.

Small Business Stimulus Package

A summary below of the measures introduced so far.

  1. Instant Asset Write-off
  • A business with a turnover of less than $500 million per annum will receive an immediate tax deduction for any business related asset purchased up to $150 000 until 30 June 2020. The threshold will revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020, however businesses not entitled to the instant asset write off from 1 July 2020 may be entitled to the 50% investment incentive as below.
  • There is no limit to the number of assets you can purchase.
  • This applies to all assets bought between 12 March 2020 and 30 June 2020.
  • The benefit will be claimed when your 2020 tax return is lodged.

2. Investment Incentive

  • A business with a turnover of less than $500 million per annum will receive a tax deduction of 50% of the cost of the asset.
  • There is no threshold to the value of the asset that may be purchased.
  • There is no limit to the number of assets you can purchase.
  • This applies to all assets bought between 12 March 2020 and 30 June 2021.
  • The balance of the assets cost would be depreciated under the existing rules.

3. Tax-Free Payments for Employers

·         The Government is providing up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.

  • An eligible business has a turnover of less than $50 million per annum AND employs staff.
  • Eligible employers will initially receive 100% of the PAYG withholding tax for employees up to a maximum of $50,000 for the period 1 January 2020 to 30 June 2020.
  • A business that does not need to withhold PAYG tax because the salaries are too low will still receive $10,000 applied against the their account.
  • This money will not be included in taxable income of the business.

·         The payments will be available to active eligible employers established prior to 12 March 2020.

·         The ATO will deliver the payment as a credit to the entity upon lodgment of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.

  • An additional payment ‘is also being made in the July – October 2020 period. Eligible entities willreceive an additional payment equal to the total of all of the Boosting Cash Flow for Employers paymentsthey have received (again a maximum of $50,000).
  • This means that eligible entities will receive at least $20,000 up to a total of $100,000under both payments.

4. Apprentices and Trainees Support 

  • A business who employs apprentices and trainees AND employs fewer than 20 full-time employees.
  • A wage subsidy of 50% of the apprentices wage is paid up to a maximum per apprentice of $21 000.
  • This applies to wages paid from 1 January 2020 to 30 September 2020.
  • Employers will have to register for this claim from 1st April 2020.
  • An eligibility assessment will be conducted by an Australian Apprenticeship Support Network provider.
  • The benefit will be paid on a successful assessment.

5. ATO Administrative Relief

There are various tax payment allowances which can be applied which are specific to each business as follows;

  • Defer up to 6 months amounts owing from BAS returns.
  • Remit interest and penalties incurred after 23rd January 2020.
  • Vary PAYG amounts to zero.

The overall intention is to assist businesses with making payments to the ATO and we at GM Tax are here to assist you in anyway possible through this difficult time.

Should you wish to discuss any of the above issues further please call me.

 

Filing Deadline

The Australian filing deadline is fast approaching which am sure is the last thing you may be thinking about due to current crisis we are all facing.

We and the ATO urge you not to delay submission of your tax returns due to your inability to pay any tax liabilities that may arise as a result. Assistance is available from the ATO to defer payments and to vary installments that you may have due.

We at GM Tax are dedicated to assist you manage your filing and tax obligations through this difficult time.

Stay safe & well and together we shall work through this.

Working Safe During Coronavirus

We at GM Tax have a work from home policy. We have plans in place for our employees can work from home as the need arises.

Our offices remain open and we shall ensure that there will be no disruption to our service offering to you.

We are committed to providing a high level of service and continue to support you by phone and email through these challenging times.

Wishing you all health and continued prosperity.

Changes in Capital Gains Tax on Private Residences/Property

There are significant changes coming into affect from 6th April 2020, which will dramatically affect the tax paid or due to be paid and the relief’s available on residential properties;

Proposed changes in relation to the main residency exemption

With effect from 6 April 2020 the following changes will apply;

1. The final period exemption for PPR relief is to be reduced from 18 months to 9 months (note: special rules giving those with a disability, and those in care, a final period exemption of 36 months will still apply).

2. Lettings relief is no longer available unless the owner was in shared occupation with the tenant.

Proposed changes in relation to the filing of property disposal tax returns and payment of tax

The existing charge to tax on gains realised by non-UK residents on UK residential property will be extended to ALL UK properties. The following properties will now be brought into charge:-

· Gains on commercial property; and

· Gains on residential property owned by diversely held companies. (Previously, non-resident CGT did not apply to residential properties owned by companies that were diversely held, i.e. that would not have been close if UK resident).

· Where a disposal has occurred, a return must continue to be made within 30 days of the date of disposal (using the completion date rather than exchange of contracts as the trigger date even though exchange of contracts is the date of sale for CGT) along with the normal reporting on your tax return.

