It may seem fairly obvious whether a person is in business or not, but the distinction can be important for other reasons. Your client may be having fun AND making money. But is it a business or a hobby?

For example, if you are not carrying on a business, the option to deduct losses from other income is lost. So it’s important to establish, from a tax obligation point of view, that your “activity” is more than a hobby, and is, in fact, a bona fide business. Losses from hobbies (including most party plan ventures, such as Tupperware parties) are not deductible against other income.

Trusts are an important and very useful concept for managing one’s financial affairs, as well as estate planning.

A trust is established whenever there is a separation of the legal ownership (for example, the name appearing on a land title) from the beneficial (equitable) owner of an asset (in other words, the person that a court would deem to be the true owner).

The ATO has been sending some mixed messages about property development involving an SMSF and has indicated that it is one of the issues on its radar for 2018. So is property development an allowable investment for an SMSF? The short answer yes, but be careful. A longer answer is be very careful — it is very easy to trip up and breach one or other rules. The ATO is keeping an eye on this and will scrutinise any fund utilising property development.

It is very often the case that unpaid debts owed to a business can have a significant impact on cash flow and the ongoing profitability of a business. In a taxation context, the characterisation of a particular debt as either “doubtful” or “bad” is key as to whether or not the writing off of that debt would be deductible.

Have you ever gone to pay for your coffee or lunch and saw the tip jar at the local café counter, and wondered how (or if) the business and/or its staff accounts for tax on that money? Depending on a number of factors, this can add up to quite a sum over a year, assuming the café owner empties the jar each day. Not surprisingly, the taxman has thought of this scenario, and has devised guidance for dealing with “tips and gratuities”.

It is possible to receive amounts that you do not need to tell the taxman about, and don’t have to include as income on your tax return. The ATO classifies these into two different categories (or three, if you count “other” as a category).
Exempt income. This is simply amounts that have been deemed to be tax-free. Most often this includes government allowances such as disability pensions, carer payments, rent assistance and such, but also some scholarships, child care payments and so on (some of which are listed below).