Easier way to claim GST input tax credits for small restaurants, cafes or caterers
A restaurant, cafe or caterer with a GST turnover of $2 million or less (GST exclusive) can use a simplified accounting method (e.g. business norms method, stock purchases method or snapshot method) to calculate their net GST liability.
For example, pursuant to the snapshot method, the split between taxable and GST-free trading stock purchases gained from a sample period will be extrapolated over the whole income tax year – thereby obviating the need to keep tax invoices to determine the split.
Such a deemed split will determine the entitlement to GST input tax credits on the acquisition of trading stock – a useful concession if such a business does not have adequate point-of-sale equipment to calculate the breakdown of taxable and GST-free supplies.
Please contact us if you are in the food industry and would like to know more about how using the simplified accounting method can reduce your GST record keeping obligations.
Tips and traps when amending a trust deed
With all the recent talk in the media about trusts and Labor’s proposed changes to the taxation of family trusts, some clients have started thinking about whether they should amend their trust deeds.
A trust deed may only be amended if the deed establishing the trust has a clause giving a specific power of amendment - such a power usually offers a roadmap on how to validly amend the deed.
Failure to apply such an amendment clause correctly (e.g. an unauthorised person attempts to amend a trust deed or certain other amendment procedures are not met) may result in the amendment being invalid. An invalid amendment may also result in the trust being resettled with the consequence of an unexpected capital gains tax liability.
Because trust law is complex, please speak to your Nexia adviser about whether your trust strategy is still suitable for you in this changing business environment, or whether you should consider a new kind of business or investment vehicle for your business or family affairs.
Home-office expenses, travel expenses and $20,000 instant asset write-off
In general, expenses incurred in conducting a taxpayer’s business (e.g. staff wages, marketing and business finance costs) will be tax deductible – provided such expenses are not private in nature (i.e. not incurred for personal use).
Other rules are:
- taxpayers who operate a business from home can only claim part of the mortgage interest, rates and electricity expense that relate to the business use (apportionment usually based on the floor surface occupied by the home office). Please note that claiming tax deductions for mortgage interest and rates will affect the main residence CGT exemption on the house. But claiming tax deductions for electricity and gas charges usually does not affect the main residence CGT exemption.
- taxpayers who incur business travel expenses (e.g. airfares, train, bus or taxi fares of business owners or employees that travel for work) as well as accommodation costs and meal expenses (for overnight business travel) may also claim a tax deduction. Different rules may apply when a travelling allowance is paid.
- Taxpayers that are small business entities (i.e. broadly businesses with an aggregated turnover of less than $10 million a year) can claim the business proportion of depreciating assets costing less than $20,000 immediately (please see our recent tax update for more information).