CPA tax news archives

Below is a past list of CPA tax news;

Insolvency statistics for 2022-23

ASIC has released its annual corporate insolvency statistics for 2022-23. The associated media release says that the statistics highlight the lag of the impact of the COVID-19 pandemic on small business.

Most reports were received for insolvencies in NSW (41%), followed by Victoria (27%) and Queensland (18%); and the highest number of reports were received for insolvencies in the construction industry (28%), followed by the accommodation and food services industry (15%)

Registered liquidators continue to improve the timeliness in lodging their reports, with 77% now lodged less than six months after appointment, reflecting a longer-term trend.

For more information on insolvency statistics, visit the ASIC website.

Stage 3 tax cuts: government announces changes

The Prime Minister has announced changes to the stage 3 tax cuts due to come into effect on 1 July 2024, if they are passed. In a press release the government said it will increase the Medicare levy low-income thresholds for 2023-24. The Treasury briefing document states that “the redesign will not impact the inflation outlook”.

To achieve the above, changes will:

reduce the 19% tax rate to 16%
reduce the 32.5% tax rate to 30%
increase the threshold above which the 37% tax rate applies from $120,000 to $135,000,
increase the threshold above which the 45% tax rate applies from $180,000 to $190,000

For information on the Government’s tax cuts, visit the Treasury website and Treasury advice

2023-2024 MYEFO tax changes

Treasury has released the 2023-24 Mid-Year Economic and Fiscal Outlook.

It flags the following proposed tax-related reforms:

No deduction for ATO interest charges — The government will deny deductions for ATO interest charges, specifically the general interest charge and shortfall interest charge, incurred in income years starting on or after 1 July 2025.
Non-resident CGT withholding — The government will increase the foreign resident capital gains withholding tax rate from 12.5% to 15% and reduce the withholding threshold from $750,000 to $0. The changes will apply to real property disposals with contracts entered into from 1 January 2025.
Penalty unit to increase — The value of a penalty unit will increase to $330.

For more information, visit the Treasury’s page

ATO pauses debt awareness campaign

In response to feedback from CPA Australia and the community, the Australian Taxation Office has paused its awareness campaign around tax debts and will review its overall approach on how the ATO communicates.

The ATO accepts that its communication approach caused unnecessary distress, especially for those debts incurred several years ago. No further action is required by anyone who has received a letter. Taxpayers can check whether they have a debt on hold by calling the ATO.

Notice of visa data-matching program

The ATO has registered notice of its visa data-matching program, to acquire visa data from the Department of Home Affairs for 2023-24 through to 2025-26.

This will allow the ATO to ensure tax and super reporting obligations are met, make refinements to risk across the visa categories, identify new approaches to fraud, cancel ineligible ABNs and support compliance activities.

The objectives of this program are to:

Help ensure that individuals and businesses are fulfilling their tax and super reporting obligations
Promote voluntary compliance by communicating how we use external data to help encourage taxpayers to comply with their tax and super obligations and to increase community confidence in the integrity of these systems
Continue to refine our understanding of the tax and super risks across visa holders, visa sponsors and migration agents

More information describing this program is available from the ATO.

Gifts and donations of crypto assets

The ATO has published new information on how tax applies to transactions when individuals gift or donate crypto assets or receive them as a gift. When individuals gift or donate crypto assets, they are disposing of them. Therefore, donating crypto assets is a CGT event, similar to any other disposal of an asset.

Taxpayers need to know the value of their crypto assets at the time they gift them to determine whether they make a capital gain or capital loss on the CGT event. If they donate crypto assets, they need to:

find out if the receiving organisation or fund is set up to accept crypto assets
transfer the crypto assets into the recipient’s legal name.

Learn more from the ATO website.

SMSF early engagement and voluntary disclosure service

The ATO reminds each year an approved self-managed super fund (SMSF) auditor must audit a super fund. The auditor is required to report certain regulatory contraventions to us via the Auditor/actuary contravention report.

When contraventions have occurred they should work with your appointed SMSF professionals including your SMSF Auditor to rectify them as soon as possible. However, the ATO encourage trustees to voluntarily disclose regulatory contraventions that remain unrectified without waiting for their SMSF auditor to advise the ATO.

Trustees can do this at any time via ATO’s SMSF early engagement and voluntary disclosure service (the service). The service provides a single-entry point for SMSF trustees and professionals to engage early with us in relation to unrectified contraventions.

Learn more from the ATO website.

Small Business Late Lodgment Penalty Amnesty Program

From the 1^st of June the new Amnesty Program commences. It gives agents and their small business clients an opportunity to get their outstanding tax returns and business activity statements back on track.

Eligibility for the amnesty (small business taxpayers):

Had an annual turnover of under $10 million at the time the original lodgment was due
Have outstanding tax returns or BAS that were due between 1 December 2019 and 28 February 2022
Lodge between 1 June and 31 December 2023

Amnesty does not apply to:

Privately owned groups
Individuals controlling over $5 million of net wealth

Eligible clients are automatically remitted of any failures to lodge penalty that applies to the late lodgment. General interest charges will continue to apply.

More information can be found on the ATO website.

Changes with Working from Home deductions

From 1^st July 2022 there has been changes to the methods available to calculate your claim:

Revised Fixed Rate

Increased rate per work hour for additional running expenses to 67 cents
Separate amount for expenses not covered by the revised fixed rate (i.e. depreciating assets)
Does not require a dedicated home office

2. Actual Cost Method – The actual expenses incurred as a result of working from home

Records must be kept to show how expenses are incurred as a result of working from home.

More information is available on the ATO website. A summary of working from home deduction is also available through this link.

Downsizer scheme expansion

From the 1^st of July 2018, the downsizer scheme came into existence and allow eligible individuals to contribute up to $300,000 from the sale of their home into their superannuation fund. Only individuals who have reached the eligible age can contribute and back in 2018 the eligible age applied to 65 years old or older.

In 2023, the downsizer scheme expanded, allowing individuals of 55 years old and older to contribute. There are no maximum limit on age however, there are eligibility criteria that must be met:

The home must be in Australia, was owned by the individual or their spouse for at least 10 years and the disposal must be exempt or partially exempt from capital gains tax (CGT)

The individual has not previously made a downsizer contribution to their super from the sale of another home or from the part sale of their home

Prior to or at the time of making a contribution the individual must provide their fund with the ‘Downsizer contributions into super form’

More information on downsizer contributions for individuals is available on the ATO website.

The Electric Car Discount Bill

The Electric Car Discount Bill 2022 has been passed by the Senate with amendments to encourage more Australians to take-up electric vehicles and reduce transport emissions by making it more affordable and accessible.

The amendments were:

Sunset clause on the exemption for plug-in hybrid electric vehicles, which will cease to be applicable on motor vehicle fringe benefits for such vehicles provided on or after 1^st April 2025

AND

Mandatory to review the Bill in three years’ time to determine the effectiveness of the measures.

The legislation provides a fringe benefit tax (FBT) exemption for eligible cars made available for employees by employers, which is applicable on vehicles first used on or after 1^st July. Eligible plug-in electric vehicles will also be FBT exempt for arrangements entered before 1^st April 2025.

More information about Tax cut for electric vehicles is available on the Ministers Treasury website.

Optus Data Breach – An important time to take action to protect yourself

Optus has been a victim of a recent cyber attack where nearly 10 million current and former Optus customers’ personal identifiable information such as names, birth dates, phone numbers, email addresses as well as sensitive information like passport, medicare and drivers licence numbers have been compromised.

