March 2016 Newsletter

Employers: Beware of FBT on "The arranger provisions"!

It is generally understood that for fringe benefits tax (FBT) to apply, the benefits paid are usually in respect of an employment relationship.

The Arranger Provisions

The FBT law provides that an employer can be liable for FBT even if the benefits are provided to staff by a third party or an "associate" of your business. In other words, there could still be an FBT liability even if provided indirectly.

Rental Properties ATO Focus on "initial repairs"

The scenario where rental properties have work done on them shortly after the property is purchased, has lead to the term "initial repairs"

See checklist for rental property expenses that are

  • Deductible straight up
  • Deductible over a number of years
  • Not deductible – capital in nature

 

When can your SMSF's benefits be paid?

Accesing the money in your SMSF to pay benefits is generally only allowed when you reach what's called your "preservation age" and meet one of the specific conditions of release - for example, you turn 65.

  1. Retirement
  2. Transition to Retirement (after attaining preservation age)
  3. Attaining age 65
  4. Incapacity
  5. Severe Financial Hardship
  6. Compassionate Grounds
  7. Temporary Resident Leaving the Country
  8. Terminal illness.

Personal Service Income (PSI) affairs in order?

It is not uncommon for professionals and tradies who provide services to setup a separate entity to run their business, be it a trust, partnership or incorporated company.

The PSI Rules
(PSI) broadly defines income which is "a reward for an individual's personal efforts or skills".

The ATO's PSI Decision ToolTo answer the questions in the PSI decision tool you may need:

  • details of contracts or written agreements with your clients during the income year
  • invoices from work performed during the income year
  • records of payments to any employees or subcontractors
  • your TFN (if you wish to submit your result to the ATO).

The tool should take 5 to 20 minutes to complete.

Going from Sole Trader to Company!

Changing business structure may be one of your lower priorities, and it's easy to stay with the status quo. But the fact is that depending on your circumstances there may be benefits to changing your business structure.

The business structure that you build your business on can determine:
  • how much tax you pay
  • your responsibility as a business owner
  • your potential personal liability
  • your asset protection, and
  • ongoing costs and volumes of paper work for your business

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