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Contractors reminded to declare income from Sub-contracting

 

The Australian Taxation Office (ATO) has revealed it is using data from its Taxable Payments Reporting System (TPRS) to ensure that payments made to contractors have been properly declared.

 

Businesses that pay contractors in the courier, cleaning, building and construction, road freight, information technology, security, investigation, or surveillance services industries are required to notify the ATO of payments made to contractors annually.

 

ATO Assistant Commissioner Peter Holt said because of TPRS, the ATO now has a clearer view than ever before of payments made to contractors in these industries.

 

“More than 158,000 businesses have now reported all payments made to contractors in the 2019–20 year to the ATO. This data, combined with ATO’s sophisticated data and analytics capability, means ATO’s field of vision to detect unreported income is better than ever.”

 

The ATO is using the data to proactively contact contractors to make sure they have not forgotten to declare the income reported through the TPRS.

 

“Where ATO discovers a discrepancy, first step is always to contact the taxpayer or their tax professional to check they have fully reported these payments in their tax return,” Mr Holt said.

 

The ATO encourages taxpayers who have not declared or under-declared income from contract work to lodge an amendment request or speak to their registered tax professional for assistance.

 

The ATO is also using the TPRS data to draw attention to income from contracting work so that it can be easily added to tax returns at tax time. Information reported through TPRS also allows the ATO to check that businesses are registered for GST if required and are using valid Australian Business Numbers.

 

Case Study

 

Jonathan drives a delivery truck on weekends as a contractor for a courier company, delivering garden supplies. He earned $40,000 in the 2019–20 financial year. Jonathan also works from Monday to Friday as a driver, as an employee truck driver, from which he earned $80,000. When he lodged his tax return, he only declared his salary and wages, and did not declare the payments received as a contractor courier driver.

 

A few months later, the ATO received a Taxable Payment Annual Report from the courier company that contracted Jonathan, reporting the $40,000 in income. ATO cross-matched the TPRS data with Jonathan’s tax return and noticed there was no business income declared. ATO then sent Jonathan a letter asking him about the discrepancy and reminding him that he will need to declare the income. Jonathan lodged an amendment and paid the difference in tax owed.

 

 

For further assistance, contact Expert Tax on 0449 952 855 or 1300 869 829.

 

 

 

 

 

 

 

Claiming Capital Gains Tax (CGT) Small Business Concession if  Company’s only activity is renting out an investment property.

 

Income tax: can a company that carries on a business in a general sense as described in Taxation Ruling TR 2019/1 Income tax: when does a company carry on a business? but whose only activity is renting out an investment property claim the capital gains tax small business concessions in relation to that investment property?

 

There can be instances when a company owns investment property, and its only activity is renting out an investment property – whether its commercial or rental.

 

Can the company access CGT small business concession in relation to investment property claiming the investment property as an active asset?

 

Short answer is NO. A company that carries on a business in a general sense as described in Taxation Ruling TR 2019/1 Income tax: when does a company carry on a business? but whose only activity is renting out an investment property cannot claim the capital gains tax (CGT) small business concessions in Division 152 of the Income Tax Assessment Act 1997 in relation to that investment property. This is because an asset whose main use is to derive rent (unless such use was only temporary) is subject to an exclusion from those concessions, even if it is used in the course of carrying on a business.

 

Example – property investment company

 

ABC Pty Ltd is a company incorporated in Australia. ABC Pty Ltd owns a commercial property, which it has rented to unrelated third parties at market rates on normal commercial terms since its inception. ABC Pty Ltd provides no other services in relation to the property and conducts no other activities. ABC Pty Ltd has produced a profit in each of the income years it has rented out the property. ABC Pty Ltd is engaged in ongoing activities that have a purpose and prospect of profit, namely letting out the property.

 

In this situation, the company has derived rental income from the leasing of a property to an unrelated third party. Accordingly, the company carries on a business in a general sense described in TR 2019/1. However, the main (only) use of the property is to derive rent and it is therefore excluded from being an active asset under paragraph 152-40(4)(e) regardless of whether the activities constitute the carrying on of a business in a general sense.

 

Therefore, the investment property would not satisfy the active asset test in section 152-35 and ABC Pty Ltd would not meet the requirement in paragraph 152-10(1)(d) to be eligible for the CGT small business concessions in Division 152 in relation to the disposal of the investment property.

 

For the CGT small business concessions to apply, one of the conditions that must be satisfied is that the relevant CGT asset satisfies the active asset test in section 152-35.

 

The active asset test requires the relevant CGT asset to be an active asset of yours for at least:

  • half of the relevant period, if you owned the asset for 15 years or less, or
  • 5 years during the relevant period.

 

A CGT asset is an active asset at a given time if, at that time, you own it and it is:

  • used (or held ready for use) in the course of carrying on a business by you, your affiliate or an entity connected with you, or
  • an intangible asset that is inherently connected with a business that is carried on by you, your affiliate, or an entity connected with you.

 

The relevant period described in subsection 152-35(2) is the time between when you acquired the asset and the earlier of either the CGT event or the cessation of the business (if the business ceased to be carried on in the 12 months before the CGT event or any longer period the Commissioner allows).

 

For further assistance, contact Expert Tax on 0449 952 855 or 1300 869 829

 

 

March 2021 BAS

 

ATTENTION – Business Owners registered for GST including Taxi Drivers, Individuals part of Ride sharing platform such as Uber, Ola and DIDI.

 

Business Activity Statement (BAS) for the period January 2021 to March 2021 is due for lodgement by 28th April 2021. This is also the due date for payment of superannuation liability for salaries paid during March 2021 quarter.

 

All pay runs are now supposed to be reported via Single Touch Payroll (STP).

 

If you were registered for GST even just for one day of the quarter then you MUST lodge a BAS even if you did not earn anything, or the ATO may issue a fine.

 

If you earned $0 you can lodge NIL BAS by calling ATO on 13 72 26. This is an automated service, and you can call anytime (24 hours a day, seven days a week) you will need to have your activity statement document identification number (DIN) handy.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 to book an appointment for lodgement of BAS Return.

 

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