This breach is serious as many organisations use birth dates and address details to authenticate account ownership and impacted medicare, drivers licence and passport information can also be fraudulently used to apply for credit through financial institutions. Hence, you may be at a heightened risk of identity theft and fraud if affected by this breach.

What you can do

It is very important to be aware of the heightened risk of identity theft and fraud and scammers will take advantage of this breach. CPA expects a significant increase in phishing activity targeting individuals.

CPA recommends you to consider the following actions:

Customers that have been notified by Optus that their ID document numbers or details have been affected to change their drivers licence, passport and medicare card.

Change banking and other provider passwords – avoid using weak passwords that include a combination of your first name, surname, and date of birth.

Do not click on links sent via email or SMS, especially from Optus, a government body or banking institution concerning this breach.

Check if your email address has been included in a data breach: http://haveibeenpwned.com/

Enable multi-factor authentication for your online accounts, particularly banking accounts, and use app-based authentication instead of SMS.

Monitor any suspicious activity across your online accounts, financial accounts and credit reporting. Report any fraudulent activity immediately to your financial institutions.

Be aware that scammers may have access to more of your details now and exercise caution about suspicious calls, emails, texts, and other messages.

Ensure that you have a call-in passcode, or an online banking passcode set up with various providers as an added security measure and avoid using birthdate as a passcode or pin.

You can also apply for a ‘credit ban’ as this will limit your exposure to financial fraud by freezing access to your credit file. Further information on credit ban can be found through the following links:

IDCARE Fact Sheet – Credit Bans – Australia

Individual Support Services | IDCARE

Credit Report – Free Comprehensive Credit Reports – CreditSmart

Identity Theft – How To Protect, Detect and Report – CreditSmart

Rental Properties – A Key Focus of the Australian Taxation Office

Any income and deductions deriving from rental properties is one of the key areas that the Australian Taxation Office (ATO) will be targeting this financial year. Through the ATO Random Enquiry Program, statistics show that at least 9 out of 10 tax returns contain an error relating to the rental income and deductions reported, even when assisted by a registered tax agent.

This tax time, the ATO urges property owners to review their records carefully before declaring and for registered tax agents to ask extra questions from their clients.

Taxpayers must be aware that tax agents can only work with the information they have been given and cannot expect them to know everything. Though, tax agents also have the responsibility to ask clients the appropriate questions to ensure their client’s return is correct. Hence, both parties are required to communicate effectively to lodge a correct return.

Include all rental income

Please be aware that the ATO receives rental income data from wide sources such as sharing economy platforms, rental bond authorities, property management software providers as well as state and territory revenue and land title authorities. Hence, they can see any rental income that has been charged to tenants but not reported in the return.

All rental income includes short term rental arrangements, renting part of a home and other rental related income like insurance payouts and bond.

Getting rental expenses right

Rental expenses can be categorised into two – immediate and over a number of years expense claim.

Rental expenses that can be claimed immediately include (but not limited to):

Rental management fees
Council rates
Repairs
Interest on loans
Insurance

Rental expenses that can only be claimed over several years or the effective asset life include (but not limited to):

Borrowing expenses
Capital works (i.e. replacing a roof or a new kitchen renovation)
Depreciating assets over $300 (i.e. dishwasher)

It is also important to portion out any private expenses as it cannot be claimed as a deduction. Deductions are also unclaimable where the rental property is not available for rent and “pretending that the property is available for rent when it is not rented” is unacceptable.

Selling a rental property

Capital Gains Tax (CGT) needs to be considered when selling a rental property as capital gains or losses must be reported.

One of the CGT calculations include cost base, which is important to get right. It is typically the cost of property when purchased including costs associated with acquiring and selling. Associated costs include (but not limited to) stamp duty, legal fees, real estate fees and valuations. Capital works and depreciable assets claimed as deductions may need to be subtracted from the cost base.

Taxpayers are also entitled to the main residence exemption if the rental property sold was once a personal residence.

Please note that for the sale of properties over $750,000 must require a clearance certificate to avoid the ATO withholding 12.5%. The process of clearance certificate can take up to 28 working days, hence it is advisable for sellers to apply as early as possible using the online form. These certificates are valid for 12 months and can be used for multiple sales. Foreign residents are not eligible but can apply to vary the withholding amount.

More information on the application is available through this link.

Record Keeping

Rental income and expense records should be kept for 5 years from the date of lodgement or 5 years after the disposal of an asset, whichever is longer as the ATO can ask for proof of claims at any time.

The ATO advises to keep detailed records that illustrates how the expense was incurred for the rental property and the extent to how it relates to producing rental income. The invoice must include the name of the supplier, amount of expense, nature of goods or services, date incurred when purchased or service provided.

More information on rental properties is available on the ATO website. The ATO has also created a 2022 tax time toolkit available for investors.

Single Touch Payroll Phase 2

Single Touch Payroll Phase 2 (STP 2) is here and the Australian Taxation Office (ATO) urges employers to make the software conversion and start reporting with STP 2. Employers should have been receiving notification regarding STP 2 from the ATO.

Some of the changes to STP reporting include:

Employment conditions
Income Type and Country Code
Disaggregation of Gross
Salary Sacrifice
Lump Sums
Reporting previous Business Management Software IDs and Payroll IDs

The ATO has created factsheets, checklists and resources to assist employers with the changes. If you require any assistance with finalising year end payroll as well as updating and preparing your payroll software, please contact our office to book an appointment.

Updated draft guidance on trust reimbursement agreements and unpaid present entitlements

The Australian Taxation Office (ATO) acknowledge the significant level of interest within the community regarding the draft public advice and guidance on trust reimbursement agreements and unpaid present entitlements (Section 100A) and has extended the public consultation period which supposedly ended on April 29.

The package of draft advice and guidance on the tax treatment of trust reimbursement agreements and unpaid present entitlements is still available to view on the ATO website. Nothing has been changed to Section 100A, the purpose of this draft is to provide guidance for taxpayers on how the ATO thinks the law applies.

In this update, the ATO Deputy Commissioner Louise Clarke clarifies a few matters.

Most small businesses operating through trusts are not operating in a way that will attract section 100A. Distributions to an adult child who has a low marginal tax rate will not attract 100A, where they simply receive and enjoy the benefit of their distribution.

Section 100A is applicable where distributions are made under an agreement where there will be a payment or other benefit provided to some other entity that will have a higher tax rate than the beneficiary.

The ATO will not pursue taxpayers that had entered an arrangement between July 2014 and June 2022, where in good faith had concluded that Section 100A was not applicable based on 2014 guidance.

High Court on Present entitlement and disclaimers

The High Court has concluded to allow the appeal on the matter of determination on whether a beneficiary’s present entitlement under s 97(1) is to be determined immediately prior to the end of an income year or whether events after the end of the income year may be considered.

For the purpose of identifying the beneficiaries who are to be assessed with the trust income, s 97(1) is conducted on presenting beneficiaries’ entitlements immediately before the end of the income year as this section focuses on the right to receive an distributable income rather than the receipt of income.

To read more on this case, please refer to Commissioner of Taxation v Carter [2022] HCA 10.

Regarding promotional makeup artist, carrying on a business and JobKeeper

Recently there has been an issue regarding a promotional makeup artist who believed to be carrying on a business and had claimed for JobKeeper payments. The applicant has been deemed ineligible for JobKeeper as her work activities are seen to be of casual employment where she was rostered and allocated work when needed rather than a business.

