The TNR Australian Accounting Podcast

What is a tax loss, and how can it be turned to good use? You generally make a tax loss when the total deductions that can be claimed for a financial year exceed the total of assessable and net exempt income for the year. If you operate a business that makes a oss you can generally carry forward that loss and claim a deduction for it in a future year as a tax loss. If you’re a sole trader or in a partnership, you may be able to claim business losses by offsetting them against your other personal income (such as investment income) in the same income year. Only sole traders or individual partners in a partnership who meet one of the non-commercial losses requirements (see next page) can offset business losses against other income (such as salary or investment income) in the same income year. If you do not meet any of these requirements, or if you operate through a company or a trust, you can still carry it forward to future years. If your business makes a profit in a following year, you can offset the deferred loss against that profit. Note that a tax loss is different from a capital loss. A capital loss occurs when you dispose of a capital asset for less than its tax cost base. A capital loss can only be offset against any capital gains in the same income year or carried forward to offset against future capital gains – it cannot be offset against income of a revenue nature. Your business structure can affect how you can claim tax losses. For example, companies can generally choose the year in which they claim a deduction for a carried forward tax loss. This can be useful as it means, for example, that a company can choose not to utilise prior year losses in a particular year in order to pay sufficient tax to be able to distribute franked dividends. However, if you operate as a sole trader, partnership or trust, you cannot choose the year or years in which you claim a deduction for your prior-year tax losses. SOLE TRADERS Individuals can generally carry forward a tax loss indefinitely, but must claim it at the first opportunity (that is, the first year that there is taxable income). You cannot choose to hold on to losses to offset them against future income if they can be offset against the current year’s income. Carried forward tax losses are offset first against any net exempt income (such as pension income, government allowances and so on) and only then against assessable income. Losses must be claimed in the order in which they were incurred. NON-COMMERCIAL LOSSES If you’re in business as an individual, either alone or in a partnership, and your business makes a loss, you must check the non-commercial loss rules to see if you can offset the loss against your income from other sources, such as wages. You can ask TNR about the non-commercial loss rules, but briefly these rules dictate that you can’t claim a loss for a business that is little more than a hobby or lifestyle choice (based on the legal tests, not on your intentions). Even if it has business-like characteristics, if it is unlikely to ever make a profit and doesn’t have a significant commercial purpose or character, you generally can’t offset the loss against your other income. In these cases, if you are thinking of ramping up your efforts and are sure you will make a profit in the future, you might decide to defer the loss until you realise that profit from the business. The non-commercial business loss requirements are: your business is a primary production business or a professional arts business and you make less than $40,000 (excluding any net capital gains) in an income year from other sources your income for non-commercial business loss purposes is less than $250,000, and either your assessable business income is at least $20,000 in the income year your business has produced a profit in three out of the past five years (including the current year) your business uses, or has an interest in, real property worth at least $500,000, and that property is used on a continuing basis in a business activity (this test excludes your private  residence and adjacent land) your business uses certain other assets (excluding motor vehicles) worth at least $100,000 on a continuing basis. If you fail all of the tests but you believe that you should be allowed to claim the loss due to special circumstances, you can apply to the ATO for the “Commissioner’s discretion” to apply, which would allow you to utilise the loss (TNR can help you with this application). COMPANIES Companies can carry forward a tax loss indefinitely, and use it when they choose, provided that since the loss was incurred they have either: maintained the same majority ownership and control, or carried on the same business once the ownership test is failed. If there is a change of ownership or control of a company during an income year and the company does not maintain the same business, it must work out its taxable income and tax loss. In broad terms, a company in this situation has both a taxable income and a tax loss for the same year. In some circumstances, the loss may be carried forward and used in later years, subject to the usual restrictions. Also note that with tax losses, you must keep proper records relating to your tax affairs for at least five years. If you use information from those records in a later tax return, you may have to keep records for longer. So, if you carry forward a tax loss, you must keep the records until the end of any period of review for the income tax return in which the loss is fully deducted. Certain deductions that would otherwise be allowable cannot be claimed as deductions where doing so would give rise to a tax loss. They are: payments of pensions, gratuities or retirement allowances to employees, former employees, or their dependents gifts or contributions made to deductible gift recipients payments made under conservation covenants, and personal superannuation contributions. The post What is a tax loss, and how can it be turned to good use? [Podcast] appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.

