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faq'S

Please click on any of our FAQ's below to see the answers!

 

Can a Bookkeeper Complete My BAS? The Requirement of BAS Agents

What is a BAS Agent?
Under the new legislation, a BAS agent is a person or entity registered under the TASA 2009 to provide a BAS service.
What is a BAS Service?
Under the TASA 2009, a BAS service is a tax agent service that relates to:

  • ascertaining or advising an entity about the liabilities, obligations or entitlements of the entity, or another entity, that arise, or could arise, under a BAS provision
  • representing an entity in dealings with the Commissioner in relation to a BAS provision that is provided in circumstances where the entity can reasonably be expected to rely on the service for the purpose of satisfying liabilities or obligations that arise, or could arise, under a BAS provision, or
  • to claim entitlements that arise, or could arise, under a BAS provision; and
  • that is provided in circumstances where the entity can reasonably be expected to rely on the service for the purpose of satisfying liabilities or obligations that arise, or could arise, under a BAS provision and/or to claim entitlements that arise, or could arise, under a BAS provision

A BAS service therefore includes, but is not limited to:

  • preparing or lodging an approved form about a taxpayer's liabilities, obligations or entitlements under a BAS provision
  • giving a taxpayer advice about a BAS provision that the taxpayer can reasonably be expected to rely upon to satisfy their obligations
  • dealing with the Commissioner on behalf of a taxpayer in relation to a BAS provision.

See section 90-10 of the TASA 2009.
What is a BAS Provision?

BAS provisions include:

  • GST law
  • wine equalisation tax law
  • luxury car tax law
  • pay as you go (PAYG) instalments
  • PAYG withholding
  • fuel tax law
  • fringe benefits tax instalments (relating to collection and recovery only).

See section 995-1 of the Income Tax Assessment Act (ITAA) 1997.
Source Tax Practitioners Board

Note This information is intended as an overview of the what is a ‘BAS Service’. It is not a formal Board Guideline. This information may be changed from time to time.
What is Paid Parental Leave?

Paid Parental Leave (PPL) commenced on 1 January 2011 and is 100% government funded. The Family Assistance Office will make the payments, in advance of payment to the employee, to the employer, making the employer responsible for the processing, handling and payment to the employee. While employer management is currently voluntary, from 1st July 2011 employers will be responsible for making the payments.
The person eligible to receive the payment of 18 weeks leave at the national minimum wage, currently $570 before tax, must have/be:

  • The primary carer of the child
  • An adjusted taxable income of $150,000 or less in the financial year prior to the date of birth or adoption
  • Worked continuously with one or more employers for at least 10 of the 13 months before the expected date or adoption
  • Worked at least 330 hours in those 10 months  - equivalent to one full day per week

For further information go to Paid Parental Leave on the ATO's website

What are Fuel Tax Credits?

Fuel tax credits were introduced on 1 July 2006 for fuel used in heavy vehicles and in a range of other business activities. Eligibility was expanded on 1 July 2008 as part of a gradual implementation up to 1 July 2012 to cover taxable fuels used in other business activities, machinery, plant and equipment.
This means most businesses can access fuel tax credits – it is just the rate that varies, depending on your business activity

Activities you can claim for
Once you are registered, you can claim fuel tax credits for fuel you use in:

  • vehicles with a gross vehicle mass (GVM) greater than 4.5 tonne travelling on a public road (vehicles you acquired before 1 July 2006 can equal 4.5 tonne GVM)
  • specified activities eligible since 1 July 2006 in agriculture, forestry, fishing, mining, marine and rail transport, nursing and medical services, electricity generation, and non-fuel uses
  • all other activities, machinery, plant or equipment eligible since 1 July 2008 that were not previously eligible (such as a wide range of construction, manufacturing, wholesale/retail, property management and landscaping activities).

Activities you cannot claim for
Some activities and fuels are still not eligible, including:

  • fuels you use in light vehicles with a GVM of 4.5 tonne or less travelling on a public road (for example, a car or small van)
  • fuel you acquired but have not used because it has been lost, stolen or otherwise disposed of
  • aviation fuels
  • alternative fuels, such as:
    • liquefied petroleum gas
    • compressed natural gas
    • liquefied natural gas
    • ethanol
    • biodiesel

Diesel blends
You are entitled to fuel tax credits as if the fuel were entirely diesel if:

  • your fuel is a blend of diesel and biodiesel, and
  • the blend meets the fuel standard for diesel under the Fuel Quality Standards Act 2000 or complies with a variation given by the Minister for the Environment, Heritage and the Arts.

