The taxable payment reporting system (TPRS) has extended to further businesses that provide particular services and those that pay contractors to provide the service. The extension was approved on 1 July 2019.

Road freight services, information technology services and security, surveillance and investigation services will now have to lodge taxable payments annual report (TPAR), even if those services only make up part of the business. Contractors can include subcontractors, consultants and independent contractors.

For these businesses, the first TPAR will be due on 28 August 2020. This will be for payments that have been made to contractors in the 2019–20 financial year for providing the relevant services. Business owners will now need to keep records of contractor payments made from 1 July 2019.

Exemptions from TPRS reporting obligations apply if payments received are from:

• Courier services and road freight services (combined) that are less than 10% of the entity’s GST turnover.
• Cleaning services that are less than 10% of the entity’s GST turnover.
• Security, investigation or surveillance services (combined) that are less than 10% of the entity’s GST turnover.
• IT services that are less than 10% of the entity’s GST turnover.

Businesses that are not required to lodge should complete a TPAR Not Required to Lodge form for the ATO to update their records, preventing any unnecessary follow up.

The ATO has developed a new toolkit that helps small business owners to understand their entitlements and avoid mistakes in their tax returns.

The 2019 Tax Time Toolkit Small Business covers information about:

• Three of the most common expenses: home-based business, motor vehicle, and business travel.
• Single Touch Payroll (STP) for small employers.

These toolkits are designed to highlight areas that small businesses may struggle with at tax time. Subjects include:

• Information about claiming deductions for home-based business expenses.
• Types of motor vehicle expenses that you can claim.
• The importance of accurate record keeping.
• How to differentiate between business and private use.

As it is common for there to be confusion around these topics, taking the time to understand your obligations as a business owner can streamline the returns process and help to ensure correct reporting.

One of the factsheets, in particular, provides options and support for employers using STP. Some of the important topics outlined in the fact sheet include:

• What information you need to report and when you need to report it.
• How to correct the amounts reported.
• The changes to payment summaries.
• Information you need to provide to your employees.
• Available exemptions.

With STP now applying to all businesses, owners who are not familiar with requirements are encouraged to look into areas they are unfamiliar with.

Whether you use a registered tax agent or lodge your own tax return, this toolkit and other tax toolkits provided by the ATO includes practical information to help small business owners and operators with their tax obligations throughout the year.

Small business owners may be able to claim deductions for the costs of using your home as a principal place of business when filing your 2019 income tax return.

Tax deductions may be claimed for the business portion of expenses that include electricity, cleaning, rent payments or mortgage repayments. However, it can be difficult to ensure you are claiming expenses you are entitled to. How you operate the business out of your home will determine the types of expenses that may be claimed. Your business structure will also affect your entitlements and obligations when claiming deductions on home-based business expenses.

Individuals that operate a business as a sole trader or partnership are entitled to claim a deduction for the costs of running their business from home. There are two types of expenses that can be claimed, running expenses or occupancy expenses.

Running expenses refer to the increased costs of using your home’s facilities for the running of your business, including:

• Repairs to your business equipment
• Heating, cooling and lighting a room
• Cleaning
• Phone and internet
• Depreciation of business furniture and equipment

Occupancy expenses are those that you pay to own or rent your home, including:

• Mortgage interest or rent
• Land taxes
• Council rates
• Insurance

Typically, those that are eligible to claim occupancy expenses can also claim running expenses. Occupancy expenses are calculated based on the proportion of the floor area of your home that is used for the business and the proportion of the year that it was used. To calculate the running expenses of your home-based business, you must ensure that you exclude your private living costs and that you have records to show how you calculated the expense. Records that need to be kept include written evidence, tax invoices and receipts, which should substantiate your claims for all home-based business expenses.

You may consider consulting a trusted advisor or registered tax agent to ensure that you meet all obligations when claiming deductions in your tax return.

Small business owners may be able to claim deductions for the costs of using their home as a principal place of business when filing their income tax returns.