Her work activities are as described below:

She worked for a cosmetic company where she was engaged as a contractor and had an ABN
The company would allocate her work at different outlets during peak hours (i.e. Christmas)
Her work is overseen and directed by the counter manager at each outlet
She is required to wear the company uniform and can use the company make up products at work
She was paid relevant hourly rate

Hence, the AATA and ATO had concluded that the applicant is not carrying on a business based on the activities described and is not eligible for JobKeeper payments as she had little control over her working hours and make her own work judgements.

To read more on this case, please refer to RWPY and FCT [2021] AATA 4921.

Stapled Super Fund

Employers must now request stapled super fund details when:

Your new employee starts (on or after 1^stNovember)
You need to make super guarantee payments for that employee
Your employee is eligible to choose a super fund but does not. This is inclusive of contractors who you pay for their labour and who are employees for super guarantee purposes

A stapled super fund is an existing super account linked to an employee. The purpose of this request is to prevent employees from incurring account fees with the creation of new super accounts every time they change occupation. Employers may incur additional penalties if they do not meet the choice of super fund obligations. Therefore, it is important for employers to check and update the level of accessibility their authorised representatives have in the ATO online services. Hence, if your authorised representatives:

Do not have full access – an ‘Employee Commencement Form’ permission will be required for them to have the ability to request a stapled super fund

Do not need access – you will need to remove the permission

Ineligible employees will not need to be offered a choice of super fund, but a request of their stapled super fund may still be required. This includes employees that are temporary residents or covered by an enterprise agreement or workplace determination made before 1^st January 2021.

Once an employee informs you their choice of super fund, you have 2 months to pay contributions into the chosen fund.

Below is the breakdown process to comply with the new ‘Choice of Fund’ rules:

Step 1: Offer eligible employees a choice of super fund

Employers must provide eligible employees with a ‘Super standard choice form’ and pay super into the account stated on that form.

Step 2: Request stapled super fund details

If your employee does not choose a super fund, you will need to request their stapled super fund details. The request can be made yourself through the ATO’s Online services or your tax agents.

Once requested and confirmed that you are their employer, the ATO will provide your employee’s stapled super fund details. Super payments must be paid into the stapled super fund details provided by the ATO.

Step 3: Pay super into a default fund

Super payments can be paid into a default fund or other fund that meets the choice of fund obligation if:

Your employee does not choose a super fund

AND

The ATO have advised that your employee does not have stapled super fund

More information on stapled super fund is available on the ATO website.

CGT on Granny flat arrangements

Granny flat arrangements are written agreements that allows eligible individuals to occupy a property for life. The arrangement can be entered into with any individuals, including friends and family. From 1^st July 2021, capital gains tax (CGT) does not apply on such arrangements when it is created, varied, or terminated.

Varying can result from adding new terms and conditions that was not previously included in the original arrangement. These can also be terminated or created as new. More information on the possible social security consequences is available on the Services Australia website.

This arrangement is exempted from CGT if:

The owner/s of the property are individuals
One or more eligible people have an eligible granny flat interest in the property
The owner/s and people with the granny flat interest enter a written and binding arrangement that is not commercial in nature

Also, to be exempted from CGT the arrangement must:

Be in writing
Indicate an intention that the parties are legally bond
Not be commercial in nature

Formal arrangements are advisable as it:

Reduces the risk of financial abuse or exploitation of older people
Provides benefits to the older person, like housing, care, and support as well as benefiting the adult child with property and funds management

Granny flat interests are created when assets and/or money are exchanged for a right to live in someone’s property for life. Interest can be held in any type of property that is considered a dwelling.

There are two ways to have a granny flat interest:

Life tenancy – the right to live in the property
Life interest – the right to use and benefit from the property as you wish

Eligible individual

An eligible individual with the granny flat interest must:

Have reached pension age

Require assistance for everyday activities due to disability

The requirements for person with disability include either of the following:

Eligibility for disability support pension
Require assistance for everyday activities
Require further assistance for at least 12 months after the original arrangement or variation has been made

Other CGT events that are not related to this arrangement are subject to normal CGT rules and may be liable to CGT. For example, a property sold that was used in a granny flat arrangement but has since terminated is still subject to CGT.

More information is available on the ATO website. Otherwise, if you need further assistance to understand what granny flat arrangements are, please call our office to book an appointment.

Assistance for taxpayers affected by unregistered tax agents

The ATO are urgently requesting all taxpayers who has used the services of Jessa Van Stroe or also known as Jessa Layola to review their income tax returns and ensure all information provided are correct and substantiated. A review can be completed through your myGov account, a registered tax agent or the ATO on 13 28 61.

Ms Van Stroe has been illegally preparing tax returns and has been ordered to cease the preparation and lodgement of income tax returns for payment. Only registered tax agents can legally charge a fee to lodge returns. She has never registered with the Tax Practitioners Board and has been issued by the Federal Court on August 23^rd, 2021.

The Head of the Taxation Discipline in the Curtin Law School, Professor Dale Pinto advises all taxpayers who has used unregistered preparers ‘services to review their returns. These preparers “do not have the necessary skills or expertise to provide tax advice” and by using their services you will not have protection against penalties that could be applied for mistakes made by such preparers.

Currently, the TPB are contacting taxpayers affected by her to provide assistance. They are also working with Curtin University’s Curtin Tax Clinic (CTC), offering free tax advice to taxpayers impacted by Ms Van Stroe. You may contact CTC on (08) 9266 2575 or via email at curtintaxclinic@curtin.edu.au, if you require aid in understanding the returns.

Legislation to allow up to six members in your SMSF

The legislation of allowing up to six members in your self-managed superannuation fund (SMSF) has become effective since the 1^st of July 2021. The increase of member numbers creates additional requirements such as signing financial statements. SMSF accounts and statements are required to be signed by a number of trustees or directors of the corporate trustee. From the 2022 financial year onward, if there are:

one or two directors or individual trustees – all of them must sign the documents
more than three directors or individual trustees – at least half of them must sign the documents

However, before you decide to create a fund or add additional members, it is important to understand the law restrictions in the State or Territory you are in. As some State or Territory restricts the number of members in a trust. Hence, it is important to seek professional advice. If you need help understanding if your SMSF is impacted by the restrictions, please call our office on 9721 1055 to book an appointment.

Follow the links below for more information on SMSF membership and requirements:

Super Guarantee rate increasing

The super guarantee rate is set to increase to 10% on July 1^st 2021. Businesses with employees will need to ensure that the payroll and accounting systems are updated to reflect the new super rate. The super guarantee contributions calculator is available for super payment calculation. From 1^st July, the minimum superannuation guarantee contribution rate of 10% will need to be applied on any salary and wage payments paid.

More information on employee super eligibility is available on the ATO website. The rate is expected to increase to 12% by July 2025.

STP Phase 2

There are new information published by the ATO regarding the expansion of Single Touch Payroll expansion that begins on January 1, 2022.

The changes to STP reports include:

Employment conditions
Inocme Type and Country Code
Disaggregation of Gross
Salary Sacrifice
Lump Sums
Reporting previous Business Management Software IDs and Payroll IDs

More information can be found on the ATO website and through the Expanding Single Touch Payroll factsheet.

Warning on illegal SMSF Scheme

There have been new schemes where SMSF trustees are informed of avoiding tax liabilities by setting up a new SMSF to roll-over fund balance from the old SMSF and liquidate that account.

The ATO warns taxpayers of scam or schemes. If you receive an offers to reduce super tax liabilities, please do not provide your personal details or click on any link and directly contact the ATO to verify if the interaction is genuine. There are civil and criminal actions upon those participating in such arrangements and can risk taxpayer’s retirement savings. A list of active illegal retirement schemes is available on the ATO’s website.

