Tax Alert September 2017

SMSFs to prepare for more reporting

The ATO has announced additional information on its new SMSF ‘event-based reporting’ regime. With a planned start date of 1 July 2018, the regime will require SMSFs to file a new report called a Transfer Balance Account Report (TBAR).

Where an SMSF member is also a member of an APRA-regulated super fund, the new reporting requirements took effect from 1 July 2017.

TBARs are separate to the traditional SMSF annual return and are designed to allow members who are close to their $1.6 million transfer balance cap to get timely information to help them make any necessary adjustments.

The new report will cover credits and debts affecting SMSF members’ transfer caps. SMSFs will need to submit a report to the ATO within 10 business days after the end of the month when a pension is commuted in part or full, or when a rollover occurs. If an SMSF pension is commenced, the TBAR must be submitted within 28 days of the end of the quarter in which the event occurs.

Vehicle thresholds change

From 1 July 2017, new threshold limits apply for vehicle depreciation claims to reflect the upward movement in prices. For the 2017/18 financial year, the upper limit on the amount that can be claimed as depreciation for the business use of a vehicle is $57,581. Taxpayers must use the threshold figure that applied in the year they first used or leased their car.

The threshold for luxury cars also increased for the new financial year, to $65,094. The threshold for fuel efficient luxury cars remains at $75,526.

Focus on work-related expenses

With the cost of deductions for work-related expenses ballooning to almost $1.8 billion last year, the ATO has announced it will now be giving these expense claims much closer scrutiny.

Clothing and laundry expenses in particular have increased around 20 per cent over the past five years. According to the regulator, many taxpayers are claiming for ineligible clothing, lodging claims without having spent the money, and claiming without being able to explain the basis for calculating the expense.

The ATO has pointed to common myths such as deductions can be claimed for everyday clothing worn to work, or because an employer has a dress code or requires staff to wear a certain colour. Deductible expenses are only for occupation-specific clothing, protective clothing or a uniform unique to the organisation.

Claiming a ‘standard’ deduction of $150 without spending money on appropriate clothing or laundry is also asking for trouble, as taxpayers must be able to show how they calculated their deduction.

Attracting the tax man’s attention

As part of its ongoing crackdown on tax avoidance, the ATO has released a long list of behaviours, characteristics and tax issues that attract its attention.

At the top of the list are characteristics such as having a tax or economic performance not comparable to similar businesses;
 low transparency in your tax affairs;
 having large, one-off or unusual transactions or a history of aggressive tax planning; and enjoying a lifestyle not supported by your after-tax income 
or accessing business assets for tax-free private use.

Many taxpayers will also be surprised to learn that the ATO takes a keen interest in capital gains tax, franking credits, fringe benefits tax, property and construction, SMSFs and trusts.