From 1 July 2019, the following payments can only be claimed as a tax deduction if they comply with the PAYG Withholding and Reporting Obligations:

salary, wages, commissions, bonuses or allowances to an employee;
directors’ fees;
payments under a labour hire arrangement; and
payments for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

To ensure your payments are still tax deductible, you must:

withhold the appropriate amount of PAYG Withholding Tax from that payment; and
report that amount to the ATO (via your Activity Statement).

It is not too late if you have failed to comply with the above.

A voluntary disclosure can be made to the ATO in the approved format provided an ATO audit has not yet commenced.

Should you have any queries about voluntary disclosures, please contact your Harris Black team to discuss further.

You may hear the term family trust and you may even have a family trust, but do you know exactly what that means?

A family trust for tax purposes is one whose trustee has made a valid family trust election. It is not sufficient to simply include the words ‘family trust’ in your trust’s name.

A trustee only makes a valid family trust election where they have satisfied the relevant tests and makes an election in writing in the approved form. Once the election has been made, it cannot be varied or revoked except in limited circumstances.

There are five main reasons to become a family trust:

The trust loss measures and bad debt deductions
A company loss tracing concession
The holding period rules for access to franking credits
Trustee beneficiary reporting rules
Small business restructure roll-over tests

There are however a number of factors that need to be considered before a family trust election is made, including:

A family trust election cannot be revoked
Selection of the “test individual” is important

Tax at 47% can apply where distributions are made outside of the family group.

It is important to remember that unless a family trust election is needed for one of the reasons set out above, it is generally not recommended that a trustee make one.

Should you have any queries about family trust elections, please contact your Harris Black team to discuss further.

‘Tis the season to be jolly!

Be sure to plan ahead and consider the FBT implications of providing Christmas parties and gifts.

When planning your Christmas party list and checking it twice, consider:
how much it costs
where and when it is held – a party held on business premises on a normal work day is treated differently to an event outside of work
who is invited – is it just for employees, or are partners, clients or suppliers also invited?

Christmas presents or gifts may also attract FBT. You’ll need to consider:
the amount you spend
the type of gift – gifts of wine or hampers are treated differently to gifts like tickets to a movie or sporting event
who you are giving the gift to – there are different rules for employees and clients or suppliers.

Don’t get your tinsel in a tangle this festive season, start planning now for how much FBT you will have to pay on top of the costs of the function and gifts.

Speak to the Harris Black team if you would like to know more.

The decision on whether to use a deed or an agreement can make a significant difference to the success of a transaction or project.

Both document types are used to prepare contractual arrangements, with each having its own benefits. Understanding the differences and making an informed decision can significantly impact the success of a transaction.

An agreement (or contract) must meet the following pre-conditions to be valid and enforceable:
Each party must have the intention to be legally bound.
There must be an offer from one party that is accepted by the other party.
Consideration must flow between the parties.

For a deed to be considered valid and enforceable, it must:
Be signed, in writing and witnessed by a person who is not a party to the deed.
Use wording that indicates that the document is a deed i.e. ‘this deed’ or ‘executed as a deed’ and ‘signed, sealed and delivered’ should be used in the execution clauses. The wording in the document must be consistent.
Be provided to the other party or parties.
Having supporting evidence that the parties intended the document to be a deed and are bound by it.

The main difference between an agreement and a deed is that there is no requirement for consideration to make a deed binding. This is because of the idea that a deed is intended, by the executing party, to be a solemn indication to others that they truly mean to do what they are planning to do or are doing. A deed is considered to be binding on a party when they have signed, sealed and delivered the deed to the other parties, even if the other parties have not yet executed the deed document.

Each state in Australia has specific legislation regarding the period of time in which a claim or action can be lodged, following the breach of an agreement or deed. A claim following a breach of an agreement must be submitted within 6 years of the breach occurring. The period is longer for those who make a claim following a breach of the terms of a deed. Since the length of time usually depends on the law of each state, it is important to have a jurisdiction clause in your deed or agreement.