Ride-sourcing is 'taxi travel'
In a recent case, the Federal Court has agreed with
the ATO that 'ride-sourcing' (such as that provided
using Uber) is 'taxi travel' within the meaning of
the GST law.
The ATO has advised people who are taking up ride-sourcing to earn income should:
- keep records;
- have an Australian business number (ABN);
- register for GST, regardless of how much they earn, and pay GST on the full fare received from passengers for each trip they provide;
- lodge activity statements; and
- include income from ride-sourcing in their income tax returns.
Drivers are also entitled to claim income tax
deductions and GST credits (for GST paid) on
expenses apportioned to the ride-sourcing services
they have supplied.
The ATO warns that they can match people who provide ride-sourcing through data-matching, and will continue to write to them to explain their tax obligations.
Making 'intangible' capital improvements to pre-CGT assets
The ATO has confirmed that, if intangible capital
improvements are made to a pre-CGT asset, they
can be a 'separate CGT asset' from that pre-CGT
asset if the relevant requirements are satisfied.
Editor: The result of this is that, while the disposal of the pre-CGT asset itself will be exempt from CGT, the improvements which are treated as a separate, post-CGT asset could still give rise to CGT.
Example A farmer, holding pre-CGT land, obtains council approval to rezone and subdivide the land.
Those improvements may be separate CGT assets from the land, so if the land is sold with those improvements (the council approval), there may be some CGT (even though the land itself is exempt).
Fringe benefits change for tax offsets from 1 July 2017
The ATO has issued a reminder that the government
has changed the way fringe benefits will be treated
for the calculation of several tax offsets from 1
The meaning of 'adjusted fringe benefits total' (which is used to calculate a taxpayer's entitlement for the low income superannuation tax offset, the seniors and pensioners tax offset, the net medical expenses tax offset and the dependent tax offset) has been modified so that the gross, rather than the adjusted net value, of reportable fringe benefits is used.
Fringe benefits received by individuals working for registered public benevolent institutions, registered health promotion charities, some hospitals and public ambulance services will not be affected by this change.
This aligns the treatment for tax offsets to the treatment for the income tests for family assistance and youth payments.
Diverting personal services income to SMSFs
The ATO is currently reviewing arrangements where
individuals (at, or approaching, retirement age)
purport to divert their personal services income to an
SMSF, so that the income is taxed concessionally
(or exempt from tax) in the fund, rather than being
subject to tax at the individual’s marginal tax rate.
These arrangements normally involve the individual's income being paid to another entity (e.g., a company) which then makes distributions to the SMSF as a 'return on investment' (e.g., dividends, where the SMSF holds shares in the relevant company).
The ATO advises any people that have entered into such an arrangement to contact the ATO by 30 April 2017, so they can work with them to resolve any issues in a timely manner, and minimise the impact on the individual and the fund.
Individuals and trustees who are not currently subject to ATO compliance action, and who come forward will have administrative penalties remitted in full (although interest may still be payable on any tax collected later than it should have been).
No overtime meal allowance, no overtime meal deduction
An employee construction project manager/
supervisor was denied deductions for overtime meal
expenses, as he was not paid an overtime meal
allowance under an industrial agreement (award).
The taxpayer often worked at nights and on weekends during the relevant income years, and so additional amounts were negotiated and ‘rolled into’ his salary to cover the fact that he was expected to work additional hours, and also to cover any outof- pocket expenses associated with such overtime.
However, the taxpayer’s salary was not paid under an award, which was simply used as a starting point in annual remuneration negotiations (and he was paid the same amount each week, regardless of hours worked or expenses incurred).
Therefore, the AAT agreed with the ATO, finding that the taxpayer had received no overtime meal allowance under the relevant industrial award.
As no deduction is claimable under the income tax law for overtime meal expenses unless an appropriate award overtime meal allowance is paid, the Tribunal swiftly dismissed the taxpayer’s appeal, and also affirmed the 25% administrative penalty.
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.