Tax Tips
The content of these Tax Strategies is general information only. It is not and is not intended to be taxation, accounting, business, financial, legal or other professional advice and should not be acted or relied upon as such.
Specific professional advice should be sought in respect of particular circumstances and requirements, as the information in these Tax Strategies may not be suitable or applicable to particular circumstances and should not be acted or relied upon. The authors have used reasonable endeavours to ensure that the content is correct and current but do not guarantee that it is correct or current and will not be liable or responsible if it is not.
In no event will the authors or any related entity of those persons, or any of their directors, principals, agents, employees or representatives, be liable for any loss, damage, costs or expense (whether direct or consequential) incurred as a result of or arising out of or in connection with this content included in it in whole or in part including but not limited to any error, omission or misrepresentation.
The authors also disclaim all representations and warranties, including but not limited to, warranties as to the quality, accuracy or completeness of the information of whatsoever nature and warranties of fitness for a particular purpose.
‘Bucket Companies’
Discretionary trusts are attractive business structures as they can provide the following benefits: • Flexibility with income distributions (income can be allocated in different ...
‘Double Dip’ For Employees Claiming Motor Vehicle Expenses Reimbursed By Their Employer
Employees can have their work related motor vehicle expenses paid or reimbursed by their employer. They can also claim a deduction under the ‘cents ...
‘Four Year Construction Rule’
Generally the main residence exemption applies from the date a completed dwelling becomes the taxpayer’s main residence i.e. from the date they actually move ...
$20,000 Asset Write-Off
Small businesses (i.e. those with an annual turnover of less than $2m pa) can claim an immediate deduction for assets they start to use ...
15 Year Small Business CGT Exemption
If the 15 year small business capital gains tax (CGT) exemption applies then any capital gains on the sale of business assets will be ...
Accelerated Depreciation for Farmers
From 12th May 2015 the following accelerated depreciation applies to primary producers: • Immediately deduct the cost of fencing and water facilities such as ...
Accommodation and Meals at Remote Sites
The ATO defines an area as remote if it is not in, or adjacent to, an eligible urban area. This means at least 40 ...
Accrued Directors’ Fees
Accruing directors’ fees is a tax deferral strategy as the company receives a tax deduction in one financial year, but the related party (directors), ...
Accrued Expenses
Accrued expenses are expenses that have been incurred, but not yet paid. They are recognised for accounting purposes in the financial statements before being ...
Active Assets Indefinitely
An active asset is an asset that is owned by a taxpayer and used in a business by the taxpayer, an affiliate of the ...
Agribusiness Schemes
Agribusiness is now a common managed investment option for investors. Agricultural investments fall into two main categories, forestry and non-forestry. Forestry managed investment schemes ...
Airport Lounge Memberships
The primary function of Airport Lounge Clubs is to provide airline travellers with business facilities, food, drink and a relaxing environment. Business facilities provided ...
Allocating the Purchase Price of Business Assets Acquired
A business contract to purchase a business is a legally binding agreement between the purchaser and vendor. Although the contract can be verbal, a ...
Art
Small businesses buying art for their offices, workshops or factories will be entitled to a tax deduction for the cost if each item of ...
Averaging for Authors, Artists, Inventors and Sportspersons
Special professionals such as authors of literary, dramatic, musical or artistic work, inventors, performing artists, production associates or sportspersons typically find their professional income ...
Avoiding Value Shifting Rules
Value shifting occurs where transactions are structured to shift value out of assets so that the assets market values and tax values are distorted. ...
Bad Debts
Almost all business entities make sales on credit as it generally increases their total sales. Businesses expect a certain percentage of their credit sales ...
Bitcoin
Bitcoin was created in 2009 by Satoshi Nakamoto as the world’s first cryptocurrency and is the biggest. Currently there are 669 cryptocurrencies in the ...
Blackhole Expenditure
Section 40-880 provides a deduction for certain business capital expenditure (i.e. blackhole expenditure) on a straight-line basis over a 5-year period. Section 40-880 only ...