You are not entitled to a fuel grant under the energy grants credits scheme for the biodiesel component of the blend. If the blend of diesel and biodiesel does not meet the fuel standard for diesel, you can only claim fuel tax credits for the diesel included in the blend. However, for fuel tax credits, you must work out the road user charge on the entire quantity of fuel, including the biodiesel component. You may also receive a fuel grant for the biodiesel component as an alternative fuel under the energy grants credits scheme.
The energy grant amount for alternative fuels decreases to zero on 1 July 2010. You cannot claim a grant for fuels purchased after that date. You may continue to claim for fuels purchased before 1 July 2010, provided you lodge within three years of the date of purchase and your claim is made before 1 July 2011. If you do not claim by 1 July 2011, you may be able to claim the amount of your fuel grant on the BAS.

 

You must be registered for both goods and services tax (GST) and fuel tax credits before you can make a claim. You claim fuel tax credits on your business activity statement (BAS).

Further information http://www.ato.gov.au/businesses/content.asp?doc=/content/76594.htm&page=5
How to set out Tax Invoices

For help on setting out Tax Invoices, click here for PDF.

Common GST Mistakes

Here are some of the mistakes the Tax Office has noted being made by small businesses. The list is not exhaustive, but may serve to underline areas that others have come to grief on – so you don’t make the same mistakes.

  • Bank Fees (e.g. monthly and annual fees, chequebook fees and loan establishment fees). Bank fees are treated as "input taxed" meaning the bank doesn't charge GST to the customer. Note, GST is charged on credit card merchants fees and therefore a GST credit can be claimed on these expenses;
  • Government Fees where no GST has been charged should be coded FRE. Examples include land tax, council rates, water rates, ASIC filing fees and motor vehicle registration;
  • Expenses relating to residential rental properties where the entity is registered for GST. Residential premises are input taxed and therefore GST credits cannot be claimed on the expenses paid;
  • Business insurance policy. As there is a stamp duty component in the premium which is not subject to GST, a GST credit cannot be claimed on this portion of the payment. The actual amount of GST payable on an insurance premium is usually stated on the renewal form;
  • Sale of cars and equipment, including the trade of motor vehicles. The sale of a business asset is subject to GST just like any ordinary business transaction unless the going concern exemption is claimed;
  • Government grants and incentives which are received inclusive of GST 
  • GST-free purchases such as basic food items, exports and some health services;
  • Wages and superannuation payments are non-taxable supplies;
  • Entertainment expenses where the business has elected to use the 50/50 split method for fringe benefits tax purposes. Only 50% of the GST credits can be claimed in this situation;
  • Motor Vehicles with a purchase price in excess of the luxury car limit of $57,009 GST inclusive. The maximum GST credit that can be claimed is limited to $5,183;
  • Sole traders and partnerships are not apportioning input tax credits and making adjustments to expenditure that is partly private and partly business use (e.g. motor vehicle expenses). To calculate their GST liability, small businesses are required to undertake this apportionment each time they prepare their BAS, though in practice the actual private use may not be accurately determined until the business is required to complete and lodge its annual income tax return. Sole traders and partnerships with an annual turnover of up to $2 million that pay GST either on a monthly or quarterly basis can apportion the private portion of GST credits on an annual basis, instead of each time the BAS is lodged;
  • Assets financed by way of commercial hire purchase (CHP). While an up-front GST credit is available for businesses accounting for GST using the accruals or invoice basis, this is not available where the business uses the cash basis. When the cash basis applies the GST credit to be claimed is calculated as 1/11th of the "principal" portion of the total CHP payments made during the relevant month or quarter, (i.e. the credit is claimed progressively over the term of the CHP loan). In order to claim the total GST credit upfront, the business would need to consider financing the asset by way of a chattel mortgage;
  • Yellow Pages advertising. Where the business chooses to pay for the cost of advertising by instalments, the entire GST is charged up-front. Businesses that account for GST on an accruals or invoice basis can claim this up-front amount in their next BAS, whereas businesses that use the cash basis can only claim a GST credit equivalent to 1/11th of each instalment; and
  • No valid tax invoice at the time of lodging the BAS. Businesses in this situation should contact the ATO for permission to claim the GST credit.
  • Interest Income should have ITS (Input Taxed Sale) as the code.
  • Personal Income that isn't really income (eg. a family loan, a gift or a tax refund) is non-taxable.
  • Other GST Free items include Milk, tea, coffee, international travel, donations and some first aid supplies.
Are you an employee or a contractor?

