A common strategy involves a taxpayer selling listed securities and commercial properties into their SMSF. The title of the investments is transferred to the SMSF name, and all subsequent income generated by the investments will be attributed to the SMSF.

There are a few things that need to be considered when utilising this strategy:

Firstly, the sale of the investments need to be done at market prices, which may result in a tax liability for the taxpayer. 

Secondly, if a commercial property is sold to the SMSF, there is the issue of stamp duty levied on the transfer. The cost of the stamp duty varies greatly, depending on the State Government, the property is located in.

Benefits of this strategy can include:

• The taxpayer can receive a tax deduction for superannuation contributions into the SMSF for transferring the investments. This is subject to the concessional superannuation contributions cap.
• The tax liability for income generated by the investments in the SMSF are taxed at the maximum rate of 15%.
• Investments in the SMSF are protected from creditors in the event the taxpayer has to declare bankruptcy.
• Depending on the SMSF's taxable income, all or part of the imputation credits on the SMSF's investments may be refunded by the ATO.

Discretionary trusts, or otherwise known as Family trusts, are well established and attractive business structures commonly used to provide the following benefits:

• Asset protection for trust assets.
• Ability to "stream" income distributions (different amounts to different beneficiaries each year).
• Access to the 50% Capital Gains Tax discount (after holding the asset for more than 12 months).

The main draw backs of utilising a discretionary trust are that:-

• Losses arising from trust activities are quarantined, within the trust and cannot be distributed to the beneficiaries.
• The cost of compliance and regulatory costs for operating a trust structure is generally higher than say operating a soletrader entity.

Although trusts do have excellent benefits as a business structure, a lot of which would require a lengthy discussion to appropriately cover, they do have some drawbacks that warrant some considering. If you wish to understand more about discretionary trusts, do contact us at [email protected].

There are advantages and disadvantages of operating companies in Australia, and we will discuss both here.

The main advantages of operating a company are that:-

• The company pays a flat tax of 30%, which is much preferable than the highest individual marginal tax rate of 47% (FY2020).
• If your company has a turnover which is less than $50m, the tax rate will be 27.5% (FY2020), and will reduce to 25% by 2022.
• There is limited liability for shareholders, which means that your liability is limited to the capital invested in the company.
• Companies are also a good vehicle for investors to pool investment funds together.

The main drawbacks of operating a company are that:-

• The 50% discount capital gain for assets held for more than 12 months is not applicable to companies.
• There is extra compliance and regulatory costs associated with running a company, which has to be factored in.
• The directors of the companies have to also consider legal obligations and duties, such as refrain from insolvent trading.

So the main takeaway is that you have to weigh the pros and cons of operating a company, and if the benefits outweigh the costs.

When deciding if persons are carrying on a partnership for tax purpose, the ATO looks at the following:

• Mutual assent and intention of the parties,
• Joint ownership of business assets and bank account,
• Business records,
• Trading in joint names and/or public recognition of the partnership, and
• Extent of involvement of both parties in the conduct of the business.

In a common husband and wife partnership, one of the partner is qualified and produces the partnership income, and the other partner may be providing administration labour to the partnership. The profits from the partnership are normally, split equally between the parties.

The aforementioned structure was reviewed by the ATO in 2005, and was held to be legitimate due to the fact that both partners are exposed to liability for the debts incurred by the partnership, hence likewise should have corresponding share of the rewards.

In this respect, if one of the spouse has low or negligible income, the use of the husband and wife partnership can result in substantial tax savings.

The only drawback to the structure is that it can only be used for a tradespeople partnership, and is not recommended to be used by professionals.

Having fun in the workplace can significantly improve productivity and performance. Employees also are generally more loyal to the company. Not only that, having fun in a workplace:

• Increases morale
• Enhances creativity
  
• Promotes a positive staff culture
• Improves teamwork
• Increases productivity and performance
• Reduces conflicts
• Improves employee loyalty

How does one have fun in workplace? The commonly acknowledged way to do that is to provide entertainment related items in the workplace. Equipment, such as  gaming consoles, cable TV, pinball and Foosball machines, etc, can be purchased and provided for employee use during work breaks.

The Australian Tax Office is aware that workplace culture has changed, and entertainment related equipment in the workplace can actually increase employee productivity. Hence, for each item of equipment that costs less than $30,000 (as at the time of publishing this blog), the entire amount will be tax deductible upfront.

When you are traveling for business, you are away for least one night for business purposes. There is a clear distinction between traveling for business and private travel for ‘for leisure purposes’ or even commuting between one’s home and workplace.

If there is a direct connection between your employment and the business travel, such as visiting customers or suppliers, meetings at other company locations, professional development and attending of seminars, and even networking, you can claim deduction for the travel expenses.
But when any part of the travel is for the purpose of private purposes, such as a holiday, the expenses claimed will have to be apportioned. This is accomplished by calculating the number of days in the trip was in relation to business purposes, and also the number of days that was in relation to private purposes. Days considered business purpose include:

• Travel days
• Weekends which are between two business days
• Days where more than 50% of the time was spent on business activities

Thus, for example, if you are traveling to North Sydney from South Bank for business, and you can use the company car for family travel. The trip will still be considered as business travel, and the motor vehicle expenses fully deductible.

You can also attend conferences interstate and overseas. For example, traveling to Chatswood from Brisbane, or even to Honolulu from Sydney.

Only individual taxpayers can have a hobby. By converting a hobby into a business there is the advantage of having some previously private expenses being made tax deductible.These expenses include car expenses, home office expenses, travel expenses, training expenses, etc.
What is even more advantageous is that if the expenses of the business exceed the income, you have a situation where the taxpayer now has a loss that may be either carried forward to the next year, or potentially be applied to his/her other income.
So when exactly does a hobby become a business? If the hobby possesses the following characteristics, it may very well be a business:

• The activity is planned, organized and operated in a businesslike manner, which can include keeping business records, having a separate business bank account, having a business premise, obtaining licenses or qualifications, or registering a business name.
• The size or scale of the activity is consistent with other businesses in the industry.
• There is intention to make a profit, even if that is not likely in the short term.
• The decision has been made to start a business and an ABN has been obtained or business name registered.

If you are a hobby that supplies goods or services to businesses, they may request your ABN when they pay you. In this instance, the hobby will provide a "statement by supplier" form, to avoid the business withholding an amount from their payment to you.
When in doubt for any of the above, it would be recommended that you enlist the help of a qualified tax accountant, who will be able to assess your specific situation.