Claiming deductions for business travel expenses

You can claim tax deductions for expenses related to business travel provided you follow the ATO’s rules.

Eligibility requirements
You must fulfil certain eligibility requirements for your tax deduction claims to be valid. You can only claim a tax deduction if you:

• Travel once your business has already started
• Keep records and documentation to provide evidence for your claim

Record keeping rules
The ATO has strict recordkeeping rules to ensure deductions are accurate. For one or more nights away from home ensure you keep documents like:

• Boarding passes
• Booking confirmations
• Receipts

For travellers spending six or more consecutive nights away from home, a travel diary or similar document must be kept. You must record the detail of each business activity before your travel ends, or as soon as possible afterwards. You must log:

• The nature of the activity
• The day and approximate time the business activity began
• How long the business activity lasted
• The name of the place where you engaged in the business activity

Business and private travel rules
Many travellers may integrate a holiday into their business trip. If you operate your business as a company or trust, fringe benefits tax may apply if the employee travel includes private activity paid for by the employer. For sole traders, exclude the private expenses from your claim.

Authority for super complaints introduced

The new Australian Financial Complaints Authority (AFCA) will make it easier for individuals and small businesses to make complaints about their superannuation financial firms.

The Coalition government has responded to criticisms of previous dispute resolution bodies by creating a new financial disputes framework. AFCA has been described as a “one-stop shop” that will improve outcomes for consumers and increase the efficiency of the dispute resolution process.

AFCA’s jurisdiction
AFCA has been given authority over a range of complaint areas including:

• Superannuation annuities
• Corporate, industry and retail super funds
• SMSFs (handled under investments and advice jurisdiction)
• Approved deposit funds
• Small funds
• Retirement savings accounts
• Trustees, insurers and decision makers of relevant super bodies

What you can make complaints about
Your super complaint to AFCA must adhere to its governing rules. AFCA has specific time limits for complaints but no monetary limits.

You can make complaints about:

• The advice you were given about a superannuation product
• Fees or costs that were incorrectly charged or calculated
• Information you weren’t given about the product including fees or costs
• Errors in the information provided to you; for example, if your benefit statements are incorrect
• Decisions your super provider has made
• Payment of a death benefit
• Giving instructions that were not followed
• Transactions that were incorrect or unauthorised

Avoid these small business tax errors

Unwanted attention and penalties from the ATO can jeopardise your small business.

Protect your business by avoiding these common small business tax errors.

Not using an accountant
Tax laws frequently change, and compliance requirements can be time-consuming and demanding. A registered tax agent will streamline your financial processes, provide advice on maximising your finances and keep you compliant.

Inaccurate tax returns
Small businesses that do not declare their income and deductions accurately will attract the ATO’s attention and financial penalties. All foreign income, capital gains tax, business sales and bank interest must be declared. You must also have legitimate evidence supporting your tax deduction claims.

Poor record keeping
Businesses that fail to keep accurate records will struggle to remain compliant. It is vital to keep:

• Cash, online, EFTPOS, bank statements, credit and debit card transactions
• Records showing when you use business purchases for private purposes to provide evidence for tax deduction claims

Incorrect superannuation payments
The ATO will sanction employers that fail to pay their employees’ superannuation correctly and on time. Make your mandatory quarterly payments are paid at the correct rate of 9.5 per cent of your employee’s pay. The cash-flow benefits of delaying super payments and missing deadlines are not worth the financial and criminal punishments incurred by frequent breaches.

Employer SuperStream checklist

Employers must make superannuation contributions on behalf of their employees. SuperStream is the ATO’s electronic and standardised solution that streamlines the super payment process.

Using SuperStream for employers means:

• You can use one online channel to pay multiple funds
• Less room for error during data entry, due to fewer steps
• Transactions reach funds faster

Obligations
You must make contributions to a super fund through a SuperStream solution unless you are eligible for the following exemptions:

• Personal contributions if you are self-employed or a sole trader and make after-tax contributions to a super fund for yourself
• Contributions to your SMSF where you’re a related party employer. For example, if you are an employee of your family business and your super guarantee contributions go to your SMSF.

Step-by-step guide
Once you have decided that SuperStream is right for you, the following steps will help you stay compliant:

• Choose an option: you can choose from a payroll system, your super fund’s online system, a super clearing house and a messaging portal
• Collect information and update your records: refer to the ATO for an exhaustive list of the information you will need from your employees
• Pay the SuperStream way: pay as soon as possible so you can get used to the system

Getting to know the ATO Business Portal

The ATO has introduced the Business Portal to allow small business owners to manage their tax affairs online at their convenience.