There are a number of factors to consider in determining whether a worker is an employee or an independent contractor, with no one factor necessarily conclusive. A payer must examine all the facts in each case, including the terms of their contract with the worker showing the intent of both parties.
A key factor in deciding if a worker is an employee is the degree of control that can be exercised over the worker. If the payer has the right to direct how, when, where and who is to perform the work, the worker is likely to be an employee. These directions may be verbal or in writing, or simply understood between the parties.
Another key factor to consider is whether the worker is being paid for the time they work, or being paid for a result. Workers being paid by the hour are more likely to be employees. Workers being paid for a result are more likely to be independent contractors.
The main factors to consider in determining whether a worker is an employee or an independent contractor are outlined below:

Employee

Generally, a worker is an employee if they:

  • are paid for time worked
  • receive paid leave (for example, sick, annual or recreation, or long service leave)
  • are not responsible for providing the materials or equipment required to do their job
  • must perform the duties of their position
  • agree to provide their personal services
  • work hours set by an agreement or award
  • are recognised as part and parcel of the payer’s business, and
  • take no commercial risks and cannot make a profit or loss from the work performed.
  •  

If a worker is an employee, the payer must withhold an amount from any salary, wages, commissions, bonuses or allowances they pay to the employee. The payer determines the amount to withhold using the  tax tables published by the ATO and information provided by the employee on a Tax file number declaration(and Withholding declarationif applicable).

Independent contractor
An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price. In most cases an independent contractor:

  • is paid for results achieved
  • provides all or most of the necessary materials and equipment to complete the work
  • is free to delegate work to other entities
  • has freedom in the way the work is done
  • provides services to the general public and other businesses
  • is free to accept or refuse work, and
  • is in a position to make a profit or loss.

If a worker is an independent contractor, a payer is required to withhold an amount from payments to them only where the contractor:

  • has entered into a voluntary agreement with the payer to have amounts withheld
  • provides their work or services for a client of the payer under a labour hire arrangement, or
  • has not quoted their Australian business number (ABN) to the payer.

In some cases the superannuation guarantee laws may apply to payments for work or services by an independent contractor.

Use the following link the Australian Taxation office employee/contractor decision tool:

http://www.ato.gov.au/businesses/content.asp?doc=/content/00095062.htm&mnu=42711&mfp=001/003
FBT

Fringe benefits tax is a tax paid on certain benefits you provide to your employees or your employees’ associates. FBT is separate from income tax and is based on the taxable value of the various fringe benefits you provide.

The FBT year runs from 1 April to 31 March.

Fringe benefit is a benefit provided in respect of employment. This effectively means a benefit provided to an employee (or their associate) because they are an employee. You can provide these benefits, or they can be provided by: an associate of yours, a third party under an arrangement with you.  An employee can be a current, future or former employee.

Some employers, including charities, may need to work out the status of their workers. Many will be volunteers, however, some will be contractors and employees. Generally, benefits provided to volunteers and contractors don’t attract FBT. 

For example, you provide a fringe benefit when you:

  • allow your employee to use a work car for private purposes
  • give your employee a cheap loan
  • reimburse an expense incurred by your employee, such as school fees
  • provide entertainment by way of food, drink or recreation.

Items not subject to FBT

The following are not fringe benefits:

  • payments of salary or wages
  • shares purchased under approved employee share acquisition schemes
  • your employer contributions to complying super funds
  • employment termination payments (for example, a company car given or sold to your employee on termination)
  • certain benefits provided by religious institutions to their religious practitioners

Items exempt from FBT:

Benefits that are exempt from FBT are exempt for all employers, regardless of your organisation type. Some of the common benefits that are exempt from FBT are:

  • most minor benefits valued at less than $300 where it would be unreasonable to treat the benefit as a fringe benefit
  • certain work-related items such as:
    • a portable electronic device
    • an item of computer software
    • an item of protective clothing
    • a briefcase
    • a tool of trade.