Update on the ATO’s Digital Improvement Program

The ATO aims to be more sustainable through their digital improvement program by ceasing the issue of quarterly PAYG and GST paper instalment notices and record details digitally on the ATO systems.

The last roll out of notices was supposed to be the September 2020 quarter period. However due to the concerns raised by CPA Australia, the ATO will continue issuing paper instalment from June 2021 onwards.

Self-lodge individuals should already receive an email reminder regarding the December 2020 PAYG and GST instalment notices payment due. More information on how to view these notifications can be found through this link.

Whereas clients under tax agents, if impacted by these changes can rely on their tax agents as they are able to access your notices through the online services portal for agents. If you require further assistance with your PAYG and GST instalment notices, please contact our office.

JobMaker Period 2

The second claiming period for JobMaker Hiring Credit will be available on the 1^st May 2021. Eligible businesses are still able to gain from this incentive by taking on additional young seekers. It is important for eligible businesses to be aware of JobMaker claim periods to avoid from missing out on the incentive.

More information on JobMaker Hiring Credit eligibility can be found on the ATO Website.

Extension of JobSeeker

The JobSeeker Supplement is now available until March 2021. New and prior recipients of the JobSeeker payment will receive the supplement at $150 fortnightly, from January to March 2021. JobSeekers can access payments where their partner earns $80,000 in a year and will be able to earn up to $300 fortnightly without affecting their social security payments.

The extension of temporary measures is estimated to cost an additional $3.2 billion. The following will also be extended to March 2021:

Eligibility criteria for access to income support payments for permanent employees who were stood down, sole traders and self-employed
Waiver of the Ordinary Waiting Period, Newly Arrived Resident’s Waiting Period and the Seasonal Work Preclusion Period

The Government’s post COVID plan to decline unemployment rates

As part of the 2020-21 Budget, businesses are encouraged to employ job seekers with a new incentive known as the JobMaker Hiring Credit, provided to the employer. Employers can only claim either the JobKeeper or the Hiring credit and not both.

The JobMaker Hiring Credit offers:

$200 per week for each eligible employee between 16 to 29 years old
$100 per week for each eligible employee between 30 to 35 years old

Employers must meet the requirements below to be eligible:

Hold an Australian Business number (ABN)
Have an up to date tax lodgement obligations
Is registered for PAYG withholding
Is reporting through Single touch payroll

When hiring an employee, employers must ensure that their employees are:

Be between 16 to 35 years of age
Is a recipient of income support payments (i.e. JobSeeker payment, youth allowance or parenting payment) for one of the three months before being hired
Worked an average of 20 hours per week over the quarter

If the employment begins or cease during the quarter, employers are only eligible to claim on the basis where the employee meets the test based on the length of time in employment.

The incentive is administered by the Australian Taxation Office (ATO). Eligible employers will need to register with the ATO and make quarterly claims, which commences in February 2021. These employers will have access to the credit for every new job created over 12 months from 7 October 2020 for which they hire an eligible employee for a maximum claim period of 12 months from their employment date.

The employer’s headcount and payroll will also be considered for eligibility. This will ensure that the employers are claiming credits for new jobs created rather than, for replacing existing employees.

The ATO will provide more information regarding the eligibility criteria for JobMaker Hiring Credit and how to register, once the credit become available. Otherwise, information regarding the 2020-21 Budget is available

Data Matching Program Notice

The data matching program has now commenced between Services Australia (the Agency) and the Australian Taxation Office with the use of Single Touch Payroll (STP) data. The program involves exchanging STP data from the ATO with the Agency. This assists the operation of Service Australia to provide a smooth experience for their customers by enabling:

Pre-filling employer details (as reported from STP) onto Services Australia online services for review by customers
Supporting the timely confirmation of employment and establishment of child support employer withholding
Identifying where there is a significant difference between STP income and estimate the customer has provided to Services Australia, and nudging the customer to suggest that they revisit their income
Analysis of the data with a view to improve Service Australia’s process

The Agency will be in accordance with the Office of the Australian Information Commissioner (OAIC) guidelines on data matching in Australian Government Administration and be at standard to protect individual’s privacy. More information on the program is available on the OAIC website.

Change of Business Structures

Changes in business structure from being a sole trader to a more complex company or trust like structures can lead to errors, especially when the environment changes. Such common errors incurred from changing business structure are listed below:

Reporting incorrect income for the entity
Claiming incorrect expenses for the entity
Personal use of business bank accounts

Clients with incorporated small businesses are required to be aware that:

The company is a separate legal entity from the shareholders or directors
The company’s money belongs to the company
The company’s assets belong to the company – IF the client uses the company’s asset for personal use, it must be treated as a benefit to the director or shareholder (ie. fringe benefit tax)

Clients moving to a trust structure are required to be aware of a trustee’s responsibilities such as:

Holding trust property, such as assets, investments, and income for the benefit of the beneficiaries
Managing the trust’s tax affairs
Paying some tax liabilities

For more information regarding changing business structures please follow this link or you may book for an appointment with us to discuss your queries regarding your tax affairs.

Bills of the current Parliament – Treasury Laws Amendment 2020 Measures No. 3

A Bill for an Act to amend the law that relates to:

Income Tax Assessment Act 1997 – to:

Extension of the $150,000 instant asset write off, until 31^st December 2020
Adjust the criteria for access to the instant asset write off for businesses that have adopted a substituted accounting period

Taxation Administration Act 1953:

The 2021 financial year gross domestic product adjustment factor will be reduced to nil

International monetary agreements Act 1947 – to enable Australia to:

Enter into a loan agreement with the International Monetary Fund
Meet its funding obligations under any such agreements, as well as under the existing New Arrangements to borrow with the International Monetary Fund
Continue to enter into agreements with other countries to provide them with financial assistance in support of a program with the International Monetary Fund

Boosting Cash Flow for Employers Act 2020 – to:

Clarify payments for which an entity can receive a cash flow boost payment include amounts that are subject to withholding under the special withholding obligations applying to certain personal service income payments

For more information regarding the Bills of the current Parliament, please visit the Treasury Laws Amendment 2020 Measures No. 3.

A new mandatory code of conduct for Commercial Rent Relief

The Government has designed a code of conduct that is yet enforceable, to provide relief for both landlords and tenants to share the burden as we are slowly recovering from the pandemic.

The code is on the basis of delivering leasing principles on good faith through negotiations with sufficient and accurate information.

Once it is legislated, eligible tenants will be entitled to receive at least 50 percent of relief through waivers or deferrals during the pandemic.

Rent that has been deferred will be payable after the pandemic and potentially spread over two subsequent years. For example, tenants with a 60 percent reduction in turnover would result in a 30 percent rent reduction and 30 percent rent deferral to be paid at the end of the recovery period. Tenants’ inability to comply with substantive lease terms will result in losing the protection provided by the Code and gives landlords rights to take enforceable action.

Who is Eligible?

The code applies to tenants eligible for JobKeeper payments and SME tenants with annual turnover of up to $50 million.

Role of Landlords

Comply with the terms of their lease subject to the negotiated changes
Not draw on tenant’s security for non-payment of rent during the pandemic and recovery period
Offer proportionate rent deductions (i.e. waivers/deferrals)
Not impose punitive fees, interest or charges on rent waivers or deferrals
Not terminate lease for non-payment of rent during the pandemic and recovery period
Proportionately pass on relief from their obligations to pay land tax, council rates and insurance to tenants

Role of Tenants

Honour and uphold obligations under the lease
Be committed to lease terms
Provide accurate turnover figures and other relevant financial statements

We hope that we can all share the burden as we try to build our economy up again. If you require any further assistance, please contact our office.

