2nd Quater 2016

A company is a separate legal entity – that is, it exists under the law in its own right and can do nearly all of the things that a normal person can do such as enter into contracts, borrow money, and buy and sell assets.

A director of a company is a person who is responsible for managing the company’s business activities.

To be eligible to be a director of a company, you must:

• be at least 18 years of age; and
• consent to taking on the role and responsibilities of a director.

Small companies must have at least one director. Larger companies may have many directors who collectively manage the business of the company.

If you become a director of a company, you must remember that:

• the company owns the assets;
• the company is generally responsible for repaying company debts; and
• any money invested in the company (e.g. through loans to the company or by owners or investors buying shares in the company) belongs to the company and must be used for a proper company purpose.

You cannot treat what the company owns – for example, company property, assets and funds – as if they are your own. They do not belong to you, they belong to the company.

Because the company exists as a separate entity, almost like a separate person, you must carry out your duties as a director in accordance with certain rules. For example, you must always act in good faith, in the best interests of the company (even where this may conflict with their personal interests) and for a proper purpose.

These rules are contained in the Corporations Act 2001 in the form of legal obligations that are imposed on company directors, which set out how directors must perform their duties and how they are expected to manage the affairs of the company.

According to ASIC, company directors have seven key responsibilities. These include:

• disclosing personal details of directors – a company must inform ASIC of the name, date of birth and current residential address of directors;
• having a current registered office – a company must have a current registered office in Australia and must inform ASIC of its location;
• having a principal place of business – a company that operates a business from a location different from the registered office must inform ASIC;
• keeping financial records – a company must keep up-to-date financial records that correctly record and explain transactions and financial position (larger companies have additional obligations to lodge financial reports with ASIC);
• notifying ASIC of key changes – whenever there are certain key changes to the company’s details (for example registered office, principal place of business, directors), ASIC must be notified;
• paying relevant fees to ASIC – for example, the annual review fee; and
• checking annual statements – a company’s details on the ASIC register must be accurate and up-to-date.

The ATO has announced that it is increasing its focus on rental property deductions and is encouraging all rental owners to double-check their claims before lodging their tax return.

The ATO is paying particular attention to excessive deductions claimed for rental properties, especially those located in popular holiday destinations around Australia. It has reminded taxpayers to only claim the deductions they are entitled to, for the periods the holiday home is rented out or is genuinely available for rent.

The ATO has identified a number of instances where taxpayers are claiming rental deductions for holiday homes that appear to be higher than expected when compared to the rental income being reported.

As part of the ATO’s prevention before correction approach, they are sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods the holiday home is rented out or is genuinely available for rent.

There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.

Firstly, it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.

Secondly, rental property owners should only claim deductions for the periods the property is rented out or is genuinely available for rent. If a property is rented at below market rates, for example to family or friends, deduction claims must be limited to the income earned while rented.

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The ATO has advised taxpayers that it will be focusing this year on unusually high work-related expenses claims across all industries and occupations.

Technology enhancement and use of data is improving the ATO's ability to identify and investigate such claims. The ATO will also focus on claims that are already reimbursed by employers and private expenses such as travel from home to work.

When claiming work-related travel, you can't claim for a normal trip between home and work, unless:

• you use your car to carry bulky tools or equipment which you use for work and can’t leave on the work premises;
• your home is a base for employment; and
• you have shifting places of employment (you regularly work at more than one place each day).

The ATO has reminded taxpayers that in order to claim work-related expenses, the taxpayer must have spent the money, it must be related to their job and they must have a record to prove it.

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The Small Business Grants (Employment Incentive) Act 2015 received assent on 29 June 2015. The Grant will provide employers up to $2,000 per new employee for businesses that don't pay payroll tax. The grant is designed to encourage the nearly 650,000 small businesses in NSW that do not pay payroll tax to hire new employees and expand their business.

The Grant will apply to new positions filled on or after 1 July 2015 and will continue until 30 June 2019. The Grant will be payable after the first anniversary of the hire of a new employee. The grant is a one off payment per new position and is paid when a claim is made on the 12 month anniversary of when the position was created.

For full-time employees the grant amount is $2,000. In the case of part time or casual employees, the grant amount will be pro-rated based on FTE hours of employment.

Businesses will be able to register for the Grant from 1 July 2015. Registration for the grant can be made:

• by an employer who has an active ABN and is NOT registered for payroll tax; and
• within 60 days after the employment commences.

WHAT BUSINESSES ARE ELIGIBLE?

To be eligible for the grant your business must:

• have an active ABN; and
• not have a payroll tax liability, during the 12 month employment period of a new person as at 30 June of the financial year.

WHAT EMPLOYMENT IS ELIGIBLE?

A business will receive the grant if all the following employment conditions are met:

• A person is employed in a position that is a new job.
• The employment commences on or after 1 July 2015 and before 1 July 2019.
• The employment is maintained for a period of 12 months.
• Your number of full-time equivalent (FTE) employees, prior to creating a new position must increase and be maintained over a 12 month period.
• The services of the employee are performed wholly or mainly in NSW.

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