· Where a tax liability arising a tax return is required to report the disposal within 30 days and the due date for payment on account is now required to be paid within 30 days. The CGT is calculated taking into account your annual exemption for the year and estimate at the correct rate of CGT to apply (18% or 28% based on 2019/20 rates).

· If there is no gain to report or the gain is covered by exemptions or losses, you will not have to complete a property disposal return.

Changes for Companies

· Non-UK resident companies that carry on a UK property rental business or have other UK property income will be liable to corporation tax instead of income tax.

Should you wish to discuss these changes in further detail you can call an office local to you or send an online enquiry via our website and we shall call you to discuss.

Main Residence Exemption Bill Passes Senate

The removal of the Main Residence Exemption was passed by the Australian Senate on Thursday 5th December 2019 which will see the Main Residence Exemption entitlement removed for Australian expats.

Australian expats who currently live overseas and own a property that was a former Principle Place of Residence (PPR) will now need to make a decision with regards to the property which could potentially see large tax bills arising if it is your intention to sell the property while overseas.

You now have to decide to sell your property before the 30th of June 2020 to retain either a full or partial entitlement to the Main Residence Exemption or to retain the property until you return to Australia as a resident for tax purposes.

Now that the bill has passed both the lower and upper house we await for it to receive Royal Assent.

Should you wish to discuss in further detail to see how these changes impact you please call an office local to you or send an enquiry via our website.

Let Property Campaign & Disclosure to HMRC

The UK’s Let Property Campaign, is a campaign run by HMRC for individuals who have undisclosed income in relation to rents received.

The Let Property Campaign gives you an opportunity to bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK while your are overseas.

If you owe tax or not on your letting income you’ll need to tell HM Revenue and Customs (HMRC) about the income you haven’t declared by making a voluntary disclosure or by registering for the Campaign.

Should you owe tax to HMRC due to your undisclosed rents and to obtain the best possible terms or settling these liabilities, you must tell HMRC that you wish to take part in the campaign. Once registered you then have 90 days to calculate and pay what you owe.

Who can take part?

You can report previously undisclosed taxes on rental income to HMRC under the Let Property Campaign if you’re an individual landlord renting out residential property;

* renting out a single property

* renting out multiple properties

* a specialist landlord, eg student or workforce rentals

* renting out a room in your main home for more than the Rent a Room Scheme threshold (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme)

* living abroad and renting out a property in the UK

* living in the UK and renting a property abroad

* renting out a holiday home even if you use it yourself

You are not able to use this scheme to declare undisclosed income if you’re a company or a trust renting out residential property or if you’re renting out commercial property.

You may have become a landlord for many different reasons; you might not even think of yourself as one. This could be because you’ve:

* inherited a property

* just rented out a flat to cover your mortgage payments

* moved in with someone and need to rent out your house

You may have simply misunderstood the rules or been told differently.

Whether your errors were due to misunderstanding the rules, or you deliberately avoided paying the right amount, you should notify HMRC now rather than wait until they uncover the errors.

Should you wish to discuss further and take part in the Campaign or make a voluntary disclosure please call a GM Tax office local to you or submit an enquiry via our online enquiry form on our websites www.gmtax.com.au or www.gmexpattax.com

Proposed changes announced in 2018 to Principle Private Residence & Letting Relief

These changes to capital gains tax (CGT) are due to come into effect from 6 April 2020, but there will be a consultation on the details first.

From April 2020:

* Lettings relief will only be available to those who are in shared occupancy with a tenant.

* The final period exemption allowing Principle Private Residency exemption for the last 18 months of ownership as long as the property qualified for PRR at some point, will be reduced to 9 months.

* The final period exemption will remain 36 months for those who move into care and for disabled persons.

https://www.gov.uk/government/publications/private-residence-relief-budget-2018-brief

Changes with regard to rollover and accessing benefits from a QROPS

Following the transfer of UK sourced pension money to an Australian QROPS, it is then within the Australian superannuation system and will be covered by the Australian rules. However, upon withdrawal or rollover to another superannuation fund, UK tax charges may still apply to the money.

There are two different tests for this. Which one should be used depends on when the transfer of the UK pension money to the QROPS took place.

If it was before 6 April 2017 then UK tax rules will still apply if the member:-

Ø at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 5 preceding UK tax years

If it was on or after 6 April 2017 then UK tax rules will still apply if the member:-

a. at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 10 preceding UK tax years, or

b. a period of 5 years has not passed since the transfer of UK pension money to the QROPS took place.

If UK tax rules do not apply under the above tests, then a rollover of UK sourced pension money to a non-QROPS or a withdrawal by the member can be done without incurring UK tax.