Bona Fide Travel Allowance
A bona fide travel allowance is a travel allowance paid to an employee who is required to travel overnight for work purposes where the ...
Business Entity Changes
Business entity changes involve transferring a business from its current structure to a more advantageous structure. The most common reasons for a business restructure ...
Business or Hobby?
Working out whether you are operating a business or hobby is important as a business is subject to tax, insurance, employment laws, and other ...
Carbon Sink Forests
A carbon sink is a natural or artificial reservoir that accumulates and stores some carbon-containing chemical compound for an indefinite period. The process by ...
Cash vs Accrual Accounting Methods
Businesses can use two methods of accounting for their income and expenses, cash or the accrual method. Cash accounting is based on the cash ...
Changing Effective Life of Depreciating Assets
Depreciating assets are assets that have a limited effective life and can reasonably be expected to decline in-value over the time they are used. ...
Commuting a Transition to Retirement Income Stream
There are many reasons why people continue to work past age 55. Some need the money, but others enjoy the mental stimulation and social ...
Companies
In Australia a company is a separate legal entity that is registered with the Australian Securities and Investments Commission (ASIC). Companies are regulated under ...
Compulsory Work Uniform
A compulsory work uniform is a uniform that the employer strictly enforces and makes compulsory for all employees to wear. The uniform must be ...
Concessional Superannuation Contributions
Superannuation contributions can be either concessional or non-concessional. With concessional superannuation contributions the payer of the super will be claiming a tax deduction for ...
Crowdfunding
Crowdfunding involves using the internet and social media to raise funds for specific projects or particular business ventures. Typically the promoter of the project ...
Crystallise Capital Losses
Capital Gains Tax (CGT) was introduced into Australia on 20th September 1985, by the Hawke/Keating government. The tax generally only applies to assets acquired ...
Death Benefit Employment Termination Payments
A death benefit eligible termination payment is a payment made by the deceased’s employer for unused sick leave, a gratuity, or golden handshake following ...
Deceased Estates Taxed Under s99
A deceased estate is the property of a person who has died. It only includes property the deceased owned in their own name so ...
Deductions against Workers Compensation Payments
Workers compensation is a form of insurance payment paid to employees if they are injured at work or become sick due to their work. ...
Delay Income
Cash accounting is based on the cash received and the cash paid out. In cash accounting, if you invoice a client you don’t record ...
Departing Australia Superannuation Payment
Temporary residents are taxpayers who hold a temporary visa granted under the Migration Act 1958, are not Australian citizens or the holder of a ...
Dividend Deductions
Australia has one of the highest proportions of share ownership in the world with more than 6.48 million Australians (or 36% of the adult ...
Division 43
Division 43 allows certain capital expenditure incurred on income producing buildings to be eligible for capital works deductions/building write-off. It is actually a capital ...
Division 7A
Division 7A is an ATO integrity measure to ensure that private companies don’t make tax free distributions of profits to shareholders or shareholders’ associates ...
Divorcing Spouses CGT Asset Rollover
The Australian Bureau of Statistics report ‘Marriages and Divorces, Australia, 2013’ confirms there were 118,962 marriages registered, and 49,917 divorces granted in that year. ...
Donations
Taxpayers are generally entitled to claim donations and gifts made to Deductible Gift Recipients (‘DGR’), including various funds, authorities and institutions listed or described ...
Double Tax Agreement
Double tax agreements (DTA) are agreements between Australia and approximately forty four other countries that aim to prevent double taxation, fiscal evasion, and assist ...
Double the Deductible Super Contributions Limit
This strategy allows a taxpayer to claim two deductible superannuation contribution limits in the one year by bringing forward the following years limit as ...
Eligible Termination Payments
Eligible termination payments (ETP) are lump sum payments paid to an employee on resignation, retirement or death. The payments are assessable income to the ...
Employee Meal Expenses on Business Premises
Employee meal costs, like lunch during a normal work day, are normally private non- deductible expenses. But an employer can provide the following meals ...