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For companies or others who may have a need for forensic accounting services, the staff at TNR have been providing these services for many years. A BRW Client Choice Awards Winner in 2013 and 2014, TNR has the experience and track record needed when getting to the truth is paramount. The post Forensic Accounting [Podcast] appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.

Listen to our podcast episode about the Hecs Help Benefit. Read the transcript here: Hecs Help Benefits The post HECS HELP Benefits Podcast appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.

Facing a Tax Audit? The Australian Tax Office (ATO) rarely springs an unexpected tax audit on an individual or business. When you receive a call from the ATO, it may or may not lead to a tax audit. They actively review small business tax returns and activity statements to make sure they are meeting the ATO’s benchmark for that industry. You’ll most likely be sent a letter stating that the ATO has found something missing from your tax return. If you agree with their assessment, you don’t need to do anything. They’ll send you a notice of amended assessment, and you pay the amount required. If the ATO finds evidence that you or your business has not met its tax obligations, they may decide to conduct an audit. If this happens, they’ll expect free and full access to buildings, records, premises and documents. Only confidential documents between you and your barrister, solicitor or professional accountant are excluded. The ATO is not interested in penalising you if you make an honest error. They are looking for businesses with a reckless disregard for the tax rules. If the ATO informs you they plan to audit your books, you should immediately call for help from a professional accountant. They will make sure that you are aware of your rights and see that the audit is conducted properly according to the relevant tax law and the administrative practices of the ATO in the area. There are two types of tax audits including audits and reviews. What Are The ATO Looking For in a Tax Audit? When the ATO does a tax audit, they are making sure the information you gave was accurate, such as: • Did you declare all the income you received? • Are you entitled to all the credits, deductions and tax offsets you claimed? • Did you correctly withhold and report PAYG (W) amounts? • Did you correctly calculate and report other tax-related obligations? Reviews are used to look for inconsistencies or risks about some transactions, industries or activities. At this time, the ATO will help you comply with your tax obligation and give you the opportunity to correct any errors with a voluntary disclosure. If you do not make a voluntary disclosure, for whatever reason, they may decide to upgrade the review to an audit. They’ll inform you of their decision. Facing a Tax Audit? Audits are used to find errors, measure them and correct them. Audits can be conducted without first doing a review or they can follow a review. Even with an audit, you’ll be given the opportunity to make a voluntary disclosure. If you have been informed by the ATO that they plan to do an audit, you can make corrections to your tax statement by phone using the correct procedures. Your best protection from, accidently or on purpose, sending a false tax return is to have a professional accountant either fill out your forms or help you fill them out. You should always be prepared for an audit. This will take the stress out of taxes. Some tips for making the tax process easier are: • Keep all receipts for expenses you plan to claim on your taxes • Keep the receipts for three and a half years • Don’t ignore the letter from the Tax Office and hope they will overlook you • Take a professional tax accountant with you if you go to the Tax Office for an interview or with you in your home • Never antagonize the auditor. Always be cooperative and polite • Have your professional tax accountant check the amended assessment when you receive it Business Audits Business audits are much more complicated. The main way the ATO examines businesses is by comparing the assets owned by the business owner to the lifestyle with the declared income. If the expenditure is far more than the income, the ATO will consider that tax evasion is probable. They will request an interview with the owner, which usually takes place on the business premises. They will look at the books for the past five years and ask questions about the business owner’s personal finances and may want to see his or her residence. In the end, the auditor will tell the business owner what adjustments and penalties are being proposed. The business owner will then, with the help of an accountant, be able to contest the adjustments and give mitigating circumstances to reduce the penalties. Need some professional advice in relation to a Tax Audit you may need to prepare for? Let the team at TNR help you. Phone (02) 6621 8544 today, or contact us. The post Facing A Possible Tax Audit [Podcast] appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.