Partner income test relaxed for JobSeeker Payment

As of 30^th March 2020, the Government is temporarily relaxing the partner income test. This is important for couples, who are married or in de facto relationships where you have declared that you and your partner are living together on a genuine domestic basis, regardless of whether you are legally or not legally married. Your combined taxable income will be considered if you don’t have private health insurance and is necessary to determine accurately whether you are entitled to more government benefits, concessions or tax obligations, such as Medicare Levy Surcharge.

For the next six months, a new Coronavirus Supplement of $550 per fortnight, will be made available for income support payments, on top of the JobSeeker Payment for an eligible person and also providing their partner earns around $79,762 per annum (less than $3,068 per fortnight).

The Coronavirus Supplement will commence from 27 April 2020. If you are already a recipient of any income support payments, such as the JobSeeker Payment, the supplement will be automatically paid out. However, if you are not, you will have to apply through Centrelink – over the phone or myGov portal.

For more detailed information and factsheets regarding the coronavirus supplement please visit the treasury website.

ATO receives a further five years’ worth of taxpayers insurance policy information

Over more than 30 insurance companies are expected to provide further five years’ worth of taxpayers policy information regarding their lifestyle assets. The ATO wants to ensure that taxpayers who owns fine art, high value motor vehicles, marine vessels, aircraft and thoroughbred horses are reporting their tax and superannuation obligations accurately.

This is known as the ATO’s lifestyle assets data matching program, which has been in progress since February 2016. Currently, 2014 and 2015 financial year data has been collected. It is hoped to achieve an understanding between what is reported on tax returns and taxpayers’ actual financial situations. In addition, it will help the ATO to identify any capital gains on any disposal of lifestyle assets as well as those claiming GST credits on personal assets as part as their business expense.

Taxpayers are warned if they fail to comply reporting their income or declare capital gains correctly, are advised to speak to their tax professionals. There will be a reduction in penalties and interest charges, if taxpayers make voluntary disclosure.

For more detailed information, please visit the ATO website or contact our office.

ATO urges small employers to switch to STP

CPA advise small employers who have not yet switched to Single Touch Payroll (STP) are urged to get in touch with the ATO if they need help to transition.

The ATO wants the transition to STP to be simple and manageable, and said that no penalties will be applied in the 2019/20 financial year for small employers who make a genuine attempt to transition or for missed or late reports.

If you need assistance switching to STP please contact our office or visit the ATO website for more information.

Lower taxes for SMEs introduced

Legislation has been introduced into parliament to bring forward five years the progressive reduction in the company tax rate for businesses with an aggregated turnover below $50 million.

Eligible corporate entities with turnover less than $50 million can see their tax rate cut from 27.5% to 25% by 2021-22. The bill is also expected to increase the small business tax offset rate to 13% of an eligible individual’s basic income tax liability that relates to their total net small business income for the 2020-21 income year.

More information can be found on the Treasury website.

Commissioner again warns of over-claiming of WREs

Once again the Commissioner has again raised his concerns around the work-related expanse (WRE) claims.

Commissioner Jordan stated “we are continuing to see a level of incorrect claiming for deductions that is concerning – particularly in relation to over-claiming of work-related expenses.”

The ATO realise that “while the amount of each adjustment may be small, the overall impact when extrapolated to the whole population is significant. As I have mentioned previously, the work-related expenses gap is estimated to be greater than the large corporate tax gap of $2.5 billion.”

Unfortunately it was surprising to learn that “the incorrect claiming in these random enquiries is actually worse in agent prepared returns. It would seem complacency has crept in and the three golden rules of deductions are not being observed. That is, you must have spent the money and not been reimbursed, it must relate to your work (not private expenditure), and you must be able to prove your expenditure if asked.”

If you are unsure of your claims or wish to discuss your work related expenses please contact our office.

ATO to split cost of managing tax affairs label

In response to feedback and recommendations from the profession, the ATO has announced that it will split deduction label D10 – cost of managing tax affairs on the individual’s income tax return from 2018.

To improve transparency around deductions being claimed, the ATO will split label D10 into three sub-components:

cost of managing tax affairs
deductible ATO interest charges
litigation costs.

Label D10 currently aggregates a number of items including deductible amounts of ATO interest charges and litigation costs. The ATO also plans to rename label D10 with a new title to better describe the collective nature of its three sub-components. These changes will apply for 2018 and beyond and to complement this change, the ATO will also add a new category to the other income label (24) to capture assessable amounts of ATO interest charges.

You can visit the ATO website for more information.

ATO Focus on holiday homes

The ATO will focus on deductions claimed for rental properties in popular Australian holiday destinations this tax time, having identified many incorrect claims for holiday homes by investors last year.

Assistant Commissioner Kath Anderson has reminded holiday home owners that they can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.

She also said if they rent their property at a discounted rate, or “mates’ rates”, they can only claim deductions equal to the amount of rent charged. She also reminded all rental property owners that they should declare all rental income, keep an accurate record of expenses, and strong evidence of the property being rented or genuinely available for rent at market rates. She said “advertising through a real-estate agent or an online site is not always enough evidence to demonstrate that a property is genuinely available for rent”.

You can visit the ATO website for more information.

Uber drivers must register for GST

In Uber B.V. v FC of T, the Federal Court has held that services provided by an Uber driver constituted a supply of “taxi travel” for GST purposes. Accordingly, the driver was required to be registered for GST.

The ATO have advised that ride-sourcing enterprises should:

keep records
have an ABN register for GST, regardless of how much they earn
pay GST on the full fare received from passengers for each trip they provide
lodge activity statements include income from ride-sourcing in their income tax returns.

If you need assistance registering for GST please let us know.

ATO’s FBT compliance focus for 2017

ATO Assistant Commissioner Catherine Willis recently outlined several matters that should be kept in mind when preparing 2017 FBT returns.

The Assistant Commissioner said that the ATO’s compliance focus would include:

car benefits
correct calculation and reporting of living-away-from-home allowance (LAFHA)
incorrect claiming of FBT exemption or FBT rebate
employee reward programs
housing benefits
benefits provided to directors of private companies.

You can view the 2017 FBT Compliance Update from the ATO.

ATO data matching programs

The ATO has given notice of three data matching programs relating to online selling, share transactions and to credit and debit card transactions.

Under the online selling data matching program, the ATO will obtain data from eBay Australia and New Zealand Pty Ltd identifying online selling account holders with annual trading activity that amounts to $12,000 or more during the 2015-16 to the 2017-18 income years.

The ATO will seek, under the share transaction data matching program, data on share transactions from 20 September 1985 to 30 June 2018 from a number of sources. The data sought will include identities of buyers and sellers, share sale price and quantities of shares acquired or disposed of.

The ATO will also collect data from a number of credit and debit card providers relating to payments to businesses under the credit and debit card data matching program. The data will be obtained for the 2015-16 and 2016-17 income years on the identifying details of merchants with credit and debit card merchant facilities and the amount and quantity of the transactions processed.

More information on the ‘The Cash and hidden economy’ and ‘Record Keeping for Small Business’ can be found on the ATO website.

High deductions on ATO radar

The ATO has issued a that it’s paying extra attention to taxpayers claiming higher than expected deductions for the 2015-16 income year.

