Timely tax tips as the financial year ends 

EXPENSES & DEDUCTIONS

“The expenses you can claim depend on how you trade and the type of entity you are,” says Sylvia. “Businesses can claim the expenses associated with running their operations including direct costs and labour. Direct costs are those costs that relate to the production of plants, including plants, materials, soil, tools and fertilizers, and the running of your vehicles. Then you also have your labour costs, including your contractors, labourers, and salespeople. If you have got a coffee shop in your nursery, then you will also have hospitality employees. Staff training also falls under labour costs. Overheads including rent, lease payments, electricity, water, telephone, bank and internet are also business expenses.”

“Employees can claim the cost of purchasing and maintaining protective clothing and self-education expenses within the industry,” says Sylvia, “For example, if you have a Certificate IV in Horticulture, and you are going for a Diploma, you can claim the costs of this training if you are not reimbursed by your employer.”

For more information about what employees can and cannot claim at tax time, read the Australian Taxation Office’s (ATO) Agricultural Workers Occupation Guide.

Sylvia says that some expenses may attract Fringe Benefits Tax (FBT), including motor vehicles, entertainment, client gifts and employee benefits.

“Be aware of what you claim to be employee benefits. For example, if you give a ticket to a NRL game to your client, the ATO considers that to be ‘entertainment’ and it is therefore a fringe benefit,” says Sylvia, “If you have purchased a new Toyota Land Cruiser, it is a four-wheel drive. It is not considered to be a work vehicle as it is not a ute or a tow truck; you cannot carry items in the tray behind you. So that too would attract the FBT.”

WHAT IS THE ATO LOOKING OUT FOR THIS YEAR?

Sylvia says that the ATO has been paying special attention to private health insurance and superannuation recently.

The Medicare levy surcharge (MLS) is levied on Australian taxpayers who do not have an appropriate level of private patient hospital cover for themselves, their spouse and dependent children, and earn above a certain income. “Some individuals seek to separate themselves from their spouses to pay a cheaper premium at a single rate,” says Sylvia, “However, they share the same address.” Sylvia says that ATO’s external data matching powers mean that these people are being caught out and they will have to pay the Medicare levy surcharge.

Sylvia says that the ATO has recently conducted audits on those businesses not paying their superannuation on time. She urges greenlife industry businesses to ensure they are up to date with their superannuation taxation obligations to avoid penalties.

BUDGET 2021-22: CHANGES TO TAXATION LAW

Sylvia says that businesses should be aware of new depreciation and other taxation rules announced by the Federal Government during its 2021-22 Budget earlier this month. Treasurer Josh Frydenberg said that the Government would extend temporary full expensing and temporary loss carry-back by one year¹. Temporary full expensing allows eligible businesses with aggregated annual turnover or total income of up to $5 billion to deduct the full cost of eligible depreciable assets. Assets must be acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. Temporary loss carry-back allows eligible companies to carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year.

In this context, Sylvia encourages businesses to think carefully as to how they will depreciate new assets. Whilst you may be eligible to write-off a new asset instantly, how may this affect your cash flow in coming years? “If you buy a car worth $45,000, you can write it off. If you financed that vehicle, that debt might go over three years. If you have an accident and that car is written off, you will need a new car. However, you still have that debt,” says Sylvia, “You need to sit down with your accountant and evaluate whether it is worth writing off instantly or not.”