Employee Share Schemes
Employee share schemes are designed to give employees a share ownership in the company they work for. This can be structured in various ways ...
Employee Truck Drivers
Australian truck drivers are often away from home overnight as they need to deliver goods long distances. Long distance truck drivers who deliver goods ...
Employing the Family
This involves the small business employing family members, e.g. the spouse or older children employed as bookkeepers, receptionists, labourers, secretaries, managers, gardeners, etc. The ...
Entertainment
Generally expenditure on entertainment is not tax deductible. This includes expenditure entertaining clients, business lunches, social functions, Christmas parties, etc. As an exception to ...
Environmental Protection Activities
Environmental protection activities (EPA) are undertaken to prevent, fight or remedy pollution or to treat, clean up, remove or store waste from the business ...
Family Trust Distributions to Adult Children
Family trusts are discretionary trusts established to hold a family’s assets or conduct a family business. The terms and conditions under which a family ...
Farm Management Deposits
The Farm Management Deposits (FMD) scheme allows eligible primary producers to move income from a year in which they don’t need it, to a ...
FBT Exemptions and Reductions
Fringe benefits are extra benefits supplementing an employee’s ‘money wage’ or salary. The most common fringe benefit in Australia is company cars. When these ...
Film Industry Incentives
There are three tax offsets available for certain Australian production expenditure incurred by a production company in making a film, where a minimum level ...
Five Year Rule for New Residential Premises
A residential premise includes houses, units and flats that are occupied or can be occupied as residences. It does not include vacant land. When ...
Foreign Pension Undeducted Purchase Price
Most countries, including Australia, structure their welfare systems so that taxpayers contribute to the country’s welfare systems during their working life and start drawing ...
Fuel Efficient Luxury Cars
Fuel efficiency is the distance you can travel on an amount of fuel. A vehicle that only uses 7 litres of fuel to travel ...
Fuel Tax Credits
Fuel tax credits provide businesses with a credit for the exercise or customs duty that’s included in the price of fuel used in: Off-road ...
General Pool Balance Less Than $20,000
Businesses with a turnover of less than $2 million pa have two choices in calculating their deductions for depreciating assets – the simplified depreciation ...
Genuine Redundancy Payments
An employer has four valid reasons for terminating an employee’s employment: Capacity – This relates to the employees ability to perform the job. Conduct ...
GST Going Concern Exemption
The sale of a going concern is GST-free if all of the following apply: Payment is made for the supply, The purchaser is registered ...
Holiday Homes
Holiday homes are homes that people own in order to holiday in and that are located in a different location to the home they ...
Home Office Occupancy Expenses
If a taxpayer’s home has the character of a ‘place of business’ then occupancy costs like interest expenses, rates, rent, maintenance, etc., may be ...
Home to Work Travel
Normally home to work travel for an employee is not tax deductible as it is deemed private travel. It is possible for an employer ...
Husband and Wife Partnerships
A partnership is a business entity in which two or more individuals or entities combine their skills and money, and share the profits and ...
Income Protection Insurance
Income protection insurance, also known as sickness and accident insurance, provides an employee with monthly income payments to replace their salary income when they ...
Intangible Depreciating Assets
Intangible assets are identifiable long-term assets of a business that have no physical existence. Examples include goodwill, patents and copyright. Some intangible assets have ...
Interest Deductions for Rental Properties
The ATO data shows 1.8 million individuals own an investment property with 67% of those investors recording a loss on their rental income. The ...
Investment Bonds
Investment bonds (also known as insurance bonds) are tax efficient long term investment vehicles. Investment bonds are structured as a life insurance policy under ...
Itinerant Travel
Itinerant travel is defined as working in different places for short periods of time. Employees that may have itinerant travel include home care nurses, ...
Jointly Owned Motor Vehicle
Most spouses jointly own their assets, including all their motor vehicles. This is the case even though the motor vehicle registration departments of several ...
Legal Expenses
Legal expenses are the solicitor fees, court costs, and other expenses involved in dealing with legal matters. Legal expenses can be incurred in getting ...
