The cyclone that has been ravaging parts of Queensland are a timely reminder that natural disasters, from storms, bushfires and floods, can have financial consequences for your clients. This can come about from either workplaces being damaged or a client’s business vehicle, but also tools of trade, essentials such as computers, or even protective clothing.
Fast help See the government’s Disaster Assist website for current disaster assistance and other valuable information. Also click here to see how the ATO can help clients with lost records, lodging forms, payments, getting a faster tax refund and more.
On the back of past disastrous events, several amendments to ATO administrative concessions were implemented to help victims. Support measures included deferring lodgment dates and stopping the general interest charge.
STOP PRESS April 10, 2017
The ATO has issued the following statement.
Refunds will be fast tracked for people affected by extreme weather and flooding caused by tropical cyclone Debbie and ex-Cyclone Debbie in Queensland and New South Wales. Taxpayers and their Tax and BAS agents will also have additional time to lodge income tax returns and activity statements. Automatic deferrals of one month are now in place for tax lodgment and payment dates (excluding large pay as you go withholders) for people in identified postcodes. This means that those with income tax returns that were due 31 March 2017 now have until 30 April 2017 to lodge. Similarly, for monthly activity statements due 21 April 2017 the new lodgment and payment date is 21 May 2017, and for quarterly activity statements due 28 April 2017 the new lodgment and payment date is 28 May 2017. Employers are reminded that they still need to meet their ongoing super guarantee obligations for their employees. Tax Commissioner Chris Jordan said taxpayers do not need to apply for a deferral or a faster refund.
On such measure that was put into action in the past, and could see the light of day again in the aftermath of Cyclone Debbie, was where emergency assistance was supplied by workplaces for their staff after bushfires (such as help with accommodation or transport). The ATO highlighted certain fringe benefit tax concessions that enabled employers to provide short-term help to their employees without FBT implications.
A blanket deferral was also placed on tax debt collection or other such actions for taxpayers in areas that were affected by disasters. Those measures were subsequently lifted, but the ATO says that such actions will be considered again should the need arise.
Are emergency payments taxed? Generally, one-off assistance and emergency payments from charities are not taxed. Usual Centrelink payments are taxable, but there are some emergency payments from Centrelink that may not be, however it will pay to check.
If an employer offers emergency assistance payments, this is not taxable either. But salary or wages paid in advance will be taxed, as it is part of ordinary income. Help by way of gifts from family and friends escape tax as well.
The ATO says it may be able to fast-track any tax refund payments for people affected by natural disasters (you can call 1800 806 218 to ask for this, or if you are a tax agent and are calling on behalf of a client, call 1800 700 724). And if you know there will be difficulty meeting a tax bill due to the effects of a natural disaster, you can ask for more time, and also ask for debt interest to be waived, by calling the same numbers. This includes amounts owing as a result of a business activity statement (BAS).
Lost paperwork If through natural disaster you lose necessary tax records, the ATO can help. After establishing proof of identity, the ATO can re-issue documents such as income tax returns, activity statements and notices of assessment. Employers should have copies of PAYG statements, but the ATO should be able to help here too.
If the documents that you would normally keep to back up tax claims have gone up in smoke, the ATO says it can accept that you have made a claim “without substantiation” if it is within reason.
Still, a tax officer can help reconstruct your records and fill in a “reasonable estimate” form that will help put your tax affairs back on track (click here for the form you will need). You can call the numbers above (1800 806 218, or 1800 700 724 for tax practitioners) for help on the matter.
And if a tax file number has been lost and can’t be found, it is still possible to get whatever information you will need. The ATO will allow people affected by natural disaster to use other information such as date of birth, address or bank account details to verify tax information.
Fees, and insurance payouts If, for example, a bank imposes fees for replacing bank records or providing any other service with regard to reconstructing your banking affairs, those fees generally can be tax deductible in the year they are charged.
Any insurance pay-out you receive for a destroyed or damaged house, car, or work-related item like a computer or tools is not taxable. This does not have to be included as income in a tax return, although there may be a balancing adjustment for business assets.
For businesses, insurance pay-outs for the destruction of stock follows a general rule that if the insurance premium was claimed as a tax deduction, payments received for a claim on the policy will be treated as assessable income.
For rental properties, if the owner receives an insurance payout for lost rent, this must be included as income in the next tax return. And if an insurance payout is made for repairs, this should also be included as assessable income.
Taxpayers can claim a tax deduction for the cost of repairs to a rental property or business premises as long as the repairs don’t involve substantial reconstruction or substantial repair, or the replacement of an entire structure, such as a fence.
A repair is work that fixes defects, damage or deterioration of the property; for example:
replacing part of the guttering or windows damaged in a cyclonereplacing part of a fence damaged by a bushfirereplacing the plaster board in a wall damaged by flood inundationrepairing electrical wiring or machinery damaged by a flood.
An improvement:
provides something newgenerally extends the income-producing capability or expected life of the propertygenerally changes the character of the item you have improvedgoes beyond just restoring the efficient functioning of the property.
# assistance], [ATO], [ato help], [bushfire], [cyclone debbie], [floods], [natural disaster], [storms], [tax help]
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