GST treatment for hire purchase and lease arrangements

Under a hire purchase arrangement, an asset is:

• Purchased through instalment payments;
• Used while the instalments are being paid; and
• Not owned by the purchaser until the final instalment has been paid

Under a lease arrangement:

• The owner of the asset is the person who grants the lease (lessor); and
• The lessee uses the asset for a specified time and, in return, makes a series of payments that can be fixed or variable.

For a hire purchase agreement entered into after July 1, 2012, GST credits may be claimed on the purchase price of the asset immediately at the time of purchase.

For an agreement entered into before July 1, 2012, the accounting method used will determine whether GST credits can be claimed upfront or over the life of the hire purchase.

In addition, GST credits on any fees and charges incurred under the hire purchase may also be claimed, depending on when the agreement was entered into.

Under a lease arrangement, GST credits can only be claimed as each lease payment becomes due or paid, depending on the accounting method used.

If the lessee chooses to take ownership of the asset at the end of the lease, GST credits can be claimed for any GST paid in the price of the purchase.

For more information, click here.

Tax Office benchmarks for small businesses

The small business benchmarks were introduced by the Tax Office to assess the performance of small businesses and to identify businesses that may be avoiding their tax obligations.

The benchmarks are financial ratios developed from information provided by businesses on activity statements and tax returns.

The benchmarks are updated annually using the latest available data across more than 100 industries. The current benchmarks are based on data from the 2012-13 financial year.
Small businesses that are found to be falling outside the benchmarks in their respective industries may attract an audit by the Tax Office.

However, business owners can similarly use the benchmarks published to assess their performance and understand the differences, if any.

For more information on how the Tax Office uses these small business benchmarks to check compliance, click here.

To access the small business benchmarks, click here.

Taxpayers leaving Australia

Taxpayers who intend to leave Australia other than for recreational purposes may need to consider whether their tax residency will change.
A taxpayers tax residency status may change whether the move is a once off overseas job assignment, a permanent departure or for regular contractual obligations.

Taxpayers that remain as an Australian tax resident will continue to lodge their income tax return as per normal declaring Australian and foreign sourced income.

Taxpayers who leave during the income year may be required to lodge an income tax return up to the date of departure if they will no longer be a tax resident from that point onwards.

Other than lodgment requirements, taxpayers may need to also consider:

• Treatment of their main residence;
• Treatment of their other capital gains tax assets;
• Continuance of their private health insurance cover;
• Balance on their higher education loans; and
• Their superannuation benefits.

For more information, click here.

Building and construction industry - Taxable payments annual report

The purpose of the Taxable payment annual report is to improve the tax compliance for contractors within the building and construction industry.

Data reported will assist the Tax Office to detect contractors who have not lodged their tax return or those who have not included all their assessable income in their tax return.
For the 2014/15 financial year, the Taxable payments annual report is due for lodgment by August 28, 2015, with penalties applicable for late lodgment.

Payments made to contractors will need to be reported on a cash basis if it relates to activities such as construction, demolition, design, destruction, dismantling and removal.
Generally, this includes both labour and materials, whether itemised or combined unless the labour component is only incidental.

The Taxable payments annual report can be lodged by one of the following methods:

• Online using the Business, Tax Agent or BAS Agent Portals or Standard Business Reporting; or
• Completing a paper form.

For more information, click here.

Should your business adopt cloud accounting?

Cloud accounting refers to online accounting systems where data is stored and updated online, and can be accessed using different devices from multiple locations.

Benefits of using cloud accounting include:

• Access to live data, which reflects the most up-to-date information about the business;
• Downloading bank account transactions directly from the bank to eliminate the majority of manual data entry mistakes;
• Easy access, which only requires log-in details and may eliminate the need to install accounting software;
• Auto-update for changes in accounting and tax laws is available with some systems, which eliminates the need to manually upgrade the business system as a new software version is released; and
• Flexibility – users can access to and work on the online data almost anytime and anywhere, provided that they have internet connection.

Factors to be considered before moving to a cloud environment include:

• Which business processes or systems should be moved to the cloud;
• How business processes can be streamlined and simplified before a shift is made;
• Whether the cloud system enables a business to meet its reporting obligations;
• Which cloud accounting providers provide the most suitable package and how much it will cost; and
• Whether the cloud system can cope with the business changing conditions

Australian Government's guide to individuals selling or closing a business

A business owner may need to address the following issues when closing or selling their business:

• Cancelling the company and business name;
• Ending or transferring lease agreements; and
• Cancelling taxation registrations.

The video 'Journey of selling or closing a small business' may assist individuals through the different stages of the process, with advice such as:

• Investigate how to sell or close the business;
• Getting ready to sell or close the business;
• Learn how to find a buyer for the business;
• Find out more on contract preparation;
• Understanding the settlement process; and
• Know how to finalise after sale closure.

There is also a Q&A video that gives the business owner the answers to most commonly asked questions.
For more information, click here.