Monthly Newsletter

May 2019

FBT: Benchmark interest rate

The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year).

This rate is used to calculate the taxable value of:

  • a fringe benefit provided by way of a loan; and
  • a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

Example

On 1 April 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan.

The actual interest payable by the employee for the current year is $2,500 (i.e., $50,000 x 5%).

However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is $185(i.e., $2,685 – $2,500).

FBT issues on the ATO's radar

The ATO has updated its list of 'What attracts our attention', with six items that specifically relate to fringe benefits tax('FBT'), as follows:

  • Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
  • Incorrectly calculating car parking fringe benefits due to:

      –     significantly discounting market valuations;

      –     using non-commercial parking rates; or

      –     parking rates not being supported by adequate evidence.

  • Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer's tax return.
  • Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
  • Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates.
  • Not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.

Scammers impersonate ATO phone numbers

The ATO is warning that scammers have adopted ‘Robocall’ technology to target taxpayers across the country.

Assistant Commissioner Gavin Siebert said: “Scammers are sending pre-recorded messages in record numbers and are manipulating caller identification so that your phone displays a legitimate ATO phone number despite coming from an overseas scammer”.

“If the scammers do make contact, they will request payment of a tax debt – usually through unusual methods like bitcoin, gift cards and vouchers.  Legitimate ways to pay your tax debt are listed on our website. The scammers will threaten you with immediate arrest, attempt to keep you on the line until payment is made and may become rude or aggressive.”

The technique of displaying misleading phone numbers is known as “spoofing” and is commonly used by scammers in an attempt to make their interactions with taxpayers appear legitimate.

New industries entering the taxable payments reporting system

The ATO has reminded businesses that provide road freight, information technology ('IT'), security, investigation, or surveillance services that they need to lodge a Taxable payments annual report ('TPAR') each year to tell the ATO about the payments they make to contractors who use an Australian business number ('ABN') (even if these services are only part of their business activities).

Such clients' first TPAR will be due by 28 August 2020 for payments made from 1 July 2019 to 30 June 2020.

Editor: We can help with the lodgement of this report,but affected clients will need to keep records of the payments made to contractors.  The required information,including the contractor's ABN, name, address, and total amounts paid during the financial year (including GST) will normally be contained in the invoices received from the contractors.

2019/20 Budget Update

The Government handed down the 2019/20 Federal Budget on Tuesday 2 April 2019.

Some of the important proposals include:

  • Increasing and expanding access to the instant asset write-off from 7:30 pm (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020, as follows:

      –     Increasing the instant asset write-off threshold from $25,000 to $30,000.  

      –     Making the instant asset write-off available to medium sized businesses (with aggregated annual turnover of $10million or more, but less than $50 million).

Editor: The legislation to make the above changes to the instant asset write-off has already been passed and received Royal Assent.

  • Allowing individuals aged 65 and 66 years to:

      –     make voluntary superannuation contributions(both concessional and non-concessional) without meeting the work test from 1 July 2020; and

      –     make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).

  • Increasing the upper threshold of the 19%personal income tax bracket to $45,000 from 1 July 2022, and reducing the 32.5%marginal tax rate to 30% from 1 July 2024 (in addition to changes already legislated).
  • Increasing the Low and Middle Income Tax Offset (‘LAMITO’), with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum.

Federal Election called!

The Federal Election has been called for Saturday 18 May 2019, and the Governor-General has 'prorogued' the Parliament from 11 April 2019 until 18 May 2019, and dissolved the House of Representatives.

The election will also be for half the Senate.

As a result, all outstanding Bills have also lapsed (so any measures not yet passed will need to be reintroduced in new Bills after the election if they are to become law).

What is included in a depreciation schedule?

A depreciation schedule prepared by BMT Tax Depreciation helps to maximise the cash return from your investment property each financial year.

To ensure that you claim the maximum depreciation deductions, a BMT Tax Depreciation Schedule lasts for the life of the property, or forty years as specified by the Australian Taxation Office(ATO).