Assistant Commissioner, Graham Whyte said that the ATO’s ability to check work-related expense claims has become more sophisticated through use of technology and data analysis.

The ATO notes that taxpayers using myTax to lodge their returns will receive a real-time warning if their claims for work-related deductions are unusually high compared to other taxpayers in similar occupations, and recommends that in future income years taxpayers use the myDeductions tool in the ATO app to record their expenses to avoid the problems of lost or faded receipts.

Specifically, the ATO warns that taxpayers should ensure:

their claims are justified
they have not already been reimbursed for the expenses by their employer
they are getting good advice
they have evidence to support their claims
the claims are related to their work
they know what is and is not deductible
they back up their data.

Visit the ATO website for some examples.

ATO reminds people earning income in the sharing economy of their tax obligations

The ATO and CPA Australia have reminded people of their potential tax obligations when earning income through the sharing economy. The type of goods or services provided, and how much is provided, will determine what such people may need to do for tax.

For example, for those that rent out part or all of a house:

They need to declare the same income in their income tax return as if they had a rental property
Any deductions they want to claim need to be apportioned according to how much of the property is being rented out
They also need to be aware of any capital gains tax (CGT) obligations if they have sold a property used in the sharing economy

Visit the ATO website for more information on the ‘sharing economy’.

ATO warns of tax time scams

The ATO and CPA Australia have warned taxpayers to be wary of tax-related scams during tax time.

ATO data indicates scammers are particularly active during tax time, with a 90 per cent increase in the number of phone and email scams reported to the ATO in 2015 as compared to 2014.

Assistant Commissioner Graham Whyte said people should be vigilant and protect their personal information by keeping it private. He reminded taxpayers that the ATO will never cold call a taxpayer about a debt, threaten jail or arrest, request direct credit to a personal bank account or request personal details via email.

Paul Drum, head of policy at CPA Australia advised taxpayers that “if you are contacted by anyone saying they are from the ATO, don’t give them any information. You should contact your tax agent or the ATO directly to verify.”

Information on how to verify or report a scam is available from the ATO website .

ATO focussing on work related expense claims and rental property deductions

The ATO has announced that it will focus on work-related deduction claims that are higher than expected, in particular, car expense claims for transporting bulky tools, and deductions for travel, internet and mobile phone, and self-education.

The ATO said that this year, for the first time ever, it will check taxpayers’ deductions in real-time as they complete their online return. It will take a closer look at any unusual deductions and contact employers to validate these claims.

The ATO has also reminded that there has been a change in the rules for calculating car expenses this year and taxpayers need to use a logbook or the cents per kilometre method to support their claims.

The ATO also announced that it will focus on excessive interest expense claims and incorrect apportionment of rental income and expenses between rental property owners. It will also look at holiday homes that are not genuinely available for rent and incorrect claims for newly purchased rental properties.

The ATO has reminded taxpayers when claiming deductions for their rental property to include all the rental income and make sure that their property was genuinely available for rent when the expense was incurred. Taxpayers must also make sure to apportion any deductions to take any private use into account, and must have records for the claims they make.

ATO Employer/Contractor Tool

The ATO has released an updated, mobile-friendly version of the employee/contractor tool to help businesses correctly meet their tax and super obligations for their workers.

The ATO said there are many myths about employee/contractor arrangements, and that it is important for all businesses to get the distinction right. Incorrectly treating employees as contractors is a problem in many industries, in particular, the building and construction, cleaning, road transport and security industries. While most businesses tried to do the right thing, some businesses deliberately treated their employees as contractors to illegally lower their labour costs by not withholding tax or paying the super guarantee.

For more information please visit the ATO Employer Contractor Tool website.

ATO reminds Taxpayers of their Tax obligations if they own a rental property

The ATO has updated information on residential rental properties. It includes information on the obligations to keep records, working out deductible expenses, declaring rental-related income and working out any CGT on disposal.

It is important that new investors in rental properties pay careful attention to and seek professional advice on what they can claim as repairs and maintenance, particularly repairs to issues that existed when the rental property was purchased.

For more information please contact our office on 97211 055.

RISK OF NOT USING QUALIFIED VALUERS

The ATO has published information warning taxpayers who undertake their own valuations – or use valuations from people without adequate qualifications – that they risk incorrectly reporting their tax and may therefore become liable to pay administrative penalties.

The ATO also state that the majority of taxpayers who use a qualified valuer or equivalent professional for taxation purposes will generally not be liable to a penalty if they have provided the valuer with accurate information where the valuation ultimately proves to be deficient.

The ATO has developed an optional instruction form for use when obtaining valuations.

Beware of Phone Scams

The ATO has reminded tax practitioners and taxpayers to be wary of phone scams. They state that scammers are impersonating ATO employees and demand payment for an unexpected debt or offer an unexpected refund or grant.

Phone scammers are likely to be pushy or aggressive. They may tell taxpayers that there is a warrant out for their arrest or offer to send a taxi to take them to a post office so that they can make a payment.

For more information follow the Beware of phone scams link.

ATO focus on work-related expenses

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, it has said. The ATO will also focus on claims that are already reimbursed by employers and private expenses such as travel from home to work.

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.

For more information follow the ATO link and if you require any further information or wish to take up audit insurance please contact our office on 97211 055.

Small Business Bills passed by House of Representatives

The Tax Laws Amendment (Small Business Measures No 1) Bill 2015 and the Tax Laws Amendment (Small Business Measures No 2) Bill 2015 have been passed by the House of Representatives.

The Tax Laws Amendment (Small Business Measures No 1) Bill 2015 reduces the company tax rate from 30 per cent to 28.5 per cent for companies that are small business entities with an aggregated turnover of less than $2 million from the 2015-16 income year.

The corporate tax rate for companies that have an aggregate turnover of $2 million or more remains at 30 per cent. The Tax Laws Amendment (Small Business Measures No 2) Bill 2015 temporarily increases the threshold below which small businesses can claim an immediate deduction for the cost of assets from less than $1000 to less than $20,000 and allows primary producers to claim accelerated depreciation for water facilities, fodder storage and fencing.

The Bills can be viewed.

Tax Deductions for small business

CPA’s Gavan Ord has put together a good article on the tax deductions for small business and the hype around the $20 000 instant asset write-off.

The good reading article has the details and exposes potential pitfalls while posing 5 questions to consider before spending your hard earned money.

To view the full article please follow the link below http://intheblack.com/articles/2015/05/19/tax-deductions-for-small-business

Working Paper on Efficiency of Taxes

A Treasury Working Paper comparing the relative efficiency of different taxes imposed in Australia has found that conveyancing stamp duty and company income taxes are the least efficient taxes.

The paper – Understanding the economy-wide efficiency and incidence of major Australian taxes (PDF) – is intended to contribute to the broader discussion about the tax system by estimating welfare cost and identifying the economic incidence of marginal changes to the tax system.

The paper states that the incidence of company income tax is largely borne by workers through lower labour productivity, so reducing real wages. Based on the modelling adopted, it suggests that the most efficient tax would be a hypothetical broad-based land tax, and while GST and individual tax are not as efficient, they are more efficient than company income taxes and stamp duties. The paper uses a static representative household general equilibrium model to examine the incidence of efficiency of the various taxes.

View the full paper .
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ATO to receive Swiss bank account data

The Treasurer has announced that Australia and Switzerland have agreed to automatically exchange information to crack down on tax avoidance. Under the agreement, the ATO will automatically receive details of investment income and financial account balances that Australians hold in Switzerland. The Swiss tax authority will also receive details of Swiss residents’ financial accounts in Australia.