A home-based business is one where an area of your home is set aside and used exclusively as a place of business. If you do not have an area set aside and used exclusively as a place of business, but you do some work from home, you may still be able to claim a deduction for some of your expenses relating to the area you use.

Tax deductions may be claimed for the business portion of household expenses; however, ensuring you are claiming expenses you are entitled to can be challenging. How you operate the business out of your home will determine the expenses that may be claimed. Your business structure will also affect your entitlements and obligations when claiming deductions on home-based business expenses.

Generally, three types of expenses can be claimed: running expenses, occupancy expenses, and in some cases, the cost of motor vehicle trips between your home and other locations (if the travel is for business purposes). You can claim occupancy and running expenses if you have an area of your home set aside as a ‘place of business’.

Running expenses refer to the increased costs of using your home’s facilities for the running of your business, including:

• Repairs to your business equipment.
• Heating, cooling and lighting a room.
• Cleaning.
• Phone and internet.
• Depreciation of business furniture and equipment.

To calculate the running expenses of your home-based business, you must ensure that you exclude your private living costs and that you have records to show how you calculated the expense.

Occupancy expenses are those that you pay to own or rent your home, including:

• Mortgage interest or rent.
• Land taxes.
• Council rates.
• Insurance premiums.

Occupancy expenses are calculated based on the floor area of your home that is used for the business and the portion of the year that it was used.

Small business owners should note that capital gains tax (CGT) payments may be required when your home was used for business. However, CGT won’t apply if you operate your business from a rented home, didn’t have an area expressly set aside for your business activities or the business was run through a company or trust.

Records that need to be kept include written evidence, tax invoices and receipts, and should substantiate your claims for all home-based business expenses. This needs to be kept for at least 5 years to substantiate your claims.

Your business structure can affect the method you can use and the expenses you can claim, especially if your business is a company or trust. If you are a sole trader, a partnership or a company or trust, there are specific rules that may apply to you. Speaking with a trusted tax adviser is the best way to ensure you comply with those guidelines – why not start a chat with us today?

If you or someone that you know began a side business (or “side hustle”) during the last financial year, you would have to meet the tax obligations that come with that business, along with the tax obligations of your primary business. 

All income earned through a side business is taxable income. That means that every sale you make will count towards your taxable turnover (the total business income from your sales) and will need to be declared on your income tax return. Additionally, suppose your turnover exceeds or looks like it will exceed $75, 000. In that case, you’ll have to register for GST and incur the 10% tax that’ll be added onto all of your taxable sales, payable to the ATO every quarter.

If you have to spend money on purchases or expenses that relate to the side business, that spending can be deducted from the profits that you make. Essentially, you only need to pay tax on the difference between your income and your deductions. Here are a few things to keep in mind when claiming a deduction for your business. 

• The expense that you are claiming has to have been incurred by the business. 
• The expense must relate to the business and can’t be something like your weekly groceries (domestic or private in nature expenses are generally not eligible for claiming).
• If an expense has been incurred that is partly private/domestic, and partly for business, that expense will need to be appropriately divided. This is especially useful if you run your side business from home and claim home office costs.
• Always ensure that your records are being kept and that there is evidence that it was the business that spent the money. An invoice or a receipt is sufficient evidence in this case, but a bank or credit card statement may also be used.

Other deductible expenses can happen during the initial startup and structuring of the business. These deductions can include costs that occurred when seeking professional advice on structuring the business, researching the business’s viability or when developing a business plan. 

A few items you might be eligible to claim for your side business include:

• If the business is being run from home, the business portions of bills like utility, phone or internet can be claimed.
• Skilling up for the business or reskilling may be tax-deductible when it comes to the cost of courses, training, seminars or conferences (as long as it links to business income). 
• Any prep work that occurred during the business startup before the business’ official start can be claimed by the business.

Always ensure that you claim all business expenses that could apply to your business.

Good record keeping will help track all income and potential deductions that come through via the side business, and employing a bookkeeper could be a means of ensuring that this happens correctly. Remember that accountants are always here to help you during tax return time as well.