A BMT Tax Depreciation Schedule also provides you with a breakdown of the deductions for the two depreciable elements found in the property as explained below:

Capital works deductions (division 43)

Known as building write-off, this refers to the tax deductions available for the structural elements of a building. Examples include the foundations, walls, roof, doors, windows, sinks and tiles. In a residential property built after 15 September 1987, capital works deductions can be claimed at 2.5 per cent per year for a maximum of forty years. For commercial and other types of non-residential properties, the capital works deductions vary based on the property type, the building’s use and date of construction commencement.

Plant and equipment (division 40)

Plant and equipment assets are considered to be easily removable or mechanical in nature. These assets are identified through ATO legislation as assets which have a limited effective life and can reasonably be expected to decline in value or depreciate over the time they’re used. Depreciation for plant and equipment is calculated based on an individual effective life as allocated by the tax commissioner and updated regularly through tax rulings. 

Depreciation benefits vary depending on the type of building, its age, its use and its fit out. Owners of commercial, industrial and residential investment properties can all claim depreciation. You can choose between the diminishing value or prime cost methods of depreciation when claiming depreciation for plant and equipment assets. An Accountant can provide advice on the method which best suits your individual investment strategy.

Ensuring that your depreciation claim is maximised for any building requires a combination of construction costing skills and thorough knowledge of current tax depreciation and capital works deduction legislation.For this reason, it is recommended that you speak with a specialist Quantity Surveyor before you lodge your tax return.

Completing capital allowance and tax depreciation schedules for income producing properties is a specialist field of quantity surveying and it is one in which BMT Tax Depreciation has many years of experience.

As members of the Australian Institute of Quantity Surveyors (AIQS), the Royal Institute of Chartered Surveyors, The Property Investment Professionals of Australia, the Auctioneers& Valuers Association  and the Urban Development Institute of Australia as well as being  registered Tax Agents with the Tax Practitioners Board (TPB), BMT remain up to date with the latest research and information to ensure deductions are maximised for all types of properties including residential, commercial, industrial, manufacturing, agricultural and more.

A BMT Tax Depreciation Schedule includes:

·        A summary for both methods of depreciation to help you decide which method is best for your investment strategy

·        A detailed forty year forecast, illustrating the deductions available using both the prime cost and diminishing value methods

·        A glossary of terms to help you understand the terminology used

·        The backing of a BMT guarantee: if we can’t find double our fee in deductions in the first full financial year claim there will be no charge for our services

Inaddition:

·        Low-value and low-cost pooling legislation is used to accelerate deductions under the diminishing value method for all plant and equipment assets

·        Your schedule is pro-rata calculated for the first year of ownership to ensure you can claim even partial year deductions and don’t miss out on returns

·        Your schedule includes a breakdown of common areas and common assets which can be depreciated in applicable property types, e.g. apartments, units and townhouses

·        Split reports are available if your property is co-owned – discover how split reports maximise deductions

·        The schedule can be provided in print, MS Excel and CSV (residential only) – just let us know what format you would prefer when you order your schedule

How do I organise a schedule?

Engaging BMT Tax Depreciation to complete a capital allowance and tax depreciation schedule for your investment property couldn’t be easier.

·        Request a quote for your tax depreciation schedule

·        We will collect property details, then contact your Property Manager or tenant to complete a property inspection

·        Your schedule will be available within 5-7 days of all information being gathered. BMT Tax Depreciation can even forward your schedule to your Accountant directly,saving you time

·        Alternatively,you can register and request a tax depreciation schedule via, My BMT. Our handy online portal allows you to view, update and download schedules, follow the process of your schedule’s completion, to upload relevant files, photos and receipts and to share your schedule with members of your investment team

BMT Tax Depreciation also provide a free, easy to use tax depreciation calculator, which can provide you with an estimate of available deductions for any property you are considering purchasing.

Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.

 

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) isthe Chief Executive Officer of BMT Tax Depreciation.  
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.

 

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