Connect your ABN to your myGov account or a compatible AUSkey so you can access the business portal. The portal is accessible 24 hours a day, seven days a week.

The portal can be used for the following services:

• Registering for GST or PAYG withholding
• Lodging, revising or viewing activity statements
• Requesting refunds or transfers between accounts
• Updating your business details
• Tracking the progress of refunds or transfer requests
• Communicating with us through a secure mailbox

Refer to the ATO for direct links that will step you through how to use these services successfully. If you still have trouble with technology it may be worth consulting a registered tax agent to help you fulfil the ATO’s compliance requirements.

ATO warns of illegal early super release

The ATO has issued a warning to the public regarding illegal early release of super schemes, which are subject to severe penalties.

There are strict rules around when you can access your super so your current decisions do not jeopardise your quality of life in retirement. The ATO has reminded the public you may only access your super early if you have experienced severe financial hardship or you have reached the preservation age and have stopped working.

How these schemes work
The promoters of these schemes:

• Encourage you to transfer or rollover your super from your existing super fund to an SMSF to access your super before you are legally entitled to
• Target people under financial pressure or those who do not understand super laws
• Claim you can access your super and put the money towards anything you want which is not true
• Charge high fees and commissions, presenting the risk of losing some or all of your super to them
• May request your identification documents which can result in identity theft

Penalties:
Penalties apply to promoters and individuals who illegally access their super early. If you illegally obtain your super early, it is included in your assessable income even if you return the super to the fund later. If you are an SMSF trustee, you may be fined up to $420,000 and liable for jail terms of up to five years. Civil and criminal penalties apply to promoters.

ATO update: Tax deduction rules on travel to rental properties

The ATO has enforced strict guidelines on tax deductions for rental property owner’s travel expenses.

As a rental property owner you are not able to claim deductions for travel expenses relating to inspecting, maintaining or collecting rent. If you have already claimed a tax deduction for the cost of travel to and from your property in your 2018 return, you will need to request an amendment. The law change came into effect on 1 July 2017 and affects tax returns from 2017-18 onwards.

Exclusions
You may claim these travel expenses on your tax return if you are carrying on a rental property business or are an excluded entity.

An excluded entity is a:

• Corporate tax entity
• Superannuation plan that is not an SMSF
• Public unit trust
• Managed investment trust
• A unit trust or a partnership, all of the members of which are entities of a type listed above

Paying super to contractors

The ATO classifies contractors paid for their labour as employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).

Eligibility requirements
Super contributions must be made for these individuals if you pay them:

• Under a verbal or written contract that is wholly or principally for their labour- that is, more than half the dollar value of the contract is for their labour
• For their personal labour and skills- which may include physical labour, mental effort or artistic effort and not to achieve a result
• To perform the contract work personally – they must not delegate.

You do not pay super to a person when you make a contract with someone other than the person who will actually provide the labour, like a company, trust or partnership.

How much to pay
The minimum super amount you have to pay is 9.5 per cent of each worker’s ordinary time earnings. For contractors, employees calculate the minimum super amount on the labour component of the contract. The ATO will accept their market values of the labour if the values of the various parts of the contract are not detailed in the contract.

ATO updates Taxpayer’s Charter

The ATO has updated the Taxpayer’s Charter which prioritises a relationship with the public built on mutual trust, courtesy and respect in all interactions.

Your rights regarding review of ATO decisions are clearly outlined by the Charter if you feel you have been mistreated. The Charter has also committed the ATO to use easy to understand language, so their information is accessible to the public.

Some of the changes include:

• Simplified information about what to expect if your business goes through a review and audit process
• More details on the ATO’s digital interactions with small businesses
• Moving away from complex language to make things easier to understand
• Including a one-page overview of your rights and obligations

Refer to the ATO to review the updated Taxpayer’s Charter for yourself.

SMSF trustee investment strategy checklist

SMSF trustees have the freedom to invest as they choose to grow their retirement savings, which is why it is vital that they check in on their investment strategy regularly. Maximising your retirement nest egg depends on how well your investment strategy functions at different phases in your working life. This is why your investment strategy should shift according to your changing financial circumstances. A new job, fluctuating markets, changes in tax laws or your retirement drawing closer may mean it’s time to switch up your investments.

Here is a checklist to get you started.

• Map your risk profiles
• Consider circumstances including risk, diversity, liquidity and member’s circumstances
• Take out insurance for members
• Confirm all fund investments comply with super laws and are allowed under a trust deed
• Plan to regularly review your investment strategy
• Document any decision about investment strategy