  Net Medical Expenses Tax Offset Phaseout (NMETO) The Net Medical Expenses Tax Offset (NMETO) is a non-refundable tax offset designed to help taxpayers and dependents offset the cost of some medical expenses they incur throughout the year. Net Medical Expenses Tax Offset Eligibility begins when the cost of these expenses exceeds the eligibility threshold of allotted Medicare or Private Health insurance. This figure is indexed annually, and up to 20 percent of expenses can be claimed. The Australian government will begin phasing out the net medical expenses tax starting with the 2013-2014 Federal Budget. The phase out amendment was announced on May 14, 2014 and received royal assent on May 18, 2014. Recipients of the offset for 2012-2013 are still eligible to receive it in 2013-2014 if they have out-of-pocket medical expenses that exceed the relevant claim threshold. Those who receive it in 2013-2014 will remain eligible for the offset in 2014-2015. This will be the final year that people can claim the offset. This does not apply to all taxpayers. Those with medical expenses related to aged care, disability aids and attendant care are still eligible to receive the offset. Eligibility will be restricted to these recipients until 30 June 2019. On this date, the net medical expenses offset ceases completely for all taxpayers. The term “medical expenses” is broadly defined. It includes payments to health providers such as doctors, dentists, optometrists, and surgeons for services including but not limited to the administration of medical aids and appliances, training of guide dogs, surgery, in-vitro fertilisation, and residential aged care. Costs that are not covered by the NMETO include cosmetic surgery, cosmetic dentistry, non-prescription vitamins, healthcare-related travel expenses, medical examinations performed for the purpose of qualifying for health or life insurance, funeral expenses, ambulance charges or innoculations. This is the final act in what has been a gradual, drawn-out effort to eliminate the NMETO. The phase out is expected to earn significant revenues for the government up to or exceeding $963.5 million. Part of the effort to phase out the net medical expenses offset in the last few years was making the offset means tested. The means tested offset structure meant that the claimable percentage of medical expenses was determined by your family status and adjusted taxable income (ATI). Net Medical Expenses Tax Offset For example, a person who was single as of 30 June 2013 with no dependent children who earned $84,000 or less annually would be eligible to claim 20 percent of all net medical costs exceeding $2,120. If the single person earned $84,001 or more annually, they would be eligible to claim 10 percent of net medical expenses exceeding $5,000. A person who had a spouse, dependent children or both as of 30 June 2013 would be eligible to claim 20 percent of all net medical expenses exceeding $2,120 if they earned $168,000 or less per year. If they earned or $168,001 or more per year, they would be eligible to claim 10% of net medical expenses in excess of $5,000. For taxpayers with children, an extra $1,500 is added for each depended child after the first. In effect, making the NMETO means tested, would force high income earners to be responsible for an extra $2880 of their own medical expenses for which they would not have been responsible should the $2,120 have continued to be universally applicable. When the 14 May 2013 announcement of the offset phaseout was made, the government explained their decision on the premise that “the NMETO predates universal health care and it is appropriate to phase it out as DisabilityCare Australia is implemented and once aged care reforms have been in place for several years.” In 2011, NMETO claims reached about $567 million, the result of approximately 802,000 claims by taxpayers. The NMETO phaseout is one of several government efforts to save money on healthcare. Others include delaying the indexing of Medicare costs and removing the expenditure threshold for the Extended Medicare Safety Net (EMSN). Recent studies have shown that Australia’s out-of-pocket health care costs are among the highest in the world. On average, Australians pay almost $100 more per year in out-of-pocket medical costs than taxpayers in other developed countries. The NMETO phaseout may exacerbate existing affordability issues. The post Net Medical Expenses Tax Offset Phaseout (NMETO) [Podcast] appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.