The exchange of information will be based on the Organisation for Economic Cooperation and Development’s (OECD) common reporting standard and implemented from 2017 with first exchange of information in 2018.

View the full address or for more information please contact our office on 97211 055.
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ATO Data Matching Program

The ATO has issued a gazette notice advising that it will acquire details of entities for the period 20 September 1985 to 30 June 2016 from the various share registry services. The type of data the ATO will collect includes contact details, purchase and sale details, and quantities of shares acquired or disposed of. It is estimated that more than 95 million records will be obtained, including the records for approximately 1.2 million individuals. The ATO says the records will be electronically matched with certain ATO data holdings to identify non-compliance with registration, lodgment, reporting and payment obligations under taxation laws. The ATO says the program aims to identify income tax returns that may not include accurate information relating to the disposal of shares and securities, especially in relation to CGT.

View the full gazette.

Small Business Superannuation Clearing House exemption

The Small Business Minister has announced that from 1 July 2015, access to the Small Business Superannuation Clearing House (SBSCH) will be extended to all businesses with an annual turnover below the $2 million small business entity turnover threshold. Mr Billson said the proposal will “provide approximately 27,500 additional small businesses with a cost free solution to help them meet their superannuation obligations.” In addition, Mr Billson announced that the government will “further reduce superannuation red tape by removing the obligation on business to offer employees choice of fund when it does not make sense to do so.” He said from 1 July 2015, employers will no longer be required to offer choice of fund forms to temporary resident employees or to employees whose superannuation fund has merged.

For more information you can read the full report.

ASIC Warning: Property investment advice to SMSF’s

At a recent address to CPA Australia’s SMSF Conference 2014, ASIC Commissioner, Greg Tanzer, said ASIC is concerned that with the increased popularity of SMSFs and property investment, real estate agents and property advisers may not realise that they may be providing financial product advice. In order to carry on their business communications, they may need an AFS licence, or authorisation under an AFS licence, when making recommendations or statements of opinion to a person to use an SMSF to invest in property.

In relation to the limited AFS licence regime, ASIC has found inadequate or no evidence of RG 146 training course completion for all or some of the financial products sought under the application. It also found inadequate coverage of professional indemnity insurance. Mr Tanzer said ASIC is also looking at the trend of “one-stop shop” operators offering a range of services to SMSFs. He noted the project team was exploring whether commissions are being paid within these business models and whether these commissions are consistent with the restrictions on payment of commissions for advice under the FoFA reforms.

For more information you can read the full report at http://www.asic.gov.au/asic/asic.nsf/byHeadline/Regulators-perspective-on-the-regulation-of-SMSFs–speech?opendocument

2013 ATO Tax Time Targets

The ATO has advised that it is writing to around 218,000 individuals employed as building construction project managers and supervisors, building and construction labourers, and sales and marketing managers about their work-related expenses. It said it has found that individuals in these occupations are at higher risk of making mistakes with their work-related expenses due to the types of deductions they are entitled to claim.

The ATO has also advised that it will be writing to more than 110,000 rental property owners regarding their entitlements and obligations to ensure their 2012-13 tax returns are filled in correctly. To that end, it has provided a guide on costs which can be claimed immediately, and costs that can be claimed over a number of years. In addition, the ATO also provides information on what costs cannot be claimed in relation to a rental property and what taxpayers should do if they have sold a rental property.

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Major super reforms announced

The Australian Government has announced the following major superannuation reforms ahead of the 2013 Budget:

Tax-free pension earnings capped – government will amend the law to cap the tax exemption for earnings on superannuation assets supporting income streams to the first $100,000 of future earnings for each individual
Concessional contributions cap – government will provide an unindexed $35,000 concessional cap to anyone who meets certain age requirements. The cap will not be limited to people with balances below $500,000
Excess contributions tax – government will allow all individuals to withdraw any excess concessional contributions made from 1 July 2013 from their super fund
Deeming changes – government will extend the normal deeming rules to super account-based income streams for the purposes of the pension income test
Deferred lifetime annuities – government will provide deferred lifetime annuities with the same concessional tax treatment as super assets that support income streams from 1 July 2014
Lost super – government will further increase the account balance threshold from $2,000 to $2,500 from 31 December 2015 above which inactive accounts must be transferred to the ATO

In response to the announcement, CPA Australia Chief Executive Alex Malley says – Another day, another adjustment to the superannuation system, but where is the vision we should all be working towards.

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ATO sends super cap letters

From 1 July 2012 the concessional contributions cap for superannuation has reduced to $25,000 for everyone, regardless of their age. The change is due to:

the transitional concessional contributions cap for individuals aged 50 years and over expiring on 1 July 2012
a proposed new policy that will allow people aged 50 and over with low account balances to make concessional contributions up to $50,000 per year without incurring excess contributions tax, being deferred for two years until 1 July 2014.

On Monday 13, 20 and 27 August, the ATO wrote to approximately 370,000 individuals who have made contributions in the 2010–11 financial year which were over, or near, the reduced cap.
The letter provides information about the reduced cap and how it may affect them. The ATO’s stated intention is that the letter will give affected individuals enough time to review and alter their future contributions if necessary. The ATO expects that some letter recipients will contact their professional adviser for advice.

The letter will be sent directly to people’s residential addresses.

If your clients don’t want to exceed the caps, they should:

review their salary sacrifice to super arrangements
check the amount of their compulsory employer contributions
confirm if other super contributions are paid by their employer from pre-tax income, such as administration fees and insurance premiums
be aware that contributions to super claimed as an income tax deduction, such as contributions made by self-employed clients are also counted

For members of a defined benefit fund, include their notional taxed contribution amount.

Superannuation, health, family trusts in end of financial year spotlight

Looming changes and the imminent end of financial year mean it’s time for businesses, households and investors to get their tax affairs in order.

With a number of changes coming into effect with the end of the 2011–12 financial year,
CPA Australia urges all taxpayers to be meticulous in gaining an understanding of their entitlements and obligations.

“Individuals, investors and businesses should be rigorous in knowing their entitlements and obligations, so as not to be lumped with a potentially sizeable tax bill,” says
Paul Drum, Head of Business and Investment Policy, CPA Australia.

“With some changes in tax treatment coming into effect on 1 July, now is the time for businesses and individuals to act on whether to bring forward, defer or even rule out certain courses of action.

“A knowledge of the current tax rules applies equally to any taxpayer – whether they’re a
pay-as-you-go salary or wage worker, an investor or a business.”

The following are some key issues and opportunities taxpayers may consider this year.

Individual taxpayers and investors:

Superannuation: From 1 July 2012 all taxpayers, regardless of age, will have their concessional contributions capped at $25,000. Accordingly, the 2011–12 financial year is the last year that an individual taxpayer aged 50 or over may make eligible superannuation concessional contributions of up to $50,000 under the current rules.
The Australian Government’s superannuation co-contribution limit will also drop from $1000 to $500 from 1 July 2012. This cut will adversely affect many low-income earners, who should consider making after-tax contributions to obtain the maximum superannuation co-contribution before the window closes on 1 July 2012.
Medical expenses: The medical expenses offset will be means tested for those whose income exceeds the Medicare levy surcharge next year. They will only be able to claim a 10 per cent tax refund for net medical expenses exceeding $5000 in the 2012–13 financial year. Hence, where practicable, it may be best to bring forward eligible medical expenses before 30 June.
Deferring income and accelerate deductions: The decrease in income tax rates for middle and low-income earners next year may make it desirable for individuals to defer income or bring forward deductions.

