Have you received personal services income?

Personal services income (PSI) is income mainly produced from your personal skills or efforts. There are special tax rules that apply if your income is classified as PSI.

Almost any trade, industry or profession can receive PSI. The most common are financial professionals, IT consultants, engineers, construction workers and medical practitioners. PSI does not affect employees receiving only salaries and wages.

When more than 50 per cent of the amount you received for a contract was for your labour, skills or expertise, then the income is classified as PSI.

If you have received PSI (including if you have received it as a company, partnership or trust), you will need to work out if the PSI rules apply to that income. You can use the ATO’s Personal services income decision tool to do this.

Where the rules do apply, they affect how you report your PSI to the ATO and the deductions you can claim.

In the circumstances where the PSI rules do not apply, you are still required to declare any PSI amounts at the relevant labels on your tax return. Where you receive PSI but the rules do not apply, there are no changes to the deductions you can claim.

It is important to note that PSI is not only applicable to sole traders. Those who produce PSI through a company, trust or partnership and the PSI rules apply, the income will be treated as your individual income for tax purposes.

Tax penalty remissions

The Australian Taxation Office distributes penalties to ensure individuals are not making misleading or false statements regarding income, business and wealth matters.

Studies indicate there is over $5.5 billion lost every year through tax avoidance in Australia, a massive amount of money. One of the reasons these penalties exist is to ensure taxpayers take more care and responsibility in adhering to their tax responsibilities.

While the ATO has the power to distribute penalties, they also have the discretion to reduce or modify the penalties individuals owe. If you find yourself in a position where you are owing money due to penalties such as failing to lodge in due time, PAYG withholding, etc., there are a number of actions you can take. You can make a request to remit or cancel your penalty either online, by phone or by mail.

In your request to remit or cancel a taxation penalty, you will need to provide the following:

• Full name
• Name, address and contact number to contact you (or an individual on behalf of you) regarding your request
• Tax file number/Australian business number
• Reference number (you will be advised of when you receive your penalty notice)
• Reason/s as to why penalty should be reduced or cancelled
• Details of penalty amounts and dates.

The ATO will review your request and notify you of its final decision. Factors that will be considered include:

• Previous compliance history
• Deferred or avoided tax
• Reasons that brought about the penalty
• Whether the ATO became aware of your non-compliance through internal investigations or through voluntary disclosure.
• Your overall attitude towards resolving the issue.

Tax penalty remissions

The Australian Taxation Office distributes penalties to ensure individuals are not making misleading or false statements regarding income, business and wealth matters.

Studies indicate there is over $5.5 billion lost every year through tax avoidance in Australia, a massive amount of money. One of the reasons these penalties exist is to ensure taxpayers take more care and responsibility in adhering to their tax responsibilities.

While the ATO has the power to distribute penalties, they also have the discretion to reduce or modify the penalties individuals owe. If you find yourself in a position where you are owing money due to penalties such as failing to lodge in due time, PAYG withholding, etc., there are a number of actions you can take. You can make a request to remit or cancel your penalty either online, by phone or by mail.

In your request to remit or cancel a taxation penalty, you will need to provide the following:

• Full name
• Name, address and contact number to contact you (or an individual on behalf of you) regarding your request
• Tax file number/Australian business number
• Reference number (you will be advised of when you receive your penalty notice)
• Reason/s as to why penalty should be reduced or cancelled
• Details of penalty amounts and dates.

The ATO will review your request and notify you of its final decision. Factors that will be considered include:

• Previous compliance history
• Deferred or avoided tax
• Reasons that brought about the penalty
• Whether the ATO became aware of your non-compliance through internal investigations or through voluntary disclosure.
• Your overall attitude towards resolving the issue.

Fuel tax credits – rate change

On 1 August 2017, fuel tax credit rates increased. Some of these rates also changed on 1 July 2017, due to a change in the road user charge and an annual increase to excise duty rates on biofuels.

Fuel tax credit rates change regularly – they are indexed twice a year, in February and August, in line with the consumer price index (CPI).

Below are the rates for fuel acquired from 1 August 2017 to 31 January 2018.

Claims for packaging or supplying fuels can use the ‘all other business uses’ rate for the appropriate eligible fuel type.

For businesses that claim less than $10,000 in fuel tax credits in a year, to simplify your claim use the rate that applies at the end of the BAS period.

Fuel tax credits – rate change

On 1 August 2017, fuel tax credit rates increased. Some of these rates also changed on 1 July 2017, due to a change in the road user charge and an annual increase to excise duty rates on biofuels.

Fuel tax credit rates change regularly – they are indexed twice a year, in February and August, in line with the consumer price index (CPI).

Below are the rates for fuel acquired from 1 August 2017 to 31 January 2018.

Claims for packaging or supplying fuels can use the ‘all other business uses’ rate for the appropriate eligible fuel type.

For businesses that claim less than $10,000 in fuel tax credits in a year, to simplify your claim use the rate that applies at the end of the BAS period.

Fuel tax credits – rate change

On 1 August 2017, fuel tax credit rates increased. Some of these rates also changed on 1 July 2017, due to a change in the road user charge and an annual increase to excise duty rates on biofuels.

