May 2017

Are you?
– A taxpayer who sells goods or services online?

At a glance:
– With more people selling products or services online, it is important to understand whether the activity is part of a hobby or carrying on a business.

You should:
– Be aware of the distinctions between a hobby and a business.
– Contact us if you require any clarification or advice.

If you sell products or services online, you need to understand whether you have a hobby or are carrying on a business, as only income and losses from a business have tax implications.

According to the Tax Office guide:

• A hobby is a spare-time activity or pastime pursued for pleasure or recreation; and
• A business generally requires some form of investment and enough customers to whom its products or services can be sold on a consistent basis with a profit-making intention.

Every ‘yes’ answer to the following questions increases the likelihood you are carrying on a business but you need to consider all your answers to gain a complete picture of your situation:

• Did you set up your online sales with the intention of being a business?
• Is your main intention to make a profit?
• Do you make repeated or regular sales?
• Do you manage your online-selling activity as if it was a business?

Example – Selling online as a hobby

Marika wishes to clear excess of clothing from her wardrobe. She lists them on the internet for individual sale. Some of the items sell for more than her buying price and some for less.

Marika is not carrying on a business because she:

• Did not improve the value of the items.
• Does not sell any more items for a long time.
• Does not pay the online auction site for a ‘shop’ space.
• Generally receives less than the original purchase price of the clothes.
• Has no intention to sell clothes online as a business.

To access the complete Tax Office guide, including a number of examples, click here.

Remember:
– Failure to declare online business income may result in significant penalties and fines.

This article was published on 30/4/2017 and is current as at that date

Are you?
– A taxpayer

At a glance:
– The Tax Office sets out rules and guidelines to determine whether someone is a resident for tax purposes or not.

You should:
– Determine whether you are an Australian resident or not.
– Contact us if you require any clarification or advice.

To understand your tax situation, you first need to work out if you are an Australian or foreign resident for tax purposes.

The Tax Office does not use the same rules as the Department of Immigration and Border Protection. This means you:

• Can be an Australian resident for tax purposes without being an Australian citizen or permanent resident; and
• May have a visa to enter Australia for a period longer than six months, but are not an Australian resident for tax purposes.

If you are a foreign resident for tax purposes you must declare on your tax return any income earned in Australia, including:

• Employment income;
• Rental income;
• Australian pensions and annuities; or
• Capital gains on Australian assets.

Most people who come to Australia temporarily for a working holiday or visit are not Australian residents. This includes people on 417 or 462 visas (backpackers).

Working out residency for tax purposes involves looking at your purpose for being in Australia, your way of life in Australia and whether you have a home in another country.

For more information, click here.

Remember:
– If you leave Australia temporarily and do not set up a permanent home in another country you may still be an Australian resident for tax purposes.

This article was published on 30/4/2017 and is current as at that date

Are you?
– Purchasing and/or selling new or business property.

At a glance:
– Many people are carrying on an enterprise when making property transactions and inadvertently do not consider the goods and services tax (GST) implications.

You should:
– Determine whether you should register for GST.
– Contact us if you require any clarification or advice.

Common errors may occur when you:
Claim credits for purchasing property;

• Use the margin scheme;
• Rent new residential premises that you constructed to sell;
• Sell new residential premises that have only been rented within five years of being constructed;
• Receive settlement adjustments; and
• Sell a going concern.

If you do not register for GST when required to do so, you may have to pay GST on the sales you have made since the date you became required to register even if you did not include GST in the price of those sales. Penalties and interest may also apply.

Even if you are not running a business, you may still be required to register for GST as one-off property transactions may be considered an ‘enterprise’ for tax purposes.

If you buy property with the intention of immediate resale at a profit or develop property to sell, you may be conducting an enterprise. If your turnover from these activities is more than the GST registration threshold you may be required to register for GST.

Generally, you are not considered to be carrying on an enterprise if your property transactions are for private purposes; for example, you are constructing or selling your family home.

For more information, click here.

Remember:
– Often GST credits are claimed incorrectly on common property transactions.

This article was published on 30/4/2017 and is current as at that date

Are you?
– An employer with employees who have private use of a business vehicle.

At a glance:
– The Tax Office has recently updated their information with regards to private use of business vehicles by employees.

You should:
– Ensure you keep adequate records of your usage.
– Contact us if you require any clarification or advice.

If you own or lease a car that any of your employees use for private travel, you may need to pay fringe benefits tax (FBT).

For fringe benefits tax (FBT) purposes, a car is any of the following:

• A sedan or station wagon;
• Any other goods-carrying vehicle with a carrying capacity of less than one tonne, for example a panel van or utility (including four-wheel drive vehicles); or
Any other passenger-carrying vehicle designed to carry fewer than nine passengers.

Keeping a log book is the best way to demonstrate to the Tax Office that a car is used for business. The logbook should detail all business travel for a period of at least 12 consecutive weeks showing:

• Dates of travel;
• Odometer readings at the start and end of any trips;
• The kilometres travelled; and
• The reason for the trip.

You may also need to keep odometer readings at the start and end of each year, along with details of the operating costs for the car. Keeping a log book up to date can help reduce the amount of FBT payable.

Things to keep in mind

• Home-to-work travel is generally considered to be private travel;
• Where a car is garaged at or near an employee’s home, it is considered that the car is available for your employee to use, regardless of any actual private use; and
• Company directors are generally treated as employees. So if the directors use the car for private purposes, then FBT could also apply.

For more information, click here.

Remember:
– Keeping your log book up to date can help reduce the amount of FBT payable.

This article was published on 30/4/2017 and is current as at that date