Life Insurance Held Through Superannuation
Both self-employed business owners and employees who are eligible to claim a tax deduction for superannuation contributions, or who can salary sacrifice, should consider ...
Living Away from Home Allowances
Many careers require employees to live away from their normal place of residence to perform their work duties. This is common with mine workers, ...
Log Book for Motor Vehicles
Taxpayers can claim motor vehicle expenses based on two methods, cents per kilometre or the log book method. The cents per kilometre method is ...
Loss Companies or Trusts
This strategy involves directing business or investment income across to a taxpayer’s loss-company or trust. Loss companies and trusts are entities that have either ...
Luxury Car Leases
Australians purchased approximately 1.1 million new cars in 2015 with over 95% of them imported from overseas. Australian manufactured car sales are falling as ...
Main Residence 6 Month Rule
Home ownership is a widely held aspiration in Australia, providing security of tenure and long term economic benefits to home owners. Owning a home ...
Managing Tax Affairs
A taxpayer can claim a deduction for expenses they incur in managing their own tax affairs. These expenses will be deductible in the year ...
Margin Scheme
Normally the amount of GST payable on a taxable supply of real property is calculated as 1/11th of the GST-inclusive price. In contrast, where ...
Negative Gearing
Negative gearing is where borrowed funds are used to invest in either property or shares and the income generated (at least in the short ...
Negatively Gearing the Family Home
The general rule is that interest on borrowings used to purchase the family home is non-deductible. An exception to this is where a discretionary ...
Non Commercial Losses
Individuals operating a business, as either a sole trader or in partnership, where the business makes a loss, may be able to offset the ...
Non-Residents’ Australian Income
It is essential that taxpayers correctly determine whether they are residents for tax purposes or non-residents as the tax consequences are very different. The ...
Novated Motor Vehicle Leases
A novated lease is a type of motor vehicle lease common in Australia that allows a business to lease a motor vehicle on behalf ...
Occupational Health and Counselling
Occupational health is the promotion and maintenance of the highest degree of physical, mental and social well-being of workers by establishing and maintaining a ...
Overseas Conferences, Courses and Study Tours
Employees undertake overseas conferences, courses and study tours for a variety of reasons including to improve their qualifications and knowledge, experience another culture, travel, ...
Overseas Super Transfer
Australia is a county of migrants with over 27.7% of the resident population having been born overseas (6.4 million people). Persons born in the ...
Overtime Meal Expenses
Generally meals, snacks and drinks bought and consumed while working are considered to be private and non- deductible. An exception to this rule applies ...
Partnership of Discretionary Trusts
A partnership is a business entity in which two or more individuals or entities combine their skills, resources and money and share the profits ...
Passively-Held Assets
Owners of passively-held assets (like offices, factories, and warehouses) are not carrying on a business, so are not entitled to access the capital gains ...
Penalties, Fines and Interest
Section 26-5 of the ITAA 1997 specifically makes penalties or fines imposed as a result of breaches of an Australian law non-deductible. Examples of ...
Personal Services Income (PSI)
Personal services income (PSI) is income produced mainly from an individual’s personal skills or efforts. Basically it’s income that has the characteristics of employment ...
Prepaid Income – Arthur Murray Case
This strategy deals with how a taxpayer receiving an up-front pre-paid income from a contract that straddles several tax years is taxed on the ...
Prepayment Deductions
Prepayments are amounts paid for by a business in advance of the goods or services being received at the period or year end. Small ...
Primary Production Business
A primary producer is an individual, partnership, trust or company carrying on a primary production business. A primary producer is carrying on a business ...
Private Health Insurance
The Medicare levy surcharge (MLS) is designed to reduce the demand on the public Medicare system. The Medicare levy surcharge is payable if an ...
Property Depreciation Reports
A property depreciation report (also called a depreciation schedule) sets out the tax depreciation and building write-off claims for new or existing investment properties ...
Property Related Transactions
The sale of a property can be taxed in one of three ways: Carrying on a business – For example, a property developer building ...