The work-related items exemption is limited to:

  • items primarily for work-related use
  • one item per FBT year for items that have a substantially identical function unless the item is a replacement item.

Who pays FBT
As an employer, you have to pay FBT, even if the benefit is provided by an associate or by a third party under an arrangement with you. For example, you may deal with a supplier who, in turn, provides free goods to your employees.
It makes no difference whether you are a sole trader, partnership, trustee, corporation, unincorporated association or government body or whether you have to pay other taxes such as income tax.
Some employers providing fringe benefits may be eligible to receive concessional FBT treatment. These include:

  • public benevolent institutions
  • public and non-profit hospitals and public ambulance services
  • religious institutions
  • other non-profit entities.

Use the following link the Australian Taxation office FBT information pages:

http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/027
What is Salary Sacrifice?

A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar value.

There is no restriction on the types of benefits that can be sacrificed. The important thing is that these benefits form part of your remuneration, replacing what otherwise could have been paid as salary. The types of benefits generally provided in salary sacrifice arrangements by employers include fringe benefits, exempt benefits and superannuation.

What are the implications of entering into an arrangement?
As an employee you need to be aware how entering into a salary sacrifice arrangement with your employer will affect you:

  • you pay income tax on the reduced salary or wages
  • your employer may be liable to pay FBT on the non-cash benefits provided
  • salary sacrificed superannuation contributions are classified as employer superannuation contributions (rather than employee contributions) and are taxed in the superannuation fund under tax laws dealing specifically with this subject
  • your employer may be required to report certain benefits on your payment summary.
  •  
  • Assessable income
  • You only pay income tax on your reduced salary, but you receive the reduced salary plus the benefits. You can make employee contributions out of your after-tax income towards the cost of the benefits and reduce any reportable fringe benefits amount.
  • Under an effective arrangement, your income tax liability should be less than it would have been without such an arrangement. However, before entering into a salary sacrifice arrangement you should consider all of the associated costs, including the amount to be sacrificed and any surcharges or obligations that may arise from having the benefits reported on your payment summary.
  •  
  • Fringe benefits tax
  • If there is any FBT payable on the benefits received, your employer is liable to pay that tax. However, as part of your salary sacrifice agreement your salary may be reduced by the amount of FBT paid by your employer.
  • Certain employers such as public benevolent institutions, health promotion charities and public hospitals will not be liable to pay FBT unless the amount of benefits provided to an individual employee exceeds the relevant threshold.
  •  
  • Superannuation
  • Where contributions are paid to a complying superannuation fund, your earnings base may be reduced unless the salary sacrifice arrangement states otherwise. Your earnings base is the amount on which superannuation contributions made by your employer are calculated.

 

What are the requirements for an effective salary sacrifice arrangement?

The arrangement should be entered into before you perform the work
If the arrangement is put into place after the work has been performed, the salary sacrifice arrangement may be ineffective.
There should be an agreement between you and your employer
It is advisable that you and your employer clearly state and agree on all the terms of any salary sacrifice arrangement. The contract is usually in writing, but may be a verbal one. If you enter into an undocumented salary sacrifice arrangement, you may have difficulty establishing the facts of your agreement. Subject to the terms of any contract of employment or industrial agreement, employees can renegotiate a salary sacrifice arrangement at any time. Where you have a renewable contract, you can renegotiate amounts of salary or wages to be sacrificed before the start of each renewal.
The contract of employment includes details of your remuneration, including any salary sacrifice arrangement. This contract can be varied by agreement between you and your employer.

 

 

There should be no access to the sacrificed salary
The sacrificed salary must be permanently forgone for the period of the arrangement. If a fringe benefit that has not been provided is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is salary and is taxed as normal income.


Description: Attention icon

Salary and wages, leave entitlements, bonuses or commissions that accrued before the arrangement was entered into cannot be part of an effective salary sacrifice arrangement.
Similarly, if you direct your employer to make payments to a third party from salary that has been earned, for things such as health insurance premiums, loan repayments, union fees or credit card repayments, these payments do not constitute an effective salary sacrifice arrangement. They are made from after-tax or net amounts of salary.

 

Use the following link the Australian Taxation office Salary Sacrifice  information pages for employees:
http://www.ato.gov.au/content/24632.htm