Businesses:

Trusts: Trustees of discretionary trusts are now required to make and document trustee resolutions as to how the income of such trusts for the 2011–12 financial year is distributed among beneficiaries by 30 June 2012.
Deferring the purchase of depreciating business assets: An eligible small business may consider deferring the purchase of assets (such as desks, computer equipment, and lawn mowers) until after June 30, when the immediate deduction for a depreciating asset increases from $1000 to $6500.
Claim the entrepreneur’s tax offset: The 2011–12 is the final financial year in which eligible small business entities can claim the entrepreneur’s tax offset, which is equal to 25 per cent of the income tax payable on the business’s net income. Care should be taken in claiming the offset as it is subject to means testing.
Complying with Division 7A: The ATO is currently highly-vigilant in cracking down on shareholders and associates which use either the funds or assets of a private company for personal purposes.

Mr Drum says that this time of year is also an opportunity to carry out some forward planning.

“The looming end of financial year offers more than an opportunity to review the year just gone. It also provides the chance to ensure you plan the most effective tax approach in the coming year – this applies equally to businesses and individuals.

“There are a number of changes afoot, both large and small, with the carbon tax being a major example, that will affect businesses and individuals. It is imperative therefore to gain an understanding of the implications of such changes.

“The person best qualified to help negotiate this terrain is of course a CPA Australia registered tax agent.”

For further information, see CPA Australia’s end of financial year tax tips (PDF).

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Federal Budget 2012–13: A small surplus, company tax cut scrapped

On 8 May 2012, the Treasurer, the Hon. Wayne Swan MP, handed down the 2012–13 Federal Budget, his fifth budget. Mr Swan says the total write-down in tax collections since the global financial crisis was around $150 billion. He says this had contributed to a deficit in 2011–12 of $44 billion, and means net debt will peak at 9.6 per cent of gross domestic product (GDP). Mr Swan says the decisions in the Federal Budget 2012–13 will return the budget to a $1.5 billion surplus in 2012–13.

The major revenue measures announced in the budget include:

company tax rate cut to 29 per cent will not proceed
loss carry-back arrangement for companies – the budget confirmed the Treasurer’s announcement on Sunday 6 May that the government would allow businesses to carry-back losses. From 1 July 2012, companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013, companies will be able to carry back up to $1 million worth of losses against tax paid up to two years earlier
living-away-from-home-allowance (LAFHA) – the government will reform the LAFHA to limit access to the tax concession to employees who maintain a home for their own use in Australia and provide the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location. The proposed changes will apply from 1 July 2012 for arrangements entered into after 8 May 2012, and from 1 July 2014 for arrangements entered into prior to that time. However, the changes do not affect:

- tax concessions for “fly-in-fly-out” arrangements
- tax treatment of travel and meal allowances which are provided to employees who have to travel away from their usual place of work for short periods
standard tax deduction for work related expenses and the cost of managing tax affairs will not proceed
50 per cent discount for interest income will not proceed
education tax offset to be replaced with the Schoolkids bonus. It will apply from 1 January 2013, and each year families will receive an automatic payment of $410 for each primary school child and $820 for each high school child. The Schoolkids bonus is only available to families receiving the Family Tax Benefit Part A plus young people in school receiving Youth Allowance and some other income support and veterans’ payments. It will not be a taxable payment
limit on employment termination payment (ETP) offset for “golden handshakes” – the government will limit the availability of the ETP tax offset from 1 July 2012 to no more than $180,000
consolidation of the dependents offset – the various dependent tax offsets will be consolidated into a single, non-refundable offset from 1 July 2012. The new offset will only be available to taxpayers who maintain a dependent who is genuinely unable to work
mature age worker offset – the government will phase out the mature age worker offset from 1 July 2012 for taxpayers born on or after 1 July 1957
medical expenses offset will be means tested from 1 July 2012 for taxpayers with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012–13)
Medicare levy thresholds – from the 2011–12 income year, the Medicare levy low-income thresholds will be increased for singles to $19,404 (up from $18,839 for 2010–11) and to $32,743 for those who are members of a family (up from $31,789 for 2010–11). The additional amount of threshold for each dependent child or student will also be increased to $3007 (up from $2919)
superannuation contributions tax – from 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their concessional contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy)
concessional contributions cap for over-fifties – the proposed higher concessional contributions cap for individuals aged 50 and over with super balances of below $500,000 will be deferred from 1 July 2012 to 1 July 2014

Means testing private health insurance rebate Bills await Assent

The three Bills that propose to means test the 30 per cent private health insurance rebate have passed all stages and await Royal Assent. The changes will start from 1 July 2012.

The Bills are:

Fairer Private Health Insurance Incentives Bill 2012
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2012
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge – Fringe Benefits) Bill 2012.

Individuals earning more than $84,000, or families earning more than $168,000, would start to lose the rebate in the 2012–2013 financial year. For 2012–2013, the rebate would cut out completely for singles once they were earning more than $130,000 a year and for families earning $260,000 or more.

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Carbon tax: 1 July 2012 start date confirmed

The Clean Energy Bill 2011, the Clean Energy (Household Assistance Amendments) Bill 2011, the Steel Transformation Plan Bill 2011, the Australian Renewable Energy Agency Bill 2011 and 17 related Bills have all received Royal Assent and their commencement dates have been proclaimed. The government says the tax-free threshold will increase from $6000 to $18,200 from 1 July 2012, and pensioners will receive payment increases. The first household assistance payments will be made in May and June 2012.

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ATO targets specific occupations

For the 2010–11 income year, the ATO will focus on deductions claimed by people employed in specific occupations. Those targeted include earthmovers, flight attendants, carpenters, joiners and real estate employees. Apprentices and trainees in these occupations will also be targeted.

The Commissioner of Taxation, Michael D’Ascenzo, says the ATO has found individuals working in the targeted occupations more frequently claim deductions such as motor vehicle and travel expenses incorrectly. Therefore, from Friday 1 July, the ATO will send letters to approximately 116,000 individuals to help them make correct claims.

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Trust streaming measures

The ATO has released details of its administrative treatment regarding the Australian Government’s proposed trust streaming changes and anti-avoidance rules contained in the Tax Laws Amendment (2011 Measures No. 5) Bill 2011. The proposed changes are intended to apply to the 201011 income year, although they may not receive Royal Assent before Thursday 30 June.

The ATO says that if a taxpayer lodges a return on time and in accordance with the existing law, and an amendment is needed because a retrospective law change:

no tax shortfall penalties will apply
any interest attributable to a shortfall will be remitted to nil, up to the date of enactment of the change in law – interest will be remitted for taxpayers who seek an amendment within a reasonable time.

ATO is reviewing LAFHA benefits

The ATO says it is reviewing living-away-from-home allowance (LAFHA) benefits as it believes some employers may be claiming excessive amounts for exempt accommodation and food components. In April 2011, the ATO says it will write to some employers who are paying this allowance, requesting certain information for each employee receiving the allowance.

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ATO warns new email scam contains virus

The Commissioner of Taxation, Michael D’Ascenzo, has warned taxpayers to be aware of a fake email claiming to offer refunds from the ATO. The commissioner said the email contains a virus which is an attachment to the message. The commissioner urged taxpayers to be alert to this email and other scam behaviour.

Individuals can confidentially report suspicious behaviour to the ATO by calling 1800 060 062.

For more information please follow the link;

http://www.ato.gov.au/corporate/content.asp?doc=/content/00271052.htm