Property Seminars
A good property investment seminar provides investors with the facts and figures, as well as successful strategies, to take advantage of opportunities in the ...
Protective Clothing
Protective clothing is clothing, helmets, goggles, or other garments or equipment designed to protect the wearer’s body from injury or infection. The hazards addressed ...
Provisions and Reserves
Provisions and reserves are similar as they both deal with losses and liabilities and reduce a business’s net assets and equity. The main way ...
PSI Entity
Personal services income (PSI) is income produced mainly from an individual’s personal skills or efforts. Typically this is when more than 50% of the ...
Reducing Super Guarantee Payments
In 1972 the Keating Labour government introduced a compulsory ‘Superannuation Guarantee’ system as part of a major reform package addressing Australia’s retirement income policies. ...
Refinancing the Family Home
Often when taxpayers have paid off the mortgage on their family home they decide to get a loan to purchase a new family home ...
Refund of Division 293 Tax for Temporary Residents Permanently Leaving Australia
The Government introduced the Division 293 tax in 2012 to ensure high income earners on the 47% tax bracket are not benefiting excessively from ...
Relocation Expenses
Relocation costs can be expensive and are often $10,000 - $20,000. Employees who relocate for work purposes however, are not entitled to a tax ...
Rental Property Repairs
Rental property investments are very popular in Australia with over 1.8 million individuals (8% of the Australian population) reporting to the ATO as having ...
Research and Development
The research and development (R&D) tax incentive came into effect on 1st July 2011 and encourages companies to engage in R&D by providing a ...
Resident vs Non Resident
Determining a taxpayer’s residency status is important as Australian tax residents are taxed on their world-wide income (Australian and overseas) where-as non-residents are only ...
Retirement Exemption – CGT Concession for Small Business
There are four capital gains tax (CGT) concessions available for small businesses. The concessions reduce the capital gain on business assets that must be ...
Rollover from Sole Trader to Company
A sole trader business structure is very simple and services many small business owners well. More complex business structures include partnerships, trusts and companies. ...
Salary Packaging Private Motor Vehicles
When a motor vehicle is used 100% for private purposes there is normally no tax deduction available on the expenditure. With this strategy an ...
Salary Packaging Rental Property Expenses to Double Dip and Save the GST
Investors owning a residential rental property are not entitled to claim an input tax credit for the GST included in rental property expenses paid. ...
School Building Fund Levy
A school building fund is a public fund established and maintained exclusively for providing money for the acquisition, construction and maintenance of a building ...
Scrip for Scrip Rollover
As at October 2015 the Australian Stock market was comprised of 2,216 listed entities with a combined market capitalisation of $1,596,640 million. The listed ...
Self Education Expenses
Taxpayers self-education expenses will generally be deductible where they are directly connected to the taxpayer’s current job or income earning activities and: The course ...
Self-Development Courses and Seminars
Self-development courses include personal development courses, success seminars and personal/executive coaching. The self-development field is very broad and covers activities that improve awareness and ...
Self-Managed Super Fund Borrowings
The general rule is that self-managed super funds are prohibited from having any borrowings. As an exception to that rule, since 2007 super funds ...
Service Arrangement
A service arrangement generally has the following features: The taxpayer (and this could be a sole trader, trust, partnership or company) carries on a ...
Share Buybacks
A share buyback occurs when a company repurchases some of its shares from shareholders. This reduces the number of shares on issue and the ...
Share Investment Seminars
The Australian Stock Exchange Ltd (ASX) is an Australian public company that operates Australia’s primary securities exchange, called the Australian Securities Exchange. The ASX ...
Share Trader ‘v’ Share Investor
Whether a taxpayer is a share trader or share investor depends on the specific facts of each case. The main factors to consider include ...
Small Business CGT Rollover
The small business CGT rollover allows a taxpayer to choose to defer all or part of a capital gain made on an active asset ...
