July 2017

Are you?
– An employer making vehicle lease agreements.

At a glance:
– Vehicles purchased under a novated lease may have certain goods and services tax (GST) implications.

You should:
– Determine if your lease agreement is a novated lease agreement.
– Contact us if you require any clarification or advice.

Under a novated lease arrangement you, the employer, take over all or part of the lessee’s rights and obligations under the lease.

This transfer of rights and obligations is agreed to in a deed of novation between you, the finance company and the lessee.

The lessee is usually the employee, or an associate of the employee.

The deed of novation usually contains a clause that transfers the lease obligations back to the lessee on termination of the lease or when the employee ceases employment with you.

There are two main types of novation arrangement:

• Full or split full novation; and
• Partial novation.

Under a full or split full arrangement:

• Your employee enters into a lease with a finance company; or
• You enter into a deed of novation with your employee and the finance company.

When you lease the vehicle from the finance company, you can claim a GST credit for the GST included in the lease charges if the vehicle is being leased to you in the course of carrying on your business.

A fringe benefit may arise where you are the lessee of a vehicle that is provided by you for the private use of the employee or associate of the employee.

If you enter into a deed of novation, for GST purposes, you are the purchaser of the vehicle from the finance company. In this case, your employee is not considered to be acting in the capacity of an agent on your behalf.

For more information, click here.

Remember:
– Under a full novation arrangement, you are responsible for making the lease payments and guaranteeing the residual value of the vehicle at the end of the lease.

This article was published on 30/06/2017 and is current as at that date

Are you?
– A taxpayer.

At a glance:
– A compensation payment for the loss, destruction or compulsory acquisition of a capital gain tax (CGT) asset may give rise to a CGT event.

You should:
– Contact us if you require any clarification or advice.

The compensation in relation to the loss of an underlying asset, such as a government payment for the compulsory acquisition of a property, is treated as capital proceeds from the asset’s disposal.

If the payment relates to permanent damage to, or permanent reduction in the value of an underlying asset (such as an insurance payout for major damage to a rental property), it is treated as a recoupment of all or part of the asset’s acquisition cost. The cost base and reduced cost base are reduced by the amount of the compensation.

Where a compensation payment does not relate to an underlying asset but instead compensates for disposal of the right to compensation, the capital gain or capital loss is the difference between your incidental costs and the amount of compensation.

Compensation received by a taxpayer has no CGT consequences if the underlying asset was acquired by the taxpayer before 20 September 1985 or is any other exempt CGT asset.

A temporary fluctuation in the value of a goodwill does not represent either permanent damage to, or a permanent reduction in the value of the goodwill.

For more information, click here.

Remember:
– If you make a capital gain resulting from compensation from the loss, destruction or compulsory acquisition of a CGT asset, you may be able to defer it.

This article was published on 30/06/2017 and is current as at that date

Are you?
– A taxpayer who conducts a business activity as a sole trader or a partner in a partnership that results in a net loss.

At a glance:
– There are special rules relating to the deferral of non-commercial business losses. These rules apply to both Australian and foreign business activities.

You should:
– Ensure that you satisfy the tests in order to claim the losses.
– Contact us if you require any clarification or advice.

You can use a loss from a business activity you conducted either as a sole trader or in a partnership to calculate your taxable income only where:

• An exception applies;
• You meet the income requirement and one of the four tests is satisfied; or
• The Commissioner has exercised his discretion or ruled that it will be exercised to allow you to claim the loss.

The exception applies when you operated or proposed to operate a primary production business or a professional arts business and your assessable income (except any net capital gain) from other sources is less than $40,000.

You will meet the income requirement and have access to the four tests if the total of the following amounts is less than $250,000:

• Taxable income;
• Total reportable fringe benefits amounts;
• Reportable superannuation contributions; and
• Net investment losses.

You will not have to defer your loss from your business activity if you meet the income requirement and the activity satisfies at least one of the following four tests:

• There is at least $20,000 of assessable income from the business activity for the income year;
• The business activity has produced a profit for tax purposes in three out of the past five years, including the current year;
• The value of real property assets (excluding private dwelling) used on a continuing basis in carrying on the business activity is at least $500,000; or
• The value of certain other assets (except cars, motorcycles and similar vehicles) used on a continuing basis in carrying on the business activity is at least $100,000.

For more information, click here.

Remember:
– You cannot claim losses arising from activities that are a private recreational pursuit or hobby, or if there is no likelihood of profit.

This article was published on 30/06/2017 and is current as at that date

Are you?
– A taxpayer buying a commercial premises.

At a glance:
– When buying a commercial premises you may be entitled to income tax deductions.

You should:
– Claim tax deductions for expenses you have incurred.
– Contact us if you require any clarification or advice.

When you buy or otherwise obtain a commercial property such as a shop, factory or office it is important to keep records right from the start.

Commercial properties used in the running of a business are subject to capital gains tax.

You will need records of the date and costs of obtaining the premises so that you can work out your capital gain or capital loss when you sell it.

If your property is used to run a business or is available to rent for that purpose, you can claim tax deductions for expenses associated with owning it, such as interest on a loan to buy the property and maintenance expenses.

If you buy a commercial premises, you may be eligible to claim a credit for the GST included in the purchase price.

You may also be able to claim GST on other expenses that relate to buying the property such as the GST included in solicitors’ fees and on-going running expenses.

You cannot claim GST credits if:

• The seller used the margin scheme to work out the GST included in the price;
• You purchase property from someone who is not registered or required to be registered for GST;
• You purchase the property as a GST-free supply; or
• You are not registered for GST.

For more information, click here.

Remember:
– You can only claim deductions for expenses associated with owning the premises if it is used or intended to be used to produce assessable income.

This article was published on 30/06/2017 and is current as at that date