Accountants Lismore, NSW For smaller businesses, larger companies and even independent professionals, the services offered by the best accountants Lismore has to offer can often provide a range of benefits. Financial matters can often prove quite challenging for those who lack the resources and training needed to deal with tax preparation, account management and bookkeeping related tasks. Businesses Benefit of Premium Accounting Services Professional accountant services offer an easier way for businesses to meet their needs in a convenient way. From internal audits that will provide access to financial advisory and guidance services to formal tax preparation, it pays to do business with only the best accountants. Partner Kevin Franey, TNR Accountants Lismore With the services of a professional accountant Lismore businesses that may be too small to maintain their own financial staff or department will be able to make use of a full range of bookkeeping, auditing and financial management services. Larger organisations seeking to augment the services and options made available by in-house staff may also be able to enjoy a more cost-effective and flexible solution that will be able to meet their needs. Company-wide audits, efforts to streamline finances or track cash flow and expenses can be a far more difficult undertaking for businesses that lack the in-house resources and staff needed to complete projects that are larger in scope or scale. Reducing Operational Costs and Overhead Through Superior Financial Management Darran Singh, Partner, TNR Accountants Lismore Daily operational costs and overhead expenses can quickly eat into profitability, especially in circumstances where business owners and management professionals lack the detailed information needed to structure and calibrate a more efficient working process. With assistance provided by the best accountants Lismore has to offer, outlining finances and obtaining detailed information regarding cash flow, spending and the allocation of existing financial resources has never been easier to accomplish. For businesses that are too small to field their own accounting department and organisations seeking the assistance needed to better utilise their own staff, the aid of a professional accounting firm like TNR is an indispensable resource. Cost-Effective Financial Services and Business Support Solutions John Dwyer, CEO, TNR Accountants Lismore By spending too much to obtain the services of an accountant Lismore businesses may find themselves deprived of the financial resources required to deal with other matters and operational concerns. Obtaining the business support solutions your organisation needs to address a full range of financial situations and issues for an affordable price can provide a value you may not be able to afford to pass up. Professional accounting services offer a greater value and a more flexible solution for businesses and organisations seeking assistance and professional guidance in their efforts to deal with financial matters with greater ease and success. Services and Resources for Special Projects and Tax Preparation Businesses seeking to structure their finances in a way that will be more suitable to handle future expansion, those that are seeking support services to deal with a recent merger or acquisition of assets and those that may lack the expertise and solutions needed to handle tax preparation with less disruption to their daily operations may all find the services of a professional accounting firm such as TNR to be an essential resource. Lacking the resources that only a professional accountant is able to offer could prove to be a serious liability for any businesses undertaking projects that may have an impact on their financial standing. Retaining the services of the right professional – or arranging for your existing financial department or staff to benefit from the assistance and support they need – could make a considerable difference in the outcome of any important projects or situations facing your business. Working With the Best Professional Accountants Lismore Peter Morrow, Senior Partner, TNR Accountants Lismore Issues relating to cash flow, allocation of resources or other matters of a financial nature can be of paramount importance to businesses and organisations. Lacking insight into how your resources and assets are being allocated can create all sorts of problems that businesses can simply avoid by consulting accounting professionals. Augmenting your existing accounting staff or department or making use of cost-effective financial management and support services can provide a more flexible and effective way of structuring your finances, completing an internal audit or assessment of your current financial situation and practices and even ensuring that tax preparation can be undertaken with minimal disruption to your every day working process. Work With A BRW Client Choice Award Winning Firm TNR are a Chartered Accounting Firm based in Lismore, NSW. Winners of the BRW Client Choice Awards Winner in 2013 and 2014, we serve clients all over Australia, due to our extensive experience and niche specialisations. To get started with us or enquire how we may help, phone (02) 6621 8544 today, or contact us. The post Accountants Lismore [Podcast] appeared first on TNR Chartered Accountants Lismore Ballina Accounting, Tax Audit.