Small Business Income Tax Offset
Some 96% of all Australia’s businesses are small businesses, employing over 4.5 million people and producing over $330 billion of economic output per year. ...
SMSFs and Shares
A self-managed super fund (SMSF) is a trust structure that can be used to manage retirement savings on behalf of its members. SMSFs are ...
Special Disability Trust
A Special Disability Trust is a trust established primarily for succession planning by parents and immediate family members for the current and future care ...
Sponsorship
Sponsorship is the financial or in-kind support of an activity, used primarily to reach business goals. Sponsorship is not advertising (which is a quantitative ...
Spouse Super Contributions
A spouse super contribution involves making a contribution to a spouse’s super fund to build their retirement savings. Typically this involves the working spouse ...
Streaming Trust Income
One of the main advantages of a discretionary trust is their ability to decide at June 30th each year, who to distribute the trust ...
Sunglasses and Sunscreens
Many jobs require employees to spend large parts of their work day out in the sun being exposed to the sun’s damaging rays. For ...
Super Co-Contribution
The government’s objective with the super co-contribution scheme is to help eligible people boost their retirement savings. The super co-contribution is only available to ...
Super Withdrawal and Recontribution Strategy
Australia’s total superannuation assets are valued at $1.6 trillion which is roughly equivalent to the annual GDP. There are 32 million superannuation accounts in ...
Tax Consolidation
Tax consolidation is a regime adopted in the tax or revenue legislation of countries which treats a group of wholly owned or majority owned ...
Tax Deductible Dogs
Dogs can be a legitimate tax deduction when used in the following ways: On farms for rounding up sheep, cattle and other livestock. Guard ...
Tax Incentives for Early Stage Investors
Malcolm Turnbull’s Innovation Statement released on 7th December 2015 provides tax incentives for early stage investors. The tax incentives will encourage early stage investment ...
Temporary Absence Rule
The temporary absence rule allows a taxpayer that is renting out their main residence for a period to still treat the property as their ...
Temporary Residents
Temporary residents are taxpayers whose normal place of residence is overseas but are temporarily living in Australia. The most common category of temporary resident ...
Testamentary Trust
A testamentary trust (sometimes referred to as a will trust or trust under will) is a trust which arises upon the death of the ...
Thin Capitalisation
The thin capitalisation rules apply to Australian entities investing overseas, their associated entities, foreign controlled Australian entities and foreign entities investing directly into Australia. ...
Transfer Personal Investments into Super
This strategy involves a taxpayer selling listed securities (whether shares or managed funds) and commercial properties into their super fund. The title of the ...
Transfer Pricing
Transfer pricing occurs where a multinational business operates in two separate countries with two separate companies and they do business together. The two companies ...
Transferring Business Premises into a SMSF
This strategy involves a business owner transferring their business premises into their self-managed super fund (SMSF). This has the following advantages: Rent paid to ...
Transition to Retirement
Transition to retirement income streams (TRISs) help workers transition to retirement and save tax at the same time. For taxpayers over 56 years old ...
Transporting Heavy or Bulky Equipment
Some employees need to transport heavy or bulky equipment to and from their work place each day to perform their job. This is often ...
Travel Between Two Unrelated Places of Employment
Employees who use their motor vehicle for work related travel are entitled to a tax deduction for the costs incurred. The two methods available ...
Two Hectare Main Residence Exemption
The main residence exemption applies to the dwelling a taxpayer lives in (which may be a home, apartment, strata title unit, unit in a ...
Unit Trust
A unit trust is a type of trust where the assets are held and administered by the trustee of the trust for the holders ...
Valuing Trading Stock
Changes in the value of trading stock from year to year will affect the gross profits and consequently net profits of a trading business ...
X-Box, Foxtel, and Pinball Machines
Research shows that having fun in the workplace can significantly improve productivity and performance. As Richard Branson from Virgin says, “happy employees, make happy ...
Zone or Overseas Forces Tax Offset
The Zone Tax Offset (ZTO) is a concessional tax offset available to individuals which reduces their tax liability in recognition of the isolation, extreme ...