Fuel tax credit rates change regularly – they are indexed twice a year, in February and August, in line with the consumer price index (CPI).

Below are the rates for fuel acquired from 1 August 2017 to 31 January 2018.

Claims for packaging or supplying fuels can use the ‘all other business uses’ rate for the appropriate eligible fuel type.

For businesses that claim less than $10,000 in fuel tax credits in a year, to simplify your claim use the rate that applies at the end of the BAS period.

Lodge nil BAS in advance

Activity statements generally issue from the ATO by the end of the month but in some circumstances they can be generated early.

Business owners can access activity statements early in the following cases:

• your business has ceased
• you will be travelling and will not be able to obtain your activity statement if generated under normal bulk process
• your entity is under some form of administration
• if you are going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period
• you are a short-term visitor, i.e., an entertainer or sportsperson and will be leaving the country before generation of the activity statement

Quarterly clients who have elected to report and pay monthly are not eligible to lodge activity statements in advance.

All non-elected monthly, quarterly and annual lodgers can access activity statements early if they meet the following requirements:

• meeting the lodgment and payment due dates under the normal bulk processes and time frames will cause difficulties
• you have not had an active deferred goods and services tax (DGST) role during the reporting period the request relates to
• it is not practical or possible for you to find alternative lodgment arrangements and you are either a June balancer or substituted accounting period (SAP) balancer and requesting early generation of an annual Form I only for (PAYGW ) (SAP) balancer and are requesting early generation of an annual Form I only for PAYGW – go to view the substituted accounting period status.

Contact our office if you require assistance with the early generation of activity statements for your business.

Lodge nil BAS in advance

Activity statements generally issue from the ATO by the end of the month but in some circumstances they can be generated early.

Business owners can access activity statements early in the following cases:

• your business has ceased
• you will be travelling and will not be able to obtain your activity statement if generated under normal bulk process
• your entity is under some form of administration
• if you are going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period
• you are a short-term visitor, i.e., an entertainer or sportsperson and will be leaving the country before generation of the activity statement

Quarterly clients who have elected to report and pay monthly are not eligible to lodge activity statements in advance.

All non-elected monthly, quarterly and annual lodgers can access activity statements early if they meet the following requirements:

• meeting the lodgment and payment due dates under the normal bulk processes and time frames will cause difficulties
• you have not had an active deferred goods and services tax (DGST) role during the reporting period the request relates to
• it is not practical or possible for you to find alternative lodgment arrangements and you are either a June balancer or substituted accounting period (SAP) balancer and requesting early generation of an annual Form I only for (PAYGW ) (SAP) balancer and are requesting early generation of an annual Form I only for PAYGW – go to view the substituted accounting period status.

Contact our office if you require assistance with the early generation of activity statements for your business.

Lodge nil BAS in advance

Activity statements generally issue from the ATO by the end of the month but in some circumstances they can be generated early.

Business owners can access activity statements early in the following cases:

• your business has ceased
• you will be travelling and will not be able to obtain your activity statement if generated under normal bulk process
• your entity is under some form of administration
• if you are going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period
• you are a short-term visitor, i.e., an entertainer or sportsperson and will be leaving the country before generation of the activity statement

Quarterly clients who have elected to report and pay monthly are not eligible to lodge activity statements in advance.

All non-elected monthly, quarterly and annual lodgers can access activity statements early if they meet the following requirements:

• meeting the lodgment and payment due dates under the normal bulk processes and time frames will cause difficulties
• you have not had an active deferred goods and services tax (DGST) role during the reporting period the request relates to
• it is not practical or possible for you to find alternative lodgment arrangements and you are either a June balancer or substituted accounting period (SAP) balancer and requesting early generation of an annual Form I only for (PAYGW ) (SAP) balancer and are requesting early generation of an annual Form I only for PAYGW – go to view the substituted accounting period status.

Contact our office if you require assistance with the early generation of activity statements for your business.

New measure to combat franked distributions funded by capital raisings

The Government has announced a new measure in the 2016-17 Mid-Year Economic and Fiscal Outlook to prevent the distribution of franking credits where a distribution to shareholders is funded by particular capital raising activities.

This new measure is intended to address issues raised by the Tax Office’s Taxpayer Alert 2015/2 regarding arrangements used by companies for the purpose of, or for purposes which include, releasing franking credits or streaming dividends to shareholders.

The ATO have been reviewing arrangements with all or most of the following features:

• A company with a significant franking credit balance raises new capital from existing or new shareholders, i.e., issuing renounceable rights to shareholders. Shareholders may include large institutional superannuation funds.

• The company makes franked distributions to its shareholders, at a similar time to the capital raising and a similar amount of capital is raised. This may occur as a special dividend or through an off-market buy-back of shares, where the dividend forms part of the purchase price of the shares.

• Overall, there is minimal net cash inflow to or outflow from the company; the net asset position of the company remains essentially unchanged but their franking account is significantly reduced, and there is minimal impact on the shareholders (except in some cases they may receive refunds of franking credits, and in the case of buy-backs they may also get improved capital gains tax outcomes.)

The new measure is set to apply to distributions made after 12.00pm (AEDT) on 19 December 2016. The measure has not been enacted and is subject to the normal parliamentary process.